EXHIBIT 99.2
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$90,000,000
AMENDED AND RESTATED
CREDIT AGREEMENT
among
MISSION RESOURCES CORPORATION,
as Borrower,
The Several Lenders
from Time to Time Parties Hereto,
FARALLON ENERGY LENDING, L.L.C.,
as Arranger
XXXXXXXXX & COMPANY, INC.,
as Syndication Agent
and
FOOTHILL CAPITAL CORPORATION,
as Administrative Agent
Dated as of March 28, 2003
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TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS ................................................... 2
1.1 Defined Terms ................................................... 2
1.2 Other Definitional Provisions ................................... 26
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS ............................... 26
2.1 Commitments ..................................................... 26
2.2 Procedure for Borrowing ......................................... 26
2.3 Repayment of Term Loans ......................................... 27
2.4 Repayment of Loans; Evidence of Debt ............................ 27
2.5 Fees ............................................................ 28
2.6 Optional Prepayments ............................................ 30
2.7 Mandatory Prepayments ........................................... 30
2.8 Interest Rates and Payment Dates ................................ 32
2.9 Application of Payments ......................................... 32
2.10 Requirements of Law ............................................. 35
2.11 Taxes ........................................................... 35
2.12 Change of Lending Office ........................................ 37
2.13 Replacement of Lenders .......................................... 37
SECTION 3. REPRESENTATIONS AND WARRANTIES ................................ 38
3.1 Financial Condition ............................................. 38
3.2 No Change ....................................................... 39
3.3 Corporate Existence; Compliance with Law ........................ 39
3.4 Corporate Power; Authorization; Enforceable Obligations ......... 40
3.5 No Legal Bar .................................................... 40
3.6 No Material Litigation .......................................... 40
3.7 No Default ...................................................... 41
3.8 Ownership of Property; Liens .................................... 41
3.9 Intellectual Property ........................................... 42
3.10 Taxes ........................................................... 42
3.11 Federal Regulations ............................................. 42
3.12 Labor Matters ................................................... 43
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TABLE OF CONTENTS
(continued)
Page
3.13 ERISA ........................................................... 43
3.14 Investment Company Act; Other Regulations ....................... 43
3.15 Subsidiaries .................................................... 43
3.16 Use of Proceeds ................................................. 43
3.17 Environmental Matters ........................................... 44
3.18 Accuracy of Information, Etc .................................... 45
3.19 Security Documents .............................................. 45
3.20 Gas Imbalances .................................................. 46
3.21 Initial Reserve Report .......................................... 46
3.22 Insurance ....................................................... 46
3.23 Existing Hedging Agreements ..................................... 47
3.24 Marketing of Production ......................................... 47
3.25 Material Personal Property ...................................... 47
3.26 Exchange Act Reports ............................................ 47
SECTION 4. CONDITIONS PRECEDENT .......................................... 48
4.1 Conditions to Initial Extension of Credit ....................... 48
SECTION 5. AFFIRMATIVE COVENANTS ......................................... 50
5.1 Financial Reporting ............................................. 50
5.2 Certificates; Other Information ................................. 53
5.3 Payment of Obligations .......................................... 55
5.4 Conduct of Business and Maintenance of Existence, Etc ........... 55
5.5 Maintenance of Property; Insurance .............................. 55
5.6 Inspection of Property; Books and Records; Discussions .......... 57
5.7 Notices ......................................................... 57
5.8 Environmental Laws .............................................. 58
5.9 Additional Collateral, Etc ...................................... 58
5.10 Title Information ............................................... 59
5.11 Rating of Loans ................................................. 60
5.12 Oil and Gas Hedging Contracts ................................... 60
5.13 Further Assurances .............................................. 61
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TABLE OF CONTENTS
(continued)
Page
5.14 Maintenance of Reserve Value ................................................ 61
5.15 Cooperation Regarding Additional Budget ..................................... 61
SECTION 6. NEGATIVE COVENANTS ........................................................ 62
6.1 Limitation on Indebtedness .................................................. 62
6.2 Limitation on Liens ......................................................... 62
6.3 Limitation on Fundamental Changes ........................................... 63
6.4 Limitation on Disposition of Property ....................................... 63
6.5 Limitation on Restricted Payments ........................................... 64
6.6 Limitation on Capital Expenditures .......................................... 65
6.7 Limitation on Investments ................................................... 65
6.8 Limitation and Modifications of Organizational Documents and Revolving
Credit Facility ............................................................. 66
6.9 Limitation on Transactions with Affiliates .................................. 66
6.10 Limitation on Sales and Leasebacks .......................................... 67
6.11 Limitation on Negative Pledge Clauses ....................................... 67
6.12 Limitation on Restrictions on Subsidiary Distributions ...................... 67
6.13 Limitation on Lines of Business ............................................. 67
6.14 Limitation on Hedging Agreements ............................................ 67
6.15 Gas Imbalances, Take-or-Pay or Other Prepayments ............................ 67
6.16 Future Subsidiaries ......................................................... 68
6.17 Dormant Subsidiaries ........................................................ 68
6.18 Limitation on Changes in Fiscal Periods ..................................... 68
6.19 Minimum Consolidated EBITDA ................................................. 68
6.20 Leverage Ratio .............................................................. 68
6.21 Consolidated Fixed Charge Coverage .......................................... 68
SECTION 7. EVENTS OF DEFAULT ......................................................... 68
SECTION 8. THE AGENTS ................................................................ 71
8.1 Appointment and Authorization of Agents ..................................... 71
8.2 Delegation of Duties ........................................................ 72
8.3 Exculpatory Provisions ...................................................... 72
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TABLE OF CONTENTS
(continued)
Page
8.4 Reliance by Agents .......................................................... 72
8.5 Notice of Default or Event of Default ....................................... 72
8.6 Credit Decision ............................................................. 73
8.7 Costs and Expenses; Indemnification ......................................... 73
8.8 Agents in Individual Capacity ............................................... 74
8.9 Successor Administrative Agent .............................................. 74
8.10 Lender in Individual Capacity ............................................... 75
8.11 Withholding Taxes ........................................................... 75
8.12 Collateral Matters .......................................................... 77
8.13 Restrictions on Actions by Lenders; Sharing of Payments ..................... 78
8.14 Agency for Perfection ....................................................... 79
8.15 Payments by the Administrative Agent to the Lenders ......................... 79
8.16 Concerning the Collateral and Related Loan Documents ........................ 79
8.17 Field Audits and Examination Reports; Confidentiality; Disclaimers
by Lenders; Other Reports and Information ................................... 80
8.18 Several Obligations; No Liability ........................................... 81
8.19 The Arranger; the Syndication Agent ......................................... 81
SECTION 9. MISCELLANEOUS ............................................................. 81
9.1 Amendments and Waivers ...................................................... 81
9.2 Notices ..................................................................... 83
9.3 No Waiver; Cumulative Remedies .............................................. 84
9.4 Survival of Representations and Warranties .................................. 84
9.5 Payment of Expenses ......................................................... 84
9.6 Successors and Assigns; Participations and Assignments ...................... 85
9.7 Adjustments; Set-off ........................................................ 89
9.8 Counterparts ................................................................ 89
9.9 Severability ................................................................ 89
9.10 Integration ................................................................. 89
9.11 GOVERNING LAW ............................................................... 90
9.12 Submission To Jurisdiction; Waivers ......................................... 90
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TABLE OF CONTENTS
(coninued)
Page
9.13 Acknowledgments ............................................................. 90
9.14 Confidentiality ............................................................. 91
9.15 Release of Collateral and Guarantee Obligations ............................. 91
9.16 Accounting Changes .......................................................... 92
9.17 WAIVERS OF JURY TRIAL ....................................................... 92
9.18 Effect of Amendment and Restatement of the Existing Credit Agreement ........ 92
9.19 Usury Savings Clause ........................................................ 92
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TABLE OF CONTENTS
(continued)
SCHEDULES:
1.1 Commitments
1.2 Designated Account
1.3 Mortgages
1.4 Payment Office
1.5 Basis Differential
3.1(b) Disposition
3.15 Subsidiaries
3.19(a)-1 UCC Filing Jurisdictions
3.19(a)-2 UCC Financing Statements to Remain on File
3.19(a)-3 UCC Financing Statements to be Terminated
3.19(b) Mortgage Filing Jurisdictions
3.20 Gas Imbalances
3.22 Insurance
3.23 Hedging Agreements
3.24 Long Term Marketing Contracts
6.1(d) Existing Indebtedness
EXHIBITS:
A Form of Borrowing Notice
B Form of Compliance Certificate
C Form of Second Amended, Restated and Consolidated Guaranty and Collateral
Agreement
D Form of Mortgage Amendment
E Form of Note
F Form of Exemption Certificate
G-1 Form of Closing Certificate
G-2 Form of Secretary's Certificate
H Form of Legal Opinion of Xxxxxx & Xxxxxx, L.L.P.
I Form of Legal Opinion of Schully, Roberts, Slattery, Jaubert & Marino
J Form of Assignment and Acceptance
K Form of Purchase and Sale Agreement
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This AMENDED AND RESTATED CREDIT AGREEMENT, dated as of March 28,
2003, is among MISSION RESOURCES CORPORATION, a corporation formed under the
laws of the State of Delaware (the "Borrower"), the several banks and other
financial institutions or entities from time to time parties to this Agreement
(the "Lenders"), FARALLON ENERGY LENDING, LLC as sole advisor, sole lead
arranger and sole bookrunner (in such capacity, the "Arranger"), XXXXXXXXX &
COMPANY, INC., as the syndication agent (in such capacity, the "Syndication
Agent") and FOOTHILL CAPITAL CORPORATION, as the administrative agent (in such
capacity, the "Administrative Agent").
W I T N E S S E T H:
WHEREAS, the Borrower, those financial institutions party thereto
(collectively, the "Prior Lenders"), The Chase Manhattan Bank, as administrative
agent, BNP Paribas, as syndication agent, and First Union National Bank and
Fleet National Bank, as co-documentation agents, entered into that certain
Credit Agreement, dated as of May 16, 2001, as amended by First Amendment to
Credit Agreement, executed effective as of May 29, 2001, Second Amendment to
Credit Agreement, executed effective as of March 28, 2002, and Third Amendment
to Credit Agreement, executed effective October 7, 2002 (the "Existing Credit
Agreement");
WHEREAS, in connection with the Existing Credit Agreement, the
Borrower and certain of its subsidiaries executed and delivered to The Chase
Manhattan Bank, as administrative agent thereunder for the benefit of the Prior
Lenders, various guarantees, mortgages, deeds of trust, stock powers, financing
statements and other Loan Documents (as defined in the Existing Credit
Agreement) (as amended, modified and supplemented prior to the effectiveness of
this Agreement, together with the Existing Credit Agreement, the "Existing
Credit Documents");
WHEREAS, the Lenders and the Prior Lenders have entered into those
certain Assignment Agreements of even date herewith pursuant to which the Prior
Lenders assigned all of their rights and interests in and delegated all of their
commitments under the Existing Credit Agreement and the Existing Credit
Documents;
WHEREAS, the Borrower has requested that the Lenders amend and restate
the Existing Credit Agreement to make available a term loan facility (referred
to herein as the "Loan Facility"); and
WHEREAS, the Lenders are willing to amend and restate the Existing
Credit Agreement in order to make the Loan Facility available upon the terms and
subject to the conditions set forth herein;
NOW THEREFORE, in consideration of the mutual covenants and agreements
herein contained and of the loans, extensions of credit and commitments
hereinafter referred to, the parties hereto agree as follows:
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SECTION 1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the terms listed in this
Section 1.1 shall have the respective meanings set forth in this Section 1.1.
"10-7/8% Notes": the 10-7/8% Senior Subordinated Notes due 2007 of the
Borrower.
"ACH Transactions": any cash management or related services (including
the Automated Clearing House processing of electronic funds transfers through
the direct Federal Reserve Fedline system) provided by Xxxxx Fargo or its
Affiliates for the account of the Borrower or its Subsidiaries.
"Acceptable Oil and Gas Hedging Agreement": an Oil and Gas Hedging
Contract (i) with Xxxxx Fargo or any of its affiliates or (ii) (a) with a
counterparty reasonably acceptable to the Administrative Agent, (b) pursuant to
an agreement the terms of which are reasonably acceptable to the Administrative
Agent, and (c) the arrangements of which are otherwise reasonably acceptable to
the Administrative Agent.
"Additional Commitment": as to any Lender, the obligation, if any, of
such Lender to make a Loan to the Borrower pursuant to Section 2.1(b) in a
principal amount not to exceed the amount set forth under the heading
"Additional Commitments" opposite such Lender's name on Schedule 1.1 attached
hereto, or, as the case may be, in the Assignment and Acceptance pursuant to
which such Lender became a party hereto, as the same may be changed from time to
time pursuant to the terms hereof. The original aggregate amount of the
Additional Commitments is $10,000,000.
"Additional Budget": as defined in Section 5.2(c).
"Additional Extensions of Credit": as defined in Section 9.1.
"Additional Loans": as defined in Section 2.1(b).
"Adjusted PV-10 Value": an aggregate net present value of Oil and Gas
Properties calculated before income taxes and discounted at 10% in accordance
with the reporting requirements concerning oil and gas reserves contained in
Regulations S-K and S-X promulgated by the SEC, provided that in calculating
such net present value, pricing for the first three years will be equal to NYMEX
strip pricing for crude oil and natural gas (held flat after the first three
years at the average strip pricing for the third year of such three-year
period), determined as of the date as of which such calculation is being made
and adjusted for historical basis differentials, and using the following risk
factors on proved reserve categories: PDP: 100%, PDNP: 75%, PUD: 50%, possible
reserves: 0% and probable reserves: 0%.
"Administrative Agent": as defined in the preamble hereto.
"Affected Lender": as defined in Section 2.13.
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"Affiliate": as to any Person, any other Person that, directly or
indirectly, is in control of, is controlled by, or is under common control with,
such Person. For purposes of this definition, "control" of a Person means the
power, directly or indirectly, either to (a) vote 10% or more of the securities
having ordinary voting power for the election of directors (or persons
performing similar functions) of such Person or (b) direct or cause the
direction of the management and policies of such Person, whether by contract or
otherwise. Notwithstanding the foregoing, no Lender shall be deemed to be an
Affiliate of the Loan Parties.
"Agent-Related Persons": each of the Agents together with their
respective affiliates, officers, directors, employees, and agents.
"Agents": the collective reference to the Syndication Agent, the
Arranger and the Administrative Agent.
"Agreement": this Amended and Restated Credit Agreement, as amended,
supplemented or otherwise modified from time to time.
"Applicable Interest Rate": (a) during the First Period, 12.0% per
annum and (b) during the Second Period, 13.0% per annum.
"Approved Engineers": as defined in Section 5.1(e).
"Arranger": as defined in the preamble hereto.
"Asset Sale": any Disposition of Property or series of related
Dispositions of Property (excluding any such Disposition permitted by clauses
(a), (b), (c), (e), (f), (h), (i) and (j) of Section 6.4 and any Disposition of
Property in connection with a Recovery Event).
"Assignee": as defined in Section 9.6(c).
"Assignment and Acceptance": as defined in Section 9.6(c).
"Assignor": as defined in Section 9.6(c).
"Authorized Person": any officer or other employee of the Borrower or
any Guarantor.
"Bank Product Agreements": those certain agreements entered into from
time to time by Borrower or its Subsidiaries in connection with any of the Bank
Products.
"Bank Product Obligations": all obligations, liabilities, contingent
reimbursement obligations, fees, and expenses owing by Borrower or its
Subsidiaries to Xxxxx Fargo or its Affiliates pursuant to or evidenced by the
Bank Product Agreements and irrespective of whether for the payment of money,
whether direct or indirect, absolute or contingent, due or to become due, now
existing or hereafter arising, and including all such amounts that Borrower is
obligated to reimburse to Lender as a result of Lender purchasing participations
or executing indemnities or reimbursement obligations with respect to the Bank
Products provided to Borrower or its Subsidiaries pursuant to the Bank Product
Agreements.
3
"Bank Products": any service or facility extended to Borrower or its
Subsidiaries by Xxxxx Fargo or any Affiliate of Xxxxx Fargo including: (a)
credit cards, (b) credit card processing services, (c) debit cards, (d) purchase
cards, (e) ACH Transactions, (f) cash management, including controlled
disbursement, accounts or services, or (g) Hedging Agreements.
"Bankruptcy Event": as defined in Section 7(f).
"Basis Differential": in the case of any Oil and Gas Property, the
difference between the NYMEX futures contract prices and the sales prices at the
delivery point where the oil or gas, as the case may be, produced by such Oil
and Gas Property, is sold.
"Benefitted Lender": as defined in Section 9.7(a).
"Board": the Board of Governors of the Federal Reserve System of the
United States (or any successor).
"Borrower": as defined in the preamble hereto.
"Borrowing Date": any Business Day specified by the Borrower as a date
on which the Borrower requests the relevant Lenders to make Loans hereunder.
"Borrowing Notice": with respect to any request for borrowing of Loans
hereunder, a notice from the Borrower, substantially in the form of, and
containing the information prescribed by, Exhibit A, delivered to the
Administrative Agent.
"Budget": means the Initial Budget together with each Additional
Budget.
"Business Day": a day other than a Saturday, Sunday or other day on
which commercial banks in New York City or Houston, Texas are authorized or
required by law to close.
"Capital Expenditures": for any period, with respect to any Person,
the aggregate of all expenditures by such Person for the acquisition or leasing
(pursuant to a capital lease) of fixed or capital assets or additions to
equipment (including replacements, capitalized repairs and improvements during
such period) which are required to be capitalized under GAAP on a balance sheet
of such Person; provided that "Capital Expenditures" shall exclude expenditures
of property and casualty insurance or any award or other compensation with
respect to any condemnations of property (or any transfer or disposition of
property in lieu of condemnation), in compliance with Section 5.5(c).
"Capital Lease Obligations": with respect to any Person, the
obligations of such Person to pay rent or other amounts under any lease of (or
other arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under GAAP;
and, for the purposes of this Agreement, the amount of such obligations at any
time shall be the capitalized amount thereof at such time determined in
accordance with GAAP.
4
"Capital Stock": any and all shares, interests, participations or
other equivalents (however designated) of capital stock of a corporation, any
and all equivalent ownership interests in a Person (other than a corporation)
and any and all warrants, rights or options to purchase any of the foregoing.
"Cash Equivalents": (a) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition; (b)
certificates of deposit, time deposits, Eurodollar time deposits or overnight
bank deposits having maturities of six months or less from the date of
acquisition issued by any Lender or by any commercial bank organized under the
laws of the United States of America or any state thereof having combined
capital and surplus of not less than $500,000,000; (c) commercial paper of an
issuer rated at least A-2 by Standard & Poor's Ratings Services ("S&P") or P-2
by Xxxxx'x Investors Service, Inc. ("Moody's"), or carrying an equivalent rating
by a nationally recognized rating agency, if both of the two named rating
agencies cease publishing ratings of commercial paper issuers generally, and
maturing within six months from the date of acquisition; (d) repurchase
obligations of any Lender or of any commercial bank satisfying the requirements
of clause (b) of this definition, having a term of not more than 30 days with
respect to securities issued or fully guaranteed or insured by the United States
government; (e) securities with maturities of one year or less from the date of
acquisition issued or fully guaranteed by any state, commonwealth or territory
of the United States, by any political subdivision or taxing authority of any
such state, commonwealth or territory or by any foreign government, the
securities of which state, commonwealth, territory, political subdivision,
taxing authority or foreign government (as the case may be) are rated at least A
by S&P or A by Moody's; (f) securities with maturities of six months or less
from the date of acquisition backed by standby letters of credit issued by any
Lender or any commercial bank satisfying the requirements of clause (b) of this
definition; and (g) shares of money market mutual or similar funds which are at
least 95% invested in assets satisfying the requirements of clauses (a) through
(f) of this definition.
"Casualty Event" shall mean any loss, casualty or other insured damage
to, or any taking under power of eminent domain or by condemnation or similar
proceeding of, any Property or asset of the Borrower or any of its Subsidiaries
having a fair market value in excess of $1,000,000.
"Change of Control": the occurrence of any of the following events:
(a) any "person" (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act of 1934, as amended (the "Exchange Act")), is or becomes the
beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act,
except that for purposes of this clause (a) such person shall be deemed to have
"beneficial ownership" of all shares that such person has the right to acquire,
whether such right is exercisable immediately or only after the passage of
time), directly or indirectly, of more than 45% of the total voting power of the
Voting Stock of the Borrower; (b) the merger or consolidation of the Borrower
with or into another Person or the merger or consolidation of another Person
with or into the Borrower, or the sale of all or substantially all the assets of
the Borrower to another Person, and, in the case of any such merger or
consolidation, the Voting Stock of the Borrower that is outstanding immediately
prior to such transaction and is changed into or exchanged for cash, securities
or property, unless pursuant to
5
such transaction such Voting Stock is changed or exchanged for, in addition to
any other consideration, securities of the surviving corporation that represent,
immediately after such transaction, at least a majority of the aggregate voting
power of the Voting Stock of the surviving corporation; or (c) the board of
directors of the Borrower shall cease to consist of a majority of Continuing
Directors; provided that the occurrence of any event specified above shall not
be deemed a Change of Control if such event occurs in connection with, or as the
result of, the exchange of 10-7/8% Notes for Voting Stock or the issuance of
Voting Stock for cash in connection with an exchange of 10-7/8% Notes for any
combination of cash, Voting Stock or Subordinated Indebtedness.
"Closing Date": the date on which the conditions precedent set forth
in Section 4.1 shall have been satisfied, which date shall be not later than
April 30, 2003.
"Code": the Internal Revenue Code of 1986, as amended from time to
time.
"Collateral": all Property of the Loan Parties, now owned or hereafter
acquired, upon which a Lien is purported to be created by any Security Document.
"Collections": all cash, checks, notes, instruments, and other items
of payment (including insurance proceeds, proceeds of cash sales, rental
proceeds, and tax refunds) of any Loan Party.
"Commitment": with respect to any Lender, such Lender's Initial
Commitment and the Additional Commitment of such Lender.
"Commonly Controlled Entity": an entity, whether or not incorporated,
that is under common control with the Borrower within the meaning of Section
4001 of ERISA or is part of a group that includes the Borrower and that is
treated as a single employer under Section 414 of the Code.
"Compliance Certificate": a certificate duly executed by a Responsible
Officer, substantially in the form of Exhibit B.
"Consolidated EBITDA": of any Person for any period, Consolidated Net
Income of such Person and its Subsidiaries for such period plus, without
duplication and to the extent reflected as a charge in the statement of such
Consolidated Net Income for such period, the sum of (a) income tax expense, (b)
Consolidated Interest Expense of such Person and its Subsidiaries, amortization
or writeoff of debt discount and debt issuance costs and commissions, discounts
and other fees and charges associated with Indebtedness, (c) depreciation and
amortization expense, (d) amortization of intangibles (including, but not
limited to, goodwill) and organization costs, (e) any extraordinary, unusual or
non-recurring expenses or losses (including, whether or not otherwise includable
as a separate item in the statement of such Consolidated Net Income for such
period, losses on sales of assets outside of the ordinary course of business)
and (f) any other non-cash charges, and minus, to the extent included in the
statement of such Consolidated Net Income for such period, the sum of (a)
interest income (except to the extent taken into account in determining
Consolidated Interest Expense), (b) any extraordinary, unusual or non-recurring
income or gains (including, whether or not otherwise includable as a separate
item in the statement of such Consolidated Net Income for such period, gains on
the sales of assets outside
6
of the ordinary course of business) and (c) any other non-cash income, all as
determined on a consolidated basis.
"Consolidated Fixed Charge Coverage": for any period, the sum (without
duplication) of (a) the Consolidated EBITDA of the Borrower during such period
minus (b) the Capital Expenditures for the Borrower and its consolidated
Subsidiaries during such period minus (c) the income tax expense of the Borrower
and its consolidated Subsidiaries for such period to the extent paid (or
required to be paid) in cash with respect to such period minus (d) the
Consolidated Interest Expense of the Borrower and its consolidated Subsidiaries
for such period to the extent paid (or required to be paid) in cash with respect
to such period plus (e) $7,000,000.
"Consolidated Interest Expense": of any Person for any period, total
interest expense (including that attributable to Capital Lease Obligations) of
such Person and its Subsidiaries for such period with respect to all outstanding
Indebtedness of such Person and its Subsidiaries (including, without limitation,
all commissions, discounts and other fees and charges owed by such Person with
respect to letters of credit and bankers' acceptance financing and net costs of
such Person under Hedge Agreements in respect of interest rates to the extent
such net costs are allocable to such period in accordance with GAAP).
"Consolidated Net Income": with respect to the Borrower and its
consolidated Subsidiaries, for any period, the aggregate of the net income (or
loss) of the Borrower and its consolidated Subsidiaries after allowances for
taxes for such period determined on a consolidated basis in accordance with
GAAP; provided that there shall be excluded from such net income (to the extent
otherwise included therein) the following: (i) the net income of any Person in
which the Borrower or any consolidated Subsidiary has an interest (which
interest does not cause the net income of such other Person to be consolidated
with the net income of the Borrower and its consolidated Subsidiaries in
accordance with GAAP), except to the extent of the amount of dividends or
distributions actually paid in such period by such other Person to the Borrower
or to a consolidated Subsidiary, as the case may be; (ii) the net income (but
not the loss) to the extent that the declaration or payment of dividends or
similar distributions or transfers or loans by that Consolidated Subsidiary is
not at the time permitted by operation of the terms of its charter or any
agreement, instrument or Governmental Requirement applicable to such
Consolidated Subsidiary or is otherwise restricted or prohibited, in each case
determined in accordance with GAAP; (iii) the net income (or loss) of any Person
acquired in a pooling-of-interests transaction for any period prior to the date
of such transaction; (iv) any extraordinary gains or losses during such period,
including gains or losses attributable to Property sales not in the ordinary
course of business, it being acknowledged and agreed that sales of Oil and Gas
Properties or interests therein are in the ordinary course of the Borrower's
business; and (v) the cumulative effect of a change in accounting principles and
any gains or losses attributable to writeups or writedowns of assets.
"Continuing Directors": the directors of the Borrower on the Closing
Date, after giving effect to the transactions contemplated hereby, and each
other director of the Borrower, if, in each case, such other director is
appointed by at least 66-2/3% of the then Continuing Directors or such other
director's nomination for election to the board of directors of the Borrower is
recommended by at least 66-2/3% of the then Continuing Directors or such other
7
director receives the vote of a majority of the Permitted Holders in his or her
election by the shareholders of the Borrower.
"Contractual Obligation": as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
Property is bound.
"Control Investment Affiliate": as to any Person, any other Person
that (a) directly or indirectly, is in control of, is controlled by, or is under
common control with, such Person and (b) is organized by such Person primarily
for the purpose of making equity or debt investments in one or more companies.
For purposes of this definition, "control" of a Person means the power, directly
or indirectly, to direct or cause the direction of the management and policies
of such Person, whether by contract or otherwise.
"DDA": any checking or other demand deposit account maintained by the
Borrower.
"Dedicated Free Cash": as to the Borrower, one-half of the amount by
which the Discretionary Cash Flow for the fiscal year ending December 31, 2003
exceeds $35,000,000.
"Default": any of the events specified in Section 7, whether or not
any requirement for the giving of notice, the lapse of time, or both, has been
satisfied.
"Deferred Financing Fee": as defined in Section 2.5(b).
"Derivatives Counterparty": as defined in Section 6.5.
"Designated Account": that certain check or other demand deposit
account maintained by the Borrower identified on Schedule 1.2.
"Designated Account Bank": the bank identified on Schedule 1.2.
"Disclosure Documents": as defined in Section 3.26.
"Discretionary Cash Flow": as to the Borrower (a) the Consolidated
EBITDA of the Borrower and its consolidated Subsidiaries for the fiscal year
ending December 31, 2003 minus (b) the sum of (i) the Consolidated Interest
Expense of the Borrower and its Consolidated Subsidiaries for such fiscal year
to the extent paid (or required to be paid) in cash with respect to such fiscal
year and (ii) the income tax expense of the Borrower and its Consolidated
Subsidiaries for such fiscal year to the extent paid (or required to be paid) in
cash with respect to such fiscal year.
"Disposition": with respect to any Property, any sale, lease, sale and
leaseback, assignment, conveyance, transfer or other disposition thereof (but
excluding the creation of any lien or the payment of any cash in the ordinary
course of business and not otherwise prohibited by Sections 6.5, 6.6 or 6.7);
and the terms "Dispose" and "Disposed of" shall have correlative meanings.
8
"Disqualified Stock": as to any Person, any Capital Stock of such
Person that by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable) or otherwise (including upon the
occurrence of an event) requires the payment of dividends (other than dividends
payable solely in common stock which does not otherwise constitute Disqualified
Stock) or matures or is required to be redeemed (pursuant to any sinking fund
obligation or otherwise) or is convertible into or exchangeable for Indebtedness
or is redeemable at the option of the holder thereof, in whole or in part, at
any time on or prior to, or within two years after, the date hereof.
"Dollars" and "$": lawful currency of the United States of America.
"Dormant Subsidiary": Bellwether Cayman, Inc., a company formed under
the laws of the Cayman Islands.
"Draft Financial Statements": as defined in Section 3.1(b).
"Environmental Laws": any and all applicable laws, rules, orders,
regulations, statutes, ordinances, codes, decrees, or other legally enforceable
requirements (including, without limitation, common law) of any international
authority, foreign government, the United States, or any state, local, municipal
or other governmental authority, regulating, relating to or imposing liability
or standards of conduct concerning protection of the environment, natural
resources or human health, or employee health and safety, as has been, is now,
or may at any time hereafter be, in effect, including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
(S)9601 et seq., the Hazardous Materials Transportation Act, 49 U.S.C. (S) 5101
et seq., the Resource Conservation and Recovery Act, 42 U.S.C. (S) 6901 et seq.,
the Clean Water Act, 33 U.S.C. (S) 1251 et seq., the Clean Air Act, 42 U.S.C.
(S) 7401 et seq., the Toxic Substances Control Act, 15 U.S.C. (S) 2601 et seq.,
the Federal Insecticide, Fungicide, and Rodenticide Act, 7 U.S.C. (S) 136 et
seq., and the Oil Pollution Act of 1990, 33 U.S.C. (S) 2701 et seq., and the
regulations promulgated pursuant thereto, and all analogous state or local
statutes.
"Environmental Permits": any and all permits, licenses, approvals,
registrations, notifications, exemptions and other authorizations required under
any Environmental Law.
"ERISA": the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Event of Default": any of the events specified in Section 7, provided
that any requirement for the giving of notice, the lapse of time, or both, has
been satisfied.
"Excepted Liens": (i) Liens for taxes, assessments or other
governmental charges or levies which are not delinquent or which are being
contested in good faith by appropriate action and for which adequate reserves
have been maintained in accordance with GAAP; (ii) Liens in connection with
workers' compensation, unemployment insurance or other social security, old age
pension or public liability obligations which are not delinquent or which are
being contested in good faith by appropriate action and for which adequate
reserves have been maintained in accordance with GAAP; (iii) operators',
vendors', carriers', warehousemen's, repairmen's, mechanics', suppliers',
workers', materialmen's, construction or other like Liens
9
arising by operation of law in the ordinary course of business or incident to
the exploration, development, operation and maintenance of Oil and Gas
Properties or statutory landlord's liens, including lessee or operator
obligations under statutes, governmental regulations or instruments related to
the ownership, exploration and production of oil, gas and minerals on private,
state, federal or foreign lands or waters, each of which is in respect of
obligations that have not been outstanding more than ninety (90) days or which
are being contested in good faith by appropriate proceedings and for which
adequate reserves have been maintained in accordance with GAAP; (iv) Liens which
(A) arise in the ordinary course of business under operating agreements, joint
venture agreements, oil and gas partnership agreements, oil and gas leases,
farm-out agreements, division orders, contracts for the sale, transportation or
exchange of oil and natural gas, unitization and pooling declarations and
agreements, area of mutual interest agreements, overriding royalty agreements,
marketing agreements, processing agreements, net profits agreements, development
agreements, gas balancing or deferred production agreements; injection,
repressuring and recycling agreements, salt water or other disposal agreements,
seismic or other geophysical permits or agreements, and other agreements which
are usual and customary in the oil and gas business and (B) are for claims which
either are not delinquent or are being contested in good faith by appropriate
proceedings and as to which the Borrower or its Subsidiaries shall have set
aside on its books such reserves as may be required pursuant to GAAP, provided
that any such Lien referred to in this clause does not materially impair the use
of the property covered by such Lien for the purposes for which such Property is
held by the Borrower or any of its Subsidiaries or materially impair the value
of such Property subject thereto; (v) Liens reserved in oil and gas mineral
leases, or created by statute, to secure royalty, net profits interests, bonus
payments, rental payments or other payments out of or with respect to the
production, transportation or processing of Hydrocarbons, and compliance with
the terms of such Hydrocarbon Interests, provided that such Liens secure claims
which either are not delinquent or are being contested in good faith by
appropriate proceedings and as to which the Borrower or any of its Subsidiaries
shall have set aside on its books such reserves as may be required pursuant to
GAAP; (vi) Liens arising solely by virtue of any statutory or common law
provision relating to banker's liens, rights of set-off or similar rights and
remedies and burdening only deposit accounts or other funds maintained with a
creditor depository institution, provided that (A) no such deposit account is a
dedicated cash collateral account or is subject to restrictions against access
by the depository in excess of those set forth by regulations promulgated by
Board of Governors of the Federal Reserve System, and (B) no such deposit
account is intended by the Borrower or any of its Subsidiaries to provide
collateral to the depository institution; (vii) all other non-consensual defects
in title (which might otherwise constitute Liens) arising in the ordinary course
of the Borrower's or such Subsidiary's business or incidental to the ownership
of their respective Properties; provided that no such Liens shall secure the
payment of Indebtedness or shall, in the aggregate, materially detract from the
value or marketability of the Property subject thereto or materially impair the
use or operation thereof in the operation of the business of the Borrower or
such Subsidiary; (viii) encumbrances (other than to secure the payment of
borrowed money or the deferred purchase price of Property or services),
easements, restrictions, servitudes, permits, conditions, covenants, exceptions
or reservations in any Property of the Borrower or any Subsidiary for the
purpose of roads, pipelines, transmission lines, transportation lines,
distribution lines for the removal of gas, oil, coal or other minerals or
timber, and other like purposes, or for the joint or common use of real estate,
rights of way, facilities and equipment, and defects, irregularities, zoning
restrictions and deficiencies in title of any Property which in
10
the aggregate do not materially impair the use of such Property for the purposes
of which such Property is held by the Borrower or any Subsidiary or materially
impair the value of such Property subject thereto; (ix) Liens on cash or
securities pledged to secure performance of tenders, surety and appeal bonds,
government contracts, performance and return of money bonds, bids, trade
contracts, leases, statutory obligations, regulatory obligations and other
obligations of a like nature incurred in the ordinary course of business; and
(x) judgment Liens not giving rise to an Event of Default provided that (A) any
appropriate legal proceedings which may have been duly initiated for the review
of such judgment shall not have been finally terminated or the period within
which such proceedings may be initiated shall not have expired and (B) no action
to enforce such Lien has been commenced.
"Excess Free Cash": as to the Borrower for the fiscal year ending
December 31, 2003, one-half of the amount by which the Discretionary Cash Flow
for such fiscal year exceeds $35,000,000.
"Existing Counterparty": the counterparties under the Existing Hedge
Agreements.
"Existing Credit Agreement": as defined in the recitals hereto.
"Existing Credit Documents": as defined in the recitals hereto.
"Existing Oil and Gas Hedging Contracts": as defined in Section 3.23.
"Farallon": Farallon Capital Management, LLC.
"Farallon Entity": any of Farallon Capital Management, LLC, Farallon
Energy Lending, L.L.C., Farallon Partners, LLC and any entity under common
controlled with any of the foregoing.
"Federal Funds Effective Rate": 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 on the next
succeeding 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 the
quotations for the day of such transactions received by Citibank, N.A. (New York
office), from three federal funds brokers of recognized standing selected by it.
"Fee Letter": that certain fee letter, dated as of March 28, 2003,
between Borrower and the Administrative Agent, in form and substance
satisfactory to the Administrative Agent.
"Fee Payment Date": as defined in Section 2.5(b).
"First Period": the period beginning on the Closing Date through and
including February 16, 2004.
"Foothill": Foothill Capital Corporation, a California corporation.
11
"Funding Office": the office specified from time to time by the
Administrative Agent as its funding office as set forth on Schedule 1.3 or
otherwise by notice to the Borrower and the Lenders.
"GAAP": generally accepted accounting principles in the United States
of America as in effect from time to time.
"Governmental Authority": any nation or government, any state or other
political subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government,
any province, commonwealth, territory, possession, county, parish, town,
township, village or municipality, whether now or hereafter constituted or
existing.
"Governmental Requirement": any law, statute, code, ordinance, order,
determination, rule, regulation, judgment, decree, injunction, franchise,
permit, certificate, license, authorization or other directive or requirement,
including, without limitation, Environmental Laws, energy regulations and
occupational, safety and health standards or controls, of any Governmental
Authority.
"Granting Lender": as defined in Section 9.6(g).
"Guarantee Obligation": as to any Person (the "guaranteeing person"),
any obligation of (a) the guaranteeing person or (b) another Person (including,
without limitation, any bank under any letter of credit), if to induce the
creation of such obligation of such other Person the guaranteeing person has
issued a reimbursement, counterindemnity or similar obligation, in either case
guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends or
other obligations (the "primary obligations") of any other third Person (the
"primary obligor") in any manner, whether directly or indirectly, including,
without limitation, any obligation of the guaranteeing person, whether or not
contingent, (i) to purchase any such primary obligation or any Property
constituting direct or indirect security therefor, (ii) to advance or supply
funds (1) for the purchase or payment of any such primary obligation or (2) to
maintain working capital or equity capital of the primary obligor or otherwise
to maintain the net worth or solvency of the primary obligor, (iii) to purchase
Property, securities or services, in each case, primarily for the purpose of
assuring the owner of any such primary obligation of the ability of the primary
obligor to make payment of such primary obligation or (iv) otherwise to assure
or hold harmless the owner of any such primary obligation against loss in
respect thereof; provided, however, that the term Guarantee Obligation shall not
include endorsements of instruments for deposit or collection in the ordinary
course of business. The amount of any Guarantee Obligation of any guaranteeing
person shall be deemed to be the lower of (a) an amount equal to the stated or
determinable amount of the primary obligation in respect of which such Guarantee
Obligation is made and (b) the maximum amount for which such guaranteeing person
may be liable pursuant to the terms of the instrument embodying such Guarantee
Obligation, unless such primary obligation and the maximum amount for which such
guaranteeing person may be liable are not stated or determinable, in which case
the amount of such Guarantee Obligation shall be such guaranteeing person's
maximum reasonably anticipated liability in respect thereof as determined by the
Borrower in good faith.
12
"Guarantors": a collective reference to Black Hawk Oil Company, a
Delaware corporation, Mission E&P Limited Partnership, a Texas limited
partnership, Mission Holdings LLC, a Delaware limited liability company, and Pan
American Energy Finance Corp., a Delaware corporation.
"Guaranty and Collateral Agreement": the Second Amended, Restated and
Consolidated Guaranty and Collateral Agreement to be executed and delivered by
the Loan Parties, substantially in the form of Exhibit C, as the same may be
amended, supplemented or otherwise modified from time to time.
"Hedging Agreement": collectively, any Rate Management Agreement
and/or Oil and Gas Hedging Contract.
"Hedging Obligations": with respect to any Person, all liabilities
(including but not limited to obligations and liabilities arising in connection
with or as a result of early or premature termination of a Hedging Agreement,
whether or not occurring as a result of a default thereunder) of such Person
under a Hedging Agreement.
"Highest Lawful Rate" shall mean, with respect to each Lender, the
maximum nonusurious interest rate, if any, that at any time or from time to time
may be contracted for, taken, reserved, charged or received on the Loans or on
other Indebtedness under laws applicable to such Lender which are presently in
effect or, to the extent allowed by law, under such applicable laws which may
hereafter be in effect and which allow a higher maximum nonusurious interest
rate than applicable laws now allow.
"Hydrocarbons": collectively, oil, gas, casinghead gas, drip gasoline,
natural gasoline, condensate, distillate and all other liquid or gaseous
hydrocarbons and related minerals and all products therefrom, in each case
whether in a natural or a processed state.
"Hydrocarbon Interests": all rights, titles and interests in and to
oil and gas leases, oil, gas and mineral leases, other Hydrocarbon leases,
mineral interests, mineral servitudes, overriding royalty interests, royalty
interests, net profits interests, production payment interests, and other
similar interests.
"Indebtedness": of any Person at any date, without duplication (a) all
indebtedness of such Person for borrowed money, (b) all obligations of such
Person for the deferred purchase price of Property or services (other than trade
payables incurred in the ordinary course of such Person's business), (c) all
obligations of such Person evidenced by notes, bonds, debentures or other
similar instruments, (d) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to Property
acquired by such Person (even though the rights and remedies of the seller or
lender under such agreement in the event of default are limited to repossession
or sale of such Property), (e) all Capital Lease Obligations of such Person, (f)
all obligations of such Person, contingent or otherwise, as an account party or
applicant under acceptance, letter of credit or similar facilities, (g) all
obligations of such Person, contingent or otherwise, to purchase, redeem, retire
or otherwise acquire for value any Capital Stock of such Person, (h) all
Guarantee Obligations of such Person in respect of obligations of the kind
referred to in clauses (a) through (g) above; (i) all
13
obligations of the kind referred to in clauses (a) through (h) above secured by
(or for which the holder of such obligation has an existing right, contingent or
otherwise, to be secured by) any Lien on Property (including, without
limitation, accounts and contract rights) owned by such Person, whether or not
such Person has assumed or become liable for the payment of such obligation and
(j) for the purposes of Section 7(e) only, all obligations (netted, to the
extent provided for therein) of such Person in respect of Hedging Agreements.
"Indemnified Liabilities": as defined in Section 9.5.
"Indemnitee": as defined in Section 9.5.
"Initial Budget": as defined in Section 4.1(g).
"Initial Commitment": as to any Lender, the obligation of such Lender,
if any, to make a Loan to the Borrower pursuant to Section 2.1(a) in a principal
amount not to exceed the amount set forth under the heading "Initial
Commitments" opposite such Lender's name on Schedule 1.1 attached hereto, or, as
the case may be, in the Assignment and Acceptance pursuant to which such Lender
became a party hereto, as the same may be changed from time to time pursuant to
the terms hereof. The original aggregate amount of the Initial Commitments is
$80,000,000.
"Initial Equity Issuance": as defined in Section 2.7(a).
"Initial Equity Issuance Excess Proceeds: as defined in Section
2.7(a).
"Initial Loans": as defined in Section 2.1(a).
"Initial Reserve Report": as defined in Section 3.21.
"Insolvency": with respect to any Multiemployer Plan, the condition
that such Plan is insolvent within the meaning of Section 4245 of ERISA, and the
term "Insolvent" shall have a correlative meaning.
"Intellectual Property": the collective reference to all rights,
priorities and privileges relating to intellectual property, whether arising
under United States, multinational or foreign laws or otherwise, including,
without limitation, copyrights, copyright licenses, patents, patent licenses,
trademarks, trademark licenses, technology, know-how and processes, and all
rights to xxx at law or in equity for any infringement or other impairment
thereof, including the right to receive all proceeds and damages therefrom.
"Interest Payment Date": the first Business Day of each month
beginning April 2003.
"Investments": as defined in Section 6.7.
"IRC": Internal Revenue Code of 1986, as amended, and the regulations
promulgated thereunder.
14
"IRS": U.S. Internal Revenue Service.
"Lender Group": individually and collectively, each of the Lenders and
the Administrative Agent, the Arranger and the Syndication Agent.
"Lender Group Expenses": all (a) costs or expenses (including taxes,
and insurance premiums) required to be paid by the Borrower under any of the
Loan Documents that are paid or incurred by any one or more members of the
Lender Group, (b) reasonable fees or charges paid or incurred by any one or more
members of the Lender Group in connection with any Loan Document, including,
fees or charges for photocopying, notarization, couriers and messengers,
telecommunication, public record searches (including tax lien and judgment
searches, and searches for liens under the Uniform Commercial Code) and
including searches with the patent and trademark office, the copyright office,
or the department of motor vehicles), filing, recording, publication, appraisal
(including periodic Collateral appraisals, business valuations or examinations
of the Borrower's or any Guarantors' Oil and Gas Properties to the extent of the
fees and charges (and up to the amount of any limitation) contained in this
Agreement), and environmental audits, (c) costs and expenses incurred by any one
or more members of the Lender Group in the disbursement of funds to the Borrower
(by wire transfer or otherwise) pursuant to any Loan Document, (d) reasonable
charges paid or incurred by any one or more members of the Lender Group
resulting from the dishonor of checks, (e) reasonable costs and expenses paid or
incurred by the Lender Group to correct any default or enforce any provision of
the Loan Documents, or in gaining possession of, maintaining, handling,
preserving, storing, shipping, selling, preparing for sale, or advertising to
sell the Collateral, or any portion thereof, irrespective of whether a sale is
consummated, (f) reasonable audit fees and expenses of any one or more members
of the Lender Group related to audit examinations of the books and records to
the extent of the fees and charges (and up to the amount of any limitation)
contained in this Agreement, (g) reasonable costs and expenses of third party
claims or any other suit paid or incurred by any one or more members of the
Lender Group in enforcing or defending the Loan Documents or in connection with
the transactions contemplated by the Loan Documents or any one or more members
of the Lender Group's relationship with the Borrower or any guarantor of the
Obligations, (h) the Administrative Agent's reasonable fees and expenses
(including attorneys' fees) incurred in advising, structuring, drafting,
reviewing, administering, or amending the Loan Documents, and (i) the
Administrative Agent's and each Lender's reasonable fees and expenses (including
attorneys' fees) incurred in terminating, enforcing (including attorneys' fees
and expenses incurred in connection with a "workout," a "restructuring," or an
Bankruptcy Event concerning the Borrower or in exercising rights or remedies
under the Loan Documents), or defending the Loan Documents, irrespective of
whether suit is brought, or in taking any Remedial Action concerning the
Collateral.
"Lenders": as defined in the preamble hereto.
"Leverage Ratio": as at the last day of any fiscal quarter of the
Borrower, the ratio of (a) the aggregate principal amount of the Loans
outstanding plus the aggregate principal amount of all Indebtedness which is
pari passu with or senior in right of payment to the Loans as of such date
(excluding Indebtedness under any Hedging Agreement) to (b) Consolidated EBITDA
of the Borrower and its Subsidiaries for the period of four fiscal quarters
ending on such day. Notwithstanding the foregoing, until four full fiscal
quarters have elapsed after the
15
Closing Date, the Leverage Ratio will be calculated with respect to the number
of full fiscal quarters elapsed since the Closing Date and, with respect to the
calculation of the Leverage Ratio (i) for the first full fiscal quarter after
the Closing Date, consolidated EBITDA for such period will be multiplied by
four, (ii) for the period consisting of the first two fiscal quarters after the
Closing Date, consolidated EBITDA will be multiplied by two and (iii) for the
period consisting of the first three fiscal quarters after the Closing Date,
consolidated EBITDA will be multiplied by four-thirds.
"Lien": any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), charge or other security
interest or any preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including, without limitation, any
conditional sale or other title retention agreement and any capital lease having
substantially the same economic effect as any of the foregoing), in each case
intended as security.
"Loans": the Initial Loans and the Additional Loans.
"Loan Documents": this Agreement, the Security Documents, the
Syndication Letter Agreement, the Fee Letter and the Notes.
"Loan Facility": as defined in the recitals hereto.
"Loan Parties": the Borrower and the Guarantors.
"Loan Percentage": at any time, with respect to any Lender (i) when
used with respect to Initial Loans or Initial Commitments, the percentage which
such Lender's Initial Loan or Initial Commitment then constitutes of the
aggregate Initial Loans or Initial Commitments, (ii) when used with respect to
Additional Loans or Additional Commitments, the percentage which such Lender's
Additional Loans or Additional Commitment then constitutes of the aggregate
Additional Loans or Additional Commitments and (iii) when used with respect to
Loans or Commitments as a whole (and not with respect to Initial Loans,
Additional Loans, Initial Commitments or Additional Commitments in particular),
the percentage which such Lender's Commitment then constitutes of the aggregate
Commitments (or, at any time after the Closing Date, the percentage which the
aggregate principal amount of such Lender's Loans then outstanding constitutes
of the aggregate principal amount of the Loans then outstanding).
"Majority Lenders": at any time, the holders of a majority of (a)
until the Closing Date, the Commitments and (b) thereafter, the sum of the
aggregate unpaid principal amount of the Loans then outstanding and the
Additional Commitments.
"Material Adverse Effect": a material adverse effect on (a) the
business, assets, property, condition (financial or otherwise) or prospects of
the Borrower and its Subsidiaries taken as a whole or (b) the validity or
enforceability of this Agreement or any of the other Loan Documents or the
rights or remedies of the Agents or the Lenders hereunder or thereunder.
"Materials of Environmental Concern": any gasoline or petroleum
(including crude oil or any fraction thereof) or petroleum products,
polychlorinated biphenyls, urea-formaldehyde insulation, asbestos, pollutants,
contaminants, radioactivity, and any other
16
substances or forces of any kind, whether or not any such substance or force is
defined as hazardous or toxic under any Environmental Law, that is regulated
pursuant to or could give rise to liability under any Environmental Law.
"Maturity Date": as defined in Section 2.3.
"Xxxxx'x": as defined in the definition of Cash Equivalents.
"Mortgaged Properties": the Oil and Gas Properties purported to be
subject to a Lien in favor of the Administrative Agent for the benefit of the
Lenders.
"Mortgages": each Amended, Restated and Consolidated Mortgage, Line of
Credit Mortgage, Deed of Trust, Assignment of Production, Security Agreement and
Financing Statement identified on Schedule 1.3, in each case, as amended by the
respective Second Amended, Restated and Consolidated Mortgage, Line of Credit
Mortgage, Deed of Trust, Assignment of Production, Security Agreement and
Financing Statement.
"Multiemployer Plan": a Plan that is a multiemployer plan as defined
in Section 4001(a)(3) of ERISA.
"Net Cash Proceeds": (a) in connection with any Asset Sale or any
Recovery Event, the proceeds thereof in the form of cash and Cash Equivalents
(including any such proceeds received by way of deferred payment of principal
pursuant to a note or installment receivable or purchase price adjustment
receivable or otherwise, but only as and when received) of such Asset Sale or
Recovery Event, net of attorneys' fees, accountants' fees, investment banking
fees, amounts required to be applied to the repayment of Indebtedness secured by
a Lien expressly permitted hereunder on any asset which is the subject of such
Asset Sale or Recovery Event (other than any Lien pursuant to a Security
Document) and other customary fees and expenses actually incurred in connection
therewith and net of taxes paid or reasonably estimated to be payable as a
result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements) and (b) in connection with any
issuance or sale of equity securities or debt securities or instruments or the
incurrence of loans, the cash proceeds received from such issuance or
incurrence, net of attorneys' fees, investment banking fees, accountants' fees,
underwriting discounts and commissions and other customary fees and expenses
actually incurred in connection therewith.
"Non-Excluded Taxes": as defined in Section 2.11(a).
"Non-U.S. Lender": as defined in Section 2.11(d).
"Note": as defined in Section 2.4(e).
"NYMEX": the New York Mercantile Exchange or its successor entity.
"NYMEX Strip Price": the lower of (i) as of any date of determination
(A) for the 24 month period commencing with the month in which the date of
determination occurs, the average of the 24 succeeding monthly futures contract
prices, commencing with the month during which the determination date occurs,
for each of the appropriate crude oil and natural gas
17
categories included in the most recent Reserve Report provided by Borrower to
the Administrative Agent pursuant to Section 5.1(i), as quoted on the NYMEX, and
(B) for periods after such 24 month period, the average of the quoted prices for
the period from and including the 13/th/ month in such 24 month period through
the 24/th/ month in such period; provided, that if the NYMEX no longer provides
futures contract price quotes or has ceased to operate, the future contract
prices used shall be the comparable futures contract prices quoted on such other
nationally recognized commodities exchange as the Administrative Agent shall
designate, and (ii) $27.43 per barrel of oil and $4.43 per MmBTU of natural gas
produced from Oil and Gas Properties located in the continental United States,
provided, that with respect to the volume of Acceptable Oil and Gas Hedging
Contracts, the NYMEX Strip Price for such volume of Hydrocarbons, if greater
than the price determined above, shall be the average weighted price fixed under
the Acceptable Oil and Gas Hedging Contracts then in effect.
"Obligations": the unpaid principal of and interest on (including,
without limitation, interest accruing after the maturity of the Loans and
interest accruing after the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or like proceeding, relating to
the Borrower, whether or not a claim for post-filing or post-petition interest
is allowed in such proceeding) the Loans and all other obligations and
liabilities of any Loan Party to the Administrative Agent or to any Lender,
whether direct or indirect, absolute or contingent, due or to become due, or now
existing or hereafter incurred, which may arise under, out of, or in connection
with, this Agreement, any other Loan Document or any other document made,
delivered or given in connection herewith or therewith, whether on account of
principal, interest, fees, indemnities, costs, expenses (including, without
limitation, all fees, charges and disbursements of counsel to the Administrative
Agent or to any Lender that are required to be paid by the Borrower pursuant
hereto), Bank Product Obligations or otherwise.
"Oil and Gas Hedging Contract": with respect to any Person, any
agreement or arrangement, or any combination thereof, relating to oil and gas or
other Hydrocarbon prices, transportation or basis costs or differentials or
other similar financial factors, that is customary in the oil and gas business
and is entered into by such Person in the ordinary course of its business for
the purpose of limiting or managing risks associated with fluctuations in such
prices, costs, differentials or similar factors.
"Oil and Gas Properties": with respect to any Person, all rights,
titles and interests of such Person in Hydrocarbon Interests; all presently
existing or future unitization, pooling agreements and declarations of pooled
units and the units created thereby (including without limitation all units
created under orders, regulations and rules of any governmental body or agency
having jurisdiction) which may affect all or any portion of such Hydrocarbon
Interests; all operating agreements, contracts and other agreements which relate
to any of such Hydrocarbon Interests or the production, sale, purchase, exchange
or processing of Hydrocarbons from or attributable to such Hydrocarbon
Interests; all Hydrocarbons in and under and which may be produced and saved or
attributable to such Hydrocarbon Interests or the lands covered thereby and all
oil in tanks and all rents, issues, profits, proceeds, products, revenues and
other incomes from or attributable to such Hydrocarbon Interests; all tenements,
hereditaments, appurtenances and properties in anywise appertaining, belonging,
affixed or incidental to such Hydrocarbon Interests, properties, rights, titles,
interests and estates described or referred to above, including any and all
Property, real or personal, now owned or hereafter acquired by such
18
Person and situated upon, used, held for use or useful in connection with the
operating, working or development of any of such Hydrocarbon Interests or
Property (excluding drilling rigs, automotive equipment or other personal
property which may be on such premises for the purpose of drilling a well or for
other similar temporary uses) and including any and all oil xxxxx, gas xxxxx,
injection xxxxx or other xxxxx, buildings, structures, fuel separators, liquid
extraction plants, plant compressors, pumps, pumping units, field gathering
systems, tanks and tank batteries, fixtures, valves, fittings, machinery and
parts, engines, boilers, meters, apparatus, equipment, appliances, tools,
implements, cables, wires, towers, casing, tubing and rods, surface leases,
rights-of-way, easements and servitudes together with all additions,
substitutions, replacements, accessions and attachments to any and all of the
foregoing.
"Other Qualified Counterparty": with respect to any Specified Hedge
Agreement, any counterparty thereto that, at the time such Specified Hedge
Agreement was entered into, was (i) any lender under the Revolving Credit
Facility or (ii) any other counterparty approved by the Administrative Agent or
the Majority Lenders, which approval will not be unreasonably withheld.
"Other Taxes": any and all present or future stamp or documentary
taxes or any other excise or property taxes, charges or similar levies arising
from any payment made hereunder or from the execution, delivery or enforcement
of, or otherwise with respect to, this Agreement or any other Loan Document.
"Participant": as defined in Section 9.6(b).
"Payment Office": the office in New York specified from time to time
by the Administrative Agent as its payment office as set forth on Schedule 1.4
or otherwise by notice to the Borrower and the Lenders.
"PBGC": the Pension Benefit Guaranty Corporation established pursuant
to Subtitle A of Title IV of ERISA (or any successor).
"Permitted Discretion": a determination made in good faith and in the
exercise of reasonable (from the perspective of a secured asset-based lender)
business judgment.
"Permitted Holders": (i) Persons who beneficially own Voting Stock of
the Borrower on the Closing Date and (ii) officers or employees of the Borrower
or any of its Subsidiaries as of the Closing Date.
"Person": an individual, partnership, corporation, limited liability
company, business trust, joint stock company, trust, unincorporated association,
joint venture, Governmental Authority or other entity of whatever nature.
"Plan": at a particular time, any employee pension benefit plan, as
defined by ERISA, and in respect of which the Borrower or a Commonly Controlled
Entity is (or, if such plan were terminated at such time, would under Section
4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of
ERISA.
"Prior Lenders": as defined in the recitals hereto.
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"Pro Forma Balance Sheet": as defined in Section 3.1(a).
"Projections": as defined in Section 5.2(c).
"Property": any right or interest in or to property of any kind
whatsoever, whether real, personal or mixed and whether tangible or intangible,
including, without limitation, Capital Stock.
"Prospect": Hydrocarbon Interests owned by any Loan Party with respect
to all or a portion of a geologic structure or feature, stratigraphic trap or
horizon in undeveloped acreage which is reasonably believed to contain
Hydrocarbons and with respect to which such Loan Party proposes to drill one or
more exploratory or development xxxxx.
"Prospect Sale": with respect to any Prospect owned in whole or in
part by any Loan Party, the sale by such Loan Party, on an arms' length basis
and on customary industry terms, of an undivided working interest or interests
in such Prospect to one or more industry participants in order to spread the
risks associated with drilling exploration or development xxxxx on such
Prospect.
"Proved Developed Non-Producing Reserves": those Oil and Gas
Properties designated as "proved developed non-producing" (in accordance with
the Definitions for Oil and Gas Reserves approved by the Board of Directors of
the Society for Petroleum Engineers, Inc. from time to time) in the Reserve
Report.
"Proved Developed Producing Reserves": those Oil and Gas Properties
designated as "proved developed producing" (in accordance with the Definitions
for Oil and Gas Reserves approved by the Board of Directors of the Society for
Petroleum Engineers, Inc. from time to time) in the Reserve Report.
"Proved Producing Reserves": proved developed producing oil and gas
reserves as such term is defined by the SEC in its standards and guidelines.
"Proved Reserves": those Oil and Gas Properties designated as "proved"
(in accordance with the Definitions for Oil and Gas Reserves approved by the
Board of Directors of the Society for Petroleum Engineers, Inc. from time to
time) in the Reserve Report.
"Proved Undeveloped Reserves": those Oil and Gas Properties designated
as "proved undeveloped" (in accordance with the Definitions for Oil and Gas
Reserves approved by the Board of Directors of the Society for Petroleum
Engineers, Inc. from time to time) in the Reserve Report.
"Purchase Agreement": that certain Purchase and Sale Agreement in form
of Exhibit K, dated as of the date hereof, with respect to the repurchase by the
Borrower of the Repurchased 10-7/8% Notes.
"PV-10 Value": as of any date of determination, the sum of the present
values of the amounts of net revenues before income taxes expected to be
received in each of the months
20
following the date of determination on the basis of estimated
production from Proved Reserves during such months determined as follows:
(i) each such monthly net revenue amount shall be calculated (x) on
the basis of the applicable NYMEX Strip Price for the appropriate
category of oil or gas as of such date of determination, adjusting
such price to reflect (A) the appropriate Basis Differential with
respect to Hydrocarbons produced from specific Oil and Gas Properties
of Borrower as set forth on Schedule 1.5, as such Exhibit may from
time to time be amended at the request of Borrower with the written
consent of the Administrative Agent, (B) the prices for fixed price
contracts for such month and (C) Btu content, (y) assuming that
production costs remain constant throughout the periods of the
calculation of such monthly net revenues, and (z) otherwise applying
the financial accounting and reporting standards prescribed by the SEC
for application of the full cost method of accounting for such
revenues under Rule 4-10 of Regulation S-X as promulgated by the SEC
from time to time; and
(ii) the present value of each such monthly net revenue amount shall
be determined by discounting each such monthly net revenue amount from
the month in which it is expected to be received, on a monthly basis,
to such date of determination at a rate of 10% per annum.
"Qualified Counterparty": with respect to any Specified Hedge
Agreement, any counterparty thereto that, at the time such Specified Hedge
Agreement was entered into, was a Lender or an Affiliate of a Lender.
"Rate Management Agreement": with respect to any Person, any interest
rate or currency swaps, caps or collar agreements, foreign exchange agreements
or similar arrangements entered into by such Person providing for protection
against fluctuations in interest rates, currency exchange rates or the exchange
of nominal interest obligations, either generally or under specific
contingencies.
"Recovery Event": any settlement of or payment in respect of any
property or casualty insurance claim or any condemnation proceeding (or
proceeding in lieu thereof) relating to any asset of the Borrower or any
Subsidiary.
"Recovery Purposes": the repair or replacement of damaged or destroyed
assets with respect to which property or casualty insurance proceeds have been
received or the acquisition of Replacement Assets with condemnation proceeds
which have been received.
"Register": as defined in Section 9.6(d).
"Regulation U": Regulation U of the Board as in effect from time to
time.
"Reinvestment Deferred Amount": at any time with respect to any
Reinvestment Event, the aggregate Net Cash Proceeds received by the Borrower or
any of its Subsidiaries in connection therewith that, at such time, are not then
required to be applied to prepay the Loans pursuant to Section 2.7(b) as a
result of the delivery of a Reinvestment Notice.
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"Reinvestment Event": any Asset Sale or Recovery Event in respect of
which the Borrower has delivered a Reinvestment Notice.
"Reinvestment Notice": with respect to any Asset Sale or Recovery
Event, a written notice executed by a Responsible Officer of the Borrower (i)
stating that no Default or Event of Default has occurred and is continuing, (ii)
stating that one or more of the Loan Parties (A) have acquired Replacement
Assets or have expended funds for Recovery Purposes during the 90-day period
immediately prior to the consummation of such Asset Sale or Recovery Event and
have paid the amount specified in such Reinvestment Notice for such Replacement
Assets or for Recovery Purposes or (B) have used all or a specified portion of
the Net Cash Proceeds of an Asset Sale or Recovery Event for the acquisition of
Replacement Assets or for Recovery Purposes or (C) in the case of a Prospect
Sale, have used or committed to use all or a specified portion of the Net Cash
Proceeds of such Prospect Sale for Replacement Assets, (iii) setting forth the
calculations used in determining such assets to be "Replacement Assets" and (iv)
with respect to Replacement Assets acquired for an aggregate consideration
greater than $5,000,000, accompanied by the reserve report or other information
delivered to or used by the Borrower with respect to the oil and gas reserves
acquired.
"Reinvestment Prepayment Date": the date occurring 90 days after a
Recovery Event or the consummation of an Asset Sale, as the case may be.
"Related Fund": with respect to any Lender, any fund that (x) invests
in commercial loans and (y) is managed or advised by the same investment advisor
as such Lender, by such Lender or an Affiliate of such Lender.
"Reorganization": with respect to any Multiemployer Plan, the
condition that such plan is in reorganization within the meaning of Section 4241
of ERISA.
"Replacement Assets": (i) with respect to any Asset Sale of Oil and
Gas Properties (other than Prospect Sales), Oil and Gas Properties acquired by
any Loan Party for which the ratio of the total consideration paid in such
acquisition to the Adjusted PV-10 Value of the Oil and Gas Properties so
acquired multiplied by 90% is equal to or less than the ratio of the total
consideration received for the Oil and Gas Properties Disposed of pursuant to an
Asset Sale to the Adjusted PV-10 Value of such Oil and Gas Properties, (ii) with
respect to any Prospect Sale, expenditures for land, geological and geophysical
and drilling expenses actually incurred in connection with respect to such
Prospect, (iii) with respect to any Asset Sale of assets other than Oil and Gas
Properties, assets comparable to the assets Disposed of in such Asset Sale and
(iv) with respect to any Recovery Event, the acquisition of assets comparable to
the assets lost or destroyed as a result of the occurrence giving rise to such
Recovery Event or the expenditure of funds to repair assets damaged as a result
of such occurrence.
"Report": as defined in Section 8.17.
"Reportable Event": any of the events set forth in Section 4043(c) of
ERISA, other than those events as to which the thirty-day notice period is
waived under subsections .27, .28, .29, .30, .31, .32, .34 or .35 of PBGC
Reg. (S) 4043.
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"Repurchased 10-7/8% Notes": the 10-7/8% Notes to be purchased
pursuant to the Purchase Agreement.
"Required Lenders": at any time, the holders of a 66-2/3% of (a) until
the Closing Date, the Commitments and (b) thereafter, the sum of the aggregate
unpaid principal amount of the Loans then outstanding and the Additional
Commitments.
"Requirement of Law": as to any Person, the certificate of
incorporation and by-laws or other organizational or governing documents of such
Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its Property or to which such Person or
any of its Property is subject.
"Reserve": a reserve against the PV-10 Value of the Proved Reserves of
the Borrower and its Subsidiaries determined by the Administrative Agent based
upon, without duplication, (a) past due or accrued taxes or other charges by a
Governmental Authority, including ad valorem, personal property and other taxes
which may have priority over the Liens of the Administrative Agent in the
Collateral; (b) Liens on any Oil and Gas Properties (including proceeds thereof
or collections from the sale of Hydrocarbons which may from time to time come
into the possession of any of the Lenders or their agents) (whether inchoate or
otherwise) in favor of third Persons, including, without limitation, any
Governmental Authority (whether or not such Liens are Excepted Liens); (c)
estimates of present and future costs, expenses, deposits and liabilities
related to the plugging and abandonment of the Oil and Gas Properties (net of
the amount thereof which has been taken into account in the most recent Reserve
Report or is fully secured by an escrow or surety arrangement acceptable to the
Administrative Agent in its Permitted Discretion); (d) without duplication of
the foregoing, amounts owing by the Borrower or any Guarantor to any Person,
including, without limitation, any Governmental Authority, to the extent secured
by a Lien (whether or not such Lien is an Excepted Lien) on, or trust
(constructive or otherwise) over, any of the Oil and Gas Properties (including
proceeds thereof or collections from the sale of Hydrocarbons which may from
time to time come into the possession of any of the Lenders or their agents),
which Lien or trust, in the Administrative Agent's Permitted Discretion has a
reasonable possibility of having a priority superior to Agent's Liens (such as
landlord liens, ad valorem taxes, production taxes, severance taxes, sales
taxes, collections attributable to sale of Hydrocarbons of Persons other than
the Loan Parties) in and to such item of Collateral, proceeds or collection; (e)
to the extent not taken into account in the most recent Reserve Report delivered
to the Administrative Agent, amounts which the Administrative Agent determines
are appropriate to account for minority interests and other interests of Persons
other than the Borrower and any natural gas imbalances of the Borrower and for
sales of Oil and Gas Properties; (f) unrealized losses related to Oil and Gas
Hedging Contracts; and (g) any reserves that the Administrative Agent may impose
as a result of non-compliance with Section 5.5 by any owner or operator of the
Oil and Gas Properties of any Loan Party.
"Reserve Report": the Initial Reserve Report and any other Reserve
Report delivered pursuant to Section 5.1, in form and substance reasonably
satisfactory to the Administrative Agent, prepared at the sole cost and expense
of the Borrower by an independent petroleum engineer acceptable to the Majority
Lenders (in the case of the Initial Reserve Report
23
or any Reserve Report delivered pursuant to Section 5.1(e)) or by petroleum
engineers who are employees of the Borrower (in the case of any Reserve Report
delivered pursuant to Section 5.1(f)). Each Reserve Report shall set forth
volumes, projections of the future rate of production, Hydrocarbons prices,
escalation rates, discount rate assumptions, and net proceeds of production
present value of the net proceeds of production, operating expenses and capital
expenditures, in each case based upon updated economic assumptions reasonably
acceptable to the Majority Lenders.
"Responsible Officer": the chief executive officer, president or chief
financial officer of the Borrower, but in any event, with respect to financial
matters, the chief financial officer of the Borrower.
"Restricted Payments": as defined in Section 6.5.
"Revolving Credit Facility": a senior secured revolving credit
facility of up to $12,500,000 in aggregate principal amount executed by one or
more of the Loan Parties on terms and provisions acceptable to the
Administrative Agent and the Majority Lenders, including without limitation,
provisions requiring the reduction of the loans outstanding under such facility
to not more than $3,000,000 in aggregate principal amount (a) for a 30-day
period in the event the loans outstanding under such facility exceed $3,000,000
in aggregate principal amount for any 90-day period and (b) the foregoing clause
(a) notwithstanding, unless the Borrower has consummated an acquisition of Oil
and Gas Properties for consideration valued at $8,000,000 or more during the
immediately prior 90 days, on the day following any required payment on
Subordinated Indebtedness.
"S&P": as defined in the definition of Cash Equivalents.
"SEC": the Securities and Exchange Commission (or successors thereto
or an analogous Governmental Authority).
"Secured Parties": as defined in the Guaranty and Collateral
Agreement.
"Security Documents": the collective reference to the Guaranty and
Collateral Agreement, the Mortgages and all other security documents hereafter
delivered to the Administrative Agent granting a Lien on any Property of any
Person to secure any of the obligations and liabilities of any Loan Party under
any Loan Document.
"Second Period": the period beginning on February 17, 2004 through and
including the Maturity Date.
"Single Employer Plan": any Plan that is covered by Title IV of ERISA,
but which is not a Multiemployer Plan.
"SPC": as defined in Section 9.6(g).
"Specified Hedge Agreement": any Hedging Agreement entered into by any
Loan Party or any of their respective Subsidiaries and any Qualified
Counterparty or Other Qualified Counterparty.
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"Subordinate Indebtedness": Indebtedness which by its terms is
subordinate in right of payment to payments on or with respect to the Loans or
otherwise with respect to Obligations under this Agreement.
"Subsidiary": as to any Person, a corporation, partnership, limited
liability company or other entity of which shares of stock or other ownership
interests having ordinary voting power (other than stock or such other ownership
interests having such power only by reason of the happening of a contingency) to
elect a majority of the board of directors or other managers of such
corporation, partnership or other entity are at the time owned, or the
management of which is otherwise controlled, directly or indirectly through one
or more intermediaries, or both, by such Person. Unless otherwise qualified, all
references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer
to a Subsidiary or Subsidiaries of the Borrower.
"Syndication Agent": as defined in the preamble hereto.
"Syndication Letter Agreement": that certain Syndication Letter
Agreement, dated as of March 28, 2003 among the Borrower, the Arranger and the
Syndication Agent.
"Taxes": as defined in Section 8.11(e).
"Transferee": as defined in Section 9.14.
"UCC": the Uniform Commercial Code of the State of New York.
"Vehicle": as defined in the Guaranty and Collateral Agreement.
"Voting Stock": as to any Person, all classes of Capital Stock of such
Person then outstanding and normally entitled (without regard to the occurrence
of any contingency) to vote in the election of directors, managers or trustees
thereof.
"Xxxxx Fargo": Xxxxx Fargo Bank, National Association, a national
banking association.
"Wholly Owned Subsidiary": as to any Person, any other Person all of
the Capital Stock of which (other than directors' qualifying shares required by
law) is owned by such Person directly and/or through other Wholly Owned
Subsidiaries.
1.2 Other Definitional Provisions. (a) Unless otherwise specified
therein, all terms defined in this Agreement shall have the defined meanings
when used in the other Loan Documents or any certificate or other document made
or delivered pursuant hereto or thereto.
(b) As used herein and in the other Loan Documents, and any
certificate or other document made or delivered pursuant hereto or thereto,
accounting terms relating to the Borrower and its Subsidiaries not defined in
Section 1.1 and accounting terms partly defined in Section 1.1, to the extent
not defined, shall have the respective meanings given to them under GAAP.
25
(c) The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and Section, Schedule and
Exhibit references are to this Agreement unless otherwise specified.
(d) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS
2.1 Commitments.
(a) Subject to the terms and conditions hereof, the Lenders severally
agree to make term loans (each, an "Initial Loan") to the Borrower on the
Closing Date in an amount for each Lender not to exceed the amount of the
Initial Commitment of such Lender.
(b) The Lenders severally agree, upon the request of the Borrower and
with the written consent of the Majority Lenders, to make term loans (each, an
"Additional Loan") to the Borrower on, or at any time after the Closing Date and
prior to the Maturity Date, in an amount for each Lender not to exceed the
amount of the Additional Commitment of such Lender.
2.2 Procedure for Borrowing.
(a) The Borrower shall deliver to the Administrative Agent a Borrowing
Notice requesting that the Lenders make the Initial Loans on the Closing Date.
Upon receipt of such Borrowing Notice, the Administrative Agent shall promptly
notify each Lender thereof. Not later than 12:00 Noon, New York City time, on
the Closing Date each Lender shall make available to the Borrower an amount in
immediately available funds equal to the Initial Loan or Initial Loans to be
made by such Lender.
(b) The Borrower may borrow under the Additional Loans on or at any
time after the Closing Date and prior to the Maturity Date, provided that the
Borrower shall deliver to the Administrative Agent a Borrowing Notice (which
Borrowing Notice must be received by the Administrative Agent prior to 12:00
Noon, New York City time, three Business Days prior to the requested Borrowing
Date). Each borrowing of Additional Loans under the Additional Commitments shall
be in an amount equal to $1,000,000 or a whole multiple thereof (or, if the then
aggregate amount of available Additional Commitments is less than $1,000,000,
such lesser amount). Upon receipt of any such Borrowing Notice from the
Borrower, the Administrative Agent shall promptly notify each Lender thereof.
Each Lender will make its Loan Percentage of the amount of each borrowing of
Additional Loans available to the Administrative Agent for the account of the
Borrower at the Funding Office prior to 12:00 Noon, New York City time, on the
Borrowing Date requested by the Borrower in funds immediately available to the
Administrative Agent. Such borrowing will then be made available to the Borrower
by the Administrative Agent in like funds as received by the Administrative
Agent.
(c) The Administrative Agent is authorized to make the Additional
Loans available to the Borrower under this Agreement based upon telephonic or
other instructions received from anyone purporting to be an Authorized Person.
The Borrower agrees to establish
26
and maintain the Designated Account with the Designated Account Bank for the
purpose of receiving the proceeds of the Initial Loans and the Additional Loans
requested by the Borrower and made by the Lenders hereunder.
2.3 Repayment of Term Loans. Each Loan of each Lender shall mature on
January 6, 2005 (the "Maturity Date").
2.4 Repayment of Loans; Evidence of Debt. (a) The Borrower hereby
unconditionally promises to pay to the Administrative Agent for the account of
the appropriate Lender the principal amount of each Loan of such Lender on the
Maturity Date or on such date on which the Loans become due and payable pursuant
to Section 7. The Borrower hereby further agrees to pay interest on the unpaid
principal amount of the Loans from time to time outstanding from the date hereof
until payment in full thereof at the rates per annum, and on the dates, set
forth in Section 2.8.
(b) Each Lender shall maintain in accordance with its usual practice
an account or accounts evidencing Indebtedness of the Borrower to such Lender
resulting from each Loan of such Lender from time to time, including the amounts
of principal and interest payable and paid to such Lender from time to time
under this Agreement.
(c) The Administrative Agent, on behalf of the Borrower, shall
maintain the Register pursuant to Section 9.6(d), and a subaccount therein for
each Lender, in which shall be recorded (i) the amount of each Loan made
hereunder and any Note evidencing such Loan, (ii) the amount of any principal or
interest due and payable or to become due and payable from the Borrower to each
Lender hereunder and (iii) both the amount of any sum received by the
Administrative Agent hereunder from the Borrower and each Lender's share
thereof.
(d) The entries made in the Register and the accounts of each Lender
maintained pursuant to Section 2.4(b) shall, to the extent permitted by
applicable law, be prima facie evidence of the existence and amounts of the
Obligations of the Borrower therein recorded; provided, however, that the
failure of any Lender or the Administrative Agent to maintain the Register or
any such account, or any error therein, shall not in any manner affect the
obligation of the Borrower to repay (with applicable interest) the Loans made to
the Borrower by such Lender in accordance with the terms of this Agreement.
(e) The Borrower agrees that, upon the request to the Administrative
Agent by any Lender, the Borrower will promptly execute and deliver to such
Lender a promissory note of the Borrower evidencing any Loans, of such Lender,
substantially in the form of Exhibit E, (a "Note"), with appropriate insertions
as to date and principal amount; provided, that delivery of Notes shall not be a
condition precedent to the occurrence of the Closing Date or the making of the
Loans on the Closing Date.
2.5 Fees.
27
(a) The Borrower agrees to pay to the Administrative Agent the fees
in the amounts and on the dates from time to time agreed to in writing by the
Borrower and the Administrative Agent, including, without limitation, the fees
set forth in the Fee Letter.
(b) On the Closing Date the Lenders shall be entitled to a fee (the
"Initial Deferred Financing Fee") from the Borrower equal to 3% of the Initial
Commitments as of the Closing Date. On the date of each Additional Loan, each
Lender shall be entitled to a fee (the "Additional Deferred Financing Fee" and,
together with the Initial Deferred Financing Fee, the "Deferred Financing Fee")
from the Borrower equal to 3% of the amount of the Additional Loan made by such
Lender. The Initial Deferred Financing Fee shall be earned in full on the
Closing Date and each Additional Deferred Financing Fee shall be earned in full
on the date the related Additional Loan is made. Except as provided below, the
Initial Deferred Financing Fee and each Additional Deferred Financing Fee shall
be payable to the then holders of the Notes on (i) the occurrence of an Event of
Default described in Sections 7(a), (e)(i) or (e)(ii) (other than an Event of
Default occasioned by failure to pay the installment of interest due October 1,
2003, on the 10-7/8% Notes), (ii) the date on which the Loans are declared or
otherwise become immediately due and payable pursuant to Section 7 and (iii) the
date on which the Loans are prepaid or repaid in full (such date, the "Fee
Payment Date"); provided, however, that:
(i) any optional prepayment of the Loans pursuant to Section 2.6
shall reduce the Deferred Financing Fee payable as follows:
(A) If such optional prepayment is made prior to the date
six months after the Closing Date, the Deferred Financing Fee payable
shall equal (1) 2% of the amount of the principal so prepaid (which
portion of the Deferred Financing Fee shall accompany any such
prepayment) and (2) to the extent the amount so prepaid is less than
all of the principal amount outstanding, 3% of the aggregate principal
amount of the Loans outstanding on the Fee Payment Date;
(B) If such optional prepayment is made on or after the date
six months after the Closing Date but on or prior to the date 10
months after the Closing Date, the Deferred Financing Fee shall equal
(1) 1% of the amount of the principal so prepaid (which portion of the
Deferred Financing Fee shall accompany any such prepayment) and (2) to
the extent the amount so prepaid is less than all of the principal
amount outstanding, 3% of the aggregate principal amount of the Loans
outstanding on the Fee Payment Date;
(C) If such optional prepayment is made after the date 10
months after the Closing Date but on or prior to the date 15 months
after the Closing Date, the Deferred Financing Fee payable with
respect to the amount of the principal so prepaid shall be waived
provided that to the extent the amount so prepaid is less than all of
the principal amount outstanding, the Deferred Financing Fee shall
continue to be payable with respect to the principal amount of the
Loans outstanding on the Fee Payment Date; and
28
(D) If such optional prepayment is made after the date 15
months after the Closing Date but prior to January 6, 2005, the
Deferred Financing Fee shall equal (1) 1% of the amount of the
principal so prepaid (which portion of the Deferred Financing Fee
shall accompany any such prepayment) and (2) to the extent the amount
so prepaid is less than all of the principal amount outstanding, 3% of
the aggregate principal amount of the Loans outstanding on the Fee
Payment Date.
(ii) any mandatory prepayment of the Loans pursuant to Sections
2.7(a) or (b) shall reduce the Deferred Financing Fee payable as follows:
(A) If such mandatory prepayment is made prior to the date
ten months after the Closing Date, the Deferred Financing Fee payable
shall equal (1) 1% of the amount of the principal so prepaid (which
portion of the Deferred Financing Fee shall accompany any such
prepayment) and (2) to the extent the amount so prepaid is less than
all of the principal amount outstanding, 3% of the aggregate principal
amount of the Loans outstanding on the Fee Payment Date; and
(B) If such mandatory prepayment is made after the date 10
months after the Closing Date, the Deferred Financing Fee payable with
respect to the amount of the principal so prepaid shall be waived
provided that to the extent the amount so prepaid is less than all of
the principal amount outstanding, the Deferred Financing Fee shall
continue to be payable with respect to the principal amount of the
Loans outstanding on the Fee Payment Date.
(iii) no Deferred Financing Fee shall be payable
(A) in connection with a mandatory prepayment pursuant to
Section 2.7(c) provided that to the extent the amount so prepaid is
less than all of the principal amount outstanding, the Deferred
Financing Fee shall continue to be payable with respect to the
principal amount of the Loans outstanding on the Fee Payment Date; and
(B) in connection with a single prepayment of up to
$20,000,000 with proceeds from an issuance of Capital Stock by the
Borrower provided that (1) such prepayment is effected within 30 days
after the consummation of such equity issuance and (2) to the extent
the amount so prepaid is less than all of the principal amount
outstanding, the Deferred Financing Fee shall continue to be payable
with respect to the principal amount of the Loans outstanding on the
Fee Payment Date.
2.6 Optional Prepayments. On and at any time after the date 90 days
after the Closing Date (provided that no Default has occurred and is
continuing), the Borrower may at any time prepay the Loans, in whole or in part,
upon payment of the applicable Deferred Financing Fee. In order to optionally
prepay any Loans, the Borrower shall deliver an irrevocable notice to
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the Administrative Agent at least three Business Days prior thereto which notice
shall specify the date and amount of such prepayment. Upon receipt of any such
notice the Administrative Agent shall promptly notify each relevant Lender
thereof. If any such notice is given, the amount specified in such notice shall
be due and payable on the date specified therein, together with accrued interest
through such date on the amount prepaid and the applicable Deferred Financing
Fee. Partial prepayments of Loans shall be in a minimum aggregate principal
amount equal to $1,000,000 and in integral multiples of $250,000 above such
amount.
2.7 Mandatory Prepayments. (a) Unless the Required Lenders shall
otherwise agree, if any Capital Stock shall be issued (other than issuances
pursuant to Section 6.5(b)), or Indebtedness incurred, by any Loan Party or any
of their respective Subsidiaries (excluding any Indebtedness incurred in
accordance with Section 6.1 as in effect on the date of this Agreement), then on
the date of such issuance or incurrence, the Loans shall be prepaid, by an
amount equal to the amount, if any, of the Net Cash Proceeds of such issuance or
incurrence, as set forth in Section 2.9. The foregoing to the contrary
notwithstanding, Section 2.7(a) shall not apply to the Net Cash Proceeds in
excess of $20,000,000 received from a single issuance, or a series of related
issuances effected within a period of 30 days (the "Initial Equity Issuance"),
of the Capital Stock of the Borrower, and the excess amount (the "Initial Equity
Issuance Excess Proceeds") may be used to repurchase or redeem 10-7/8% Notes or
for general corporate purposes, including making Capital Expenditures permitted
by Section 6.6. The provisions of this Section 2.7(a) do not constitute a
consent to the issuance of any additional equity securities by any entity whose
equity securities are pledged pursuant to the Guaranty and Collateral Agreement
(unless such additional equity interest is likewise pledged), or a consent to
the incurrence of any Indebtedness by the Borrower or any of its Subsidiaries
which is not permitted by Section 6.1.
(b) Unless the Required Lenders shall otherwise agree, if on any date
any Loan Party shall receive Net Cash Proceeds from any Asset Sale or Recovery
Event then, except as provided below, the Loans shall be prepaid by an amount
equal to the amount of such Net Cash Proceeds, as set forth in Section 2.9. No
prepayment shall be required under this Section 2.7(b) with respect to (i) up to
$5,000,000 in aggregate Net Cash Proceeds received from one or more Asset Sales
or Recovery Events during the term of the Loans, (ii) the Net Cash Proceeds of
any Asset Sale or Recovery Event paid for the acquisition of Replacement Assets
acquired after the date of such Asset Sale and prior to the Reinvestment
Prepayment Date applicable to such Asset Sale or expended for Recovery Purposes
after such Recovery Event and prior to the Reinvestment Prepayment Date
applicable to such Recovery Event (provided the Borrower shall have delivered a
Reinvestment Notice to the Administrative Agent within twenty Business Days
after such acquisition or such expenditure), (iii) that portion of the Net Cash
Proceeds of any Asset Sale equal to the aggregate cash consideration paid by a
Loan Party for the acquisition of Replacement Assets during the 90-day period
immediately prior to the consummation of such Asset Sale (provided the Borrower
shall have delivered a Reinvestment Notice to the Administrative Agent not less
than three Business Days prior to the Reinvestment Prepayment Date); provided
the sum of the aggregate Net Cash Proceeds of Asset Sales and Recovery Events
that may be excluded from the foregoing requirement pursuant to clauses (i),
(ii) and (iii) shall not exceed an aggregate of $50,000,000 during the term of
the Loans. Except as proved in clauses (i), (ii) and (iii) of this Section
2.7(b), or as otherwise may be agreed by the Required Lenders, the Reinvestment
Deferred Amounts received by the Borrower or any of its
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Subsidiaries shall be applied as a prepayment on the Loans. The provisions of
this Section 2.7(b) do not constitute a consent to the consummation of any
Disposition not permitted by Section 6.4. Notwithstanding any provision hereof
to the contrary, the Loans to be prepaid pursuant to this Section 2.7(b) will be
prepaid in the minimum amount of $1,000,000 and in integral multiples thereof,
and proceeds of Asset Sales otherwise payable pursuant to this Section 2.7(b)
will cumulate until such minimum amount (or an integral multiple thereof) is
reached. Any amounts not paid as a result of the operation of the immediately
preceding sentence will be carried forward and taken into account in connection
with any subsequent prepayment pursuant to this Section 2.7(b).
(c) Unless the Required Lenders shall otherwise agree, simultaneously
with the delivery pursuant to Section 5.1(e) of a financial report for the month
of December 2003, the Loans shall be prepaid by an amount equal to the Dedicated
Free Cash for the fiscal year ending December 31, 2003, as set forth in Section
2.9; provided, however, that the prepayment required pursuant to this Section
2.7(c) shall be in the minimum amount of $1,000,000.
(d) Pending a prepayment of the Loans and/or the acquisition of
Replacement Assets with the Net Cash Proceeds received from an Asset Sale and/or
Recovery Event pursuant to Section 2.7(b), such proceeds shall be deposited with
the Administrative Agent who shall hold such proceeds in an interest bearing
cash collateral account reasonably satisfactory to it; provided, however, that
the Loan Parties shall not be required to deposit the proceeds from any Asset
Sale resulting in less than $250,000 in Net Cash Proceeds until the aggregate
Net Cash Proceeds of such Asset Sales exceeds $1,000,000. From time to time,
upon the written request of the Borrower, and provided no Default has occurred
and is continuing, the Administrative Agent will release such proceeds to the
Borrower as necessary for the acquisition of Replacement Assets in accordance
with 2.7(b); provided, however, that prior to the date 90 days after the Closing
Date or in the event a Default has occurred and is continuing the Administrative
Agent shall not be required to release the Net Cash Proceeds received as a
result of any Casualty Event.
(e) If, at any time or for any reason, the amount of the Bank Product
Obligations (based upon Xxxxx Fargo's or its Affiliate's reasonable
determination of the credit exposure in respect of the then extant Bank
Products) owed by the Borrower to the Lender Group is greater than an amount
equal to 25% of the difference between (i) the PV-10 Value of the Proved
Developed Producing Reserves of the Borrower and its Subsidiaries that are
located in the continental United States and subject to a Mortgage and UCC
financing statements, that in each case create a first priority perfected Lien
in such Oil and Gas Properties in favor of the Administrative Agent, and (ii)
the aggregate amount of Reserves, if any, established by the Administrative
Agent, the Borrower immediately shall provide cash collateral, in such amounts
as Xxxxx Fargo or its Affiliates, as applicable, requires from its customers
generally with respect to such products (based upon Xxxxx Fargo's or its
Affiliate's reasonable determination of the credit exposure in respect of the
then extant Bank Products), to be held by the Administrative Agent for the
benefit of Xxxxx Fargo or its Affiliates with respect to the then extant Bank
Products Obligations.
2.8 Interest Rates and Payment Dates. (a) Each Loan shall bear
interest for each day on which it is outstanding at a rate per annum equal to
the Applicable Interest Rate.
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(b) Interest shall be payable in arrears on each Interest Payment
Date.
(c) Interest, fees and commissions payable pursuant hereto shall be
calculated on the basis of a 365- (or 366-, as the case may be) day year for the
actual days elapsed.
(d) If all or a portion of any Obligation shall not be paid when due,
such Obligation or the portion of such Obligation which is due and payable (to
the extent legally permitted) shall bear interest at a rate per annum that is
equal to the rate that would otherwise be applicable the Loans pursuant to
Section 2.8(a) from the date of such non-payment until such amount is paid in
full (after as well as before judgment).
2.9 Application of Payments. (a) Each borrowing of Initial Loans or
Additional Loans by the Borrower from the Lenders hereunder, any reduction of
the Initial Commitments or Additional Commitments of the Lenders and each
payment by the Borrower on account of any fee, shall be made pro rata according
to the respective applicable Loan Percentages of the Lenders. Each payment of
fees payable hereunder shall be applied to the amounts of such obligations owing
to the Lenders pro rata according to the respective Loan Percentages of the
Lenders.
(b) Each payment (including each prepayment, whether mandatory or
optional) shall be allocated among the Lenders pro rata based on the respective
Loan Percentages of the Lenders. Amounts prepaid on account of the Loans may not
be reborrowed.
(c) All payments (including prepayments) to be made by the Borrower
hereunder, whether on account of principal, interest, fees or otherwise, shall
be made without setoff or counterclaim and shall be made prior to 12:00 Noon,
New York City time, on the due date thereof to the Administrative Agent, for the
account of the relevant Lenders, at the Payment Office, in Dollars and in
immediately available funds. Any payment made by the Borrower after 12:00 Noon,
New York City time, on any Business Day shall be deemed to have been made on the
next following Business Day. The Administrative Agent shall distribute such
payments to the Lenders promptly upon receipt in like funds as received. If any
payment hereunder becomes due and payable on a day other than a Business Day,
such payment shall be extended to the next succeeding Business Day. In the case
of any extension of any payment of principal pursuant to the preceding sentence,
interest thereon shall be payable at the then applicable rate during such
extension.
(d) Unless the Administrative Agent shall have been notified in
writing by any Lender prior to a borrowing that such Lender will not make the
amount that would constitute its share of such borrowing available to the
Administrative Agent, the Administrative Agent may assume that such Lender is
making such amount available to the Administrative Agent, and the Administrative
Agent may, in reliance upon such assumption, make available to the Borrower a
corresponding amount. If such amount is not made available to the Administrative
Agent by the required time on the Borrowing Date therefor, such Lender shall pay
to the Administrative Agent, on demand, such amount with interest thereon at a
rate equal to the daily average Federal Funds Effective Rate for the period
until such Lender makes such amount immediately available to the Administrative
Agent. A certificate of the Administrative Agent submitted to any Lender with
respect to any amounts owing under this paragraph shall be conclusive in the
absence of
32
manifest error. If such Lender's share of such borrowing is not made available
to the Administrative Agent by such Lender within three Business Days after such
Borrowing Date, the Administrative Agent shall also be entitled to recover such
amount with interest thereon at the Applicable Interest Rate, on demand, from
the Borrower.
(e) Unless the Administrative Agent shall have been notified in
writing by the Borrower prior to the date of any payment due to be made by the
Borrower hereunder that the Borrower will not make such payment to the
Administrative Agent, the Administrative Agent may assume that the Borrower is
making such payment, and the Administrative Agent may, but shall not be required
to, in reliance upon such assumption, make available to the Lenders their
respective pro rata shares of a corresponding amount. If such payment is not
made to the Administrative Agent by the Borrower within three Business Days
after such due date, the Administrative Agent shall be entitled to recover, on
demand, from each Lender to which any amount which was made available pursuant
to the preceding sentence, such amount with interest thereon at the rate per
annum equal to the daily average Federal Funds Effective Rate. Nothing herein
shall be deemed to limit the rights of the Administrative Agent or any Lender
against the Borrower.
(f) All payments of principal and interest in respect of outstanding
Loans, all payments of fees (other than the fees set forth in the Fee Letter)
and all other payments in respect of any other Obligations, shall be allocated
by the Administrative Agent among such of the Administrative Agent and the
Lenders as are entitled thereto, in proportion to their respective Loan
Percentage or otherwise as provided herein or, in respect of payments not made
on account of Loans, as designated by the Person making payment when the payment
is made.
(g) After the occurrence and during the continuance of a Default or
an Event of Default, the Administrative Agent shall apply all payments in
respect of any Obligations and all proceeds of the Collateral, subject to the
provisions of this Agreement:
(i) first, to pay any Lender Group Expenses then due to the
Administrative Agent under the Loan Documents, until paid in full, then
(ii) second, to pay any fees then due to the Administrative
Agent under the Loan Documents until paid in full, then
(iii) third, to the Administrative Agent, to be held by the
Administrative Agent, for the benefit of Xxxxx Fargo or its Affiliates, as
applicable, as cash collateral in an amount as Xxxxx Fargo or its
Affiliates, as applicable, requires from its customers generally with
respect to such products (based upon Xxxxx Fargo's or its Affiliate's
reasonable determination of the credit exposure in respect of the then
extant Bank Products), until the Borrower's and its Subsidiaries'
obligations in respect of the then extant Bank Products have been paid in
full or the cash collateral amount has been exhausted, then
(iv) fourth, to pay any other Obligations of the Administrative
Agent or Xxxxx Fargo or any of their Affiliates (including Bank Product
Obligations) until paid in full, then
33
(v) fifth, to pay the Lender Group Expenses then due to the
Lenders, on a ratable basis, until paid in full, then
(vi) sixth, to pay any fees then due to the Lenders until paid
in full, then
(vii) seventh, to pay the interest due in respect of the Loans
until paid in full, then
(viii) eighth, to pay the outstanding principal balance of the
Loans until the Loans are paid in full, then
(ix) ninth, to pay any other Obligations of the Lenders until
paid in full, then
(x) tenth, to the Borrower (to be wired to the Designated
Account) or such other Person entitled thereto under applicable law.
(h) The Administrative Agent promptly shall distribute to each
Lender, pursuant to the applicable wire instructions received from each Lender
in writing, such funds as it may be entitled to receive.
(i) For purposes of the foregoing, "paid in full" means payment of
all amounts owing under the Loan Documents according to the terms thereof,
including loan fees, service fees, professional fees, interest (and specifically
including interest accrued after the commencement of any Bankruptcy Event),
default interest, interest on interest, and expense reimbursements, whether or
not the same would be or is allowed or disallowed in whole or in part in any
Bankruptcy Event.
(j) Notwithstanding anything contained in this Agreement, the
Borrower shall not repay any Obligations to the Lenders (other than fees,
expenses and interest related thereto) unless and until all Lender Group
Expenses and fees of the Administrative Agent have been paid in full and all
Bank Product Obligations have been paid in full or cash collateralized.
(k) In the event of a direct conflict between the priority provisions
of this Section 2.9 and other provisions contained in any other Loan Document,
it is the intention of the parties hereto that such priority provisions in such
documents shall be read together and construed, to the fullest extent possible,
to be in concert with each other. In the event of any actual, irreconcilable
conflict that cannot be resolved as aforesaid, the terms and provisions of this
Section 2.9 shall control and govern.
2.10 Requirements of Law. (a) If any Lender shall have determined that
the adoption of or any change in any Requirement of Law regarding capital
adequacy or in the interpretation or application thereof or compliance by such
Lender or any corporation controlling such Lender with any request or directive
regarding capital adequacy (whether or not having the force of law) from any
Governmental Authority made subsequent to the date hereof shall have the effect
of reducing the rate of return on such Lender's or such corporation's capital as
a consequence of its obligations hereunder to a level below that which such
Lender or such
34
corporation could have achieved but for such adoption, change or compliance
(taking into consideration such Lender's or such corporation's policies with
respect to capital adequacy) by an amount deemed by such Lender to be material,
then from time to time, after submission by such Lender to the Borrower (with a
copy to the Administrative Agent) of a written request therefor, the Borrower
shall pay to such Lender such additional amount or amounts as will compensate
such Lender or such corporation for such reduction.
(b) A certificate as to any additional amounts payable pursuant to
this Section 2.10 submitted by any Lender to the Borrower (with a copy to the
Administrative Agent) shall be conclusive in the absence of manifest error. The
obligations of the Borrower pursuant to this Section 2.10 shall survive the
termination of this Agreement and the payment of the Loans and all other amounts
payable hereunder.
2.11 Taxes. (a) All payments made by the Borrower under this Agreement
shall be made free and clear of, and without deduction or withholding for or on
account of, any present or future income, stamp or other taxes, levies, imposts,
duties, charges, fees, deductions or withholdings, now or hereafter imposed,
levied, collected, withheld or assessed by any Governmental Authority, excluding
net income taxes and franchise taxes (imposed in lieu of net income taxes)
imposed on any Agent or any Lender as a result of a present or former connection
between such Agent or such Lender and the jurisdiction of the Governmental
Authority imposing such tax or any political subdivision or taxing authority
thereof or therein (other than any such connection arising solely from such
Agent's or such Lender's having executed, delivered or performed its obligations
or received a payment under, or enforced, this Agreement or any other Loan
Document). If any such non-excluded taxes, levies, imposts, duties, charges,
fees, deductions or withholdings ("Non-Excluded Taxes") or any Other Taxes are
required to be withheld from any amounts payable to any Agent or any Lender
hereunder, the amounts so payable to such Agent or such Lender shall be
increased to the extent necessary to yield to such Agent or such Lender (after
payment of all Non-Excluded Taxes and Other Taxes) interest or any such other
amounts payable hereunder at the rates or in the amounts specified in this
Agreement; provided, however, that the Borrower shall not be required to
increase any such amounts payable to any Lender with respect to any Non-Excluded
Taxes (i) that are attributable to such Lender's failure to comply with the
requirements of paragraph (d) or (e) of this Section 2.11 or (ii) that are
United States withholding taxes imposed on amounts payable to such Lender at the
time such Lender becomes a party to this Agreement, except to the extent that
such Lender's assignor (if any) was entitled, at the time of assignment, to
receive additional amounts from the Borrower with respect to such Non-Excluded
Taxes pursuant to this paragraph (a).
(b) In addition, the Borrower shall pay any Other Taxes to the
relevant Governmental Authority in accordance with applicable law.
(c) Whenever any Non-Excluded Taxes or Other Taxes are payable by the
Borrower, as promptly as possible thereafter the Borrower shall send to the
Administrative Agent for the account of the relevant Agent or Lender, as the
case may be, a certified copy of an original official receipt received by the
Borrower showing payment thereof. If the Borrower fails to pay any Non-Excluded
Taxes or Other Taxes when due to the appropriate taxing authority or fails to
remit to the Administrative Agent the required receipts or other required
documentary evidence, the Borrower shall indemnify the Agents and the Lenders
for any
35
incremental taxes, interest or penalties that may become payable by any Agent or
any Lender as a result of any such failure. The agreements in this Section 2.11
shall survive the termination of this Agreement and the payment of the Loans and
all other amounts payable hereunder.
(d) Each Lender (or Transferee) that is not a citizen or resident of
the United States of America, a corporation, partnership or other entity created
or organized in or under the laws of the United States of America (or any
jurisdiction thereof), or any estate or trust that is subject to federal income
taxation regardless of the source of its income (a "Non-U.S. Lender") shall
deliver to the Borrower and the Administrative Agent (or, in the case of a
Participant, to the Lender from which the related participation shall have been
purchased) two copies of either U.S. Internal Revenue Service Form W-8BEN or
Form W-8ECI, or, in the case of a Non-U.S. Lender claiming exemption from U.S.
federal withholding tax under Section 871(h) or 881(c) of the Code with respect
to payments of "portfolio interest" a statement substantially in the form of
Exhibit F and a Form W-8BEN, or any subsequent versions thereof or successors
thereto properly completed and duly executed by such Non-U.S. Lender claiming
complete exemption from, or a reduced rate of, U.S. federal withholding tax on
all payments by the Borrower under this Agreement and the other Loan Documents.
Such forms shall be delivered by each Non-U.S. Lender on or before the date it
becomes a party to this Agreement (or, in the case of any Participant, on or
before the date such Participant purchases the related participation). In
addition, each Non-U.S. Lender shall deliver such forms promptly upon the
obsolescence or invalidity of any form previously delivered by such Non-U.S.
Lender. Each Non-U.S. Lender shall promptly notify the Borrower at any time it
determines that it is no longer in a position to provide any previously
delivered certificate to the Borrower (or any other form of certification
adopted by the U.S. taxing authorities for such purpose). Notwithstanding any
other provision of this paragraph, a Non-U.S. Lender shall not be required to
deliver any form pursuant to this paragraph that such Non-U.S. Lender is not
legally able to deliver. The Borrower shall not be required to indemnify any
Non-U.S. Lender which is not legally able to deliver any such form against
Non-Excluded Taxes.
(e) A Lender that is entitled to an exemption from or reduction of
non-U.S. withholding tax under the law of the jurisdiction in which the Borrower
is located, or any treaty to which such jurisdiction is a party, with respect to
payments under this Agreement shall deliver to the Borrower (with a copy to the
Administrative Agent), at the time or times prescribed by applicable law or
reasonably requested by the Borrower, such properly completed and executed
documentation prescribed by applicable law as will permit such payments to be
made without withholding or at a reduced rate, provided that such Lender is
legally entitled to complete, execute and deliver such documentation and in such
Lender's reasonable judgment such completion, execution or submission would not
materially prejudice the legal position of such Lender.
2.12 Change of Lending Office. Each Lender agrees that, upon the
occurrence of any event giving rise to the operation of Sections 2.10 or 2.11(a)
with respect to such Lender, it will, if requested by the Borrower, use
reasonable efforts (subject to overall policy considerations of such Lender) to
designate another lending office for any Loans affected by such event with the
object of avoiding the consequences of such event; provided, that such
designation is made on terms that, in the sole judgment of such Lender, cause
such Lender and its lending office(s) to suffer no economic, legal or regulatory
disadvantage, and provided,
36
further, that nothing in this Section 2.12 shall affect or postpone any of the
obligations of the Borrower or the rights of any Lender pursuant to Sections
2.10 or 2.11(a).
2.13 Replacement of Lenders. In the event that (a) (i) any Lender
makes a claim under Section 2.10 or (ii) the Borrower is required to make any
payment pursuant to Section 2.11 that is attributable to any Lender, (b) in the
case of clause (a)(i) above, as a consequence of increased costs in respect of
which such claim is made, the effective rate of interest payable to such Lender
under this Agreement with respect to its Loans materially exceeds the effective
average annual rate of interest payable to the Majority Lenders under this
Agreement and (c) Lenders holding at least 75% of the Commitments are not
subject to such increased costs or payment (any such Lender, an "Affected
Lender"), the Borrower may substitute another financial institution for such
Affected Lender hereunder, upon reasonable prior written notice (which written
notice must be given within 90 days following the occurrence of any of the
events described in clauses (a)(i) or (ii)) by the Borrower to the
Administrative Agent and the Affected Lender that the Borrower intends to make
such substitution, which substitute financial institution must be reasonably
acceptable to the Administrative Agent; provided, however, that if more than one
Lender claims increased costs or right to payment arising from the same act or
condition to the same extent (taking into account the amount of each such
Lender's Loans) and such claims are received by the Borrower within thirty (30)
days of each other then the Borrower may substitute all, but not (except to the
extent the Borrower has already substituted one of such Affected Lenders before
the Borrower's receipt of the other Affected Lenders' claims) less than all,
Lenders making such claims. In the event that the proposed substitute financial
institution or other entity is reasonably acceptable to the Administrative Agent
and the written notice was properly issued under this Section 2.13, the Affected
Lender shall sell and the substitute financial institution or other entity shall
purchase, pursuant to an Assignment and Acceptance, all rights and claims of
such Affected Lender under the Loan Documents and the substitute financial
institution or other entity shall assume and the Affected Lender shall be
relieved of its Commitments and all other prior unperformed obligations of the
Affected Lender under the Loan Documents (other than in respect of any damages
(other than exemplary or punitive damages, to the extent permitted by applicable
law) in respect of any such unperformed obligations). Upon the effectiveness of
such sale, purchase and assumption (which, in any event shall be conditioned
upon the payment in full by the Borrower to the Affected Lender in cash of all
fees, unreimbursed costs and expenses and indemnities accrued and unpaid through
such effective date), the substitute financial institution or other entity shall
become a "Lender" hereunder for all purposes of this Agreement having a
Commitment (if applicable) in the amount of such Affected Lender's Commitment
assumed by it and such Commitment (if applicable) of the Affected Lender shall
be terminated, provided that all indemnities under the Loan Documents shall
continue in favor of such Affected Lender.
SECTION 3. REPRESENTATIONS AND WARRANTIES
To induce the Agents and the Lenders to enter into this Agreement and
to make the Loans the Borrower hereby represents and warrants to each Agent and
each Lender that as of the Closing Date:
3.1 Financial Condition. (a) The unaudited pro forma consolidated
balance sheet (including the notes thereto) (the "Pro Forma Balance Sheet"), of
the Borrower and its
37
consolidated Subsidiaries, dated as of December 31, 2002, and adjusted to give
effect (as if such events had occurred on such date) to (i) the Loans to be made
on the Closing Date and the use of proceeds thereof and (ii) the payment of fees
and expenses in connection with the foregoing, a copy of which has been
furnished to the Administrative Agent and each Lender, has been prepared based
on the best information available to the Borrower as of the date of delivery
thereof, and presents fairly on a pro forma basis the estimated financial
position of the Borrower and its consolidated Subsidiaries as at December 31,
2002, assuming that the events specified in clauses (i) and (ii) above had
actually occurred at such date.
(b) The audited consolidated balance sheets of the Borrower and its
consolidated Subsidiaries as at December 31, 2000 and December 31, 2001, and the
related consolidated statements of income and of cash flows for the fiscal years
ended on such dates, reported on by and accompanied by an unqualified report
from KPMG LLP, and the draft consolidated balance sheet of the Borrower and its
consolidated Subsidiaries as at December 31, 2002, and the related consolidated
statement of income and of cash flow for the fiscal year then ended previously
delivered to the Administrative Agent (the "Draft Financial Statements"),
present fairly the consolidated financial condition of the Borrower and its
consolidated Subsidiaries as at such date, and the consolidated results of the
operations of the Borrower and its consolidated Subsidiaries and their
consolidated cash flows for the respective fiscal years then ended. The Draft
Financial Statements are identical to the financial statements to be included in
the Borrower's Report on Form 10-K for fiscal year 2002 except that the
financial statements in such report will contain an unqualified auditors report,
in customary form and substance, and a subsequent events footnote which will
describe the transactions contemplated under this Agreement and the Purchase
Agreement, and the notes to such financial statements may contain immaterial
editorial changes to the narrative content of such notes. All such financial
statements, including the related schedules and notes thereto, have been
prepared in accordance with GAAP applied consistently throughout the periods
involved (except as approved by the aforementioned firm of accountants and
disclosed therein). Except as disclosed in writing to the Administrative Agent,
as of the date hereof, the Borrower and its Subsidiaries have no material
Guarantee Obligations, contingent liabilities (which, in the case of contingent
liabilities, are of the type required in accordance with GAAP to be disclosed in
the Borrower's annual financial statements) and liabilities for taxes, or any
long-term leases or unusual forward or long-term commitments, including, without
limitation, any Hedging Obligation that is not reflected in the most recent
financial statements referred to in this paragraph except for Hedging
Obligations incurred since the date of such financial statements in the ordinary
course of business and disclosed on Schedule 3.23. During the period from
December 31, 2002, to and including the date hereof except as disclosed on
Schedule 3.1(b), there has been no Disposition by the Borrower or its
Subsidiaries of any material part of its business or Property.
3.2 No Change. Since December 31, 2002 there has been no development
or event that has had or could reasonably be expected to have a Material Adverse
Effect.
3.3 Corporate Existence; Compliance with Law. (a) Each Loan Party (i)
is duly incorporated or organized, as the case may be, validly existing and in
good standing under the laws of the jurisdiction of its organization, (ii) has
the power and authority, and the legal right, to own and operate its Property,
to lease the Property it operates as lessee and to conduct the business in which
it is currently engaged, (iii) is duly qualified as a foreign corporation or
38
other entity, as the case may be, and in good standing under the laws of each
jurisdiction where its ownership, lease or operation of Property or the conduct
of its business requires such qualification except to the extent that the
failure to comply therewith could not, in the aggregate, reasonably be expected
to have a Material Adverse Effect and (iv) is in compliance with all
Requirements of Law except to the extent that the failure to comply therewith
could not, in the aggregate, reasonably be expected to have a Material Adverse
Effect.
(b) Each Loan Party has all licenses, permits, franchises, or other
governmental authorizations necessary for the ownership and, if such Loan Party
is the operator, operation of its Oil and Gas Properties and the conduct of its
businesses, and is in compliance with the terms and conditions of all such
licenses, permits, franchises, or other governmental authorizations except where
the failure to obtain the same or to be in compliance could not reasonably be
expected to have a Material Adverse Effect. The Oil and Gas Properties operated
by the Loan Parties have been maintained, operated and developed by the
applicable Loan Party in a good and workmanlike manner and in conformity in all
material respects with all Requirements of Law and all rules, regulations and
orders of all duly constituted Governmental Authorities having jurisdiction and
in conformity in all material respects with the provisions of all leases,
subleases or other contracts comprising a part of the Hydrocarbon Interests and
other contracts and agreements forming a part of such Oil and Gas Properties;
specifically in this connection, to the best knowledge of the Loan Parties, (i)
after the date of this Agreement, no such Oil and Gas Property is subject to
having allowable production reduced in any material respect below the full and
regular regulatory allowable (including the maximum permissible tolerance)
because of any overproduction (whether or not the same was permissible at the
time) prior to the date of this Agreement; and (ii) none of the xxxxx comprising
a part of such Oil and Gas Properties are deviated from the vertical more than
the maximum permitted by Requirements of Law and regulations, rules and orders
of any Governmental Authority having appropriate jurisdiction, and such xxxxx
are, in fact, bottomed under and are producing from, and the wellbores are
wholly within, the Oil and Gas Properties.
3.4 Corporate Power; Authorization; Enforceable Obligations. Each Loan
Party has the power and authority, and the legal right, to make, deliver and
perform the Loan Documents to which it is a party and, in the case of the
Borrower, to borrow hereunder. Each Loan Party has taken all necessary corporate
or other action to authorize the execution, delivery and performance of the Loan
Documents to which it is a party and, in the case of the Borrower, to authorize
the borrowings on the terms and conditions of this Agreement. No consent or
authorization of, filing with, notice to or other act by or in respect of, any
Governmental Authority or any other Person is required to be obtained by a Loan
Party in connection with the borrowings hereunder or the execution, delivery,
performance, validity or enforceability of this Agreement or any of the other
Loan Documents except for filings and recording of Security Documents required
to perfect the interest of Lenders and actions to be taken in compliance with
covenants contained in any of the Loan Documents. Each Loan Document has been
duly executed and delivered on behalf of each Loan Party that is a party
thereto. This Agreement constitutes, and each other Loan Document upon execution
will constitute, a legal, valid and binding obligation of each Loan Party that
is a party thereto, enforceable against each such Loan Party in accordance with
its terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement
of
39
creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).
3.5 No Legal Bar. The execution, delivery and performance of this
Agreement and the other Loan Documents, the borrowings hereunder and the use of
the proceeds thereof will not result in a violation by a Loan Party of any
Requirement of Law or any Contractual Obligation of any Loan Party or any of
their respective Subsidiaries and will not result in, or require, the creation
or imposition of any Lien on any of their respective properties or revenues
pursuant to any Requirement of Law or any such Contractual Obligation (other
than the Liens created by the Security Documents). No Requirement of Law or
Contractual Obligation applicable to the Loan Parties or any of their respective
Subsidiaries could reasonably be expected to have a Material Adverse Effect.
Other than the Borrower's Indebtedness which has been incurred pursuant to the
Existing Credit Agreement and which is being refinanced pursuant to the terms of
the Loan Documents, the Loan Parties have not created, incurred, assumed,
permitted, guaranteed, or otherwise become, directly or indirectly, liable with
respect to any Indebtedness permitted pursuant to clauses (a) and (j) of the
definition of "Permitted Indebtedness" set forth in the Indenture.
3.6 No Material Litigation.
(a) No litigation, investigation or proceeding of or before any
arbitrator or Governmental Authority is pending or, to the knowledge of the Loan
Parties, threatened by or against the Loan Parties or any of their respective
Subsidiaries or against any of their respective properties or revenues (i) with
respect to any of the Loan Documents or any of the transactions contemplated
hereby or thereby or (ii) that could reasonably be expected to have a Material
Adverse Effect.
(b) There is no material claim or action pending or, to the knowledge
of the Borrower, overtly threatened, by any party claiming any interest in any
Mortgage Property or any lands subject to any mortgaged lease, servitudes or
other mineral rights.
3.7 No Default. No Loan Party is in default under or with respect to
any of its Contractual Obligations in any respect that could reasonably be
expected to have a Material Adverse Effect. No Default or Event of Default has
occurred and is continuing.
3.8 Ownership of Property; Liens.
(a) Each Loan Party has good and defensible title to its material Oil
and Gas Properties, and good and indefeasable title to all of its other Property
and Oil and Gas Properties constituting personal property, in each case material
to its business and in each case, free and clear of all Liens except as
permitted by Section 6.2.
(b) After giving full effect to all Liens permitted under Section 6.2,
the Borrower and its Subsidiaries own in all material respects the net revenue
interest (inclusive of overriding royalty interests and royalty interests) in
Hydrocarbons produced from the Oil and Gas Properties as reflected in the most
recent Reserve Report (other than Oil and Gas Properties Disposed of (i) in the
case of the Initial Reserve Report, since the date thereof and described on
Schedule 3.1(b) or (ii) in the case of any other Reserve Report, since the date
hereof in
40
accordance with the provisions of Section 6.4), and neither the Borrower nor any
of its Subsidiaries is obligated to bear costs or expenses in respect of such
Oil and Gas Properties materially in excess of its working interests percentage
as reflected in the most recent Reserve Report including, without limitation any
"back-in" or "reversionary" interests held by third parties which would
materially reduce the interest of the Borrower or any Subsidiary in such Oil and
Gas Properties, except as expressly set forth in the most recent Reserve Report.
The ownership of such Oil and Gas Properties shall not obligate the Borrower or
any of its Subsidiaries to bear the costs and expenses relating to the
maintenance, development and operations of each such Oil and Gas Property in any
amount materially in excess of the working interest of such Oil and Gas Property
as reflected in the most recent Reserve Report. Notwithstanding anything to the
contrary in the foregoing parts of this Section 3.8(b), the Lenders understand
and agree that the net revenue interests and working interests for all
categories of oil and gas reserves other than Proved Producing Reserves are
based on Borrowers reasonable estimates and assumptions and are subject to
change based on pre-drilling title examinations and/or the final configuration
of any unit subsequently formed in connection with any xxxxx drilled, re-entered
or re-completed on the applicable hydrocarbon interest.
(c) All material leases and agreements necessary for the conduct of
the business of the Borrower and its Subsidiaries are valid and subsisting, in
full force and effect, and there exists no default or event or circumstance
which with the giving of notice or the passage of time or both would give rise
to a default under any such lease or leases, which would affect in any material
respect the conduct of the business of the Borrower and its Subsidiaries, taken
as a whole.
(d) The rights, Properties and other assets presently owned, leased or
licensed by the Borrower and its Subsidiaries including, without limitation, all
easements and rights of way, include all rights, Properties and other assets
necessary to permit the Borrower and its Subsidiaries to conduct their
businesses in all material respects in the same manner as their businesses have
been conducted prior to the Closing Date.
(e) To the best of the Borrower's knowledge, no consents or rights of
first refusal exist or remain outstanding with respect to the Borrower's and its
Subsidiaries' interests in the Oil and Gas Properties assigned to them pursuant
to any acquisition of Oil and Gas Properties, except as permitted by Section
6.2, to the extent any such consents or rights of first refusal would limit or
otherwise adversely affect their ownership of such properties or the rights
granted to the Administrative Agent for the benefit of the Lenders under the
Security Documents.
(f) The Hydrocarbon Interests and operating agreements attributable to
the Oil and Gas Properties are in full force and effect in all material respects
in accordance with their terms.
(g) The Borrower's and each of its Subsidiary's marketing, gathering,
transportation, processing and treating facilities and equipment, together with
any marketing, gathering, transportation, processing and treating contracts in
effect between and/or among the Borrower, any of its Subsidiaries and any other
Person, are sufficient to gather transport, process
41
and/or treat, reasonably anticipated volumes of production of Hydrocarbons from
the Oil and Gas Properties of the Borrower and its Subsidiaries.
3.9 Intellectual Property. Each Loan Party owns, or is licensed to
use, all Intellectual Property necessary for the conduct of its business as
currently conducted. No material claim has been asserted and is pending by any
Person challenging or questioning the use of any Intellectual Property or the
validity or effectiveness of any Intellectual Property, nor does the Borrower
know of any valid basis for any such claim. The use of Intellectual Property by
the Borrower and its Subsidiaries does not infringe on the rights of any Person,
except for such infringements that, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect.
3.10 Taxes. Each Loan Party has filed or caused to be filed all
Federal, state and other material tax returns that are required to be filed and
has paid all taxes shown to be due and payable on said returns or on any
assessments made against it or any of its Property and all other taxes, fees or
other charges imposed on it or any of its Property by any Governmental Authority
(other than any amount the validity of which is currently being contested in
good faith by appropriate proceedings and with respect to which reserves in
conformity with GAAP have been provided on the books of the appropriate Loan
Party or its Subsidiaries, as the case may be); and no tax Lien has been filed
against the Property of any Loan Party, and, to the knowledge of the Borrower,
no claim is being asserted, with respect to any such tax, fee or other charge.
3.11 Federal Regulations. No part of the proceeds of any Loans will be
used for "purchasing" or "carrying" any "margin stock" within the respective
meanings of each of the quoted terms under Regulation U as now and from time to
time hereafter in effect or for any purpose that violates the provisions of the
Regulations of the Board. If requested by any Lender or the Administrative
Agent, the Borrower will furnish to the Administrative Agent and each Lender a
statement to the foregoing effect in conformity with the requirements of FR Form
G-3 or FR Form U-1 referred to in Regulation U.
3.12 Labor Matters. There are no strikes or other labor disputes
against any Loan Party pending or, to the knowledge of the Borrower, threatened
that (individually or in the aggregate) could reasonably be expected to have a
Material Adverse Effect. Hours worked by and payment made to employees of the
Loan Parties have not been in violation of the Fair Labor Standards Act or any
other applicable Requirement of Law dealing with such matters that (individually
or in the aggregate) could reasonably be expected to have a Material Adverse
Effect. All payments due from any Loan Party on account of employee health and
welfare insurance that (individually or in the aggregate) could reasonably be
expected to have a Material Adverse Effect if not paid have been paid or accrued
as a liability on the books of any Loan Party.
3.13 ERISA. Neither a Reportable Event nor an "accumulated funding
deficiency" (within the meaning of Section 412 of the Code or Section 302 of
ERISA) has occurred during the five-year period prior to the date on which this
representation is made or deemed made with respect to any Plan, and each Plan
has complied in all material respects with the applicable provisions of ERISA
and the Code. No termination of a Single Employer Plan has occurred, and no Lien
in favor of the PBGC or a Plan has arisen, during such five-year period.
42
The present value of all accrued benefits under each Single Employer Plan (based
on those assumptions used to fund such Plans) did not, as of the last annual
valuation date prior to the date on which this representation is made or deemed
made, exceed the value of the assets of such Plan allocable to such accrued
benefits by a material amount. No Loan Party nor any Commonly Controlled Entity
has had a complete or partial withdrawal from any Multiemployer Plan that has
resulted or could reasonably be expected to result in a material liability under
ERISA, and no Loan Party nor any Commonly Controlled Entity would become subject
to any material liability under ERISA if any Loan Party or any such Commonly
Controlled Entity were to withdraw completely from all Multiemployer Plans as of
the valuation date most closely preceding the date on which this representation
is made or deemed made. No such Multiemployer Plan is in Reorganization or
Insolvent.
3.14 Investment Company Act; Other Regulations. No Loan Party is an
"investment company", or a company "controlled" by an "investment company",
within the meaning of the Investment Company Act of 1940, as amended. No Loan
Party is subject to regulation under any Requirement of Law (other than
Regulation X of the Board) which limits its ability to incur Indebtedness.
3.15 Subsidiaries. (a) The Subsidiaries listed on Schedule 3.15
constitute all of the Subsidiaries of the Loan Parties at the date hereof.
Schedule 3.15 sets forth as of the Closing Date the name and jurisdiction of
incorporation of each Subsidiary and, as to each Subsidiary, the percentage of
each class of Capital Stock owned by each Loan Party.
(b) There are no outstanding subscriptions, options, warrants, calls,
rights or other agreements or commitments (other than stock options granted to
employees, directors, consultants, former employees, former directors and former
consultants and directors' qualifying shares) of any nature relating to any
Capital Stock of any Loan Party other than the Borrower.
3.16 Use of Proceeds. The proceeds of the Loans shall be used (i) to
repurchase the Repurchased 10-7/8% Notes pursuant to the Purchase Agreement,
(ii) to pay the related fees and expenses incurred in connection therewith and
(iii) for general corporate purposes (including, in the case of the Additional
Loans only, to repurchase 10-7/8% Notes).
3.17 Environmental Matters. Other than exceptions to any of the
following that could not, individually or in the aggregate, reasonably be
expected to result in Material Adverse Effect:
(a) The Loan Parties: (i) are, and within the period of all
applicable statutes of limitation have been, in compliance with all applicable
Environmental Laws; (ii) hold all Environmental Permits (each of which is in
full force and effect) required for any of their current or intended operations
or for any property owned, leased, or otherwise operated by any of them; (iii)
are, and within the period of all applicable statutes of limitation have been,
in compliance with all of their Environmental Permits; and (iv) reasonably
believe that: each of their Environmental Permits will be timely renewed and
complied with, without material expense; any additional Environmental Permits
that may be required of any of them will be timely obtained and complied with,
without material expense; and compliance with any Environmental Law that
43
is or is expected to become applicable to any of them will be timely attained
and maintained, without material expense.
(b) Materials of Environmental Concern are not present at, on, under,
in, or about any real property now or formerly owned, leased or operated by any
Loan Party, or at any other location (including, without limitation, any
location to which Materials of Environmental Concern have been sent for re-use
or recycling or for treatment, storage, or disposal) which could reasonably be
expected to (i) give rise to liability of such Person under any applicable
Environmental Law or otherwise result in costs to such Person, or (ii) interfere
with such Person's continued operations, or (iii) impair the fair saleable value
of any real property owned, operated or leased by such Person.
(c) There is no judicial, administrative, or arbitral proceeding
(including any notice of violation or alleged violation) under or relating to
any Environmental Law to which any Loan Party is, or to the knowledge of the
Borrower will be, named as a party that is pending or, to the knowledge of the
Borrower, threatened.
(d) No Loan Party has received any written request for information,
or been notified that it is a potentially responsible party under or relating to
the federal Comprehensive Environmental Response, Compensation, and Liability
Act or any similar Environmental Law, or with respect to any Materials of
Environmental Concern.
(e) No Loan Party has entered into or agreed to any consent decree,
order, or settlement or other agreement, or is subject to any judgment, decree,
or order or other agreement, in any judicial, administrative, arbitral, or other
forum for dispute resolution, relating to compliance with or liability under any
Environmental Law.
(f) No Loan Party has assumed or retained, by contract or operation
of law, any liabilities of any kind, fixed or contingent, known or unknown,
under any Environmental Law or with respect to any Material of Environmental
Concern.
3.18 Accuracy of Information, Etc. No statement or information
contained in this Agreement, any other Loan Document or any other document,
certificate or statement furnished to the Administrative Agent or the Lenders or
any of them, by or on behalf of any Loan Party for use in connection with the
transactions contemplated by this Agreement or the other Loan Documents,
contained as of the date such statement, information, document or certificate
was so furnished, any untrue statement of a material fact and all such
statements and information, taken as a whole, do not omit to state a material
fact necessary in order to make the statements contained herein or therein not
misleading; provided, however, with respect to projections and pro forma
financial information and engineering reports contained in the materials
referenced above the Borrower represents only that such information was based
upon good faith estimates and assumptions believed by management of the Borrower
to be reasonable at the time made, it being recognized by the Lenders that such
financial information as it relates to future events is not to be viewed as fact
and that actual results during the period or periods covered by such financial
information may differ from the projected results set forth therein by a
material amount. There is no fact known to any Loan Party that could reasonably
be expected to have a Material Adverse Effect that has not been expressly
disclosed herein, in the other Loan
44
Documents or in any other documents, certificates and statements furnished to
the Agents and the Lenders for use in connection with the transactions
contemplated hereby and by the other Loan Documents.
3.19 Security Documents. (a) The Guaranty and Collateral Agreement is
effective to create in favor of the Administrative Agent, for the benefit of the
Secured Parties, a legal, valid and enforceable security interest in the
Collateral described therein and proceeds thereof. In the case of the securities
pledged by the Loan Parties pursuant to the Guaranty and Collateral Agreement,
when any certificates representing such pledged securities are delivered to the
Administrative Agent, and in the case of the other Collateral described in the
Guaranty and Collateral Agreement, when financing statements in appropriate form
are filed in the offices specified on Schedule 3.19(a)-1 (which financing
statements have been duly completed and delivered to the Administrative Agent)
and such other filings and actions as are specified on Schedule 3 to the
Guaranty and Collateral Agreement have been completed, the Guaranty and
Collateral Agreement shall constitute a fully perfected Lien on, and security
interest in, all right, title and interest of the Loan Parties in such
Collateral and the proceeds thereof, as security for the Obligations (as defined
in the Guaranty and Collateral Agreement), in each case prior and superior in
right to any other Person (except, in the case of Collateral other than
securities pledged by the Loan Parties, Liens permitted by Section 6.2).
Schedule 3.19(a)-2 lists each Uniform Commercial Code financing statement that
(i) names any Loan Party as debtor and (ii) will be assigned on the Closing
Date. On or prior to the Closing Date, the Borrower will have delivered to the
Administrative Agent, or caused to be filed, duly completed Uniform Commercial
Code termination statements, signed by the relevant secured party or with
respect to which the relevant secured parties have given Borrower the authority
to file such termination statements, in respect of each Uniform Commercial Code
financing statement listed in Schedule 3.19(a)-3.
(b) Each of the Mortgages covering the Mortgaged Properties is
effective to create in favor of the Administrative Agent, for the benefit of the
Secured Parties, a legal, valid and enforceable Lien on the Properties described
therein and proceeds thereof and when such Mortgages are filed in the offices
specified on Schedule 3.19(b) (in the case of the Mortgages to be executed and
delivered on the Closing Date) or in the recording office designated by the
Borrower (in the case of any Mortgage to be executed and delivered pursuant to
Section 5.9(c)), each such Mortgage shall constitute a fully perfected Lien on,
and security interest in, all right, title and interest of the Loan Parties in
the Mortgaged Properties described therein and the proceeds thereof, as security
for the Obligations (as defined in the relevant Mortgage), in each case prior
and superior in right to any other Person (other than Persons holding Liens or
other encumbrances or rights permitted by Section 6.2 or the relevant Mortgage).
3.20 Gas Imbalances. Set forth in Schedule 3.20 is a schedule, as of
the most recent date available, on a net basis, of all material gas imbalances,
take or pay or other prepayments with respect to the Borrower's or any
Subsidiary's Oil and Gas Properties which would require the Borrower or a
Subsidiary to deliver Hydrocarbons produced from the Borrower's or such
Subsidiary's Oil and Gas Properties at some future time without then or
thereafter receiving full payment therefor.
45
3.21 Initial Reserve Report. The Borrower has heretofore delivered to
the Administrative Agent true and complete copies of a Reserve Report prepared
by Netherland Xxxxxx & Associates, Inc. dated January 1, 2003 (the "Initial
Reserve Report") relating to an evaluation of the Proved Reserves attributable
to the Oil and Gas Properties described therein. To the best of the Borrower's
knowledge, (i) the assumptions stated or used in the preparation of the Initial
Reserve Report were reasonable at the time made (it being understood by the
Administrative Agent and the Lenders that assumptions as to future results are
subject to uncertainty and that no assurance can be given that any particular
projections will be realized), (ii) all information furnished by the Borrower to
Netherland Xxxxxx & Associates, Inc., taken as a whole, for use in the
preparation of the Initial Reserve Report was accurate in all material respects,
(iii) there has been no material change in the amount of the estimated Proved
Reserves shown in the Initial Reserve Report since the date thereof, except for
changes which have occurred as a result of production in the ordinary course of
business, changes in prices, acquisitions, divestitures and changes in
operations arising in the ordinary course of business and (iv) the Initial
Reserve Report does not omit any material statement or information necessary to
cause the same not to be misleading to the Administrative Agent and the Lenders
in any material respect.
3.22 Insurance. Each Loan Party has, (a) all insurance policies
sufficient for the compliance by each of them with all material Governmental
Requirements and all material agreements and (b) insurance coverage in at least
amounts and against such risk (including, without limitation, public liability)
that are usually insured against by companies similarly situated and engaged in
the same or a similar business for the assets and operations of the Borrower and
its Subsidiaries. The Administrative Agent, for the ratable benefit of the
Lenders, has been named as additional insureds in respect of such liability
insurance policies. Schedule 3.22 attached hereto contains an accurate and
complete description of all performance bonds related to operations on or
pertaining to the Oil and Gas Properties, and all material policies of insurance
owned or held by the Borrower and each of its Subsidiaries. Except as set forth
on Schedule 3.22, all such policies are in full force and effect, all premiums
with respect thereto covering all periods up to and including the Closing Date
have been paid, and no notice of cancellation or termination has been received
with respect to any such policy. Except as set forth on Schedule 3.22, such
bonds and policies are sufficient for compliance with all requirements of law
and of all agreements to which the Borrower or any of its Subsidiaries is a
party; are valid, outstanding and enforceable policies; provide adequate
coverage in at least such amounts and against at least such risks (but including
in any event public liability) as are required by Governmental Authorities
and/or usually insured or bonded against in the same general area by companies
engaged in the same or a similar business for the assets and operations of the
Borrower and each of its Subsidiaries; will remain in full force and effect
through the respective dates set forth in Schedule 3.22 without the payment of
additional premiums except as set forth on Schedule 3.22; and will not in any
way be affected by, or terminate or lapse by reason of, the transactions
contemplated by this agreement. Neither the Borrower nor any of its Subsidiaries
has been refused any bonds or insurance with respect to its assets or
operations, nor has its coverage been limited below usual and customary bond or
policy limits, by any bonding company or insurance carrier to which it has
applied for any such bond or insurance or with which it has carried insurance
during the last three years; provided, that the Borrower and its Subsidiaries
are currently required to post letters of credit or other collateral to obtain
bonds.
46
3.23 Existing Hedging Agreements. Schedule 3.23 sets forth, as of two
Business Days prior to the date hereof, a true and complete list of all (i) Oil
and Gas Hedging Contracts (including commodity price swap agreements, forward
agreements or contracts of sale which provide for prepayment for deferred
shipment or delivery of oil, gas or other commodities) of the Borrower and each
Subsidiary (collectively, the "Existing Oil and Gas Hedging Contracts") and (ii)
Rate Management Agreements, including, in each case, the material terms thereof
(including the type, term, effective date, termination date and notional amounts
or volumes), the net xxxx to market value thereof, all credit support agreements
relating thereto (including any margin required or supplied) and the
counterparty to each such agreement.
3.24 Marketing of Production. Except for contracts listed on Schedule
3.24 (with respect to all of which contracts the Borrower represents that it or
its Subsidiaries are receiving a price for all production sold thereunder which
is computed substantially in accordance with the terms of the relevant contract
and are not having deliveries curtailed substantially below the subject
Property's delivery capacity), as of the Closing Date, there exist no material
agreements which are not cancelable on 60 days' notice or less without penalty
or detriment for the sale of production from the Borrower's or its Subsidiaries'
Hydrocarbons (including, without limitation, calls on, or other rights to
purchase, production, whether or not the same are currently being exercised)
that (a) pertain to the sale of production at a fixed price and (b) have a
maturity or expiry date of longer than six months from the Closing Date.
3.25 Material Personal Property. All material pipelines, xxxxx, gas
processing plants, platforms and other material improvements, fixtures and
equipment owned in whole or in part by any Loan Party that are necessary to
conduct normal operations are being maintained in a state adequate to conduct
normal operations, and with respect to such of the foregoing which are operated
by such Loan Party, in a manner consistent with such Loan Party's past practices
(other than those the failure of which to maintain in accordance with this
Section 3.25 could not reasonably be expect to have a Material Adverse Effect).
3.26 Exchange Act Reports. The Purchaser has timely filed all reports,
forms, proxy statements and registration statements (collectively the
"Disclosure Documents") required to be filed with the SEC under the Exchange Act
and the Securities Act. As of their respective dates, the Disclosure Documents
complied in all material respects with the requirements of the Exchange Act and
the Securities Act and the respective rules and regulations of the SEC
thereunder applicable to such documents. As of their respective dates none of
the Disclosure Documents contained, and as of the date hereof none of the
Disclosure Documents filed since December 31, 2001 contain, any untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
SECTION 4. CONDITIONS PRECEDENT
4.1 Conditions to Initial Extension of Credit. The agreement of each
Lender to make the initial extension of credit requested to be made by it
hereunder is subject to the satisfaction, prior to or concurrently with the
making of such extension of credit on the Closing Date, of the following
conditions precedent:
47
(a) Loan Documents. The Administrative Agent shall have received (i)
this Agreement, executed and delivered by a duly authorized officer of the
Borrower, (ii) the Guaranty and Collateral Agreement, executed and delivered by
a duly authorized officer of each Loan Party party thereto, (iii) a Mortgage
covering each of the Mortgaged Properties, executed and delivered by a duly
authorized officer of each Loan Party party thereto and (v) the Syndication
Letter Agreement executed and delivered by the Borrower, the Syndication Agent
and the Arranger.
(b) Purchase Agreement. The purchase by the Borrower of the 10-7/8%
Notes shall be consummated, on the terms and subject to conditions set forth in
the Purchase Agreement, simultaneously with the making of the Initial Loans.
(c) Pro Forma Balance Sheet; Financial Statements. The Lenders shall
have received (i) the Pro Forma Balance Sheets, (ii) audited consolidated
financial statements for the Borrower, for the 2000 and 2001 fiscal years and
(iii) the Draft Financial Statements and the Draft Financial Statements shall
not reflect any material adverse change in the consolidated financial condition
of the Borrower and its consolidated Subsidiaries as reflected in the financial
statements or projections previously delivered to the Lenders.
(d) Approvals. All governmental and material third party approvals
necessary to be obtained by a Loan Party in connection with the purchase of the
Repurchased 10-7/8% Notes, the continuing operations of the Loan Parties and the
transactions contemplated hereby shall have been obtained and be in full force
and effect, and all applicable waiting periods shall have expired without any
action being taken or threatened by any competent authority which would
restrain, prevent or otherwise impose adverse conditions on the purchase of the
10-7/8% Notes or the financing contemplated hereby.
(e) Fees. The Lenders and the Administrative Agent shall have received
all fees required to be paid, and all expenses for which invoices have been
presented (including reasonable fees, disbursements and other charges of counsel
to the Agents), on or before the Closing Date. All such amounts will be paid
with proceeds of Loans made on the Closing Date and will be reflected in the
funding instructions given by the Borrower to the Administrative Agent on or
before the Closing Date.
(f) Business Plan. The Lenders shall have received a satisfactory
business plan for fiscal year 2003 and a satisfactory written analysis of the
business and prospects of the Borrower and its Subsidiaries for the period from
the Closing Date through January 6, 2005.
(g) Budget. The Lenders shall have received a budget for the Borrower
and its Subsidiaries for the 2003 fiscal year which budget shall be acceptable
to the Lenders (the "Initial Budget").
(h) Lien Searches. The Administrative Agent shall have received the
results of a recent lien search in each of the jurisdictions in which Uniform
Commercial Code financing statement or other filings or recordations should be
made to evidence or perfect security interests in all assets of the Loan
Parties, and such search shall reveal no liens on any of the assets of the Loan
Parties, except for Liens permitted by Section 6.2.
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(i) Environmental Matters. The Administrative Agent shall be
satisfied with the results of the environmental review of the Properties of the
Loan Parties.
(j) Certificate. The Administrative Agent shall have received
certificates of each Loan Party, dated the Closing Date, substantially in the
form of Exhibits G-1 and G-2, with appropriate insertions and attachments.
(k) Legal Opinions. The Administrative Agent shall have received the
following executed legal opinions:
(i) the legal opinion of Xxxxxx & Xxxxxx, L.L.P., counsel to the
Borrower and its Subsidiaries, substantially in the form of Exhibit H;
(ii) the legal opinion of Schully, Roberts, Slattery, Jaubert &
Marino, special Louisiana counsel to the Borrower and its Subsidiaries,
substantially in the form of Exhibit I.
Each such legal opinion shall cover such other matters incident to the
transactions contemplated by this Agreement as the Administrative Agent may
reasonably require.
(l) Pledged Securities; Stock Powers; Acknowledgment and Consent.
The Administrative Agent shall have received the certificates representing the
shares of Capital Stock pledged pursuant to the Guaranty and Collateral
Agreement, together with an undated stock power for each such certificate
executed in blank by a duly authorized officer of the pledgor thereof.
(m) Filings, Registrations and Recordings. Each document (including,
without limitation, any Uniform Commercial Code financing statement) required by
the Security Documents or under law or reasonably requested by the
Administrative Agent to be filed, registered or recorded in order to create in
favor of the Administrative Agent, for the benefit of the Secured Parties, a
perfected Lien on the Collateral described therein, prior and superior in right
to any other Person (other than with respect to Liens expressly permitted by
Section 6.2), shall have been filed, registered or recorded or shall have been
delivered to the Administrative Agent in proper form for filing, registration or
recordation.
(n) Initial Reserve Report. The Administrative Agent shall have
received and shall be satisfied with the contents, results and scope of the
Initial Reserve Report.
(o) Representations and Warranties. Each of the representations and
warranties made by any Loan Party in or pursuant to the Loan Documents shall be
true and correct on and as of such date as if made on and as of such date.
(p) No Default. No Default or Event of Default shall have occurred
and be continuing on such date or after giving effect to the extensions of
credit requested to be made on such date.
(q) Fee Letter. The Administrative Agent shall have received the Fee
Letter, executed and delivered by a duly authorized officer of each Loan Party.
49
SECTION 5. AFFIRMATIVE COVENANTS
The Borrower hereby agrees that, so long as the Commitments remain in
effect or any Loan or other amount is owing to any Lender or any Agent
hereunder, the Borrower shall and shall cause each of the Loan Parties and their
respective Subsidiaries to:
5.1 Financial Reporting. Furnish to each Agent and each Lender:
(a) as soon as available, but in any event within 90 days after the
end of each fiscal year of the Borrower, a copy of the audited consolidated
balance sheet of the Borrower and its consolidated Subsidiaries as at the end of
such year and the related audited consolidated statements of income and of cash
flows for such year, setting forth in each case in comparative form the figures
as of the end of and for the previous year, reported on by KPMG LLP or other
independent certified public accountants of nationally recognized standing;
(b) as soon as available, but in any event not later than 45 days
after the end of each of the first three quarterly periods of each fiscal year
of the Borrower, the unaudited consolidated balance sheet of the Borrower and
its consolidated Subsidiaries as at the end of such quarter and the related
unaudited consolidated statements of income and of cash flows for such quarter
and the portion of the fiscal year through the end of such quarter, setting
forth in each case in comparative form the figures as of the end of and for the
corresponding period in the previous year, certified by a Responsible Officer as
being fairly stated in all material respects (subject to normal year-end audit
adjustments);
(c) as soon as available, but in any event not later than 35 days
after the end of each month occurring during each fiscal year of the Borrower
(other than the first month of each fiscal year), (i) the Borrower's internally
generated management financial report for the Borrower and its Subsidiaries as
at the end of such month (which report shall be subject to normal adjustments as
reflected in the financial reports provided pursuant to Sections 5.1(a) and (b))
in a form, and covering such matters, reasonably acceptable to the Majority
Lenders and the Administrative Agent and setting forth (A) a calculation of the
Dedicated Free Cash to date from January 1, 2003, through the last day of such
month, (B) as of the last Business Day of such month, a summary of the hedging
positions of each Loan Party under all Hedging Agreements (including, without
limitation, any contracts of sale which provide for prepayment for deferred
shipment or delivery of oil, gas or other commodities) of each Loan Party,
including the type, term, effective date, termination date and notional
principal amounts or volumes, the hedged price(s), interest rate(s) or exchange
rate(s), as applicable, and any new credit support agreements relating thereto
and (C) such other information as the Administrative Agent and/or the Majority
Lenders may reasonably request, (ii) a certificate, current as of the last day
of such month, supported by schedules showing the derivation thereof, including
the calculation of the PV-10 Value of the Proved Reserves and containing such
detail and other information as the Administrative Agent may request from time
to time, provided that amounts set forth in the certificate shall be determined
pursuant to the information set forth in the Reserve Report most recently
delivered by the Borrower pursuant to Section 5.1(c), such calculation to be
made by multiplying (1) the volumetric quantity of the categories of estimated
Proved Reserves set forth in such Reserve Report less such aggregate projected
production volumes of Proved Reserves since the date of and as provided in such
Reserve Report by (2) the applicable NYMEX Strip
50
Price as of the last Business Day of the month preceding the date of the
delivery by the Borrower of such report to the Administrative Agent and (iii) a
report, with a certificate of an Authorized Person of the Borrower certifying to
the completeness and accuracy of the report, discussing (A) any change since the
date of such Reserve Report in the categorization of any Oil and Gas Properties
among Proved Developed Producing Reserves, Proved Developed Non-Producing
Reserves, Provided Undeveloped Reserves and "other", (B) any change in the
working interest or net revenue interest in the Oil and Gas Properties of the
Borrower reflected on such Reserve Report and (C) such other information as the
Administrative Agent shall reasonably consider appropriate or necessary from the
perspective of an asset-based lender;
(d) together with the delivery of the financial information to be
supplied under Sections 5.1(a) and (b), a report, in form and substance
satisfactory to the Administrative Agent, setting forth as of the last Business
Day of such fiscal quarter or fiscal year, a true and complete list of all
Hedging Agreements (including commodity price swap agreements, forward
agreements or contracts of sale which provide for prepayment for deferred
shipment or delivery of oil, gas or other commodities) of the Borrower and each
Subsidiary, the material terms thereof (including the type, term, effective
date, termination date and notional amounts or volumes), the net xxxx to market
value therefor, any new credit support agreements relating thereto not listed on
Schedule 3.23, any margin required or supplied under any credit support
document, and the counterparty to each such agreement.
(e) (i) not later than February 28, 2004, a Reserve Report prepared by
Netherland Xxxxxx & Associates, Inc. or another independent petroleum
engineering firm chosen by the Borrower and acceptable to the Majority Lenders
(the "Approved Engineers"), dated as of January 1, 2004 and (ii) either (A) not
later than 40 days after any one written request by the Majority Lenders, a
Reserve Report prepared by petroleum engineers who are employees of the Borrower
and audited by the Approved Engineers or (B) not later than 75 days after any
one written request by the Majority Lenders, a Reserve Report prepared by the
Approved Engineers, in either case dated as of the first day of the month during
which the Borrower receives such request and together with an accompanying
report on Oil and Gas Property sales, Oil and Gas Property purchases and changes
in categories concerning the Oil and Gas Properties and interests owned by the
Borrower and its Subsidiaries which have attributable to them Proved Reserves.
Each such Reserve Report shall reflect the PV-10 Value of the Oil and Gas
Properties of the Loan Parties as of the effective date of such Reserve Report
and shall otherwise conform to the reporting requirements concerning oil and gas
reserves contained in Regulations S-K and S-X promulgated by the SEC, shall take
into account any material "over-produced" and "under produced" status under gas
balancing arrangements, and shall contain information and analysis comparable in
scope to that contained in the Initial Reserve Report, including the Proved
Reserves of the Borrower and its Subsidiaries as of the date of such report and
any updated production history of the Proved Reserves of the Borrower as of such
date. Together with such report, the Borrower shall furnish to the Lenders any
updated production history of the Proved Reserves of the Borrower and its
Subsidiaries as of such date, the lease operating expenses attributable to the
Borrower's and its Subsidiaries' Oil and Gas Properties for the prior 12-month
period, together with any other information as to the operations of the Borrower
and its Subsidiaries as reasonably requested by the Lenders. Together with such
report, the Borrower shall furnish to the Lenders such additional data and
information concerning pricing, quantities,
51
or volume of production from or attributable to the Oil and Gas Properties with
respect thereto as the Lenders may reasonably request;
(f) within 45 days after the end of each first, second and third
fiscal quarter of each fiscal year (other than any quarter during which a
Reserve Report has been delivered pursuant to Section 5.1(e)(ii)), a Reserve
Report prepared as of the first day after the end of each such fiscal quarter by
petroleum engineers who are employees of the Borrower, together with an
accompanying report on Oil and Gas Property sales, Oil and Gas Property
purchases and changes in categories, both in the same form and scope as the
reports in paragraph (e) above. Each such Reserve Report shall be prepared by or
at the direction of the Borrower and shall be certified by the senior petroleum
engineer of the Borrower as to the truth and accuracy of the information
utilized to prepare the Reserve Report, except as to projections as to the
results of future operations and quantities of reserves, which will be certified
as being based on assumptions believed to be reasonable at the time made. Each
such Reserve Report shall roll forward quantities of Proved Reserves from the
immediately preceding Reserve Report provided pursuant to Section 5.1(e) or this
Section 5.1(f), as applicable, adjusted for (w) actual production since the
effective date of such preceding Reserve Report, (x) appropriate revisions in
timing of development activities, (y) prices in effect at the effective date of
such Reserve Report and (z) any material additions or revisions in proved
reserves known to the management of the Borrower at the effective date of such
Reserve Report; and
(g) such other information (including reserve, engineering,
geological, and title information) as the Administrative Agent or any Lender may
from time to time reasonably request.
All such financial statements are to present fairly in all material respects and
are to be prepared in reasonable detail and in accordance with GAAP applied
consistently throughout the periods reflected therein and with prior periods
(except as approved by such accountants or officer, as the case may be, and
disclosed therein) and are to present fairly the financial positions and results
of operations of the Borrower and its consolidated Subsidiaries.
5.2 Certificates; Other Information. Furnish to each Agent and each
Lender:
(a) concurrently with the delivery of the financial statements
referred to in Section 5.1(a), a certificate of the independent certified public
accountants reporting on such financial statements stating that in making the
examination necessary therefor no knowledge was obtained of any Default or Event
of Default, except as specified in such certificate (it being understood that
such certificate shall be limited to the items that independent certified public
accountants are permitted to cover in such certificates pursuant to their
professional standards and customs of the profession);
(b) concurrently with the delivery of any financial statements
pursuant to Sections 5.1(a) and (b), (i) a certificate of a Responsible Officer
stating that, to the best of such Responsible Officer's knowledge, each Loan
Party during such period has observed or performed all of its covenants and
other agreements, and satisfied every condition, contained in this Agreement and
the other Loan Documents to which it is a party to be observed, performed or
satisfied by it, and that such Responsible Officer has obtained no knowledge of
any Default or
52
Event of Default except as specified in such certificate and (ii) in the case of
quarterly or annual financial statements, (A) a Compliance Certificate
containing all information and calculations necessary for determining compliance
by the Loan Parties and their respective Subsidiaries with the provisions of
this Agreement referred to therein as of the last day of the fiscal quarter or
fiscal year of the Borrower, as the case may be, (B) to the extent not
previously disclosed to the Administrative Agent, a listing of any Hydrocarbon
Interests and/or real property acquired by any Loan Party at a purchase price in
excess of $1,000,000 and a listing of any Intellectual Property acquired by any
Loan Party at a purchase price in excess of $250,000, in each case since the
date of the most recent list delivered pursuant to this clause (B) (or, in the
case of the first such list so delivered, since the Closing Date) and (C) any
Uniform Commercial Code financing statements or other filings specified in such
Compliance Certificate as being required to be delivered therewith;
(c) as soon as available, and in any event not later than November 15,
2003, a detailed consolidated budget for fiscal year 2004 (including a projected
consolidated balance sheet of the Borrower and its Subsidiaries as of the end of
fiscal year 2004, and the related consolidated statements of projected cash
flow, projected changes in financial position and projected income) which budget
shall be subject to review and approval in accordance with the provisions of
Section 5.15, if applicable (such budget, following any revision and approval
required by Section 5.15, being referred to as the "Additional Budget"), and, as
soon as available, significant revisions, if any, of such budget and projections
with respect to such fiscal year (collectively, the "Projections"), which
Projections shall in each case be accompanied by a certificate of a Responsible
Officer stating that such Projections were prepared based upon estimates,
information and assumptions believed by the Borrower at the time made to be
reasonable and that such Responsible Officer has no reason to believe that such
Projections are incorrect or misleading in any material respect;
(d) within 45 days after the end of each fiscal quarter of the
Borrower, a narrative discussion and analysis of the financial condition and
results of operations of the Borrower and its Subsidiaries for such fiscal
quarter and for the period from the beginning of the then current fiscal year to
the end of such fiscal quarter, as compared to the portion of the Projections
covering such periods and to the comparable periods of the previous year;
(e) as soon as possible and in any event within five days of obtaining
knowledge thereof: (i) any development, event, or condition that, individually
or in the aggregate with other developments, events or conditions, could
reasonably be expected to result in a Material Adverse Effect; and (ii) any
notice that any Governmental Authority may deny any application for an
Environmental Permit sought by, or revoke or refuse to renew any Environmental
Permit held by, any Loan Party;
(f) reports, certifications, engineering studies, environmental
assessments, or other written material or data in form, scope, and substance
satisfactory to the Administrative Agent or the Majority Lenders, in the event
that the Administrative Agent or the Majority Lenders at any time have a
reasonable basis to believe that there may be a material violation of any
Environmental Law or a condition at any property owned, operated or leased by
any Loan Party or any of their respective Subsidiaries that could give rise to
material environmental costs or liabilities, or if an Event of Default occurs;
provided, however, that should any Loan Party or
53
its Subsidiary fail to provide such reports, certifications, engineering studies
or other written material or data within 75 days after the Administrative
Agent's or Lender's request, the Administrative Agent shall have the right, at
such Loan Parties' or Subsidiary's sole cost and expense, to conduct such
environmental assessments or investigations as may reasonably be required to
satisfy the Administrative Agent and the Lenders that the Loan Parties or their
respective Subsidiary is in material compliance with Environmental Laws;
(g) upon the request of the Administrative Agent or any Lender,
provide reasonable access during normal business hours to all geological,
engineering and related data contained in any Loan Parties' or its Subsidiaries'
files or readily accessible to the Loan Parties or their Subsidiaries relating
to its Mortgaged Properties, subject to and as may be limited by any
confidentiality agreements to which such Loan Party or any of its Subsidiaries
is a party or by which any such data is bound; provided, however, that upon the
request of the Administrative Agent, such Loan Party shall make such reasonable
efforts to obtain a release from such confidentiality agreements for the purpose
of providing such data to the Administrative Agent;
(h) in the event the Borrower or any Subsidiary intends to Dispose of
any Oil or Gas Properties in accordance with this Agreement (but only if such
transaction involves the disposition of Oil and Gas Properties for a value in
excess of $3,000,000 prior written notice of such Disposition, the price thereof
and the anticipated date of closing;
(i) promptly after the furnishing thereof, copies of any financial
statement, report or notice furnished to or any Person pursuant to the terms of
any preferred stock designation, indenture, loan or credit or other similar
agreement in respect of Indebtedness in excess of $2,000,000, other than this
Agreement and not otherwise required to be furnished to the Lenders pursuant to
any other provision of this Section 5;
(j) promptly following the written request from the Administrative
Agent thereof, a list of all Persons disbursing proceeds to the Borrower or any
Subsidiary from its Oil and Gas Properties;
(k) promptly upon receipt thereof, a copy of each other report or
letter submitted to the Borrower or any Subsidiary by independent accountants in
connection with any annual, interim or special audit made by them of the books
of the Borrower or any Subsidiary, and a copy of any response by the Borrower or
any such Subsidiary of the Borrower, or the Board of Directors of the Borrower
or any such Subsidiary of the Borrower, to such letter or report;
(l) promptly upon its becoming available, each financial statement,
report, notice or proxy statement sent by the Borrower to stockholders generally
and each regular or periodic report and any registration statement or prospectus
filed by the Borrower with any securities exchange or the SEC; and
(m) promptly, such additional financial and other information as any
Lender may from time to time reasonably request.
5.3 Payment of Obligations. Pay, discharge or otherwise satisfy at or
before maturity or before they become delinquent, as the case may be, all its
material obligations of
whatever nature, except where the amount or validity thereof is currently being
contested in good faith by appropriate proceedings and reserves in conformity
with GAAP with respect thereto have been provided on the books of the Loan
Parties or their respective Subsidiaries, as the case may be.
5.4 Conduct of Business and Maintenance of Existence, Etc. (a) (i)
preserve, renew and keep in full force and effect its corporate or other
existence and (ii) take all reasonable action to maintain all rights, privileges
and franchises necessary or desirable in the normal conduct of its business,
except, in each case, as otherwise permitted by Section 6.3 and except, in the
case of clause (ii) above, to the extent that failure to do so could not
reasonably be expected to have a Material Adverse Effect.
(a) comply in all material respects with all Contractual Obligations
and Requirements of Law.
(b) produce and market all the Proved Reserves attributable to the
Borrower's and its Subsidiaries' interests in the Oil and Gas Properties in
accordance with prudent industry practice.
(c) comply in all material respects with all leases, agreements and
documents pertaining to or affecting the Hydrocarbon Interests during the term
of this Agreement.
5.5 Maintenance of Property; Insurance. (a) keep all Property and
systems useful and necessary in its business in good working order and
condition, ordinary wear and tear excepted.
(b) maintain, and cause its Subsidiaries to maintain, (i) all
insurance policies sufficient for the compliance by each of them with all
material Governmental Requirements and all material agreements and (ii)
insurance coverage in at least amounts and against such risks (including,
without limitation, public liability) that are usually insured against by
companies similarly situated and engaged in the same or a similar business for
the assets and operations of the Borrower and its Subsidiaries.
(c) name the Administrative Agent, for the ratable benefit of the
Lenders, as an additional insured in respect of the insurance policies referred
to in Section 5.5(b). Such insurance policies shall not be (i) canceled or (ii)
amended or changed in any respect which is materially adverse to the interests
of the Lenders, in either event without at least 30 days' written notice to the
Administrative Agent. So long as no Default or Event of Default exists and is
continuing, proceeds of any such insurance policies shall be applied, subject to
2.7(b), first to the restoration, repair, replacement or plugging and
abandonment (and any reasonable costs and expenses related to any thereof) of
the Properties to the extent such actions would be reasonably prudent and the
remainder, if any, shall be applied to the Obligations to prepay the Obligations
in the manner set forth in Section 2.7(b).
(d) renew or replace all insurance policies referred to in Section
5.5(b) on terms no less favorable to the Administrative Agent for the ratable
benefit of the Lenders during the term of this Agreement. Any substitute
underwriter shall be financially sound as the Borrower's existing underwriters.
55
(e) do or cause to be done all things reasonably necessary to preserve
and keep in good repair, working order and efficiency (ordinary wear and tear
excepted) all of its material Oil and Gas Properties and other material
Properties, including, without limitation, all equipment, machinery, facilities,
marketing, gathering, transportation and processing assets and from time to time
make all the reasonably necessary repairs, renewals and replacements so that at
all times the state and condition of its material Oil and Gas Properties and
other material Properties will be preserved and maintained, except to the extent
a portion of such Properties is no longer capable of commercially producing
Hydrocarbons.
(f) (i) to promptly pay and discharge, or make reasonable and
customary efforts to cause to be paid and discharged, all delay rentals,
royalties, expenses and Indebtedness accruing under the leases or other
agreements affecting or pertaining to its Oil and Gas Properties and do all
other things necessary to keep unimpaired its rights with respect thereto and
prevent any forfeiture thereof or default thereunder, and (ii) perform or make
reasonable and customary efforts to cause to be performed, in accordance with
industry standards, the obligations required by each and all of the assignments,
deeds, leases, sub-leases, contracts and agreements affecting its interests in
its Oil and Gas Properties and other material Properties, except in each case of
clauses (i) and (ii) to the extent a portion of such Properties is no longer
capable of producing Hydrocarbons in economically reasonable amounts and except
for Dispositions permitted by Section 6.4.
(g) to the extent that the Oil and Gas Properties (i) are operated by
the Borrower or its Subsidiaries, act as a prudent operator in an effort to
identify and prevent the occurrence of any drainage of Hydrocarbons from the Oil
and Gas Properties; to carry out all such operations as would a reasonable and
prudent operator in accordance with standard industry practices; and to comply
in all material respects with all applicable contracts and agreements and all
Governmental Requirements and (ii) are not operated by the Borrower or its
Subsidiaries, utilize its property and contractual rights as a prudent owner in
an effort (A) to identify and prevent the occurrence of any drainage of
Hydrocarbons from the Oil and Gas Properties; (B) to cause the operator to carry
out all operations as would a reasonable and prudent operator in accordance with
standard industry practices; and (C) to cause the operator to comply in all
material respects as would a reasonable and prudent operator with all applicable
material contracts and agreements and all Governmental Requirements and with
this Section 5.5.
5.6 Inspection of Property; Books and Records; Discussions. (a) keep
proper books of records and account in which full, true and correct entries in
conformity with GAAP and all Requirements of Law shall be made of all dealings
and transactions in relation to its business and activities and (b) subject to
and as may be limited by any confidentiality agreements to which such Loan Party
or any of its Subsidiaries is a party or by which any such data is bound, permit
representatives of any Lender to visit and inspect any of its properties and
examine and make abstracts from any of its books and records upon reasonable
prior notice and at any reasonable time and as often as may reasonably be
desired and to discuss the business, operations, properties and financial and
other condition of the Loan Parties and their respective Subsidiaries with
officers and employees of the Loan Parties and their respective Subsidiaries and
with its independent certified public accountants; provided, however, that upon
the request of the Administrative Agent, such Loan Party shall make such
reasonable efforts to obtain a
56
release from such confidentiality agreements for the purpose of providing such
data to the Administrative Agent and the Lenders.
5.7 Notices. Promptly, and in any event within five Business Days
after knowledge thereof, give notice to the Administrative Agent and each Lender
of:
(a) the occurrence of any Default or Event of Default;
(b) any (i) default or event of default under any Contractual
Obligation of the Loan Parties or any of their respective Subsidiaries or (ii)
litigation, investigation or proceeding which may exist at any time between any
Loan Party or any of their respective Subsidiaries and any Governmental
Authority, that in either case, if not cured or if adversely determined, as the
case may be, could reasonably be expected to have a Material Adverse Effect;
(c) any litigation or proceeding affecting any Loan Party or any of
their respective Subsidiaries in which the amount involved is $500,000 or more
and not covered by insurance or in which injunctive or similar relief is sought;
(d) the occurrence of any Casualty Event to the Mortgaged Property or
the commencement of any action or proceeding for the taking of any material
portion of the Mortgaged Property or any part thereof or interest therein under
power of eminent domain or by condemnation, nationalization or similar
proceeding;
(e) the following events, as soon as possible and in any event within
30 days after the Borrower knows or has reason to know thereof: (i) the
occurrence of any Reportable Event with respect to any Plan, a failure to make
any material required contribution to a Plan, the creation of any Lien in favor
of the PBGC or a Plan or any withdrawal from, or the termination, Reorganization
or Insolvency of, any Multiemployer Plan or (ii) the institution of proceedings
or the taking of any other action by the PBGC or any Loan Party or any Commonly
Controlled Entity or any Multiemployer Plan with respect to the withdrawal from,
or the termination, Reorganization or Insolvency of, any Plan; and
(f) any development or event that has had or could reasonably be
expected to have a Material Adverse Effect.
Each notice pursuant to this Section 5.7 shall be accompanied by a statement of
a Responsible Officer setting forth details of the occurrence referred to
therein and stating what action the Borrower or the relevant Subsidiary proposes
to take with respect thereto.
5.8 Environmental Laws. Except where failure to do so could not
reasonably be expected to have a Material Adverse Effect:
(a) comply in all respects with, and require compliance in all
respects at any property owned, leased or operated by the Loan Parties by all
tenants, subtenants, lessees, sublessees, operators and contractors, if any,
with, all applicable Environmental Laws, and obtain and comply in all respects
with and maintain, and require that all tenants, subtenants, lessees,
sublessees, operators and contractors obtain and comply in all respects with and
maintain, any and all licenses, approvals, notifications, registrations or
permits required by
57
applicable Environmental Laws with respect to any property owned, leased or
operated by the Loan Parties.
(b) Conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other actions required under
Environmental Laws as a result of a release of or the discovery of Materials of
Environmental Concern at concentrations in excess of those allowed by
Environmental Laws, and promptly comply in all respects with all lawful orders
and directives of all Governmental Authorities regarding Environmental Laws.
(c) As soon as available, and in any case within three Business Days
prior to the closing of any acquisition of Oil and Gas Properties for which the
Borrower reasonably believes that its liability for environmental remediation
potentially associated with the ownership and/or operation of all such Oil and
Gas Properties (exclusive of usual and customary platform and site maintenance,
refurbishment and abandonment obligations) is expected to exceed $500,000,
deliver to the Administrative Agent an environmental site assessment report
covering such Oil and Gas Properties to be acquired.
5.9 Additional Collateral, Etc.
(a) Grant to the Administrative Agent, for the benefit of the Secured
Parties, a perfected, first priority Lien, subject to Liens permitted by Section
6.2, on all personal property (provided, with respect to Vehicles, only to the
extent required by the Guaranty and Collateral Agreement and, with respect to
personal property with respect to which a central filing is not sufficient to
perfect a Lien, only to the extent a first priority Lien is required to be
granted in respect of such Mortgaged Property) of the Loan Parties whether owned
as of the Closing Date or acquired after the Closing Date by any Loan Party or
any of their respective Subsidiaries. In connection with the foregoing, the Loan
Parties shall, from time to time (and, in any event, immediately after the
request by the Administrative Agent to do so) (i) execute and deliver to the
Administrative Agent such amendments to the Security Documents or such other
documents as the Administrative Agent shall deem necessary or advisable to grant
to the Administrative Agent, for the benefit of the Secured Parties, a perfected
first priority Lien, subject to Liens permitted by Section 6.2, on such
property, (ii) take all actions necessary or advisable to cause such Lien to be
duly perfected in accordance with all applicable law, including, without
limitation, the filing of financing statements or other filings or recordations
in such jurisdictions as may be requested by the Administrative Agent, and (iii)
if requested by the Administrative Agent, deliver to the Administrative Agent
legal opinions relating to the matters described in clauses (i) and (ii)
immediately preceding, which opinions shall be in form and substance, and from
counsel, reasonably satisfactory to the Administrative Agent. For the avoidance
of doubt, the parties acknowledge that the Liens in favor of the Administrative
Agent for the benefit of the Secured Parties granted pursuant to this Agreement
and the Security Documents will be inferior to Liens securing the Revolving
Credit Facility.
(b) With respect to any real property (other than Oil and Gas
Properties) acquired after the Closing Date by any Loan Party or any of their
respective Subsidiaries (other than any such real property acquired for an
aggregate consideration of less than $1,000,000 or subject to a Lien expressly
permitted by Section 6.2(b)), promptly (i) execute and deliver a first priority
Mortgage (subject to Liens permitted by Section 6.2) in favor of the
Administrative
58
Agent, for the benefit of the Secured Parties, covering such real property, (ii)
if applicable, and if required by the Administrative Agent, provide the Lenders
with title and extended coverage insurance covering such real property in an
amount at least equal to the purchase price of such real property (or such other
amount as shall be reasonably specified by the Administrative Agent) as well as
a current ALTA survey thereof, together with a surveyor's certificate and (iii)
if requested by the Administrative Agent, deliver to the Administrative Agent
legal opinions relating to the matters described above, which opinions shall be
in form and substance, and from counsel, reasonably satisfactory to the
Administrative Agent.
(c) In connection with the delivery of each Reserve Report (other
than the Initial Reserve Report), the Borrower shall review the Reserve Report
and the list of current Mortgaged Properties to ascertain whether the PV-10
Value of the Mortgaged Properties represents at least 90% of the PV-10 Value of
the Proved Reserves evaluated in such Reserve Report after giving effect to
exploration and production activities, acquisitions, dispositions and
production. In the event that the PV-10 Value of the Mortgaged Properties does
not represent at least 90% of the PV-10 Value of such Proved Reserves, then the
Borrower shall, and shall cause the other Loan Parties to, grant to the
Administrative Agent as security for the Obligations a perfected, first priority
Lien (subject only to the Liens permitted by Sections 6.2(d) and (e) and to
Excepted Liens of the type described in clauses (i) to and including (v), (vii)
and (viii) of the definition thereof) on additional Oil and Gas Properties not
already subject to the Mortgages such that after giving effect thereto, the
Mortgaged Properties will represent at least 90% of the PV-10 Value of the
Proved Reserves. All such Liens will be created and perfected by and in
accordance with the provisions of deeds of trust, security agreements and
financing statements, or other Security Instruments, all in form and substance
reasonably satisfactory to the Administrative Agent and in sufficient executed
(and acknowledged where necessary or appropriate) counterparts for recording
purposes.
5.10 Title Information.
(a) On or before the delivery to the Administrative Agent and the
Lenders of each Reserve Report required by Section 5.1(e), the Borrower will
deliver title information in form and substance reasonably acceptable to the
Administrative Agent covering enough of the Proved Reserves of the Borrower and
its Subsidiaries that were not included in the immediately preceding Reserve
Report, such that the Administrative Agent shall have received, together with
title information previously delivered to the Administrative Agent, title
information reasonably satisfactory to it on at least 90% of the PV-10 Value of
the Proved Reserves of the Borrower and its Subsidiaries.
(b) If the Borrower has provided title information for additional Oil
and Gas Properties under Section 5.10(a), the Borrower shall, within 60 days
after receipt of a notice from the Administrative Agent that material title
defects or exceptions exist with respect to such additional Oil and Gas
Properties, either (i) cure any such title defects or exceptions raised by such
information (including defects or exceptions as to priority) which are not
permitted by Section 6.2, (ii) substitute acceptable Mortgaged Properties with
no title defects or exceptions (except for Excepted Liens) having an equivalent
value or (iii) deliver title information in form and substance reasonably
acceptable to the Administrative Agent so that the Administrative Agent shall
have received, together with title information previously delivered to the
59
Administrative Agent, satisfactory title information on at least 90% of the
PV-10 Value of the Proved Reserves of the Borrower and its Subsidiaries.
(c) If the Borrower fails or is unable to cure any title defect or
exception as requested by the Administrative Agent pursuant to Section 5.10(b)
within the 60-day period therein provided or the Borrower does not comply with
the requirements to provide acceptable title information as required by Section
5.10(a), such failure or inability shall not be a Default or an Event of
Default, but instead the Majority Lenders shall have the right to exercise the
following remedy in their sole discretion from time to time, and any failure to
so exercise this remedy at any time shall not be a waiver as to future exercise
of the remedy by the Majority Lenders. To the extent that the Majority Lenders
reasonably determine that material title defects or exceptions exist with
respect to any Mortgaged Property after the 60-day period has elapsed, such
unacceptable Mortgaged Property shall not constitute Proved Reserves for
purposes of the 90% requirement in Section 5.10(b) and shall not count towards
the requirement to maintain the minimum PV-10 Value of Proved Reserves pursuant
to Section 5.14.
5.11 Rating of Loans. Use reasonable efforts to obtain from S&P,
Xxxxx'x or any other rating agency acceptable to the Majority Lenders,
including, without limitation, the payment of customary fees in connection
therewith, within 30 days after the Closing Date, a rating of the Borrower's
senior secured long-term debt that is not credit enhanced by any third party.
5.12 Oil and Gas Hedging Contracts. At all times maintain the Existing
Oil and Gas Hedging Contracts (other than Existing Oil and Gas Hedging Contracts
which are replaced with reasonably comparable Oil and Gas Hedging Contracts and
Existing Oil and Gas Contracts which are terminated in connection with sales or
condemnation of Proved Producing Reserves which would result in the Borrower
being out of compliance with its then existing policies with respect to hedging)
and establish and maintain a policy with respect to the hedging of its
anticipated production of Proved Producing Reserves (such policy to be approved
by the Majority Lenders, such approval not to be unreasonably withheld) and the
Borrower will use reasonably commercial efforts to endeavor to comply with such
policy in all material respects.
5.13 Further Assurances. From time to time execute and deliver, or
cause to be executed and delivered, such additional instruments, certificates or
documents, and take such actions, as the Administrative Agent may reasonably
request for the purposes of implementing or effectuating the provisions of this
Agreement and the other Loan Documents, or of more fully perfecting or renewing
the rights of the Administrative Agent and the Lenders with respect to the
Collateral (or with respect to any additions thereto or replacements or proceeds
thereof or with respect to any other property or assets hereafter acquired by
the Loan Parties or any of their Subsidiaries which may be deemed to be part of
the Collateral) pursuant hereto or thereto. Upon the exercise by the
Administrative Agent or any Lender of any power, right, privilege or remedy
pursuant to this Agreement or the other Loan Documents which requires any
consent, approval, recording, qualification or authorization of any Governmental
Authority, the Borrower will execute and deliver, or will cause the execution
and delivery of, all applications, certifications, instruments and other
documents and papers that the Administrative Agent or such Lender may be
required to obtain from the Loan Parties or any of their respective Subsidiaries
for such governmental consent, approval, recording, qualification or
authorization.
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5.14 Maintenance of Reserve Value. (a) Maintain (i) the sum of the (A)
cash of the Loan Parties plus (B) the PV-10 Value of their Proved Reserves less
(C) an amount equal to 50% of the annual interest expected to be paid on all
Subordinate Indebtedness, at an amount not less than (ii)(A) 150% of the
aggregate principal amount of the Loans plus (B) the aggregate principal amount
of loans outstanding under the Revolving Credit Facility;
(a) Maintain a ratio of (i) the aggregate principal amount of the
Loans minus the amount of cash deposited with Administrative Agent at the time
of determination pursuant to Section 2.7(d) to (ii) the barrels of oil
equivalent of Proved Producing Reserves, as set forth in the most recent Reserve
Report, equal to not greater than 4:0 to 1.0. For purposes of this Section
5.14(b), a "barrel of oil equivalent" shall mean (i) with respect to crude oil,
condensate or natural gas liquids, a stock tank barrel, or 42 U.S. gallons of
liquid volume, the basic unit of measure for measuring crude oil and other
liquid hydrocarbons and (ii) with respect to natural gas, six Mcf or natural gas
calculated at 60 (degrees)F and 14.73 psi.
(b) If the Borrower fails to maintain the required levels of Proved
Reserves or of Proved Producing Reserves, as the case may be, as required by
Sections 5.14(a) and 5.14(b), such failure shall not constitute a Default or
Event of Default, but rather such failure shall require the Borrower to prepay
the Loans or (in the case of Section 5.14(a)) either the Loans or loans then
outstanding under the Revolving Credit Facility to the extent required to bring
the Borrower into compliance with the provisions of this Section 5.14. In the
event the Borrower fails to make such prepayment within 30 days after notice
from the Majority Lenders, then such failure shall constitute an Event of
Default.
5.15 Cooperation Regarding Additional Budget. From time to time between
November 15, 2003 and December 15, 2003 the Borrower and representatives of the
Majority Lenders shall meet for the purpose of reviewing the proposed Additional
Budget. The adoption and implementation of the Additional Budget for 2004 shall
be subject to approval by the Majority Lenders (or if Farallon Entities no
longer constitute the Majority Lenders, by Lenders holding at least 40% of the
Loans then outstanding) which approval shall not be unreasonably withheld.
SECTION 6. NEGATIVE COVENANTS
The Borrower hereby agrees that, so long as the Commitments remain in
effect or any Loan or other amount is owing to any Lender or any Agent
hereunder, the Borrower shall not, and shall not permit any of the Loan Parties
or their respective Subsidiaries to, directly or indirectly:
6.1 Limitation on Indebtedness. Create, incur, issue, assume,
guaranty, or suffer to exist any Indebtedness, except:
(a) Indebtedness of any Loan Party pursuant to any Loan Document;
(b) Indebtedness among the Loan Parties;
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(c) Indebtedness of the Borrower and its Subsidiaries (including,
without limitation, Capital Lease Obligations) secured by Liens permitted by
Section 6.2(b) in an aggregate principal amount not to exceed $1,000,000 at any
one time outstanding;
(d) Indebtedness outstanding on the date hereof and listed on Schedule
6.1(d) and any refinancings, refundings, renewals or extensions thereof (without
any increase in the principal amount thereof or any shortening of the maturity
of any principal amount thereof);
(e) Indebtedness of the Borrower and its Subsidiaries under any
Hedging Agreement permitted under Section 6.14;
(f) endorsements of negotiable instruments for collection in the
ordinary course of business;
(g) obligations under gas balancing agreements incurred in the
ordinary course of business, on terms which are customary in the oil and gas
industry and among owners of the same properties affected; and
(h) Indebtedness under the Revolving Credit Facility.
6.2 Limitation on Liens. Create, incur, assume or suffer to exist any
Lien upon any of its Property, whether now owned or hereafter acquired, except
for:
(a) Excepted Liens;
(b) Liens on fixed or capital assets acquired, constructed or improved
by the Borrower or its Subsidiaries; provided, that (i) such Liens secure
Indebtedness permitted under Section 6.1(c), (ii) such Liens and the
Indebtedness secured thereby are incurred substantially simultaneously with the
acquisition, construction or improvement of such fixed or capital assets, (iii)
such Liens do not at any time encumber any Property other than the Property
financed by such Indebtedness and (iv) the amount of Indebtedness secured by
such Liens is not more than 100% of the purchase price;
(c) Liens created pursuant to the Security Documents;
(d) Liens on Oil and Gas Properties to secure payment of any Hedging
Agreement entered into by the Borrower and its Subsidiaries permitted under
Section 6.14; and
(e) Liens securing the Indebtedness outstanding under the Revolving
Credit Facility.
6.3 Limitation on Fundamental Changes. Enter into any merger,
consolidation or amalgamation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution) or Dispose of all or substantially all of
its Property or business, except that, provided no Default shall have occurred
or be continuing:
(a) any Subsidiary of the Borrower that is a Guarantor may be merged
or consolidated with or into the Borrower (provided that the Borrower shall be
the continuing or
62
surviving corporation) or with or into any Guarantor (provided that (i) such
Guarantor shall be the continuing or surviving corporation or (ii)
simultaneously with such transaction, the continuing or surviving corporation
shall become a Guarantor and the Borrower shall comply with Section 5.9 in
connection therewith);
(b) any Subsidiary of the Borrower may Dispose of any or all of its
assets (upon voluntary liquidation or otherwise) to the Borrower or any
Guarantor; and
(c) any Subsidiary may dispose of all or substantially all of its
Property or business and may merge, consolidate, amalgamate provided such
transaction complies with the provisions of Section 6.4 and the Net Cash
Proceeds of any such transaction are applied as provided in Section 2.7.
The foregoing notwithstanding, the Borrower shall not take nor permit to occur,
any of the actions permitted pursuant to Sections 6.3(a), (b) or (c) (i) on or
prior to the date 90 days after the Closing Date and (ii) at any time after the
90th day after the Closing Date in the event a Default has occurred and is
continuing.
6.4 Limitation on Disposition of Property. Dispose of any of its
Property (including, without limitation, receivables and leasehold interests),
whether now owned or hereafter acquired, or, in the case of any Subsidiary,
issue or sell any shares of such Subsidiary's Capital Stock to any Person,
except:
(a) the Disposition of obsolete or worn out property in the ordinary
course of business;
(b) the sale of inventory (including Hydrocarbons sold as produced)
for cash or on ordinary trade terms in the ordinary course of business other
than the sale of a production payment; provided that no contract for the sale of
Hydrocarbons shall obligate the Borrower or any of its Subsidiary to deliver
Hydrocarbons at a future date without receiving full payment therefor within 90
days after delivery;
(c) Dispositions permitted by Section 6.3(b);
(d) the sale or issuance by the Borrower of its Capital Stock so long
as the provisions of Section 2.7(a) (to the extent applicable thereto) are
complied with and the sale or issuance of any Subsidiary's Capital Stock to the
Borrower or to any Guarantor;
(e) the granting of oil and gas mineral leases and the farming out of
interests in Oil and Gas Properties, in either case in the ordinary course of
business, on market terms and in arms' length transactions;
(f) termination of Hedging Agreements;
(g) abandonment of Oil and Gas Properties not capable of producing
Hydrocarbons in paying quantities after expiration of their primary terms;
provided that the requirements of Section 2.7(b) are complied with in connection
therewith;
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(h) Dispositions of claims against customers, working interest owners,
other industry partners or any other Person in connection with workouts or
bankruptcy, insolvency or other similar proceedings with respect to any such
Person and Dispositions of any Property received from any such Persons in
connection with any such workouts, bankruptcy, insolvency or other similar
proceedings;
(i) the sale or discount of overdue accounts receivable arising in the
ordinary course of business, but only in connection with the compromise or
collection thereof;
(j) the granting of royalty, overriding royalty and similar interests
in the ordinary course of business and on standard industry terms in Oil and Gas
Properties;
(k) any Disposition of any assets in connection with a Recovery Event;
provided that the requirements of Section 2.7(b) are complied with in connection
therewith; and
(l) the Disposition of other assets and the issuance of any
Subsidiary's or the Borrower's Capital Stock for which the Loan Parties receive
consideration at the time of such Disposition at least equal to the fair market
value of such assets and 90% of such consideration is in the form of cash;
provided that the requirements of Sections 2.7(a) and 2.7(b) are complied with
in connection therewith.
The foregoing notwithstanding, the Borrower shall not take nor permit to occur,
any of the actions permitted pursuant to Sections 6.4(d) or (l) (i) on or prior
to the date 90 days after the Closing Date and (ii) at any time after the 90th
day after the Closing Date in the event a Default has occurred and is
continuing.
6.5 Limitation on Restricted Payments. Declare or pay any dividend on,
or make any payment or distribution on account of, or set apart assets for a
sinking or other analogous fund for, the purchase, redemption, defeasance,
retirement, conversion into or other acquisition of, any Capital Stock of the
Borrower or any Subsidiary, whether now or hereafter outstanding, or make any
other distribution in respect thereof, either directly or indirectly, whether in
cash or property or in obligations of the Borrower or any Subsidiary, or enter
into any derivatives or other transaction with any financial institution,
commodities or stock exchange or clearinghouse (a "Derivatives Counterparty")
obligating the Borrower or any Subsidiary to make payments to such Derivatives
Counterparty as a result of any change in market value of any such Capital Stock
or make or offer to make any optional or voluntary payments, prepayment,
repurchase or redemption or, otherwise voluntarily or optionally defease any
Subordinate Indebtedness (collectively, "Restricted Payments"), except that:
(a) any Subsidiary of the Borrower may make Restricted Payments to the
Borrower or any Subsidiary;
(b) the Borrower may repurchase, repay, defease, redeem or otherwise
acquire or retire any Capital Stock with the contemporaneous issuance of the
Capital Stock of the Borrower so long as the Capital Stock so issued is not
Disqualified Stock;
(c) with the prior approval of the Majority Lenders, the Borrower may
repurchase its Capital Stock upon the termination of employment of any officer
or employee of
64
the Borrower or any Subsidiary or upon the termination of the services of any
Director; provided, the Borrower may repurchase up to $500,000 of Capital Stock
in the aggregate from one or more officers or employees of the Borrower or any
of its Subsidiaries upon termination of the employment of such officers or
employees; and
(d) the Borrower may exchange Capital Stock of the Borrower (other
than Disqualified Stock) for 10-7/8% Notes and may refinance or refund 10-7/8%
Notes to the extent permitted by Section 6.1(d) and may use the Net Cash
Proceeds received from an issuance of Capital Stock to repurchase or redeem
10-7/8% Notes to the extent permitted by Section 2.7(a).
6.6 Limitation on Capital Expenditures. Make or commit to make any
Capital Expenditures, except for Capital Expenditures of the Borrower and its
Subsidiaries made in the ordinary course of business and which (a) in the
aggregate for the fiscal year ending December 31, 2003, do not exceed the sum of
$35,000,000 plus the Excess Free Cash; provided, that expenditures for
exploration, including, without limitation, expenditures for exploratory
geological and geophysical data and exploratory drilling, during such fiscal
year shall not exceed $15,000,000 in the aggregate, (b) in the aggregate for the
fiscal year ending December 31, 2004, do not exceed the amount for Capital
Expenditures provided for in the Additional Budget for such fiscal year which
has been approved by the Majority Lenders pursuant to Section 5.15 or (c) are
financed out of Initial Equity Issuance Excess Proceeds in accordance with
provisions of Section 2.7(a) or out of the proceeds of Asset Sales in accordance
with the provisions of Section 2.7(b). Notwithstanding any provisions hereof to
the contrary, any amounts permitted to be expended for Capital Expenditures
during the fiscal year ending December 31, 2003, but which are not spent during
such fiscal year may be carried forward and expended during the fiscal year
ending December 31, 2004.
6.7 Limitation on Investments. Make any advance, loan, extension of
credit (by way of guaranty or otherwise) or capital contribution to any other
Person, or purchase, repurchase, exchange or optionally redeem any Capital
Stock, bonds, notes, debentures or other debt securities of any Person (other
than a Loan Party), or acquire any assets constituting an ongoing business from,
or make any other investment in, any other Person (all of the foregoing,
"Investments"), except:
(a) extensions of trade credit and advances to operators, working
interest owners or other industry partners under operating agreements in the
ordinary course of business;
(b) Investments in Cash Equivalents;
(c) Investments arising in connection with the incurrence of
Indebtedness permitted by Section 6.1(b);
(d) Investments (other than those relating to the incurrence of
Indebtedness permitted by Section 6.7(c)) by the Borrower or any of its
Subsidiaries in a Guarantor;
(e) Hedging Agreements permitted by Section 6.14;
65
(f) Investments received by the Borrower or any Subsidiary in
connection with workouts with, or bankruptcy, insolvency or other similar
proceedings with respect to, customers, working interest owners, other industry
partners or any other Person; and
(g) Investments in Oil and Gas Properties; provided the requirements
of Sections 5.9 and 6.6 are complied with in connection therewith.
Notwithstanding the foregoing or any other provisions of the Loan Documents, the
Borrower shall not, and shall not permit any of the Loan Parties or their
respective Subsidiaries to, directly or indirectly, acquire, form or organize
any Subsidiary after the Closing Date except in compliance with Section 6.16.
6.8 Limitation and Modifications of Organizational Documents and
Revolving Credit Facility. Amend the certificate of incorporation or bylaws, or
other organizational documents, of any Loan Party or the Revolving Credit
Facility, in any manner adverse to the Lenders.
6.9 Limitation on Transactions with Affiliates. Enter into any
transaction, including, without limitation, any purchase, sale, lease or
exchange of Property, the rendering of any service or the payment of any
management, advisory or similar fees, with any Affiliate (other than the
Borrower or any Subsidiary) unless such transaction is (a) otherwise permitted
under this Agreement and (b) determined to be upon fair and reasonable terms no
less favorable to such Loan Party or such Subsidiary, as the case may be, than
it would obtain in a comparable arm's length transaction with a Person that is
not an Affiliate by a majority of the Board of Directors of the Borrower having
no interest in such transaction or, in the event such transaction involves a
total consideration in excess of $5,000,000, by a investment bank of national
standing and acceptable to the Majority Lenders; provided however, that the
foregoing restriction will not apply to (1) the payment of reasonable and
customary regular fees to directors of the Borrower or any of its Subsidiaries
who are not employees of the Borrower or any of its Affiliates, (2) the
Borrower's employee compensation and other benefit arrangements, (3) indemnities
of officers and directors of the Borrower or any of its Subsidiaries consistent
with such Person's organizational documents and applicable statutory provisions
or (4) to the extent permitted by law, expense and other similar advances in the
ordinary course of business to employees.
6.10 Limitation on Sales and Leasebacks. Enter into any arrangement
with any Person providing for the leasing by any Loan Party or any of their
respective Subsidiaries, of real or personal property which has been or is to be
sold or transferred by such Loan Party or such Subsidiary to such Person or to
any other Person to whom funds have been or are to be advanced by such Person on
the security of such property or rental obligations of such Loan Party or such
Subsidiary.
6.11 Limitation on Negative Pledge Clauses. Enter into or suffer to
exist or become effective any agreement that prohibits or limits the ability of
any Loan Party or any of their respective Subsidiaries to create, incur, assume
or suffer to exist any Lien upon any of their Property or revenues, whether now
owned or hereafter acquired, to secure the Obligations or, in the case of any
Guarantor, their obligations under the Guaranty and Collateral Agreement, other
than (a) this Agreement and the other Loan Documents and (b) in the case of the
Borrower and
66
its Subsidiaries any agreements governing any purchase money Liens or Capital
Lease Obligations otherwise permitted hereby (in which case, any prohibition or
limitation shall only be effective against the assets financed thereby) and (c)
the documentation governing the Revolving Credit Facility.
6.12 Limitation on Restrictions on Subsidiary Distributions. Enter into
or suffer to exist or become effective any consensual encumbrance or restriction
on the ability of any Subsidiary to (a) make Restricted Payments in respect of
any Capital Stock of such Subsidiary held by, or pay any Indebtedness owed to,
any Loan Party or any of its Subsidiaries, (b) make Investments in any Loan
Party or any of its Subsidiaries or (c) transfer any of its assets to any Loan
Party or any of its Subsidiaries, except for such encumbrances or restrictions
existing under or by reason of (i) any restrictions existing under the Loan
Documents, (ii) any restrictions with respect to any such Subsidiary imposed
pursuant to an agreement that has been entered into in connection with the
Disposition of all or substantially all of the Capital Stock or assets of such
Subsidiary and (iii) any restrictions under the documentation governing the
Revolving Credit Facility.
6.13 Limitation on Lines of Business. Enter into any business, either
directly or through any Subsidiary, except for those businesses in which the
Loan Parties are engaged on the date of this Agreement or that are reasonably
related thereto.
6.14 Limitation on Hedging Agreements. Enter into any Hedging Agreement
other than in the ordinary course of business, limited to the amount of the
underlying exposure (which, in the case of Rate Management Agreements, shall not
exceed $12,500,000 principal amount in the aggregate) and not for speculative
purposes but to protect against changes in interest rates, exchange rates and/or
commodity prices.
6.15 Gas Imbalances, Take-or-Pay or Other Prepayments. Allow gas
imbalances, take-or-pay or other prepayments with respect to the Oil and Gas
Properties that would require the delivery of Hydrocarbons produced on Oil and
Gas Properties at some future time without then or thereafter receiving full
payment therefor to exceed two and one-half million mcf of gas in the aggregate
on a net basis for the Loan Parties.
6.16 Future Subsidiaries. Acquire or create another Subsidiary unless
such Subsidiary shall unconditionally guarantee all of the Guarantee Obligations
of the Guarantors under Guaranty and Collateral Agreement.
6.17 Dormant Subsidiaries. Permit any Dormant Subsidiary to effect any
transaction or otherwise engage in any business (other than the winding up and
dissolution or liquidation of such Subsidiary) unless such Dormant Subsidiary
shall have first unconditionally guaranteed all of the Guarantee Obligations of
the Guarantors under Guaranty and Collateral Agreement
6.18 Limitation on Changes in Fiscal Periods. Permit the fiscal year of
the Borrower to end on a day other than December 31 or change the Borrower's
method of determining its fiscal year.
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6.19 Minimum Consolidated EBITDA. Permit the Consolidated EBITDA, as of
the last day of any fiscal quarter, for the period of two fiscal quarters then
ending, to be less than $17,500,000.
6.20 Leverage Ratio. Permit the Leverage Ratio as at the last day of
any fiscal quarter hereafter commencing with the fiscal quarter ending June 30,
2003, to exceed 2.75 to 1.
6.21 Consolidated Fixed Charge Coverage. Permit the Consolidated Fixed
Charge Coverage, as of the last day of (i) March 31, 2003, for the fiscal
quarter then ended, to be less than $0, (ii) June 30, 2003, for the two fiscal
quarters then ended, to be less than $0, (iii) September 30, 2003, for the three
fiscal quarters then ended, to be less than $0 and (iv) any fiscal quarter of
the Borrower ending after September 30, 2003, for the four fiscal quarters then
ended, to be less than $0.
SECTION 7. EVENTS OF DEFAULT
If any of the following events shall occur and be continuing:
(a) The Borrower shall fail to pay any principal of any Loan when due
in accordance with the terms hereof; or the Borrower shall fail to pay any
interest on any Loan, or any other amount payable hereunder or under any other
Loan Document, within five days after any such interest or other amount becomes
due in accordance with the terms hereof or thereof; or
(b) Any representation or warranty made or deemed made by any Loan
Party herein or in any other Loan Document or that is contained in any
certificate, document or financial or other statement furnished by it at any
time under or in connection with this Agreement or any such other Loan Document
shall prove to have been inaccurate in any material respect on or as of the date
made or deemed made or furnished; or
(c) Any Loan Party default in the observance or performance of any
agreement contained in clause (i) or (ii) of Section 5.4(a) (with respect to the
Borrower only), Section 5.7(a), 5.9(d) or Section 6, in Section 5 of the
Guaranty and Collateral Agreement shall have occurred and be continuing; or
(d) Any Loan Party shall default in the observance or performance of
any other agreement contained in this Agreement or any other Loan Document
(other than as provided in paragraphs (a) through (c) of this Section 7), and
such default shall continue unremedied for a period of 30 days after knowledge
thereof by any Loan Party; or
(e) Any Loan Party shall (i) default in making any payment of any
principal of any Indebtedness (including, without limitation, any Guarantee
Obligation, but excluding the Loans) on the scheduled or original due date with
respect thereto; or (ii) default in making any payment of any interest on any
such Indebtedness beyond the period of grace, if any, provided in the instrument
or agreement under which such Indebtedness was created; or (iii) default in the
observance or performance of any other agreement or condition relating to any
such Indebtedness or contained in any instrument or agreement evidencing,
securing or relating thereto, or any other event shall occur or condition exist,
the effect of which default or other event or condition is to cause, or to
permit the holder or beneficiary of such Indebtedness (or a
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trustee or agent on behalf of such holder or beneficiary) to cause, with the
giving of notice if required, such Indebtedness to become due prior to its
stated maturity or to become subject to a mandatory offer to purchase by the
obligor thereunder or (in the case of any such Indebtedness constituting a
Guarantee Obligation) to become payable; provided, that a default, event or
condition described in clause (i), (ii) or (iii) of this paragraph (e) shall not
at any time constitute an Event of Default unless, at such time, one or more
defaults, events or conditions of the type described in clauses (i), (ii) and
(iii) of this paragraph (e) shall have occurred and be continuing with respect
to Indebtedness the outstanding principal amount of which exceeds in the
aggregate $2,000,000; or
(f) (i) Any Loan Party shall commence any case, proceeding or other
action (A) under any existing or future law of any jurisdiction, domestic or
foreign, relating to bankruptcy, insolvency, reorganization or relief of
debtors, seeking to have an order for relief entered with respect to it, or
seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, winding-up, liquidation, dissolution, composition or
other relief with respect to it or its debts, or (B) seeking appointment of a
receiver, trustee, custodian, conservator or other similar official for it or
for all or any substantial part of its assets, or such Loan Party shall make a
general assignment for the benefit of its creditors; or (ii) there shall be
commenced against any Loan Party any case, proceeding or other action of a
nature referred to in clause (i) above that (A) results in the entry of an order
for relief or any such adjudication or appointment or (B) remains undismissed,
undischarged or unbonded for a period of 60 days; or (iii) there shall be
commenced against any Loan Party any case, proceeding or other action seeking
issuance of a warrant of attachment, execution, distraint or similar process
against all or any substantial part of its assets that results in the entry of
an order for any such relief that shall not have been vacated, discharged, or
stayed or bonded pending appeal within 60 days from the entry thereof; or (iv)
any Loan Party shall take any action in furtherance of, or indicating its
consent to, approval of, or acquiescence in, any of the acts set forth in clause
(i), (ii), or (iii) above (any of the foregoing, a "Bankruptcy Event"); or
(g) Any Person shall engage in (i) any "prohibited transaction" (as
defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan,
(ii) any "accumulated funding deficiency" (as defined in Section 302 of ERISA),
whether or not waived, shall exist with respect to any Plan, or any Lien in
favor of the PBGC or a Plan shall arise on the assets of any Loan Party or any
Commonly Controlled Entity, (iii) a Reportable Event shall occur with respect
to, or proceedings shall commence to have a trustee appointed, or a trustee
shall be appointed, to administer or to terminate, any Single Employer Plan,
which Reportable Event or commencement of proceedings or appointment of a
trustee is, in the reasonable opinion of the Majority Lenders, likely to result
in the termination of such Plan for purposes of Title IV of ERISA, (iv) any
Single Employer Plan shall terminate for purposes of Title IV of ERISA, (v) any
Loan Party or any Commonly Controlled Entity shall, or in the reasonable opinion
of the Majority Lenders shall be likely to, incur any liability in connection
with a withdrawal from, or the Insolvency or Reorganization of, a Multiemployer
Plan or (vi) any other event or condition shall occur or exist with respect to a
Plan; and in each case in clauses (i) through (vi) above, such event or
condition, together with all other such events or conditions, if any, could, in
the sole judgment of the Majority Lenders, reasonably be expected to have a
Material Adverse Effect; or
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(h) One or more judgments or decrees shall be entered against any Loan
Party or any of their respective Subsidiaries involving, for the Loan Parties
taken as a whole, a liability (not paid or fully covered by insurance as to
which the relevant insurance company has acknowledged coverage) of $3,000,000 or
more, and all such judgments or decrees shall not have been vacated, discharged,
stayed or bonded pending appeal within 30 days from the entry thereof; or
(i) Any of the Security Documents shall cease, for any reason (other
than by reason of the express release thereof pursuant to Section 9.15), to be
in full force and effect, or any Loan Party or any Affiliate of any Loan Party
shall so assert, or any Lien created by any of the Security Documents shall
cease to be enforceable and of the same effect and priority purported to be
created thereby; or
(j) The guarantee contained in Section 2 of the Guaranty and
Collateral Agreement shall cease, for any reason (other than by reason of the
express release thereof pursuant to Section 9.15), to be in full force and
effect or any Loan Party or any Affiliate of any Loan Party shall so assert; or
(k) Any Change of Control shall occur;
then, and in any such event, (A) if such event is an Event of Default specified
in clause (i) or (ii) of paragraph (f) above with respect to the Borrower,
automatically the Commitments shall immediately terminate and the Loans
hereunder (with accrued interest thereon) and all other amounts owing under this
Agreement and the other Loan Documents shall immediately become due and payable,
and (B) if such event is any other Event of Default, with the consent of the
Majority Lenders, the Administrative Agent may, or upon the request of the
Majority Lenders, the Administrative Agent shall, by notice to the Borrower,
declare the Loans hereunder (with accrued interest thereon) and all other
amounts owing under this Agreement and the other Loan Documents to be due and
payable forthwith, whereupon the same shall immediately become due and payable.
SECTION 8. THE AGENTS
8.1 Appointment and Authorization of Agents. Each Lender hereby
designates and appoints the Agents as their representatives under this Agreement
and the other Loan Documents and each Lender hereby irrevocably authorizes each
Agent, in such capacity, to take such action on its behalf under the provisions
of this Agreement and each other Loan Document and to exercise such powers and
perform such duties as are expressly delegated to such Agent by the terms of
this Agreement or any other Loan Document, together with such powers as are
reasonably incidental thereto. Each Agent agrees to act as such on the express
conditions contained in this Section 8. Except as otherwise specifically
provided in Sections 8.12 and 8.17, the provisions of this Section 8 are solely
for the benefit of the Agents, and the Lenders, and the Borrower shall have no
rights as a third party beneficiary of any of the provisions contained herein.
Any provision to the contrary contained elsewhere in this Agreement or in any
other Loan Document notwithstanding, the Agents shall not have any duties or
responsibilities, except those expressly set forth herein, nor shall any Agent
have or be deemed to have any fiduciary relationship with any Lender, and no
implied covenants, functions,
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responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against any Agent; it
being expressly understood and agreed that the use of the word "Agent" is for
convenience only, that the Agents are merely the representatives of the Lenders,
and only have the contractual duties set forth herein. Except as expressly
otherwise provided in this Agreement, each Agent shall have and may use its sole
discretion with respect to exercising or refraining from exercising any
discretionary rights or taking or refraining from taking any actions that such
Agent expressly is entitled to take or assert under or pursuant to this
Agreement and the other Loan Documents. Without limiting the generality of the
foregoing, or of any other provision of the Loan Documents that provides rights
or powers to the Administrative Agent, the Lenders agree that the Administrative
Agent shall have the right to exercise the following powers as long as this
Agreement remains in effect: (a) maintain, in accordance with its customary
business practices, ledgers and records reflecting the status of the
Obligations, the Collateral, the Collections, and related matters, (b) execute
or file any and all financing or similar statements or notices, amendments,
renewals, supplements, documents, instruments, proofs of claim, notices and
other written agreements with respect to the Loan Documents, (c) make Loans on
behalf of the Lenders as provided in the Loan Documents, (d) exclusively
receive, apply, and distribute the Collections as provided in the Loan
Documents, (e) open and maintain such bank accounts and cash management
arrangements as the Administrative Agent deems necessary and appropriate in
accordance with the Loan Documents for the foregoing purposes with respect to
the Collateral and the Collections, (f) perform, exercise, and enforce any and
all other rights and remedies of the Lender Group with respect to the Borrower,
the Obligations, the Collateral, the Collections, or otherwise related to any of
same as provided in the Loan Documents, and (g) incur and pay such Lender Group
Expenses as the Administrative Agent may deem necessary or appropriate for the
performance and fulfillment of its functions and powers pursuant to the Loan
Documents. The Administrative Agent and each Lender have executed a side letter
on the Closing Date pursuant to which the Administrative Agent and each Lender
have agreed, among other things, to certain arrangements relative to matters
requiring the approval of the Lenders. The rights and duties of the
Administrative Agent and each Administrative Agent and the Lender with respect
to such matters are subject to such side letter.
8.2 Delegation of Duties. The Administrative Agent may execute any of
its duties under this Agreement or any other Loan Document by or through agents,
employees or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Administrative Agent shall
not be responsible for the negligence or misconduct of any agent or
attorney-in-fact that it selects as long as such selection was made without
gross negligence or willful misconduct.
8.3 Exculpatory Provisions. None of the Agent-Related Persons shall
(i) be liable for any action taken or omitted to be taken by any of them under
or in connection with this Agreement or any other Loan Document or the
transactions contemplated hereby (except for its own gross negligence or willful
misconduct), or (ii) be responsible in any manner to any of the Lenders for any
recital, statement, representation or warranty made by the Borrower or any
Subsidiary or Affiliate of the Borrower, or any officer or director thereof,
contained in this Agreement or in any other Loan Document, or in any
certificate, report, statement or other document referred to or provided for in,
or received by any Agent under or in connection with, this Agreement or any
other Loan Document, or the validity, effectiveness, genuineness,
71
enforceability or sufficiency of this Agreement or any other Loan Document, or
for any failure of the Borrower or any other party to any Loan Document to
perform its obligations hereunder or thereunder. No Agent-Related Person shall
be under any obligation to any Lender to ascertain or to inquire as to the
observance or performance of any of the agreements contained in, or conditions
of, this Agreement or any other Loan Document, or to inspect the books or
records or properties of the Borrower or the books or records or properties of
any of the Borrower's Subsidiaries or Affiliates.
8.4 Reliance by Agents. Each Agent shall be entitled to rely, and
shall be fully protected in relying, upon any writing, resolution, notice,
consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone
message, statement or other document or conversation believed by it to be
genuine and correct and to have been signed, sent, or made by the proper Person
or Persons, and upon advice and statements of legal counsel (including counsel
to the Borrower or counsel to any Lender), independent accountants and other
experts selected by such Agent. Each Agent shall be fully justified in failing
or refusing to take any action under this Agreement or any other Loan Document
unless such Agent shall first receive such advice or concurrence of the Lenders
as it deems appropriate and until such instructions are received, such Agent
shall act, or refrain from acting, as it deems advisable. If such Agent so
requests, it shall first be indemnified to its reasonable satisfaction by
Lenders against any and all liability and expense that may be incurred by it by
reason of taking or continuing to take any such action. Each Agent shall in all
cases be fully protected in acting, or in refraining from acting, under this
Agreement or any other Loan Document in accordance with a request or consent of
the Lenders and such request and any action taken or failure to act pursuant
thereto shall be binding upon all of the Lenders.
8.5 Notice of Default or Event of Default. No Agent shall be deemed to
have knowledge or notice of the occurrence of any Default or Event of Default,
except with respect to defaults in the payment of principal, interest, fees, and
expenses required to be paid to any such Agent for the account of the Lenders,
except with respect to Defaults and Events of Default of which any such Agent
has actual knowledge, unless such Agent shall have received written notice from
a Lender or the Borrower referring to this Agreement, describing such Default or
Event of Default, and stating that such notice is a "notice of default." Such
Agent promptly will notify the Lenders of its receipt of any such notice or of
any Event of Default of which such Agent has actual knowledge. If any Lender
obtains actual knowledge of any Event of Default, such Lender promptly shall
notify the other Lenders and the Agents of such Event of Default. Each Lender
shall be solely responsible for giving any notices to its Participants, if any.
Subject to Section 8.4, each Agent shall take such action with respect to such
Default or Event of Default as may be requested by the Required Lenders in
accordance with Section 7; provided, however, that unless and until an Agent has
received any such request, such Agent may (but shall not be obligated to) take
such action, or refrain from taking such action, with respect to such Default or
Event of Default as it shall deem advisable.
8.6 Credit Decision. Each Lender acknowledges that none of the
Agent-Related Persons has made any representation or warranty to it, and that no
act by any Agent hereinafter taken, including any review of the affairs of the
Borrower and its Subsidiaries or Affiliates, shall be deemed to constitute any
representation or warranty by any Agent-Related Person to any Lender. Each
Lender represents to the Agents that it has, independently and
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without reliance upon any Agent-Related Person and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, prospects, operations, property, financial and
other condition and creditworthiness of the Borrower and any other Person (other
than the Lender Group) party to a Loan Document, and all applicable bank
regulatory laws relating to the transactions contemplated hereby, and made its
own decision to enter into this Agreement and to extend credit to the Borrower.
Each Lender also represents that it will, independently and without reliance
upon any Agent-Related Person and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action under this Agreement and
the other Loan Documents, and to make such investigations as it deems necessary
to inform itself as to the business, prospects, operations, property, financial
and other condition and creditworthiness of the Borrower and any other Person
(other than the Lender Group) party to a Loan Document. Except for notices,
reports, and other documents expressly herein required to be furnished to the
Lenders by an Agent, no Agent shall have any duty or responsibility to provide
any Lender with any credit or other information concerning the business,
prospects, operations, property, financial and other condition or
creditworthiness of the Borrower and any other Person party to a Loan Document
that may come into the possession of any of the Agent-Related Persons.
8.7 Costs and Expenses; Indemnification. The Administrative Agent may
incur and pay Lender Group Expenses to the extent the Administrative Agent
reasonably deems necessary or appropriate for the performance and fulfillment of
its functions, powers, and obligations pursuant to the Loan Documents, including
court costs, reasonable attorneys fees and expenses, costs of collection by
outside collection agencies and auctioneer fees and costs of security guards or
insurance premiums paid to maintain the Collateral, whether or not the Borrower
is obligated to reimburse such Agent or Lenders for such expenses pursuant to
the Loan Agreement or otherwise. The Administrative Agent is authorized and
directed to deduct and retain sufficient amounts from Collections received by
the Administrative Agent to reimburse the Administrative Agent for such
out-of-pocket costs and expenses prior to the distribution of any amounts to
Lenders. In the event the Administrative Agent is not reimbursed for such costs
and expenses from Collections received by the Administrative Agent, each Lender
hereby agrees that it is and shall be obligated to pay to or reimburse the
Administrative Agent for the amount of such Lender's pro rata share thereof.
Whether or not the transactions contemplated hereby are consummated, the Lenders
shall indemnify upon demand the Agent-Related Persons (to the extent not
reimbursed by or on behalf of the Borrower and without limiting the obligation
of the Borrower to do so), according to their pro rata shares, from and against
any and all Indemnified Liabilities; provided, however, that no Lender shall be
liable for the payment to any Agent-Related Person of any portion of such
Indemnified Liabilities resulting solely from such Person's gross negligence or
willful misconduct nor shall any Lender be liable for the obligations of any
Defaulting Lender in failing to make an Advance or other extension of credit
hereunder. Without limitation of the foregoing, each Lender shall reimburse each
Agent upon demand for such Lender's ratable share of any costs or out-of-pocket
expenses (including attorneys fees and expenses) incurred by such Agent in
connection with the preparation, execution, delivery, administration,
modification, amendment, or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, any other Loan Document, or any document
contemplated by or referred to herein, to the extent that such Agent is not
reimbursed for such
73
expenses by or on behalf of the Borrower. The undertaking in this Section shall
survive the payment of all Obligations hereunder and the resignation or
replacement of any Agent.
8.8 Agents in Individual Capacity. The Agents and each of their
Affiliates may make loans to, issue letters of credit for the account of, accept
deposits from, acquire equity interests in, and generally engage in any kind of
banking, lending, trust, financial advisory, underwriting, or other business
with the Borrower and its Subsidiaries and Affiliates and any other Person
(other than the Lender Group) party to any Loan Documents as though such Agents
were not Agents hereunder, and, in each case, without notice to or consent of
the other members of the Lender Group. The other members of the Lender Group
acknowledge that, pursuant to such activities, the Agents or their respective
Affiliates may receive information regarding the Borrower or its Affiliates and
any other Person (other than the Lender Group) party to any Loan Documents that
is subject to confidentiality obligations in favor of the Borrower or such other
Person and that prohibit the disclosure of such information to the Lenders, and
the Lenders acknowledge that, in such circumstances (and in the absence of a
waiver of such confidentiality obligations, which waiver each Agent will use its
reasonable best efforts to obtain), such Agent shall not be under any obligation
to provide such information to them. The terms "Lender" and "Lenders" include
Farallon Energy Lending, L.L.C. in its individual capacity.
8.9 Successor Administrative Agent.
(a) The Administrative Agent may resign as Administrative Agent (i)
immediately and without prior notice upon the occurrence of any Event of
Default, (ii) on or prior to the date 75 days after the Closing Date, such
resignation to be effective on the ninety-first day after the Closing Date, and
(iii) at any time after the date 75 days after the Closing Date, upon 45 days'
notice to the Lenders. If the Administrative Agent resigns under this Agreement,
the Majority Lenders shall appoint a successor Administrative Agent for the
Lenders. If no successor Administrative Agent is appointed prior to the
effective date of the resignation of Administrative Agent, Administrative Agent
may appoint, after consulting with the Lenders, a successor Administrative
Agent. If Administrative Agent has materially breached or failed to perform any
material provision of this Agreement or of applicable law, the Majority Lenders
may agree in writing to remove and replace the Administrative Agent with a
successor Administrative Agent from among the Lenders. Upon the resignation of
Foothill as the Administration Agent, all Lender Group Expenses and fees of the
Administrative Agent shall be paid in full, all Bank Product Obligations shall
be paid in full or cash collateralized and all other Obligations of any Loan
Party to Foothill shall be paid in full.
(b) After all Lender Group Expenses and fees of the Administrative
Agent have been paid in full and all Bank Product Obligations have been paid in
full or cash collateralized, Foothill agrees to resign and, immediately upon
such resignation, the Lenders (or their designee) shall automatically and
without further action be appointed the successor Administrative Agent.
(c) Nothing contained in this Section 8.9 shall be construed to limit
or eliminate the Administrative Agent's right to resign as an Administrative
Agent in accordance with this Section 8.9. In any such event, upon the
acceptance of its appointment as successor Administrative Agent hereunder, such
successor Administrative Agent shall succeed to all the
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rights, powers, and duties of the retiring Administrative Agent and the term
"Administrative Agent" shall mean such successor Administrative Agent and the
retiring Administrative Agent's appointment, powers, and duties as
Administrative Agent shall be terminated. After any retiring Administrative
Agent's resignation hereunder as Administrative Agent, the provisions of this
Section 8 shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Administrative Agent under this Agreement. If no
successor Administrative Agent has accepted appointment as Administrative Agent
by the date which is 45 days following a retiring Administrative Agent's notice
of resignation, the retiring Administrative Agent's resignation shall
nevertheless thereupon become effective and the Lenders shall perform all of the
duties of the Administrative Agent hereunder until such time, if any, as the
Lenders appoint a successor Administrative Agent as provided for above.
8.10 Lender in Individual Capacity. Any Lender and its respective
Affiliates may make loans to, issue letters of credit for the account of, accept
deposits from, acquire equity interests in and generally engage in any kind of
banking, trust, financial advisory, underwriting or other business with the
Borrower and its Subsidiaries and Affiliates and any other Person (other than
the Lender Group) party to any Loan Documents as though such Lender were not a
Lender hereunder without notice to or consent of the other members of the Lender
Group. The other members of the Lender Group acknowledge that, pursuant to such
activities, such Lender and its respective Affiliates may receive information
regarding the Borrower or its Affiliates and any other Person (other than the
Lender Group) party to any Loan Documents that is subject to confidentiality
obligations in favor of the Borrower or such other Person and that prohibit the
disclosure of such information to the Lenders, and the Lenders acknowledge that,
in such circumstances (and in the absence of a waiver of such confidentiality
obligations, which waiver such Lender will use its reasonable best efforts to
obtain), such Lender not shall be under any obligation to provide such
information to them. With respect to the Swing Loans and Agent Advances, Swing
Lender shall have the same rights and powers under this Agreement as any other
Lender and may exercise the same as though it were not the sub-agent of any
Agent.
8.11 Withholding Taxes.
(a) If any Lender is a "foreign corporation, partnership or trust"
within the meaning of the IRC and such Lender claims exemption from, or a
reduction of, U.S. withholding tax under Sections 1441 or 1442 of the IRC, such
Lender agrees with and in favor of the Administrative Agent and the Borrower, to
deliver to the Administrative Agent and the Borrower:
(i) if such Lender claims an exemption from withholding tax
pursuant to its portfolio interest exception, (a) a statement of such
Lender, signed under penalty of perjury, that it is not a (I) a "bank" as
described in Section 881(c)(3)(A) of the IRC, (II) a 10% shareholder
(within the meaning of Section 881(c)(3)(B) of the IRC), or (III) a
controlled foreign corporation described in Section 881(c)(3)(C) of the
IRC, and (B) a properly completed IRS Form W-8BEN, before the first payment
of any interest under this Agreement and at any other time reasonably
requested by the Administrative Agent or the Borrower;
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(ii) if such Lender claims an exemption from, or a reduction of,
withholding tax under a United States tax treaty, properly completed IRS
Form W-8BEN before the first payment of any interest under this Agreement
and at any other time reasonably requested by the Administrative Agent or
the Borrower;
(iii) if such Lender claims that interest paid under this
Agreement is exempt from United States withholding tax because it is
effectively connected with a United States trade or business of such
Lender, two properly completed and executed copies of IRS Form W-8ECI
before the first payment of any interest is due under this Agreement and at
any other time reasonably requested by the Administrative Agent or the
Borrower; and
(iv) such other form or forms as may be required under the IRC or
other laws of the United States as a condition to exemption from, or
reduction of, United States withholding tax.
Such Lender agrees promptly to notify the Administrative Agent and Borrower of
any change in circumstances which would modify or render invalid any claimed
exemption or reduction.
(b) If any Lender claims exemption from, or reduction of, withholding
tax under a United States tax treaty by providing IRS Form W-8BEN and such
Lender sells, assigns, grants a participation in, or otherwise transfers all or
part of the Obligations of the Borrower to such Lender, such Lender agrees to
notify the Administrative Agent of the percentage amount in which it is no
longer the beneficial owner of Obligations of the Borrower to such Lender. To
the extent of such percentage amount, the Administrative Agent will treat such
Lender's IRS Form W-8BEN as no longer valid.
(c) If any Lender is entitled to a reduction in the applicable
withholding tax, the Administrative Agent may withhold from any interest payment
to such Lender an amount equivalent to the applicable withholding tax after
taking into account such reduction. If the forms or other documentation required
by this Section 8.11(a) are not delivered to the Administrative Agent, then the
Administrative Agent may withhold from any interest payment to such Lender not
providing such forms or other documentation an amount equivalent to the
applicable withholding tax.
(d) If the IRS or any other Governmental Authority of the United
States or other jurisdiction asserts a claim that the Administrative Agent did
not properly withhold tax from amounts paid to or for the account of any Lender
(because the appropriate form was not delivered, was not properly executed, or
because such Lender failed to notify the Administrative Agent of a change in
circumstances which rendered the exemption from, or reduction of, withholding
tax ineffective, or for any other reason) such Lender shall indemnify and hold
the Administrative Agent harmless for all amounts paid, directly or indirectly,
by the Administrative Agent as tax or otherwise, including penalties and
interest, and including any taxes imposed by any jurisdiction on the amounts
payable to the Administrative Agent under this Section 8.11, together with all
costs and expenses (including attorneys fees and expenses). The obligation of
the Lenders under this Section 8.11(d) shall survive the payment of all
Obligations and the resignation or replacement of the Administrative Agent.
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(e) All payments made by the Borrower hereunder or under any note will
be made without setoff, counterclaim, or other defense, except as required by
applicable law other than for Taxes (as defined below). All such payments will
be made free and clear of, and without deduction or withholding for, any present
or future taxes, levies, imposts, duties, fees, assessments or other charges of
whatever nature now or hereafter imposed by any jurisdiction (other than the
United States) or by any political subdivision or taxing authority thereof or
therein (other than of the United States) with respect to such payments (but
excluding, any tax imposed by any jurisdiction or by any political subdivision
or taxing authority thereof or therein (i) measured by or based on the net
income or net profits of a Lender, or (ii) to the extent that such tax results
from a change in the circumstances of the Lender, including a change in the
residence, place of organization, or principal place of business of the Lender,
or a change in the branch or lending office of the Lender participating in the
transactions set forth herein) and all interest, penalties or similar
liabilities with respect thereto (all such non-excluded taxes, levies, imposts,
duties, fees, assessments or other charges being referred to collectively as
"Taxes"). If any Taxes are so levied or imposed, the Borrower agrees to pay the
full amount of such Taxes, and such additional amounts as may be necessary so
that every payment of all amounts due under this Agreement or under any Note,
including any amount paid pursuant to this Section 8.11(e) after withholding or
deduction for or on account of any Taxes, will not be less than the amount
provided for herein; provided, however, that the Borrower shall not be required
to increase any such amounts payable to the Administrative Agent or any Lender
(i) that is not organized under the laws of the United States, if such Person
fails to comply with the other requirements of this Section 8.11, or (ii) if the
increase in such amount payable results from the Administrative Agent's or such
Lender's own willful misconduct or gross negligence. The Borrower will furnish
to the Administrative Agent as promptly as possible after the date the payment
of any Taxes is due pursuant to applicable law certified copies of tax receipts
evidencing such payment by the Borrower.
8.12 Collateral Matters.
(a) The Lenders hereby irrevocably authorize the Administrative Agent,
at its option and in its sole discretion, to release any of its Liens on any
Collateral (i) upon the termination of the Commitments and payment and
satisfaction in full by the Borrower of all Obligations, (ii) constituting
property being sold or disposed of if a release is required or desirable in
connection therewith and if the Borrower certifies to the Administrative Agent
that the sale or disposition is permitted under this Agreement or the other Loan
Documents (and the Administrative Agent may rely conclusively on any such
certificate, without further inquiry), (iii) constituting property in which the
Borrower owned no interest at the time the security interest was granted or at
any time thereafter, or (iv) constituting property leased to the Borrower under
a lease that has expired or is terminated in a transaction permitted under this
Agreement. Except as provided above, the Administrative Agent will not execute
and deliver a release of any Lien on any Collateral without the prior written
authorization of (y) if the release is of all or a material portion of the
Collateral, all of the Lenders and the Administrative Agent or (z) otherwise,
the Required Lenders and the Administrative Agent. Upon request by the
Administrative Agent or the Borrower at any time, the Lenders will confirm in
writing the Administrative Agent's authority to release any such Liens on
particular types or items of Collateral pursuant to this Section 8.12; provided,
however, that (1) the Administrative Agent shall not be required to execute any
document necessary to evidence such release on terms that,
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in the Administrative Agent's opinion, would expose the Administrative Agent to
liability or create any obligation or entail any consequence other than the
release of such Lien without recourse, representation, or warranty, and (2) such
release shall not in any manner discharge, affect, or impair the Obligations or
any Liens (other than those expressly being released) upon (or obligations of
the Borrower in respect of) all interests retained by the Borrower, including,
the proceeds of any sale, all of which shall continue to constitute part of the
Collateral. To the maximum extent permitted by law, the Lenders waive any right
to assert that any release, sale, transfer or other disposition of any
Collateral by any Agent was not made on commercially reasonable terms.
(b) No Agent shall have any obligation whatsoever to any of the
Lenders to assure that the Collateral exists or is owned by the Borrower or is
cared for, protected, or insured or has been encumbered, or that the
Administrative Agent's Liens have been properly or sufficiently or lawfully
created, perfected, protected, or enforced or are entitled to any particular
priority, or to exercise at all or in any particular manner or under any duty of
care, disclosure or fidelity, or to continue exercising, any of the rights,
authorities and powers granted or available to the Administrative Agent pursuant
to any of the Loan Documents, it being understood and agreed that in respect of
the Collateral, or any act, omission, or event related thereto, subject to the
terms and conditions contained herein, the Administrative Agent may act in any
manner it may deem appropriate, absent the Administrative Agent's gross
negligence or willful misconduct as finally determined by a court of competent
jurisdiction, in its sole discretion given the Administrative Agent's own
interest in the Collateral in its capacity as one of the Lenders and that the
Administrative Agent shall have no other duty or liability whatsoever to any
Lender as to any of the foregoing, except as otherwise provided herein.
8.13 Restrictions on Actions by Lenders; Sharing of Payments.
(a) Each of the Lenders agrees that it shall not, without the express
consent of the Administrative Agent, and that it shall, to the extent it is
lawfully entitled to do so, upon the request of the Administrative Agent, set
off against the Obligations, any amounts owing by such Lender to the Borrower or
any deposit accounts of the Borrower now or hereafter maintained with such
Lender. Each of the Lenders further agrees that it shall not, unless
specifically requested to do so by the Administrative Agent, take or cause to be
taken any action, including, the commencement of any legal or equitable
proceedings, to foreclose any Lien on, or otherwise enforce any security
interest in, any of the Collateral the purpose of which is, or could be, to give
such Lender any preference or priority against the other Lenders with respect to
the Collateral.
(b) If, at any time or times any Lender shall receive (i) by payment,
foreclosure, setoff, or otherwise, any proceeds of Collateral or any payments
with respect to the Obligations arising under, or relating to, this Agreement or
the other Loan Documents, except for any such proceeds or payments received by
such Lender from the Administrative Agent pursuant to the terms of this
Agreement, or (ii) payments from the Administrative Agent in excess of such
Lender's pro rata share portion of all such distributions by the Administrative
Agent, such Lender promptly shall (1) turn the same over to the Administrative
Agent, in kind, and with such endorsements as may be required to negotiate the
same to the Administrative Agent, or in immediately available funds, as
applicable, for the account of all of the Lenders and for application to the
Obligations in accordance with the applicable provisions of this Agreement, or
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(2) purchase, without recourse or warranty, an undivided interest and
participation in the Obligations owed to the other Lenders so that such excess
payment received shall be applied ratably as among the Lenders in accordance
with their pro rata shares; provided, however, that if all or part of such
excess payment received by the purchasing party is thereafter recovered from it,
those purchases of participations shall be rescinded in whole or in part, as
applicable, and the applicable portion of the purchase price paid therefor shall
be returned to such purchasing party, but without interest except to the extent
that such purchasing party is required to pay interest in connection with the
recovery of the excess payment.
8.14 Agency for Perfection. The Administrative Agent hereby appoints
each other Lender as its agent (and each Lender hereby accepts such appointment)
for the purpose of perfecting the Administrative Agent's Liens in assets which,
in accordance with Article 9 of the UCC can be perfected only by possession.
Should any Lender obtain possession of any such Collateral, such Lender shall
notify the Administrative Agent thereof, and, promptly upon the Administrative
Agent's request therefor shall deliver such Collateral to the Administrative
Agent or in accordance with the Administrative Agent's instructions.
8.15 Payments by the Administrative Agent to the Lenders. All payments
to be made by the Administrative Agent to the Lenders shall be made by bank wire
transfer or internal transfer of immediately available funds pursuant to such
wire transfer instructions as each party may designate for itself by written
notice to the Administrative Agent. Concurrently with each such payment, the
Administrative Agent shall identify whether such payment (or any portion
thereof) represents principal, premium, or interest of the Obligations.
8.16 Concerning the Collateral and Related Loan Documents. Each member
of the Lender Group authorizes and directs the Administrative Agent to enter
into this Agreement and the other Loan Documents relating to the Collateral, for
the benefit of the Lender Group. Each member of the Lender Group agrees that any
action taken by the Administrative Agent in accordance with the terms of this
Agreement or the other Loan Documents relating to the Collateral and the
exercise by the Administrative Agent of its powers set forth therein or herein,
together with such other powers that are reasonably incidental thereto, shall be
binding upon all of the Lenders.
8.17 Field Audits and Examination Reports; Confidentiality; Disclaimers
by Lenders; Other Reports and Information. By becoming a party to this
Agreement, each Lender:
(a) is deemed to have requested that the Administrative Agent furnish
such Lender, promptly after it becomes available, a copy of each field audit or
examination report (each a "Report" and collectively, "Reports") prepared by or
at the request of the Administrative Agent, and the Administrative Agent shall
so furnish each Lender with such Reports;
(b) expressly agrees and acknowledges that the Administrative Agent
(i) does not make any representation or warranty as to the accuracy of any
Report, and (ii) shall not be liable for any information contained in any
Report;
(c) expressly agrees and acknowledges that the Reports are not
comprehensive audits or examinations, that the Administrative Agent or other
party performing
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any audit or examination will inspect only specific information regarding the
Borrower and will rely significantly upon the books and records of the Borrower,
as well as on representations of the Borrower's personnel;
(d) agrees, for the benefit of the Lender Group and, notwithstanding
Section 8.1, the Loan Parties, to keep all Reports and other material,
non-public information regarding the Borrower and its Subsidiaries and their
operations, assets, and existing and contemplated business plans in a
confidential manner; it being understood and agreed by the Borrower that in any
event such Lender may make disclosures (a) to counsel for and other advisors,
accountants, and auditors to such Lender, (b) reasonably required by any bona
fide potential or actual Assignee or Participant in connection with any
contemplated or actual assignment or transfer by such Lender of an interest
herein or any participation interest in such Lender's rights hereunder, (c) of
information that has become public by disclosures made by Persons other than
such Lender, its Affiliates, assignees, transferees, or Participants, or (d) as
required or requested by any court, governmental or administrative agency,
pursuant to any subpoena or other legal process, or by any law, statute,
regulation, or court order; provided, however, that, unless prohibited by
applicable law, statute, regulation, or court order, such Lender shall notify
the Borrower of any request by any court, governmental or administrative agency,
or pursuant to any subpoena or other legal process for disclosure of any such
non-public material information concurrent with, or where practicable, prior to
the disclosure thereof; and
(e) without limiting the generality of any other indemnification
provision contained in this Agreement, agrees: (i) to hold the Administrative
Agent and any other Lender preparing a Report harmless from any action the
indemnifying Lender may take or conclusion the indemnifying Lender may reach or
draw from any Report in connection with any loans or other credit accommodations
that the indemnifying Lender has made or may make to the Borrower, or the
indemnifying Lender's participation in, or the indemnifying Lender's purchase
of, a loan or loans of the Borrower, and (ii) to pay and protect, and indemnify,
defend and hold the Administrative Agent, and any such other Lender preparing a
Report harmless from and against, the claims, actions, proceedings, damages,
costs, expenses, and other amounts (including, attorneys fees and costs)
incurred by the Administrative Agent and any such other Lender preparing a
Report as the direct or indirect result of any third parties who might obtain
all or part of any Report through the indemnifying Lender.
In addition to the foregoing: (x) any Lender may from time to time
request of the Administrative Agent in writing that the Administrative Agent
provide to such Lender a copy of any report or document provided by the Borrower
to the Administrative Agent that has not been contemporaneously provided by the
Borrower to such Lender, and, upon receipt of such request, the Administrative
Agent promptly shall provide a copy of same to such Lender, (y) to the extent
that the Administrative Agent is entitled, under any provision of the Loan
Documents, to request additional reports or information from the Borrower, any
Lender may, from time to time, reasonably request the Administrative Agent to
exercise such right as specified in such Lender's notice to the Administrative
Agent, whereupon the Administrative Agent promptly shall request of the Borrower
the additional reports or information reasonably specified by such Lender, and,
upon receipt thereof from the Borrower, the Administrative Agent promptly shall
provide a copy of same to such Lender, and (z) any time that the Administrative
Agent renders to the Borrower a
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statement regarding the Register, the Administrative Agent shall send a copy of
such statement to each Lender.
8.18 Several Obligations; No Liability. Notwithstanding that certain of
the Loan Documents now or hereafter may have been or will be executed only by or
in favor of the Agents in their capacity as such, and not by or in favor of the
Lenders, any and all obligations on the part of the Lenders to make any credit
available hereunder shall constitute the several (and not joint) obligations of
the respective Lenders on a ratable basis, according to their respective
Commitments, to make an amount of such credit not to exceed, in principal
amount, at any one time outstanding, the amount of their respective Commitments.
Nothing contained herein shall confer upon any Lender any interest in, or
subject any Lender to any liability for, or in respect of, the business, assets,
profits, losses, or liabilities of any other Lender. Each Lender shall be solely
responsible for notifying its Participants of any matters relating to the Loan
Documents to the extent any such notice may be required, and no Lender shall
have any obligation, duty, or liability to any Participant of any other Lender.
Except as provided in Section 8.7, no member of the Lender Group shall have any
liability for the acts or any other Lender. No Agent or Lender shall be
responsible to the Borrower or any other Person for any failure by any other
Lender to fulfill its obligations to make credit available hereunder, nor to
advance for it or on its behalf in connection with its Commitment, nor to take
any other action on its behalf hereunder or in connection with the financing
contemplated herein.
8.19 The Arranger; the Syndication Agent. Neither the Arranger nor the
Syndication Agent, in their respective capacities as such, shall have any duties
or responsibilities, and shall incur any liability, under this Agreement and the
other Loan Documents.
SECTION 9. MISCELLANEOUS
9.1 Amendments and Waivers. Neither this Agreement or any other Loan
Document, nor any terms hereof or thereof may be amended, supplemented or
modified except in accordance with the provisions of this Section 9.1. The
Majority Lenders and each Loan Party party to the relevant Loan Document may, or
(with the written consent of the Majority Lenders) the Agents and each Loan
Party to the relevant Loan Document may, from time to time, (a) enter into
written amendments, supplements or modifications hereto and to the other Loan
Documents (including amendments and restatements hereof or thereof) for the
purpose of adding any provisions to this Agreement or the other Loan Documents
or changing in any manner the rights of the Lenders or of the Loan Parties
hereunder or thereunder or (b) waive, on such terms and conditions as may be
specified in the instrument of waiver, any of the requirements of this Agreement
or the other Loan Documents or any Default or Event of Default and its
consequences; provided, however, that no such waiver and no such amendment,
supplement or modification shall:
(a) forgive the principal amount or extend the final scheduled date of
maturity of any Loan, reduce the stated rate of any interest or fee payable
hereunder or extend the scheduled date of any payment thereof, or increase the
amount or extend the expiration date of any Commitment of any Lender, in each
case without the consent of each Lender directly affected thereby;
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(b) amend, modify or waive any provision of this Section 9.1 or reduce
the percentage specified in the definition of Majority Lender and/or Majority
Lenders, consent to the assignment or transfer by the Borrower of any of its
rights and obligations under this Agreement and the other Loan Documents,
release all or substantially all of the Collateral or release all or
substantially all of the Guarantors from their obligations under the Guaranty
and Collateral Agreement, in each case without the consent of all Lenders;
(c) amend, modify or waive any provision of Sections 5.14, 6.19, 6.20
and 6.21 without the consent of the Required Lenders;
(d) amend, modify or waive any provision of Section 8 without the
consent of any Agent directly affected thereby;
(e) amend, modify or waive any provision of Section 2.9 without the
consent of each Lender directly affected thereby; or
(f) be effective without the consent of the Administrative Agent (i)
on or prior to the date 90 days after the Closing Date or (ii) at any time after
the 90th day after the Closing Date in the event a Default has occurred and is
continuing.
Any such waiver and any such amendment, supplement or modification shall apply
equally to each of the Lenders and shall be binding upon the Loan Parties, the
Lenders, the Agents and all future holders of the Loans. In the case of any
waiver, the Loan Parties, the Lenders and the Agents shall be restored to their
former position and rights hereunder and under the other Loan Documents, and any
Default or Event of Default waived shall be deemed to be cured and not
continuing; but no such waiver shall extend to any subsequent or other Default
or Event of Default, or impair any right consequent thereon. Any such waiver,
amendment, supplement or modification shall be effected by a written instrument
signed by the parties required to sign pursuant to the foregoing provisions of
this Section 9.1; provided, that delivery of an executed signature page of any
such instrument by facsimile transmission shall be effective as delivery of a
manually executed counterpart thereof.
For the avoidance of doubt, this Agreement and any other Loan Document
may be amended (or amended and restated) with the written consent of the
Majority Lenders, the Administrative Agent and each Loan Party to each relevant
Loan Document (x) to add one or more additional credit facilities to this
Agreement and to permit the extensions of credit from time to time outstanding
thereunder and the accrued interest and fees in respect thereof (collectively,
the "Additional Extensions of Credit") to share ratably in the benefits of this
Agreement and the other Loan Documents with the Loans and the accrued interest
and fees in respect thereof and (y) to include appropriately the Lenders holding
such credit facilities in any determination of the Majority Lenders; provided,
however, that no such amendment shall permit the Additional Extensions of Credit
to share ratably with or with preference to the Loans in the application of
mandatory prepayments without the consent of the Majority Lenders.
9.2 Notices. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including by
telecopy), and, unless otherwise expressly provided herein, shall be deemed to
have been duly given or made when delivered, or
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three Business Days after being deposited in the mail, postage prepaid, or, in
the case of telecopy notice, when received, addressed (a) to the Borrower at the
address set forth below, (b) in the case of the Agents, to the Administrative
Agent and the Arranger at the respective addresses set forth below, (c) in the
case of the Lenders, as set forth in an administrative questionnaire delivered
to the Administrative Agent or, in the case of a Lender which becomes a party to
this Agreement pursuant to an Assignment and Acceptance, in such Assignment and
Acceptance or (d) in the case of any party, to such other address as such party
may hereafter notify to the other parties hereto:
The Borrower: Mission Resources Corporation
0000 Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxx X. Xxxxxx
Telecopy: (000) 000-0000
with a copy to Xxxxxx & Xxxxxx, LLP
000 Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, Xx.
Xxxxxx X. Xxxxx
Telecopy: (000) 000-0000
The Administrative Agent: Foothill Capital Corporation
0000 Xxxxxxxx Xxxxxx
Xxxxx 0000 Xxxx
Xxxxx Xxxxxx, Xxxxxxxxxx 00000
Attention: Business Finance
Division Manager
Telecopy: (000) 000-0000
Telephone:
with a copy to: Xxxxxxx Xxxx & Xxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxx X. Xxxxxxx
Telecopy: (000) 000-0000
The Arranger: Farallon Capital Management, LLC
Xxx Xxxxxxxx Xxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxx Xxxxxxx
Facsimile: (000) 000-0000
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with a copy to: Weil, Gotshal & Xxxxxx LLP
000 Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxx X. Xxxxx
Telecopy: (000) 000-0000
provided that any notice, given pursuant to Section 2 to any Agent or any Lender
shall not be effective until received.
9.3 No Waiver; Cumulative Remedies. No failure to exercise and no
delay in exercising, on the part of any Agent or any Lender, any right, remedy,
power or privilege hereunder or under the other Loan Documents shall operate as
a waiver thereof; nor shall any single or partial exercise of any right, remedy,
power or privilege hereunder preclude any other or further exercise thereof or
the exercise of any other right, remedy, power or privilege. The rights,
remedies, powers and privileges herein provided are cumulative and not exclusive
of any rights, remedies, powers and privileges provided by law.
9.4 Survival of Representations and Warranties. All representations
and warranties made herein, in the other Loan Documents and in any document,
certificate or statement delivered pursuant hereto or in connection herewith
shall survive the execution and delivery of this Agreement and the making of the
Loans and other extensions of credit hereunder.
9.5 Payment of Expenses. The Borrower agrees (a) to pay or reimburse
the Agents and the Lenders for all its reasonable out-of-pocket costs and
expenses incurred in connection with the syndication of the Loan Facility (other
than fees payable to syndicate members) and the development, preparation and
execution of, and any amendment, supplement or modification to, this Agreement
and the other Loan Documents and any other documents prepared in connection
herewith or therewith, and the consummation and administration of the
transactions contemplated hereby and thereby, including, without limitation, the
reasonable fees and disbursements and other charges of counsel to the
Administrative Agent and the Lenders and any Lender Group Expenses, (b) to pay
or reimburse each Lender and the Agents for all their out-of-pocket costs and
expenses incurred in connection with the enforcement or preservation of any
rights under this Agreement, the other Loan Documents and any other documents
prepared in connection herewith or therewith, including, without limitation, the
fees and disbursements of counsel to each Lender and of counsel to the Agents,
(c) to pay, indemnify, or reimburse each Lender and the Agents for, and hold
each Lender and the Agents harmless from, any and all recording and filing fees
and any and all liabilities with respect to, or resulting from any delay in
paying, stamp, excise and other taxes, if any, which may be payable or
determined to be payable in connection with the execution and delivery of, or
consummation or administration of any of the transactions contemplated by, or
any amendment, supplement or modification of, or any waiver or consent under or
in respect of, this Agreement, the other Loan Documents and any such other
documents, and (d) to pay, indemnify or reimburse each Lender, each Agent, their
respective Affiliates, and their respective officers, directors, trustees,
employees, advisors, agents and controlling persons (each, an "Indemnitee") for,
and hold each Indemnitee harmless from and against any and all other
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever with respect
to the execution, delivery, enforcement, performance and administration of this
Agreement, the
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other Loan Documents and any such other documents, including, without
limitation, any of the foregoing relating to the use of proceeds of the Loans or
the violation of, noncompliance with or liability under, any Environmental Law
applicable to the operations of the Loan Parties or any of their respective
Subsidiaries or any of the Properties and the fees and disbursements and other
charges of legal counsel in connection with claims, actions or proceedings by
any Indemnitee against them hereunder (all the foregoing in this clause (d),
collectively, the "Indemnified Liabilities"), provided, that the Borrower shall
have no obligation hereunder to any Indemnitee with respect to Indemnified
Liabilities to the extent such Indemnified Liabilities are found by a final and
nonappealable decision of a court of competent jurisdiction to have resulted
from the gross negligence or willful misconduct of such Indemnitee. No
Indemnitee shall be liable for any damages arising from the use by unauthorized
persons of information or other materials sent through electronic,
telecommunications or other information transmission systems that are
intercepted by such persons or for any special, indirect, consequential or
punitive damages in connection with the Loan Facility. Without limiting the
foregoing, and to the extent permitted by applicable law, the Loan Parties agree
not to assert and to cause their respective Subsidiaries not to assert, and
hereby waive and agree to cause their respective Subsidiaries so to waive, all
rights for contribution or any other rights of recovery with respect to all
claims, demands, penalties, fines, liabilities, settlements, damages, costs and
expenses of whatever kind or nature, under or related to Environmental Laws,
that any of them might have by statute or otherwise against any Indemnitee. All
amounts due under this Section 9.5 shall be payable not later than 30 days after
written demand therefor. Statements payable by the Borrower pursuant to this
Section 9.5 shall be submitted to the Chief Financial Officer of the Borrower
(Telephone No. 000-000-0000) (Fax No. 000-000-0000), at the address of the
Borrower set forth in Section 9.2, or to such other Person or address as may be
hereafter designated by the Borrower in a notice to the Administrative Agent.
The agreements in this Section 9.5 shall survive repayment of the Loans and all
other amounts payable hereunder.
9.6 Successors and Assigns; Participations and Assignments.
(a) This Agreement shall be binding upon and inure to the benefit of,
the Borrower, the Lenders, the Agents, all future holders of the Loans and their
respective successors and assigns, except that the Borrower may not assign or
transfer any of its rights or obligations under this Agreement without the prior
written consent of the Agents and each Lender.
(b) Any Lender may, with the consent of the Administrative Agent and
the Borrower, which consent will not be unreasonably withheld (provided that no
consent from the Administrative Agent or the Borrower shall be required at any
time after the occurrence of a Bankruptcy Event), in accordance with applicable
law, at any time sell to one or more banks, financial institutions or other
entities (each, a "Participant") participating interests in any Loan owing to
such Lender, any Commitment of such Lender or any other interest of such Lender
hereunder and under the other Loan Documents; provided, however, that, without
the prior written consent of the Borrower and the Administrative Agent, (i) each
such sale shall include an aggregate principal amount of not less than
$1,000,000 and (ii) no sale shall result in a Lender holding less than
$1,000,000 in aggregate principal amount of the Loans (other than in the case of
a sale of all of a Lender's interests under this Agreement). In the event of any
such sale by a Lender of a participating interest to a Participant, such
Lender's obligations under this Agreement to the other parties to this Agreement
shall remain unchanged, such Lender shall
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remain solely responsible for the performance thereof, such Lender shall remain
the holder of any such Loan for all purposes under this Agreement and the other
Loan Documents, and the Borrower and the Agents shall continue to deal solely
and directly with such Lender in connection with such Lender's rights and
obligations under this Agreement and the other Loan Documents. In no event shall
any Participant under any such participation have any right to approve any
amendment or waiver of any provision of any Loan Document, or any consent to any
departure by any Loan Party therefrom, except to the extent that such amendment,
waiver or consent would require the consent of all Lenders pursuant to Section
9.1. The Borrower agrees that if amounts outstanding under this Agreement and
the Loans are due or unpaid, or shall have been declared or shall have become
due and payable upon the occurrence of an Event of Default, each Participant
shall, to the maximum extent permitted by applicable law, be deemed to have the
right of setoff in respect of its participating interest in amounts owing under
this Agreement to the same extent as if the amount of its participating interest
were owing directly to it as a Lender under this Agreement, provided that, in
purchasing such participating interest, such Participant shall be deemed to have
agreed to share with the Lenders the proceeds thereof as provided in Section
9.7(a) as fully as if such Participant were a Lender hereunder. The Borrower
also agrees that each Participant shall be entitled to the benefits of Sections
2.10 and 2.11 with respect to its participation in the Commitments and the Loans
outstanding from time to time as if such Participant were a Lender; provided
that, in the case of Section 2.11, such Participant shall have complied with the
requirements of said Section, and provided, further, that no Participant shall
be entitled to receive any greater amount pursuant to any such Section than the
transferor Lender would have been entitled to receive in respect of the amount
of the participation transferred by such transferor Lender to such Participant
had no such transfer occurred.
(c) Any Lender (an "Assignor") may, in accordance with applicable law
and upon written notice to the Administrative Agent, at any time and from time
to time assign to any Lender or any Affiliate, Related Fund or Control
Investment Affiliate thereof or, with the consent of the Agent and the Borrower,
which consent, in each case, shall not be unreasonably withheld or delayed
(provided that (i) no such consent need be obtained by any Farallon Entity for a
period of 180 days following the Closing Date and (ii) no consent from the
Borrower or Administrative Agent shall be required at any time after the
occurrence of a Bankruptcy Event), to an additional bank, financial institution
or other entity (an "Assignee") all or any part of its rights and obligations
under this Agreement pursuant to an Assignment and Acceptance, substantially in
the form of Exhibit J (an "Assignment and Acceptance"), executed by such
Assignee and such Assignor (and, where the consent of the Agents is required
pursuant to the foregoing provisions, by the Agent) and delivered to the
Administrative Agent for its acceptance and recording in the Register; provided
that, without the prior written consent of the Borrower and the Administrative
Agent, (i) each such assignment to an Assignee (other than any Lender or any
Affiliate thereof) shall include an assignment of not less than $1,000,000 in
aggregate principal amount and (ii) no such assignment shall result in an
Assignor holding less than $1,000,000 in aggregate principal amount of the Loans
(other than in the case of an assignment of all of a Lender's interests under
this Agreement). Upon such execution, delivery, acceptance and recording, from
and after the effective date determined pursuant to such Assignment and
Acceptance, (x) the Assignee thereunder shall be a party hereto and, to the
extent provided in such Assignment and Acceptance, have the rights and
obligations of a Lender hereunder with Commitments and/or Loans as set forth
therein, and (y) the Assignor thereunder shall, to the extent provided in such
Assignment and Acceptance, be released from its obligations under this
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Agreement (and, in the case of an Assignment and Acceptance covering all of an
Assignor's rights and obligations under this Agreement, such Assignor shall
cease to be a party hereto, except as to Section 2.10, 2.11 and 9.5 in respect
of the period prior to such effective date). Notwithstanding any provision of
this Section 9.6, the consent of the Borrower shall not be required for any
assignment that occurs at any time when any Event of Default shall have occurred
and be continuing. For purposes of the minimum assignment amounts set forth in
this paragraph, multiple assignments by two or more Related Funds shall be
aggregated.
(d) The Administrative Agent shall, on behalf of the Borrower,
maintain at its address referred to in Section 9.2 a copy of each Assignment and
Acceptance delivered to it and a register (the "Register") for the recordation
of the names and addresses of the Lenders and the Commitment of, and principal
amount of the Loans owing to, each Lender from time to time. The entries in the
Register shall be conclusive, in the absence of manifest error, and the
Borrower, each Agent and the Lenders shall treat each Person whose name is
recorded in the Register as the owner of the Loans and any Notes evidencing such
Loans recorded therein for all purposes of this Agreement. Any assignment of any
Loan, whether or not evidenced by a Note, shall be effective only upon
appropriate entries with respect thereto being made in the Register (and each
Note shall expressly so provide). Any assignment or transfer of all or part of a
Loan evidenced by a Note shall be registered on the Register only upon surrender
for registration of assignment or transfer of the Note evidencing such Loan,
accompanied by a duly executed Assignment and Acceptance; thereupon one or more
new Notes in the same aggregate principal amount shall be issued to the
designated Assignee, and the old Notes shall be returned by the Administrative
Agent to the Borrower marked "canceled". The Register shall be available for
inspection by the Borrower or any Lender (with respect to any entry relating to
such Lender's Loans) at any reasonable time and from time to time upon
reasonable prior notice. The Administrative Agent shall furnish the Borrower a
copy of the Register and the notice information for each Lender, as requested by
the Borrower from time to time.
(e) Upon its receipt of an Assignment and Acceptance executed by an
Assignor and an Assignee (and, in any case where the consent of any other Person
is required by Section 9.6(c), by each such other Person) together with payment
to the Administrative Agent of a registration and processing fee of $3,500
(treating multiple, simultaneous assignments by or to two or more Related Funds
as a single assignment) (except that no such registration and processing fee
shall be payable (y) in connection with an assignment by or to a Farallon Entity
or (z) in the case of an Assignee which is already a Lender or is an Affiliate
or Related Fund of a Lender or a Person under common management with a Lender),
the Administrative Agent shall (i) promptly accept such Assignment and
Acceptance and (ii) on the effective date determined pursuant thereto record the
information contained therein in the Register and give notice of such acceptance
and recordation to the Borrower. On or prior to such effective date, the
Borrower, at its own expense, upon request, shall execute and deliver to the
Administrative Agent (in exchange for the applicable Notes of the assigning
Lender) a new Note or Notes to the order of such Assignee in an amount equal to
the applicable Loans assumed or acquired by it pursuant to such Assignment and
Acceptance and, if the Assignor has retained any Loans, as the case may be, upon
request, new Notes to the order of the Assignor in an amount equal to the Loans
retained by it hereunder. Such new Note or Notes shall be dated the Closing Date
and shall otherwise be in the form of the Note or Notes replaced thereby.
87
(f) For avoidance of doubt, the parties to this Agreement acknowledge
that the provisions of this Section 9.6 concerning assignments of Loans and
Notes relate only to absolute assignments and that such provisions do not
prohibit assignments creating security interests in Loans and Notes, including,
without limitation, any pledge or assignment by a Lender of any Loan or Note to
any Federal Reserve Bank in accordance with applicable law.
(g) Notwithstanding anything to the contrary contained herein, any
Lender (a "Granting Lender") may grant to a special purpose funding vehicle (an
"SPC"), identified as such in writing from time to time by the Granting Lender
to the Administrative Agent and the Borrower, the option to provide to the
Borrower all or any part of any Loan that such Granting Lender would otherwise
be obligated to make to the Borrower pursuant to this Agreement; provided that
(i) nothing herein shall constitute a commitment by any SPC to make any Loan and
(ii) if an SPC elects not to exercise such option or otherwise fails to provide
all or any part of such Loan, the Granting Lender shall be obligated to make
such Loan pursuant to the terms hereof. The making of a Loan by an SPC hereunder
shall utilize the Commitment of the Granting Lender to the same extent, and as
if, such Loan were made by such Granting Lender. Each party hereto hereby agrees
that no SPC shall be liable for any indemnity or similar payment obligation
under this Agreement (all liability for which shall remain with the Granting
Lender). In furtherance of the foregoing, each party hereto hereby agrees (which
agreement shall survive the termination of this Agreement) that, prior to the
date that is one year and one day after the payment in full of all outstanding
commercial paper or other indebtedness of any SPC, it will not institute
against, or join any other person in instituting against, such SPC any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings
under the laws of the United States or any state thereof. In addition,
notwithstanding anything to the contrary in this Section 9.6(g), any SPC may (A)
with notice to, but without the prior written consent of, the Borrower and the
Administrative Agent and without paying any processing fee therefor, assign all
or a portion of its interests in any Loans to the Granting Lender, or with the
prior written consent of the Borrower and the Administrative Agent (which
consent shall not be unreasonably withheld) to any financial institutions
providing liquidity and/or credit support to or for the account of such SPC to
support the funding or maintenance of Loans, and (B) disclose on a confidential
basis any non-public information relating to its Loans to any rating agency,
commercial paper dealer or provider of any surety, guarantee or credit or
liquidity enhancement to such SPC; provided that non-public information with
respect to the Borrower may be disclosed only with the Borrower's consent which
will not be unreasonably withheld. This paragraph (g) may not be amended without
the written consent of any SPC with Loans outstanding at the time of such
proposed amendment.
9.7 Adjustments; Set-off.
(a) Except to the extent that this Agreement provides for payments to
be allocated to a particular Lender, if any Lender (a "Benefitted Lender") shall
at any time receive any payment of all or part of the Obligations owing to it,
or receive any Collateral in respect thereof (whether voluntarily or
involuntarily, by set-off, pursuant to events or proceedings of the nature
referred to in Section 7(f), or otherwise), in a greater proportion than any
such payment to or collateral received by any other Lender, if any, in respect
of such other Lender's Obligations, such Benefitted Lender shall purchase for
cash from the other Lenders a participating interest in such portion of each
such other Lender's Obligations, or shall provide such other Lenders with
88
the benefits of any such Collateral, as shall be necessary to cause such
Benefitted Lender to share the excess payment or benefits of such Collateral
ratably with each of the Lenders; provided, however, that if all or any portion
of such excess payment or benefits is thereafter recovered from such Benefitted
Lender, such purchase shall be rescinded, and the purchase price and benefits
returned, to the extent of such recovery, but without interest.
(b) In addition to any rights and remedies of the Lenders provided by
law, each Lender shall have the right, without prior notice to the Borrower, any
such notice being expressly waived by the Borrower to the extent permitted by
applicable law, upon any amount becoming due and payable by the Borrower
hereunder (whether at the stated maturity, by acceleration or otherwise), to set
off and appropriate and apply against such amount any and all deposits (general
or special, time or demand, provisional or final), in any currency, and any
other credits, indebtedness or claims, in any currency, in each case whether
direct or indirect, absolute or contingent, matured or unmatured, at any time
held or owing by such Lender or any branch or agency thereof to or for the
credit or the account of the Borrower. Each Lender agrees promptly to notify the
Borrower and the Administrative Agent after any such setoff and application made
by such Lender, provided that the failure to give such notice shall not affect
the validity of such setoff and application.
9.8 Counterparts. This Agreement may be executed by one or more of the
parties to this Agreement on any number of separate counterparts, and all of
said counterparts taken together shall be deemed to constitute one and the same
instrument. Delivery of an executed signature page of this Agreement by
facsimile transmission shall be effective as delivery of a manually executed
counterpart hereof. A set of the copies of this Agreement signed by all the
parties shall be lodged with the Borrower and the Administrative Agent.
9.9 Severability. Any provision of this Agreement that is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
9.10 Integration. This Agreement and the other Loan Documents represent
the entire agreement of the Borrower, the Agents, the Arranger and the Lenders
with respect to the subject matter hereof and thereof, and there are no
promises, undertakings, representations or warranties by the Arranger, any Agent
or any Lender relative to subject matter hereof not expressly set forth or
referred to herein or in the other Loan Documents.
9.11 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
9.12 Submission To Jurisdiction; Waivers. The Borrower hereby
irrevocably and unconditionally:
89
(a) submits for itself and its Property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to which it
is a party, or for recognition and enforcement of any judgment in respect
thereof, to the non-exclusive general jurisdiction of the courts of the State of
New York, the courts of the United States of America for the Southern District
of New York, and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought in such
courts and waives any objection that it may now or hereafter have to the venue
of any such action or proceeding in any such court or that such action or
proceeding was brought in an inconvenient court and agrees not to plead or claim
the same;
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail (or
any substantially similar form of mail), postage prepaid, to the Borrower at its
address set forth in Section 9.2 or at such other address of which the
Administrative Agent shall have been notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the right
to xxx in any other jurisdiction; and
(e) WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT
MAY HAVE TO CLAIM OR RECOVER IN ANY LEGAL ACTION OR PROCEEDING REFERRED TO IN
THIS SECTION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES.
9.13 Acknowledgments. The Borrower hereby acknowledges that:
(a) it has been advised by counsel in the negotiation, execution and
delivery of this Agreement and the other Loan Documents;
(b) neither the Arranger, any Agent nor any Lender has any fiduciary
relationship with or duty to the Borrower arising out of or in connection with
this Agreement or any of the other Loan Documents, and the relationship between
the Arranger, the Agents and the Lenders, on one hand, and the Borrower, on the
other hand, in connection herewith or therewith is solely that of debtor and
creditor; and
(c) no joint venture is created hereby or by the other Loan Documents
or otherwise exists by virtue of the transactions contemplated hereby among the
Arranger, the Agents and the Lenders or among the Borrower and the Lenders.
9.14 Confidentiality. Each of the Agents and the Lenders agrees to keep
confidential all non-public information provided to it by any Loan Party
pursuant to this Agreement that is designated by such Loan Party as
confidential; provided that nothing herein shall prevent any Agent or any Lender
from disclosing any such information (a) to the Arranger, any Agent, any other
Lender or any Affiliate of any thereof, (b) to any Participant or Assignee
(each, a "Transferee") or prospective Transferee that agrees to comply with the
provisions of this Section 9.14 or substantially equivalent provisions, (c) to
any of its employees, directors, agents, attorneys, accountants and other
professional advisors, (d) to any financial institution that is a direct or
indirect contractual counterparty in swap agreements or such contractual
counterparty's
90
professional advisor (so long as such contractual counterparty or professional
advisor to such contractual counterparty agrees to be bound by the provisions of
this Section 9.14), (e) upon the request or demand of any Governmental Authority
having jurisdiction over it, (f) in response to any order of any court or other
Governmental Authority or as may otherwise be required pursuant to any
Requirement of Law, (g) in connection with any litigation or similar proceeding,
(h) that has been publicly disclosed other than in breach of this Section 9.14,
(i) to the National Association of Insurance Commissioners or any similar
organization or any nationally recognized rating agency that requires access to
information about a Lender's investment portfolio in connection with ratings
issued with respect to such Lender or (j) in connection with the exercise of any
remedy hereunder or under any other Loan Document. The foregoing
notwithstanding, the obligations of confidentiality contained herein (the
"Confidentiality Obligations"), as they relate to the financing transaction
contemplated herein, shall not apply to the "tax structure" or "tax treatment"
of the such financing (as these terms are used in Section 1.6011-4(b)(3) (or any
successor provision) of the Treasury Regulations (the "Confidentiality
Regulation") promulgated under Section 6011 of the Code); and the Borrower, any
Agent or Lender (and any of their respective Representatives) may disclose to
any and all persons, without limitation of any kind, the "tax structure" and
"tax treatment" of the financing transaction contemplated herein (as these terms
are defined in the Confidentiality Regulation). In addition, the Borrower, each
Agent an the Lenders acknowledges that that none of them has a proprietary or
exclusive right to any tax matter or tax idea related to the proposed financing
transaction.
9.15 Release of Collateral and Guarantee Obligations.
(a) Notwithstanding anything to the contrary contained herein or in
any other Loan Document, upon request of the Borrower in connection with any
Disposition of Property not prohibited by the Loan Documents, the Administrative
Agent shall (without notice to, or vote or consent of, any Lender, or any
Affiliate of any Lender that is a party to any Specified Hedge Agreement) take
such actions as shall be required to release its security interest in any
Collateral being Disposed of in such Disposition, and to release any Guarantee
Obligations under any Loan Document of any Person being Disposed of in such
Disposition, to the extent necessary to permit consummation of such Disposition
in accordance with the Loan Documents.
(b) Notwithstanding anything to the contrary contained herein or any
other Loan Document, when all Obligations (other than obligations in respect of
any Specified Hedge Agreement) have been paid in full, all Commitments have
terminated or expired, upon request of the Borrower, the Administrative Agent
shall (without notice to, or vote or consent of, any Lender, or any Affiliate of
any Lender that is a party to any Specified Hedge Agreement) take such actions
as shall be required to release its security interest in all Collateral, and to
release all Guarantee Obligations under any Loan Document, whether or not on the
date of such release there may be outstanding Obligations in respect of
Specified Hedge Agreements. Any such release of Guarantee Obligations shall be
deemed subject to the provision that such Guarantee Obligations shall be
reinstated if after such release any portion of any payment in respect of the
Obligations guaranteed thereby shall be rescinded or must otherwise be restored
or returned upon the insolvency, bankruptcy, dissolution, liquidation or
reorganization of the Borrower or any Guarantor, or upon or as a result of the
appointment of a receiver, intervenor or conservator of, or trustee or similar
officer for, the Borrower or any Guarantor or any substantial part of its
property, or otherwise, all as though such payment had not been made.
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9.16 Accounting Changes. In the event that any "Accounting Change" (as
defined below) shall occur and such change results in a change in the method of
calculation of financial covenants, standards or terms in this Agreement, then
the Borrower and the Administrative Agent agree to enter into negotiations in
order to amend such provisions of this Agreement so as to equitably reflect such
Accounting Change with the desired result that the criteria for evaluating the
Borrower's financial condition shall be the same after such Accounting Change as
if such Accounting Change had not been made. Until such time as such an
amendment shall have been executed and delivered by the Borrower, the
Administrative Agent and the Majority Lenders or the Required Lenders, as the
case may be, all financial covenants, standards and terms in this Agreement
shall continue to be calculated or construed as if such Accounting Change had
not occurred. "Accounting Change" refers to any change in accounting principles
required by the promulgation of any rule, regulation, pronouncement or opinion
by the Financial Accounting Standards Board of the American Institute of
Certified Public Accountants or, if applicable, the SEC.
9.17 WAIVERS OF JURY TRIAL. THE BORROWER, THE AGENTS AND THE LENDERS
HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION
OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY
COUNTERCLAIM THEREIN.
9.18 Effect of Amendment and Restatement of the Existing Credit
Agreement. On the Closing Date, the Existing Credit Agreement shall be amended,
restated and superseded in its entirety. The parties hereto acknowledge and
agree that (a) this Agreement and the other Loan Documents executed and
delivered in connection herewith do not constitute a novation, payment and
reborrowing, or termination of the "Obligations" (as defined in the Existing
Credit Agreement) under the Existing Credit Agreement as in effect prior to the
Closing Date; (b) such "Obligations" are in all respects continuing (as amended
and restated hereby) with only the terms thereof being modified as provided in
this Agreement; and (c) the Liens and security interests as granted under the
Security Documents securing payment of such "Obligations" are in all respect
continuing and in full force and effect and secure the payment of the
Obligations (as defined in this Agreement).
9.19 Usury Savings Clause. It is the intention of the parties hereto
that each Lender shall conform strictly to usury laws applicable to it.
Accordingly, if the transactions contemplated hereby would be usurious as to any
Lender under laws applicable to it (including the laws of the United States of
America and the State of Texas or any other jurisdiction whose laws may be
mandatorily applicable to such Lender notwithstanding the other provisions of
this Agreement), then, in that event, notwithstanding anything to the contrary
in any of the Loan Documents or any agreement entered into in connection with or
as security for the Loans, it is agreed as follows: (i) the aggregate of all
consideration which constitutes interest under law applicable to any Lender that
is contracted for, taken, reserved, charged or received by such Lender under any
of the Loan Documents or agreements or otherwise in connection with the Loans
shall under no circumstances exceed the maximum amount allowed by such
applicable law, and any excess shall be canceled automatically and if
theretofore paid shall be credited by such Lender on the principal amount of the
Indebtedness (or, to the extent that the principal amount of the Indebtedness
shall have been or would thereby be paid in full, refunded by such
92
Lender to the Borrower); and (ii) in the event that the maturity of the Loans is
accelerated by reason of an election of the holder thereof resulting from any
Event of Default under this Agreement or otherwise, or in the event of any
required or permitted prepayment, then such consideration that constitutes
interest under law applicable to any Lender may never include more than the
maximum amount allowed by such applicable law, and excess interest, if any,
provided for in this Agreement or otherwise shall be canceled automatically by
such Lender as of the date of such acceleration or prepayment and, if
theretofore paid, shall be credited by such Lender on the principal amount of
the Indebtedness (or, to the extent that the principal amount of the
Indebtedness shall have been or would thereby be paid in full, refunded by such
Lender to the Borrower). All sums paid or agreed to be paid to any Lender for
the use, forbearance or detention of sums due hereunder shall, to the extent
permitted by law applicable to such Lender, be amortized, prorated, allocated
and spread throughout the stated term of the Loans evidenced by the Notes until
payment in full so that the rate or amount of interest on account of any Loans
hereunder does not exceed the maximum amount allowed by such applicable law. If
at any time and from time to time (i) the amount of interest payable to any
Lender on any date shall be computed at the Highest Lawful Rate applicable to
such Lender pursuant to this Section 9.19 and (ii) in respect of any subsequent
interest computation period the amount of interest otherwise payable to such
Lender would be less than the amount of interest payable to such Lender computed
at the Highest Lawful Rate applicable to such Lender, then the amount of
interest payable to such Lender in respect of such subsequent interest
computation period shall continue to be computed at the Highest Lawful Rate
applicable to such Lender until the total amount of interest payable to such
Lender shall equal the total amount of interest which would have been payable to
such Lender if the total amount of interest had been computed without giving
effect to this Section 9.19. To the extent that Chapter 303 of the Texas Finance
Code is relevant for the purpose of determining the Highest Lawful Rate
applicable to a Lender, such Lender elects to determine the applicable rate
ceiling under such Chapter by the weekly ceiling from time to time in effect.
[The remainder of this page is intentionally left blank.]
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their proper and duly authorized
officers as of the day and year first above written.
MISSION RESOURCES CORPORATION, as
Borrower
By: /s/ Xxxxxxx X. Xxxxxxxx
-------------------------------------
Xxxxxxx X. Xxxxxxxx
Senior Vice President and Chief
Financial Officer
FARALLON ENERGY LENDING, L.L.C., as
Arranger and as a Lender
By: /s/ Xxxxxxx X. Xxxxx
-------------------------------------
Xxxxxxx X. Xxxxx
Managing Member
FOOTHILL CAPITAL CORPORATION, as
Administrative Agent
By: /s/ Xxxxxx X. Xxxxxxxx
-------------------------------------
Xxxxxx X. Xxxxxxxx
Vice President
XXXXXXXXX & COMPANY, INC., as Syndication
Agent
By: /s/ Xxxx X. Xxxx
-------------------------------------
Xxxx X. Xxxx
Executive Vice President
94
SCHEDULE 1.1
INITIAL COMMITMENTS
Name and Address of Lender Initial Commitment
-------------------------- ------------------
FARALLON ENERGY FUNDING, L.L.C. $80,000,000
Xxx Xxxxxxxx Xxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
ADDITIONAL COMMITMENTS
Name and Address of Lender Additional Commitment
-------------------------- ---------------------
FARALLON ENERGY FUNDING, L.L.C. $10,000,000
Xxx Xxxxxxxx Xxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
