EXHIBIT 10.4.1
MBP DRAFT
October 28, 1999
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AMENDED AND RESTATED 364-DAY CREDIT AGREEMENT
Dated as of October 29, 1999
Among
SPINNAKER EXPLORATION COMPANY, L.L.C.,
AS BORROWER
and
CERTAIN FINANCIAL INSTITUTIONS,
AS LENDERS,
BANK OF MONTREAL,
AS ADMINISTRATIVE AGENT
and
CREDIT SUISSE FIRST BOSTON,
AS DOCUMENTATION AGENT
$25,000,000
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364-DAY CREDIT AGREEMENT
TABLE OF CONTENTS
Page
----
ARTICLE I - Definitions and References............................... 2
Section 1.1 Defined Terms..................................... 2
Section 1.2 Exhibits and Schedules; Additional Definitions.... 17
Section 1.3 Amendment of Defined Instruments.................. 18
Section 1.4 References and Titles............................. 18
Section 1.5 Calculations and Determinations................... 18
ARTICLE II - The Loans............................................... 18
Section 2.1 Loans............................................. 18
Section 2.2 Extension of Maturity Date and of Commitments..... 19
Section 2.3 [Reserved]........................................ 21
Section 2.4 Requests for Advances............................. 21
Section 2.5 Use of Proceeds................................... 22
Section 2.6 Rate Elections: Interest Rates.................... 22
Section 2.7 Commitment Fees; Advances......................... 23
Section 2.8 Administrative Agent's Fees....................... 23
Section 2.9 [Reserved]........................................ 23
Section 2.10 Prepayments....................................... 23
Section 2.11 Payments to Lenders............................... 24
Section 2.12 Initial Borrowing Base............................ 25
Section 2.13 Subsequent Determinations of Borrowing Base....... 26
Section 2.14 Borrower's Reduction of Borrowing Base............ 27
Section 2.15 Alternate Rate of Interest........................ 27
Section 2.16 Increased Costs................................... 27
Section 2.17 Break Funding Payments............................ 29
Section 2.18 Taxes............................................. 29
Section 2.19 Mitigation Obligations; Replacement of Lenders.... 30
ARTICLE III - Letters of Credit..................................... 31
Section 3.1 Letters of Credit................................. 31
Section 3.2 Requesting Letters of Credit...................... 31
Section 3.3 Reimbursement and Participations.................. 32
Section 3.4 Letter of Credit Fees............................. 33
Section 3.5 No Duty to Inquire................................ 34
Section 3.6 LC Collateral..................................... 35
ARTICLE IV - Conditions Precedent to Lending......................... 36
364-DAY CREDIT AGREEMENT
TABLE OF CONTENTS
(continued)
Page
----
Section 4.1 Documents to be Delivered......................... 36
Section 4.2 Additional Conditions Precedent................... 38
ARTICLE V - Representations and Warranties........................... 39
Section 5.1 Borrower's Representations and Warranties......... 39
ARTICLE VI - Covenants of Borrower................................... 44
Section 6.1 Affirmative Covenants............................. 44
Section 6.2 Negative Covenants................................ 50
ARTICLE VII - Security............................................... 57
Section 7.1 The Security...................................... 57
Section 7.2 Agreement to Deliver Security Documents........... 57
Section 7.3 Perfection and Protection of Security Interests
and Liens......................................... 58
Section 7.4 Bank Accounts; Offset............................. 58
Section 7.5 Additional Subsidiaries........................... 58
Section 7.6 Production Proceeds............................... 59
ARTICLE VIII - Events of Default and Remedies........................ 59
Section 8.1 Events of Default................................. 59
Section 8.2 Remedies.......................................... 62
Section 8.3 Payment of Expenses, Indemnities, etc............. 62
ARTICLE IX - Administrative Agent.................................... 64
Section 9.1 Appointment and Authority......................... 64
Section 9.2 Exculpation, Administrative Agent's Reliance,
Etc............................................... 65
Section 9.3 Lenders' Credit Decisions......................... 66
Section 9.4 Indemnification................................... 66
Section 9.5 Rights as Lender.................................. 66
Section 9.6 Sharing of Set-Offs and Other Payments............ 67
Section 9.7 Investments....................................... 67
Section 9.8 Benefit of Article IX............................. 67
Section 9.9 Resignation....................................... 68
Section 9.10 Documentation Agent............................... 68
ARTICLE X - Miscellaneous............................................ 68
Section 10.1 Waivers and Amendments; Acknowledgments........... 68
364-DAY CREDIT AGREEMENT
TABLE OF CONTENTS
(continued)
Page
----
Section 10.2 Survival of Agreements; Cumulative Nature......... 70
Section 10.3 Notices........................................... 70
Section 10.4 Parties in Interest............................... 70
Section 10.5 Governing Law; Submission to Process.............. 71
Section 10.6 Maximum Interest.................................. 71
Section 10.7 Termination; Limited Survival..................... 72
Section 10.8 Severability...................................... 72
Section 10.9 Counterparts...................................... 72
Section 10.10 WAIVER OF JURY TRIAL, PUNITIVE DAMAGES, ETC....... 72
Section 10.11 Assignments and Participations.................... 73
Section 10.12 Confidentiality................................... 75
Section 10.13 Renewal and Continuation of Existing Loans........ 75
Section 10.14 Release of Collateral............................. 76
Schedules and Exhibits:
Lender Schedule
Schedule 1 - Disclosure Schedule
Schedule 2 - Security Schedule
Schedule 3 - Identified Properties
Schedule 4 - Investment Guidelines
Schedule 5 - Collateral to be Released
Exhibit A - Form of Note
Exhibit B - [Reserved]
Exhibit C - Request for Advances
Exhibit D - Rate Election
Exhibit E - Certificate Accompanying Financial Statements
Exhibit F - Form of Opinion of ▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P.,
counsel for the Related Persons
Exhibit G - [Reserved]
Exhibit H - Agreement to be Bound
Exhibit I - Terms of Subordination
Exhibit J - Form of Certificate of Extension
Exhibit K - Form of Pledge Agreement
Exhibit L - Form of Guaranty
AMENDED AND RESTATED
364-DAY CREDIT AGREEMENT
------------------------
THIS AMENDED AND RESTATED 364-DAY CREDIT AGREEMENT (this "Agreement"),
dated as of October 29, 1999, by and among SPINNAKER EXPLORATION COMPANY,
L.L.C., a Delaware limited liability company ("Borrower"), BANK OF MONTREAL
("Bank of Montreal") and such other various financial institutions as are or may
become parties hereto, as lenders (collectively, together with their respective
successors and permitted assigns, the "Lenders"), BANK OF MONTREAL, acting
through certain U.S. branches or agencies, as administrative agent (in such
capacity together with its successors in such capacity, the "Administrative
Agent") for the Lenders and CREDIT SUISSE FIRST BOSTON, a bank organized under
the laws of Switzerland, acting through its New York Branch ("CSFB"), as
documentation agent (in such capacity, the "Documentation Agent") for the
Lenders.
WHEREAS, Borrower, CSFB as administrative agent, Bank of Montreal as
syndication agent, NationsBank, N.A. as documentation agent, and certain banks
(the "Original Banks") have heretofore entered into that certain Credit
Agreement, dated as of September 30, 1998, as amended by that certain First
Amendment to Credit Agreement, dated as of March 15, 1999, by that certain
Second Amendment to Credit Agreement, dated as of August 19, 1999, and that
certain Third Amendment to Credit Agreement, dated as of September 27, 1999 (the
"Original Credit Agreement"), providing for commitments from the Original Banks
to make loans and issue letters of credit for the benefit of Borrower on the
terms and subject to the conditions set forth therein;
WHEREAS, the Borrower desires to amend and restate the Original Credit
Agreement in order to restructure, rearrange, renew, extend and continue all
indebtedness evidenced by and outstanding under the Original Credit Agreement
(the "Prior Indebtedness"), and to modify the commitments from the Lenders
pursuant to which Loans will be made by the Lenders to the Borrower and Letters
of Credit will be issued by the Issuer under the several responsibilities of the
Lenders for the account of the Borrower from time to time prior to the Final
Maturity Date (as hereinafter defined);
WHEREAS, the Lenders and the Issuer (as hereinafter defined) are willing,
on the terms and subject to the conditions hereinafter set forth (including
Article IV), to amend and restate the Original Credit Agreement in order to
restructure, rearrange, renew, extend and continue all Prior Indebtedness and to
modify the commitments and make such Loans to the Borrower and issue and
participate in such Letters of Credit for the account of the Borrower; and
WHEREAS, the proceeds of such Loans and Letters of Credit will be used (a)
for restructuring, rearranging, renewing, extending and continuing the debt of
Borrower under the Original Credit Agreement; (b) for general corporate purposes
including working capital purposes of the Borrower; and (c) for the acquisition,
exploration, development and production of oil and gas properties and other
energy related assets including, without limitation, the acquisition of
hydrocarbon interests;
NOW, THEREFORE, the parties hereto agree that the Original Credit Agreement
is amended and restated in its entirety as follows:
ARTICLE I - Definitions and References
Section 1.1 Defined Terms. As used in this Agreement, each of the
following terms has the meaning given it in this Section 1.1 or in the sections
and subsections referred to below:
"Accepting Lenders" has the meaning given it in Section 2.2.
"Adjusted LIBOR Rate" means, with respect to each particular LIBOR Rate
Portion and the associated LIBOR Rate and Reserve Percentage, the rate per annum
calculated by Administrative Agent (rounded upwards, if necessary, to the next
higher 1/100%) determined on a daily basis pursuant to the following formula:
Adjusted LIBOR Rate=
LIBOR Rate + LIBOR Spread
100.0% - Reserve Percentage
"Advances" has the meaning given it in Section 2.1.
"Affiliate" means, as to any Person, each other Person that directly or
indirectly (through one or more intermediaries or otherwise) controls, is
controlled by, or is under common control with, such Person. A Person shall be
deemed to be "controlled by" any other Person if such other Person possesses,
directly or indirectly, power
(a) to vote 20% or more of the securities (on a fully diluted basis) having
ordinary voting power for the election of directors or managing general
partners; or
(b) to direct or cause the direction of the management and policies of such
Person whether by contract or otherwise.
"Administrative Agent" has the meaning given it in the preamble.
"Agreement" has the meaning given it in the preamble.
"Bank of Montreal" has the meaning given it in the preamble.
"Base Rate" means, on any date and with respect to all Base Rate Loans, a
fluctuating rate of interest per annum equal to (a) the higher of (i) the rate
of interest most recently announced by Bank of Montreal at its Domestic Office
as its base rate for dollar advances made in the United States or (ii) the
Federal Funds Rate most recently determined by the Administrative Agent plus
1/2% (0.5%) per annum, plus (b) the Base Rate Spread. The Base Rate is not
necessarily intended to be
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the lowest rate of interest determined by the Bank of Montreal or any Lender in
connection with extensions of credit. Changes in the rate of interest on that
portion of any Loans maintained as Base Rate Loans will take effect
simultaneously with each change in the Base Rate. The Administrative Agent will
give notice to the Borrower of changes in the Base Rate promptly upon receipt of
notice of any such change from the Bank of Montreal.
"Base Rate Loan" means any Loan which bears interest at the Base Rate.
"Base Rate Portion" means that portion of the unpaid principal balance of
the Loans which is not made up of LIBOR Rate Portions.
"Base Rate Spread" means, with respect to any Loan bearing interest at the
Base Rate for any time prior to the Final Maturity Date, the applicable margin
set forth below under the caption "Base Rate Spread", determined by reference to
the percentage of the Borrowing Base that the sum of all Advances outstanding
plus all LC Obligations represent at that time.
Percentage of
Borrowing Base
Usage Base Rate Spread
------------------ ----------------
(greater than or equal to) 75% 0.25%
(greater than or equal to) 60% but less than 75% 0%
(greater than or equal to) 40% but less than 60% 0%
(less than) 40% 0%
"Borrower" has the meaning given it in the preamble.
"Borrowing Base" means, at the particular time in question, either the
amount provided for in Section 2.12 or the amount determined by Administrative
Agent in accordance with the provisions of Section 2.13, as reduced by Borrower
pursuant to Section 2.14; provided, however, that in no event shall the
Borrowing Base ever exceed the amount equal to the Maximum Loan Amount.
"Borrowing Base Deficiency" has the meaning given it in Section 2.10.
"Business Day" means a day, other than a Saturday or Sunday, on which
commercial banks are open for business with the public in Houston, Texas and
Chicago, Illinois. Any Business Day in any way relating to LIBOR Rate Portions
(such as the day on which an Interest Period begins or ends) means any Business
Day on which dealings in U.S. dollar deposits are carried on in the London
interbank market and on which commercial banks are open for domestic and
international business (including dealings in U.S. dollar deposits) in London,
England.
3
"Capitalized Lease Obligations" shall mean as to any Personal monetary
obligations of such Person or any of its Subsidiaries under any leasing or
similar arrangement which, in accordance with GAAP, would be classified as
capitalized leases, and, for purposes of this Agreement and each other Loan
Document, the amount of such obligations shall be the capitalized amount
thereof, determined in accordance with GAAP.
"Certificate of Extension" means a certificate of Borrower executed by an
officer of the Borrower and delivered to the Administrative Agent, in
substantially the form of Exhibit J hereto, which requests an extension of the
then scheduled Final Maturity Date pursuant to Section 2.2.
"Change in Circumstances" has the meaning given to it in Section 6.1(1).
"Change in Control" means the occurrence of any of the following: (a)
Spinnaker Exploration Company and WP Spinnaker Holdings, Inc. shall cease to own
100% of the membership interest of the Borrower; (b) the sale, lease or
transfer, in one or a series of related transactions, of all or substantially
all of Borrower's assets to any Person or Group (as such term is used in Section
13(d)(3) of the Exchange Act); (c) the acquisition, directly or indirectly, by
any Person or Group (other than the Sponsors) of beneficial ownership (as
defined in Rule 13d-3 under the Exchange Act) of more than 50% of the aggregate
voting power of the voting stock of Spinnaker Exploration Company (for the
purposes of this definition, such other Person shall be deemed to beneficially
own any voting stock of a specified Person held by a parent Person, if such
other Person is the beneficial owner (as defined above) directly or indirectly,
of more than 35% of the voting power of the membership interests or similar
equity interests of such parent Person); or (d) individuals who at the Closing
Date constituted the Board of Directors of Spinnaker Exploration Company
(together with any new directors whose election by such Board of Directors or
whose nomination for election by the stockholders of Spinnaker Exploration
Company was approved by a vote of 66 2/3% of the directors of Spinnaker
Exploration Company then still in office who were either directors at the
Closing Date or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Board of
Directors of Spinnaker Exploration Company then in office.
"Change in Law" means (a) the adoption of any law, rule or regulation after
the date of this Agreement, (b) any change in any law, rule or regulation or in
the interpretation or application thereof by any Governmental Authority after
the date of this Agreement or (c) compliance by any Lender or the Issuing Bank
(or, for purposes of Section 2.16(b), by any lending office of such Lender or by
such Lender's or the Issuing Bank's holding company, if any) with any request,
guideline or directive (whether or not having the force of law) of any
Governmental Authority made or issued after the date of this Agreement.
"Closing Date" means the date on which the conditions specified in Section
4.1 are satisfied (or waived in accordance with Section 10.1).
4
"Collateral" means all property of any kind which is subject to a Lien in
favor of Lenders (or in favor of Administrative Agent for the benefit of
Lenders) or which, under the terms of any Security Document, is purported to be
subject to such a Lien.
"Commitment Fee Rate" means for any time prior to the Final Maturity Date,
the applicable margin set forth below under the caption "Commitment Fee Rate",
determined by reference to the percentage of the Borrowing Base that the sum of
all Advances outstanding plus all LC Obligations represent at that time.
Percentage of
Borrowing Base Commitment Fee
Usage Rate
------------------ ----------------
(greater than or equal to) 75% 0.375%
(greater than or equal to) 60% but less than 75% 0.375%
(greater than or equal to) 40% but less than 60% 0.375%
(less than) 40% 0.250%
"Commitments" means, at any time, the amount of Loans the Lenders are then
obligated to advance hereunder, as such amount may be increased or reduced from
time to time pursuant to the terms hereof.
"Consolidated" refers to the consolidation of any Person, in accordance
with GAAP, with its properly consolidated subsidiaries. References herein to a
Person's consolidated financial statements, financial position, financial
condition, liabilities, etc. refer to the consolidated financial statements,
financial position, financial condition, liabilities, etc. of such Person and
its properly consolidated subsidiaries.
"CSFB" has the meaning given it in the preamble.
"Declining Lenders" has the meaning given it in Section 2.2.
"Default" means any Event of Default and any default, event or condition
which would, with the giving of any requisite notices and the passage of any
requisite periods of time, constitute an Event of Default.
"Determination Date" has the meaning given it in Section 2.13.
"Disclosure Report" means either a notice given by Borrower under Section
6.1(d) or a certificate given by Borrower's chief financial officer under
Section 6.1 (b)(ii).
5
"Disclosure Schedule" means Schedule 1 hereto and the documents attached
thereto or referred to therein.
"Documentation Agent" has the meaning given it in the preamble.
"Domestic Office" with respect to the Administrative Agent or any Lender,
means the office of the Administrative Agent or any Lender specified as its
"Domestic Office" on the signature pages hereto or such other office of the
Administrative Agent or any Lender as the Administrative Agent or any Lender may
from time to time specify to the Borrower and (in the case of a Lender) the
Administrative Agent.
"Engineering Report" means the Initial Engineering Report and each
engineering report delivered pursuant to Section 6.1(b)(v).
"Environmental Laws" means all laws, rules, regulations, codes, ordinances,
orders, decrees, judgments, injunctions, notices or binding agreements issued,
promulgated or entered into by any Governmental Authority, relating in any way
to the environment, preservation or reclamation of natural resources, the
management, release or threatened release of any Hazardous Material or to health
and safety matters.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, together with all rules and regulations promulgated
with respect thereto.
"ERISA Plan" means any employee pension benefit plan subject to Title IV of
ERISA maintained by any Related Person or any Affiliate thereof with respect to
which any Related Person has a fixed or contingent liability.
"Evaluation Date" means each of the following:
(a) Each date which either Borrower or Majority Lenders, at their
respective options, specifies as a date as of which the Borrowing Base is to be
redetermined, provided that neither Borrower nor Majority Lenders shall be
entitled to request any such redetermination more than once during any six-month
period;
(b) Each date which the Administrative Agent pursuant to Section
2.10(a)(ii) or 6.2(d)(iii), at its option, specifies as a date as of which the
Borrowing Base is to be redetermined; and
(c) March 15 and August 15 of each year, beginning March 15, 2000.
"Event of Default" has the meaning given it in Section 8.1.
"Excluded Taxes" means, with respect to the Administrative Agent, any
Lender, the Issuing Bank or any other recipient of any payment to be made by or
on account of any obligation of the
6
Borrower hereunder, (a) income or franchise taxes imposed on (or measured by)
its net income by the United States of America, or by the jurisdiction under the
laws of which such recipient is organized or in which its principal office is
located or, in the case of any Lender, in which its applicable lending office is
located, (b) any branch profits taxes imposed by the United States of America or
any similar tax imposed by any other jurisdiction in which the Borrower is
located, (c) any jurisdiction (or political subdivision thereof) in which any
recipient of any payment to be made by or on account of any obligation of the
Borrower hereunder is presently doing business in which taxes are imposed solely
as a result of doing business in such jurisdiction and (d) in the case of a
Foreign Lender (other than an assignee pursuant to a request by the Borrower
under Section 2.19(b) unless such assignee so agrees in writing), any
withholding tax that is imposed on amounts payable to such Foreign Lender at the
time such Foreign Lender becomes a party to this Agreement (or designates a new
lending office) or is attributable to such Foreign Lender's failure to comply
with Section 2.18(e), except to the extent that such Foreign Lender (or its
assignor, if any) was entitled, at the time of designation of a new lending
office (or assignment), to receive additional amounts from the Borrower with
respect to such withholding tax pursuant to Section 2.18(a).
"Federal Funds Rate" means, for any period, a fluctuating interest rate per
annum equal for each day during such period to the weighted average of the rates
on overnight Federal funds transactions with members of the Federal Reserve
System arranged by Federal funds brokers, as published for such day (or, if such
day is not a Business Day, for the next preceding Business Day) by the Federal
Reserve Bank of New York, or, if such rate is not so published for any day which
is a Business Day, the average of the quotations for such day on such
transactions received by the Administrative Agent from three Federal funds
brokers of recognized standing selected by it. For purposes of this Agreement,
any change in the Base Rate due to a change in the Federal Funds Rate shall be
effective on the effective date of such change in the Federal Funds Rate. If
the Administrative Agent shall have determined (which determination shall be
conclusive and binding, absent manifest error) that it is unable to ascertain
the Federal Funds Rate for any reason, including, without limitation, the
inability or failure of the Administrative Agent to obtain sufficient bids or
publications in accordance with the terms hereof, the Base Rate shall be the
rate described in clause (i) of the definition thereof until the circumstances
giving rise to such inability no longer exist.
"Fee Letter" means that certain Fee Letter dated as of October 29, 1999
between Bank of Montreal and Borrower.
"Final Maturity Date" means the Original Maturity Date, or such other later
date as may result from any extension requested by Borrower and consented to by
the Administrative Agent and the Lenders pursuant to Section 2.2.
"Fiscal Quarter" means a three-month period ending on March 31, June 30,
September 30 or December 31 of any year.
"Fiscal Year" means a twelve-month period ending on December 31 of any
year.
7
"Foreign Lender" means any Lender that is organized under the laws of a
jurisdiction other than that in which the Borrower is located. For purposes of
this definition, the United States of America, each State thereof and the
District of Columbia shall be deemed to constitute a single jurisdiction.
"GAAP" means those generally accepted accounting principles and practices
which are recognized as such by the Financial Accounting Standards Board (or any
generally recognized successor). Except as otherwise expressly provided herein,
all terms of an accounting or financial nature shall be construed in accordance
with GAAP, as in effect from time to time; provided, however, that if GAAP shall
change after the Closing Date in a manner affecting any of the covenants set
forth herein, then, at the request of Borrower or the Administrative Agent, the
parties shall negotiate in good faith in an effort to agree upon appropriate
adjustments to such covenants and, following the execution of an amendment to
the Loan Documents giving effect to any such agreement, such accounting or
financial terms shall for purposes of determining compliance with such covenants
be construed in accordance with GAAP as so changed (it being understood that
such terms shall be construed in accordance with GAAP as in effect prior to such
change at all times following any such request and before the execution of any
such amendment).
"Governmental Authority" means the government of the United States of
America, any other nation or any political subdivision thereof, whether state or
local, and any agency, authority, instrumentality, regulatory body, court,
central bank or other entity exercising executive, legislative, judicial,
taxing, regulatory or administrative powers or functions of or pertaining to
government.
"Guarantee" of or by any Person shall mean any obligation, contingent or
otherwise, of such Person guaranteeing or having the economic effect of
guaranteeing any Indebtedness of any other Person (the "primary obligor") in any
manner, whether directly or indirectly, and including any obligation of such
Person, direct or indirect, (a) to purchase or pay (or advance or supply funds
for the purchase or payment of) such Indebtedness or to purchase (or to advance
or supply funds for the purchase of) any security for the payment of such
Indebtedness, (b) to purchase or lease property, securities or services for the
purpose of assuring the owner of such Indebtedness of the payment of such
Indebtedness or (c) to maintain working capital, equity capital or any other
financial statement condition or liquidity of the primary obligor so as to
enable the primary obligor to pay such Indebtedness; provided, however, that the
term "Guarantee" shall not include endorsements for collection or deposit in the
ordinary course of business.
"Guarantor" means Spinnaker Exploration Company and WP Spinnaker Holdings,
Inc., a Delaware corporation, and any Subsidiary of Borrower which now or
hereafter executes and delivers a guaranty to Administrative Agent pursuant to
Section 7.5.
"Guaranty" means (i) that certain Guaranty, dated as of September 30, 1998,
executed by Spinnaker Exploration Company, as guarantor, in favor of CSFB, as
administrative agent under the Original Credit Agreement, as the same may be
amended, supplemented, restated or otherwise modified from time to time, (ii)
that certain Guaranty, dated as of September 30, 1998, executed by WP Spinnaker
Holdings, Inc., a Delaware corporation, as guarantor, in favor of CSFB, as
8
administrative agent under the Original Credit Agreement, as the same may be
amended, supplemented, restated or otherwise modified from time to time and
(iii) any Guaranty executed and delivered pursuant to Section 4.1(g) or Section
7.5 by any Guarantor substantially in the form of Exhibit L hereto with
appropriate deletions and insertions acceptable to Administrative Agent, as
amended, supplemented, restated or otherwise modified from time to time.
"Hazardous Materials" means all explosive or radioactive substances or
wastes and all hazardous or toxic substances, wastes or other pollutants,
including petroleum or petroleum distillates, asbestos or asbestos containing
materials, polychlorinated biphenyls, radon gas, infectious or medical wastes
and all other substances or wastes of any nature regulated pursuant to any
Environmental Law.
"Hedging Agreement" shall mean any interest rate protection agreement,
foreign currency exchange agreement, commodity price protection agreement or
other interest or currency exchange rate or commodity price hedging arrangement.
"Highest Lawful Rate" has the meaning given to it in Section 10.6.
"Indebtedness" of any Person shall mean, without duplication, (a) all
obligations of such Person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, (c) all obligations of such Person
upon which interest charges are customarily paid, (d) all obligations of such
Person under conditional sale or other title retention agreements relating to
property or assets purchased by such Person, (e) all obligations of such Person
issued or assumed as the deferred purchase price of property or services
(excluding trade accounts payable and accrued obligations incurred in the
ordinary course of business), (f) all Indebtedness of others secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien on property owned or acquired by such
Person, whether or not the obligations secured thereby have been assumed, (g)
all Guarantees by such Person of Indebtedness of others, (h) all Capital Lease
Obligations of such Person, (i) all net obligations of such Person in respect of
Hedging Agreements, (j) all obligations of such Person as an account party in
respect of letters of credit and bankers' acceptances, (k) the undischarged
balance of any production payment created by such Person or for the creation of
which such Person directly or indirectly received payment, and (1) obligations
to deliver goods or services including hydrocarbons in consideration of advance
payments other than (i) obligations to sell or purchase hydrocarbons, (ii)
obligations with pipelines for firm transportation of natural gas of such
Person, and (iii) oil and gas balancing agreements, take or pay agreements or
other prepayment obligations in respect of hydrocarbons, in each case, incurred
in the ordinary course of business and which are customary in the oil and gas
industry. The Indebtedness of any Person shall include the Indebtedness of any
partnership in which such Person is a general partner.
"Indemnified Taxes" means Taxes other than Excluded Taxes.
9
"Initial Engineering Report" means the engineering report concerning oil
and gas properties of Related Persons dated June 30, 1999, prepared by ▇▇▇▇▇
▇▇▇▇▇ Company, covering all existing proved reserves of Borrower.
"Initial Financial Statements" means, as to the Related Persons, the
unaudited balance sheet, income statement and statement of cash flow of
Spinnaker Exploration Company for the quarterly period ended June 30, 1999.
"Interest Payment Date" means (a) with respect to any Base Rate Loan, the
last day of each month and (b) with respect to any LIBOR Loan, the last day of
the Interest Period applicable to such Loan and, in the case of an Interest
Period of more than three months' duration, each day prior to the last day of
such Interest Period that occurs at intervals of three months' duration after
the first day of such Interest Period.
"Interest Period" means, with respect to each particular LIBOR Rate Portion
of a Loan, a period of 1, 2, 3 or 6 months, as specified in the Rate Election
applicable thereto, beginning on and including the date specified in such Rate
Election (which must be a Business Day), and ending on but not including the
same day of the month as the day on which it began (e.g., a period beginning on
the third day of one month shall end on but not include the third day of another
month), provided that each Interest Period which would otherwise end on a day
which is not a Business Day shall end on the next succeeding Business Day
(unless such next succeeding Business Day is the first Business Day of a
calendar month, in which case such Interest Period shall end on the immediately
preceding Business Day). No Interest Period may be elected which would extend
past the date on which the associated Note is due and payable in full.
"Issuing Bank" or "Issuer" means Bank of Montreal in its capacity as the
issuer of Letters of Credit hereunder, and its successors in such capacity.
"Late Payment Rate" means, with respect to each Lender, the Base Rate
otherwise in effect with respect to the principal amount in question, plus two
percent (2%) per annum, but in no event to exceed the Highest Lawful Rate.
"LC Application" means any application for a letter of credit hereafter
made by Borrower to Issuing Bank.
"LC Collateral" has the meaning given it in Section 3.6.
"LC Conditions" has the meaning given it in Section 3.1.
"LC Disbursement" means a payment made by the Issuing Bank pursuant to a
Letter of Credit.
"LC Obligations" means at the time in question, the sum of the Matured LC
Obligations plus the Maximum Drawing Amount.
10
"Lenders" has the meaning given it in the preamble.
"Lender Schedule" shall mean the Lender Schedule attached hereto.
"Letter of Credit" means any standby or commercial letter of credit issued
by Issuing Bank at the application of Borrower, which may be issued for the
account of any Related Person, provided, any and all reimbursement obligations,
fees and other amounts payable in connection with any and all such Letters of
Credit shall be Obligations of Borrower as set forth in Article III.
"LIBOR Rate" shall mean, with respect to any LIBOR Rate Portion within a
LIBOR Tranche and with respect to the related Interest Period, the rate per
annum determined by the Administrative Agent, at approximately 11:00 a.m.
(London time) on the date which is two Business Days prior to the beginning of
the relevant Interest Period by reference to the British Bankers' Association
Interest Settlement Rate for deposits in U.S. dollars (as set forth by any
service which has been nominated by the British Bankers' Association as an
authorized information vendor for the purpose of displaying such rates) for a
period equal to such Interest Period, provided that, to the extent that an
interest rate is not ascertainable pursuant to the foregoing provision of this
definition, the "LIBOR Rate" shall be the interest rate per annum, determined by
the Administrative Agent to be the average of the rates per annum at which
deposits in U.S. dollars are offered for such relevant Interest Period to major
banks in the London interbank market in London, England by the Administrative
Agent at approximately 11:00 a.m. (London time) on the date which is two
Business Days prior to the beginning of such Interest Period.
"LIBOR Rate Loan" means any Loan which bears interest at the Adjusted LIBOR
Rate.
"LIBOR Rate Portion" means any portion of the unpaid principal balance of a
Loan which Borrower designates as such in a Rate Election.
"LIBOR Spread" means with respect to any Loan bearing interest at the LIBOR
Rate for any time prior to the Final Maturity Date, the applicable margin set
forth below under the caption "LIBOR Rate Spread," determined by reference to
the percentage of the Borrowing Base that the sum of all Advances outstanding
plus all LC Obligations represents at that time.
Percentage of
Borrowing Base LIBOR Rate
Usage Spread
------------------ ----------------
(greater than or equal to) 75% 2.50%
(greater than or equal to) 60% but less than 75% 2.00%
(greater than or equal to) 40% but less than 60% 1.75%
(less than) 40% 1.50%
▇▇
"▇▇▇▇▇ ▇▇▇▇▇▇▇" has the meaning given it in Section 2.6.
"Lien" means, with respect to any property or assets, any right or interest
therein of a creditor to secure Indebtedness owed to such creditor or any other
arrangement with such creditor which provides for the payment of such
Indebtedness out of such property or assets or which allows him to have such
Indebtedness satisfied out of such property or assets prior to the general
creditors of any owner thereof, including any lien, mortgage, security interest,
pledge, deposit, production payment, rights of a vendor under any title
retention or conditional sale agreement or lease substantially equivalent
thereto, tax lien, mechanic's or materialman's lien, or any other charge or
encumbrance for security purposes, whether arising by law or agreement or
otherwise, but excluding any right of offset which arises without agreement in
the ordinary course of business. "Lien" also means any filed financing
statement, any registration of a pledge (such as with an issuer of
uncertificated securities), or any other arrangement or action which would serve
to perfect a Lien described in the preceding sentence, regardless of whether
such financing statement is filed, such registration is made, or such
arrangement or action is undertaken before or after such Lien exists.
"Loan" has the meaning given it in Section 2.1.
"Loan Documents" means this Agreement, the Notes, the LC Applications, the
Letters of Credit, the Security Documents, the Pledge Agreements, the Guaranties
and all other written agreements, certificates, documents, instruments and
writings at any time delivered in connection herewith or therewith and any
Hedging Agreement between the Borrower and any Lender now or hereafter existing.
"Majority Lenders" means, at any time, Lenders holding at least 66 2/3% of
the unpaid principal amounts outstanding under the Notes.
"Material Adverse Effect" means any material adverse effect on (a) the
financial condition, business, properties, assets or operations of the Related
Persons, taken as a whole, or (b) the ability of any Related Person to perform
its respective obligations under any Loan Document to which it is a party on a
timely basis or (c) the ability of Administrative Agent or any Lender to enforce
the Obligations of any Related Person under the Loan Documents.
"Matured LC Obligations" means all amounts paid by Issuing Bank on drafts
or demands for payment drawn or made under or purported to be under any Letter
of Credit (or under or in connection with any LC Application) which have not
been repaid to Issuing Bank (with the proceeds of an Advance or otherwise).
"Maximum Drawing Amount" means at the time in question the sum of the
maximum amounts which Issuing Bank might then or thereafter be called upon to
advance under all Letters of Credit then outstanding.
"Maximum Loan Amount" means the amount of $25,000,000.
12
"Mortgage" means (i) that certain Mortgage, Deed of Trust, Assignment of
Production, Security Agreement and Financing Statement, dated as of September
30, 1998, executed by Borrower, as mortgagor and debtor in favor of CSFB, as
administrative agent under the Original Credit Agreement, as the same may be
amended, supplemented, restated or otherwise modified from time to time, (ii)
that certain Mortgage, Assignment of Production, Security Agreement and
Financing Statement, dated as of September 30, 1998, executed by Borrower, as
mortgagor and debtor, in favor of CSFB, as administrative agent under the
Original Credit Agreement, as the same may be amended, supplemented, restated or
otherwise modified from time to time and (iii) any Mortgage executed and
delivered pursuant to Section 4.1(J) or 7.2 in form and substance satisfactory
to Administrative Agent, as amended, supplemented, restated or otherwise
modified from time to time.
"Mortgaged Project" has the meaning given it in the Mortgage.
"Net Proceeds of Debt" means the aggregate amount of all cash proceeds
received by or paid to or for the account of any Related Person from time to
time (whether as initial consideration or through payment or disposition of
deferred consideration) from the issuance of promissory notes or other
instruments or debt securities (other than Indebtedness permitted by Section
6.2(a)) deducting therefrom only (without duplication) (a) reasonable out-of-
pocket costs and fees, and (b) the amount of taxes payable in connection with or
as a result of such transaction, in each case to the extent, but only to the
extent that the amounts so deducted are, at the time of receipt of such cash,
actually paid to a Person that is not an Affiliate of such Related Person and
are properly attributable to such transaction.
"Net Proceeds of Equity" means an amount equal to the difference of (i) the
aggregate amount of all cash proceeds received by or paid to or for the account
of any Related Person thereof (other than from another Related Person) from time
to time (whether as initial consideration or through payment or disposition of
deferred consideration) from the sale of any capital stock or other ownership or
profit interest, any securities convertible into or exchangeable for capital
stock or other ownership or profit interest or any warrants, rights, options or
other securities to acquire capital stock or other ownership or profit interest
in any Related Person (or any other Person which directly or indirectly owns
100% of Borrower) deducting therefrom only (without duplication) (a) reasonable
out-of-pocket costs and fees, and (b) the amount of taxes payable in connection
with or as a result of such transaction, in each case to the extent, but only to
the extent, that the amounts so deducted are, at the time of receipt of such
cash, actually paid to a Person that is not an Affiliate of such Related Person
and are properly attributable to such transaction, less (ii) the amount of
preferred dividends paid pursuant to Section 2(c) of the Certificate of
Designations, Preferences and Rights of Series A Convertible Preferred Stock,
dated as of January 15, 1998.
"Net Sales Proceeds" means, with respect to any sale, lease, transfer or
other disposition of any asset by any Related Person, the aggregate amount of
cash received by or paid to or for the account of any such Related Person from
time to time (whether as initial consideration or through payment or disposition
of deferred consideration) by or on behalf of such Person in connection with
such transaction after deducting therefrom only (without duplication) (a)
reasonable out-of-pocket
13
costs and fees, (b) the amount of taxes payable in connection with or as a
result of such reaction and (c) the amount of any Indebtedness permitted by
Section 6.2(a) hereof secured by a Lien on such asset permitted by Section
6.2(b) hereof that, by the terms of the agreement or instrument governing such
Indebtedness, is required to be repaid or may be prepaid upon such disposition,
in each case to the extent, but only to the extent, that the amounts so deducted
are, at the time of receipt of such cash, actually paid to a Person that is not
an Affiliate of such Related Person and are properly attributable to such
transaction or to the asset that is the subject thereof.
"Note" has the meaning given it in Section 2.1 and also means all other
promissory notes accepted from time to time in substitution therefor or renewal
thereof.
"Obligations" means all Indebtedness from time to time owing by any Related
Person to Administrative Agent or any Lender under or pursuant to any of the
Loan Documents, including all LC Obligations. "Obligation" means any part of
the Obligations.
"Original Banks" has the meaning given it in the first recital.
"Original Credit Agreement" has the meaning given it in the first recital.
"Original Maturity Date" means the earlier of (a) October 26, 2000 and (b)
the date on which the Note becomes due and payable in full.
"Other Taxes" means 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.
"Percentage Share" means, with respect to any Lender (a) when used in
Sections 2.1, 2.2, 2.6 or 3.3, in any Request for Advance or when no Loans are
outstanding hereunder, the percentage set forth opposite such Lender's name on
the Lender Schedule attached hereto, and (b) when used otherwise, the percentage
obtained by dividing (i) the unpaid principal balance of such Lender's Loans at
the time in question plus the Matured LC Obligations which such Lender has
funded pursuant to Section 3.3(c) plus the portion of the Maximum Drawing Amount
which such Lender might be obligated to fund under Section 3.3(c), by (ii) the
sum of the aggregate unpaid principal balance of all Loans at such time plus the
aggregate amount of LC Obligations outstanding at such time.
"Permitted Initial Public Offering" means an initial public offering of the
membership interests of Borrower, or of the capital stock of any Person which
directly or indirectly owns 100% of the membership interests of Borrower, which
would not result in a Default or Event of Default.
"Permitted Investments" means investments:
(a) in open market commercial paper, maturing within 270 days after
acquisition thereof, which has the highest or second highest credit rating given
by either Rating Agency;
14
(b) in marketable obligations, maturing within 12 months after acquisition
thereof, issued or unconditionally guaranteed by the United States of America or
an instrumentality or agency thereof and entitled to the full faith and credit
of the United States of America;
(c) in demand deposits, and time deposits (including certificates of
deposit) maturing within 12 months from the date of deposit thereof, with any
office of any Lender or with a domestic office of any national or state bank or
trust company which is organized under the laws of the United States of America
or any state therein, which has capital, surplus and undivided profits of at
least $500,000,000, and whose certificates of deposit have at least the third
highest credit rating given by either Rating Agency;
(d) in money market funds as defined in paragraphs (c)(2) through (4) of
Rule 2a-7 of the Investment Company Act; and
(e) investments pursuant to investment advisory agreements that meet the
investment guidelines set forth on Schedule 4.
"Person" means an individual, corporation, partnership, limited liability
company, association, joint stock company, trust or trustee thereof, estate or
executor thereof, unincorporated organization or joint venture, court or
governmental unit or any agency or subdivision thereof, or any other legally
recognizable entity.
"PGS" means Petroleum Geo-Services ASA, a Norwegian joint-stock company.
"PGS Data Contract" means that certain Amended and Restated Data
Contribution Agreement dated January 6, 1998, by PGS, Seismic Energy Holdings,
Inc., Spinnaker Exploration Company and the Borrower, as amended, modified or
restated from time to time.
"Pledge Agreement" means (i) that certain Pledge and Security Agreement,
dated as of September 30, 1998, by Spinnaker Exploration Company, as grantor in
favor of CSFB, as administrative agent under the Original Credit Agreement, as
the same may be amended, supplemented, restated or otherwise modified from time
to time, (ii) that certain Pledge and Security Agreement, dated as of September
30, 1998, by WP Spinnaker Holdings, Inc., a Delaware corporation, as grantor, in
favor of CSFB, as administrative agent under the Original Credit Agreement, as
the same may be amended, supplemented, restated or otherwise modified from time
to time and (iii) each Pledge Agreement executed and delivered pursuant to
Section 4.1(f) or Section 7.5 substantially in the form of Exhibit K hereto with
appropriate deletions and insertions acceptable to the Administrative Agent, as
amended, supplemented, restated or otherwise modified from time to time.
"Prior Indebtedness" has the meaning given it in the second recital.
"Prohibited Lien" means any Lien not expressly allowed under Section
6.2(b).
15
"Rate Election" has the meaning given it in Section 2.6.
"Rating Agency" means either Standard & Poor's Ratings Group (a division of
McGraw Hill, Inc.) or ▇▇▇▇▇'▇ Investors Service, Inc., or their respective
successors.
"Regulation D" means Regulation D of the Board of Governors of the Federal
Reserve System as from time to time in effect.
"Related Person" means any of Borrower, each Subsidiary of Borrower and
each Guarantor.
"Replacement Lenders" has the meaning given it in Section 2.2(c)(ii).
"Request for Advance" means a written or telephonic request, or a written
confirmation, made by Borrower which meets the requirements of Section 2.4.
"Reserve Percentage" means, on any day with respect to each particular
LIBOR Rate Portion in a Tranche, the maximum reserve requirement as determined
by Administrative Agent (including without limitation any basic, supplemental,
marginal, emergency or similar reserves and taking into account any transitional
adjustments or other scheduled changes in reserve requirements), expressed as a
percentage, which would then apply under Regulation D with respect to
"Eurocurrency liabilities" (as such term is defined in Regulation D) equal in
amount to each Lender's LIBOR Rate Portion in such Tranche, were such Lender to
have any such "Eurocurrency liabilities". If such reserve requirement shall
change after the date hereof, the Reserve Percentage shall be automatically
increased or decreased, as the case may be, from time to time as of the
effective time of each such change in such reserve requirement.
"Security Documents" means the instruments listed in the Security Schedule
and any other security agreements, deeds of trust, mortgages, chattel mortgages,
pledges, guaranties, financing statements, continuation statements, extension
agreements and other agreements or instruments now, heretofore, or hereafter
delivered by any Person to Administrative Agent in connection with this
Agreement or any transaction contemplated hereby to secure or guarantee the
payment of any part of the Obligations or the performance of any Related
Person's other duties and obligations under the Loan Documents.
"Security Schedule" means Schedule 2 hereto.
"Special Entity" shall mean any joint venture, limited liability company or
partnership, general or limited partnership or any other type of partnership or
company other than a corporation in which a Person or one or more of its other
Subsidiaries is a member, owner, partner or joint venturer and owns, directly or
indirectly, at least a majority of the equity of such entity or controls such
entity, but excluding any tax partnerships that are not classified as
partnerships under state law. For purposes of this definition, any Person which
owns directly or indirectly an equity investment in another Person which allows
the first Person to manage or elect managers who manage the normal
16
activities of such second Person will be deemed to "control" such second Person
(e.g., a sole general partner controls a limited partnership).
"Spinnaker Exploration Company" shall mean Spinnaker Exploration Company, a
Delaware corporation, and its successors and permitted assigns.
"Sponsors" means PGS and Warburg, together with any successors thereof.
"Subsidiary" shall mean (i) any corporation of which at least a majority of
the outstanding shares of stock having by the terms thereof ordinary voting
power to elect a majority of the board of directors of such corporation
(irrespective of whether or not at the time stock of any other class or classes
of such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time directly or indirectly owned or
controlled by a Person or one or more of its Subsidiaries or by a Person and one
or more of its Subsidiaries and (ii) any Special Entity. Unless otherwise
indicated herein, each reference to the term "Subsidiary" shall mean a
Subsidiary of the Borrower.
"Systems" has the meaning given to it in Section 5.1(s).
"Taxes" means any and all present or future taxes, levies, imposts, duties,
deductions, charges or withholdings imposed by any Governmental Authority.
"Termination Event" means (a) the occurrence with respect to any ERISA Plan
of (i) a reportable event described in Sections 4043(b)(5) or (6) of ERISA or
(ii) any other reportable event described in Section 4043(b) of ERISA other than
a reportable event not subject to the provision for 30-day notice to the Pension
Benefit Guaranty Corporation pursuant to a waiver by such corporation under
Section 4043(a) of ERISA, or (b) the withdrawal of any Related Person or of any
Affiliate of any Related Person from an ERISA Plan during a plan year in which
it was a "substantial employer" as defined in Section 4001(a)(2) of ERISA, or
(c) the filing of a notice of intent to terminate any ERISA Plan or the
treatment of any ERISA Plan amendment as a termination under Section 4041 of
ERISA, or (d) the institution of proceedings to terminate any ERISA Plan by the
Pension Benefit Guaranty Corporation under Section 4042 of ERISA, or (e) any
other event or condition which might constitute grounds under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to administer, any
ERISA Plan.
"Warburg" means, collectively, Warburg, ▇▇▇▇▇▇ Ventures, L.P., a Delaware
limited partnership, and WPV, Inc., a Delaware corporation.
"Year 2000 Compliant" has the meaning given to it in Section 5.1(s).
Section 1.2 Exhibits and Schedules; Additional Definitions. All
Exhibits and Schedules attached to this Agreement are a part hereof for all
purposes. Reference is hereby made to the Security Schedule for the meaning of
certain terms defined therein and used but not defined herein; which definitions
are incorporated herein by reference.
17
Section 1.3 Amendment of Defined Instruments. Unless the context
otherwise requires or unless otherwise provided herein the terms defined in this
Agreement which refer to a particular agreement, instrument or document or
related exhibits, schedules, appendices or similar attachments thereto also
refer to and include all renewals, extensions, modifications, amendments and
restatements of such agreement, instrument or document or related exhibits,
schedules, appendices or similar attachments thereto, provided that nothing
contained in this section shall be construed to authorize any such renewal,
extension, modification, amendment or restatement.
Section 1.4 References and Titles. All references in this Agreement to
Exhibits, Schedules, articles, sections, subsections and other subdivisions
refer to the Exhibits, Schedules, articles, sections, subsections and other
subdivisions of this Agreement unless expressly provided otherwise. Titles
appearing at the beginning of any subdivisions are for convenience only and do
not constitute any part of such subdivisions and shall be disregarded in
construing the language contained in such subdivisions. The words "this
Agreement", "this instrument", "herein", "hereof', "hereby", "hereunder" and
words of similar import refer to this Agreement as a whole and not to any
particular subdivision unless expressly so limited. The phrases "this section"
and "this subsection" and similar phrases refer only to the sections or
subsections hereof in which such phrases occur. The word "or" is not exclusive,
and the word "including" (in its various forms) means "including without
limitation". Pronouns in masculine, feminine and neuter genders shall be
construed to include any other gender, and words in the singular form shall be
construed to include the plural and vice versa, unless the context otherwise
requires.
Section 1.5 Calculations and Determinations. All calculations under the
Loan Documents of interest chargeable with respect to LIBOR Rate Portions shall
be made on the basis of actual days elapsed (including the first day but
excluding the last) and a year of 360 days. All other calculations of interest
made under the Loan Documents and all fees shall be made on the basis of actual
days elapsed (including the first day but excluding the last) and a year of 365
or 366 days, as appropriate. Unless otherwise expressly provided herein or
unless Majority Lenders otherwise consent all financial statements and reports
furnished to Administrative Agent or any Lender hereunder shall be prepared and
all financial computations and determinations pursuant hereto shall be made in
accordance with GAAP.
ARTICLE II - The Loans
Section 2.1 Loans. Subject to the terms and conditions hereof, each
Lender agrees to make advances to Borrower (such Lender's "Advances") upon
request from time to time prior to the Final Maturity Date, so long as (a) each
Advance by such Lender does not exceed such Lender's Percentage Share of the
aggregate amount of Advances then requested from all Lenders, (b) the sum of (i)
the aggregate amount of such Lender's Advances outstanding at any time plus (ii)
the Maximum Drawing Amount for which such Lender is liable to purchase
participations under Section 3.3 (c), plus (iii) the Matured LC Obligations
which have been funded by such Lender under such section, does not exceed such
Lender's Percentage Share of the Borrowing Base then outstanding and (c) the
aggregate amount of all Advances outstanding plus all LC Obligations does not
exceed the Borrowing Base then outstanding. The aggregate amount of all
Advances requested of all
18
Lenders in any Request for Advance must be greater than or equal to $500,000 (or
a higher integral multiple of $100,000) or, subject to the $500,000 minimum
aggregate amount applicable to any LIBOR Tranche in any Rate Election, may equal
the unadvanced portion of the Borrowing Base or an amount required to finance
the reimbursement of an LC Disbursement as contemplated by Section 3.3. The
obligation of Borrower to repay to each Lender the aggregate amount of all
Advances made by such Lender (such Lender's "Loan"), together with interest
accruing in connection therewith, shall be evidenced by a single promissory note
(such Lender's "Note") made by Borrower payable to the order of such Lender in
the form of Exhibit A with appropriate insertions. The amount of principal owing
on any Lender's Note at any given time shall be the aggregate amount of all
Advances theretofore made by such Lender minus all payments of principal
theretofore received by such Lender on such Note. Interest on each Note shall
accrue and be due and payable as provided herein and therein. Subject to the
terms and conditions hereof, Borrower may borrow, repay, and reborrow under the
Notes. The entire unpaid principal balance of the Loans and all interest accrued
thereon shall be due and payable in full on the Final Maturity Date.
Section 2.2 Extension of Maturity Date and of Commitments.
(a) Subject to the other provisions of this Agreement, the total
Commitments shall be effective for an initial period from the Closing Date to
the Original Maturity Date; provided that the Final Maturity Date, and
concomitantly the total Commitments, may be extended for successive 364 day
periods, each expiring on the date which is 364 days from the then scheduled
Final Maturity Date. If Borrower shall request in a Certificate of Extension
delivered to the Administrative Agent not more than sixty (60) days and not less
than forty-five (45) days prior to the Final Maturity Date that the Final
Maturity Date be extended for 364 days from the then scheduled Final Maturity
Date, then the Administrative Agent shall promptly notify each Lender of such
request and each Lender shall notify the Administrative Agent in writing, no
later than thirty (30) days after receipt by the Lenders of the Certificate of
Extension, whether such Lender, in the exercise of its sole discretion, will
extend the Final Maturity Date for such 364 day period. Any Lender which shall
not timely notify the Administrative Agent whether it will extend the Final
Maturity Date shall be deemed to not have agreed to extend the Final Maturity
Date. No Lender shall have any obligation whatsoever to agree to extend the
Final Maturity Date. Any agreement to extend the Final Maturity Date by any
Lender shall be irrevocable, except as provided in clause (c) of this Section.
(b) If all Lenders notify the Administrative Agent pursuant to clause (a)
of this Section of their agreement to extend the Final Maturity Date, then the
Administrative Agent shall so notify each Lender and Borrower, and such
extension shall be effective without other or further action by any party hereto
and the Final Maturity Date shall be extended for an additional 364 day period.
(c) If any Lenders approve the extension of the then scheduled Final
Maturity Date (such Lenders agreeing to extend the Final Maturity Date herein
called the "Accepting Lenders") and if one or more Lenders shall notify, or be
deemed to notify, the Administrative Agent pursuant to clause (a) of this
Section that they will not extend the then scheduled Final Maturity Date (such
Lenders herein called the "Declining Lenders"), then (A) the Administrative
Agent shall promptly so notify the Borrower and the Accepting Lenders and the
Declining Lenders; (B) the Accepting
19
Lenders shall, upon Borrower's election to extend the then scheduled Final
Maturity Date in accordance with clause (i) or (ii) below, extend the then
scheduled Final Maturity Date; and (C) Borrower shall, pursuant to a notice
delivered to the Administrative Agent, the Accepting Lenders and the Declining
Lenders, no later than the tenth (10th) day following the date by which each
Lender is required pursuant to clause (a) of this Section to approve or
disapprove the requested extension of the total Commitments, either:
(i) elect to extend the Final Maturity Date with respect to the
Accepting Lenders and direct the Declining Lenders to terminate their
Commitments, which termination shall become effective on the date which
would have been the Final Maturity Date except for the operation of this
Section (on such date, (x) Borrower shall deliver a notice of the
effectiveness of such termination to the Declining Lenders with a copy to
the Administrative Agent, and (y) Borrower shall pay to the Administrative
Agent, on behalf of the Declining Lenders, in full in immediately available
funds all Obligations of Borrower owing to the Declining Lenders, including
any amounts required pursuant to Article II, and upon the occurrence of
such events, the Declining Lenders shall each cease to be Lenders hereunder
for all purposes and shall cease to have any obligations hereunder, other
than to the Administrative Agent pursuant to Article IX, and the
Administrative Agent shall promptly notify the Accepting Lenders and
Borrower of the new Percentage Shares and Commitment amounts); or
(ii) elect to extend the Final Maturity Date with respect to the
Accepting Lenders and, prior to or no later than the then scheduled Final
Maturity Date, (A) replace one or more of the Declining Lender or Declining
Lenders with another lender or lenders reasonably acceptable to the
Administrative Agent (such lenders herein called the "Replacement Lenders")
and (B) pay in full in immediately available funds all Obligations of
Borrower owing to any Declining Lenders which are not being replaced, as
provided in clause (i) above; provided that (x) the Replacement Lender or
Replacement Lenders shall purchase, and the Declining Lender or Declining
Lenders shall sell, the Declining Lender's or Declining Lenders' rights and
obligations hereunder without recourse or expense to, or warranty by, such
Declining Lender or Declining Lenders being replaced for a purchase price
equal to the aggregate outstanding principal amount of the Obligations
payable to such Declining Lender or Declining Lenders plus any accrued but
unpaid interest on such Obligations and accrued but unpaid fees or other
amounts owing in respect of such Declining Lender's or Declining Lenders'
Loans and Commitments hereunder; and (y) upon the payment of such amounts
referred to in clause (x) to the Administrative Agent on behalf of the
Declining Lenders and the execution of an Agreement to be Bound,
Replacement Lender or Replacement Lenders and the Declining Lender or
Declining Lenders (which each such Declining Lender agrees to execute
promptly), the Replacement Lender or Replacement Lenders shall each
constitute a Lender hereunder and the Declining Lender or Declining Lenders
being so replaced shall no longer constitute a Lender, and shall no longer
have any obligations hereunder, other than to the Administrative Agent
pursuant to Article IX; or
20
(iii) elect to revoke and cancel the extension request in such
Certificate of Extension by giving notice of such revocation and
cancellation to the Administrative Agent (which shall promptly notify the
Lenders thereof) no later than the tenth (10th) day following the date by
which each Lender is required, pursuant to clause (a) of this Section, to
approve or disapprove the requested extension of the Final Maturity Date,
and concomitantly the total Commitments.
If Borrower fails to timely provide the election notice referred to in this
clause (c), Borrower shall be deemed to have revoked and canceled the extension
request in the Certificate of Extension and to have elected not to extend the
Final Maturity Date, and, on the then scheduled Final Maturity Date, Borrower
shall repay in full all Obligations under the Loan Documents.
Section 2.3 [Reserved].
Section 2.4 Requests for Advances. Borrower must give to Administrative
Agent not later than 11:00 am., Central time, at least one Business Day's prior
written notice of any requested Advances which shall bear interest at the Base
Rate and not later than 11:00 a.m., Central time, at least three Business Day's
prior written notice of any requested Advances which shall bear interest at the
Adjusted LIBOR Rate, after which Administrative Agent shall give each Lender
prompt notice thereof. Each such written request must be made in the form and
substance of the "Request for Advances" attached hereto as Exhibit C, duly
completed. If all conditions precedent to such Advances have been met, each
Lender will not later than 12:00 noon, Central time, on the date requested
promptly remit to Administrative Agent at Administrative Agent's office at ▇▇▇
▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, with a copy to ▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, the amount of such Lender's Advance in
immediately available funds, and upon receipt of such funds, unless to its
actual knowledge any conditions precedent to such Advances have been neither met
nor waived as provided herein, Administrative Agent shall promptly make the
Advances available to Borrower in immediately available funds. Each Request for
Advances shall be irrevocable and binding on Borrower. Unless Administrative
Agent shall have received prompt notice from a Lender that such Lender will not
make available to Administrative Agent such Lender's Advance, Administrative
Agent may in its discretion assume that such Lender has made such Advance
available to Administrative Agent in accordance with this section and
Administrative Agent may if it chooses, in reliance upon such assumption, make
such Advance available to Borrower. If and to the extent such Lender shall not
so make its Advance available to Administrative Agent, such Lender and Borrower
severally agree to pay or repay to Administrative Agent within two Business Days
after demand the amount of such Advance together with interest thereon, for each
day from the date such amount is made available to Borrower until the date such
amount is paid or repaid to Administrative Agent, to be calculated as to such
Lender at the Federal Funds Rate, and to be calculated as to Borrower at the
interest rate applicable at the time to the other Advances made on such date. If
any Lender fails to make such payment to Administrative Agent within such two
Business Day period, such Lender shall in addition to such amount pay interest
thereon, for each day from the date such Advance is made available to Borrower
until the date such amount is paid or repaid to Administrative Agent, at the
interest rate applicable at the time to the other Advances made on such date.
The failure of any Lender to make any Advance to be made by
21
it hereunder shall not relieve any other Lender of its obligation hereunder, if
any, to make its Advance, but no Lender shall be responsible for the failure of
any other Lender to make any Advance to be made by such other Lender.
Section 2.5 Use of Proceeds. Borrower shall use all funds from Advances
for general corporate purposes in its existing lines of business (which include
the exploration, operation and development of oil and gas properties) and
acquisition of oil and gas reserves. In no event shall the funds from any
Advance or Letter of Credit be used directly or indirectly by any Person for
personal, family, household or agricultural purposes or for the purpose, whether
immediate, incidental or ultimate, of purchasing, acquiring or carrying any
"margin stock" or any "margin" securities; (as such terms are defined
respectively in Regulation U and Regulation G promulgated by the Board of
Governors of the Federal Reserve System) or to extend credit to others directly
or indirectly for the purpose of purchasing or carrying any such margin stock or
margin securities. Borrower represents and warrants to Lenders that Borrower is
not engaged principally, or as one of Borrower's important activities, in the
business of extending credit to others for the purpose of purchasing or carrying
such margin stock or margin securities.
Section 2.6 Rate Elections: Interest Rates.
(a) Borrower may from time to time designate all or any portions of the
Loans (including any yet to be made Advances which are to be made prior to or at
the beginning of the designated Interest Period but excluding any portions of
the Loans which are required to be repaid prior to the end of the designated
Interest Period) as a "LIBOR Tranche", which term refers to a set of LIBOR Rate
Portions with identical interest Periods and with each Lender participating in
such LIBOR Tranche in accordance with its Percentage Share. Borrower may make
no such election during the continuance of a Default and Borrower may make such
an election with respect to already existing LIBOR Rate Portions only if such
election will take effect at or after the termination of the Interest Period
applicable thereto. Each election by Borrower of a LIBOR Tranche shall:
(i) Be made in writing in the form and substance of the "Rate
Election" attached hereto as Exhibit D, duly completed;
(ii) Specify the aggregate amount of the Loans which Borrower desires
to designate as such LIBOR Tranche, the first day of the Interest Period
which is to apply thereto, and the length of such Interest Period; and
(iii) Be received by Administrative Agent not later than 11:00 a.m.,
Central time, on the third Business Day preceding the first day of the
specified Interest Period.
Promptly after receiving any such election (a "Rate Election" ) which meets the
requirements of this section, Administrative Agent shall notify each Lender
thereof. Each Rate Election shall be irrevocable. Borrower may make no Rate
Election which does not specify an Interest Period complying with the definition
of "Interest Period" in Section 1.1, and the aggregate amount of the LIBOR
Tranche elected in any Rate Election must be $500,000 or a higher integral
multiple of
22
$100,000. Upon the termination of each Interest Period the portion of each Loan
within the related LIBOR Tranche shall, unless the subject of a new Rate
Election then taking effect, automatically become a part of the Base Rate
Portion of such Loan and become subject to all provisions of the Loan Documents
governing such Base Rate Portion. Borrower shall have no more than nine (9)
LIBOR Tranches in effect at any time; provided, however, that for purposes of
calculating such limitation, any LIBOR Tranche as to which all Lenders have not
participated shall not be included.
(b) Accrued interest on each Loan shall be payable in arrears on each
Interest Payment Date for such Loan and upon termination of the applicable
Commitments; provided that (i) interest accrued at the Late Payment Rate shall
be payable on demand, (ii) in the event of any repayment or prepayment of any
Loan, accrued interest on the principal amount repaid or prepaid shall be
payable on the date of such repayment or prepayment and (iii) in the event of
any conversion of any LIBOR Loan prior to the end of the current Interest Period
therefor, accrued interest on such Loan shall be payable on the Closing Date of
such conversion.
Section 2.7 Commitment Fees; Advances. In consideration of each
Lender's commitment to make Advances, Borrower will pay to Administrative Agent
for the account of each Lender a commitment fee determined on a daily basis by
applying the applicable Commitment Fee Rate to such Lender's Percentage Share of
the unused portion of the Borrowing Base on each day, determined for each such
day by deducting from the amount of the Borrowing Base at the end of such day
the sum of (i) the aggregate unpaid principal balance of the Loans at the end of
such day plus (ii) the amount of all Matured LC Obligations at the end of such
day. This commitment fee shall be due and payable in arrears, with the first
payment due on January 1, 2000, and thereafter on the first day of each Fiscal
Quarter and on the Final Maturity Date.
Section 2.8 Administrative Agent's Fees. Borrower agrees to pay to
Administrative Agent, for its own account, fees payable in the amounts and at
the times set forth in the Fee Letter.
Section 2.9 [Reserved].
Section 2.10 Prepayments.
(a) Mandatory Prepayments. Borrower shall make the following prepayments
of the Loans:
(i) Borrowing Base Deficiency. If at any time the aggregate unpaid
principal balance of the Loans plus the aggregate amount of LC Obligations
exceeds the Borrowing Base (the "Borrowing Base Deficiency"), Borrower
shall, within thirty (30) days after Administrative Agent sends written
notice of such fact to Borrower, either (1) prepay the principal of the
Loans in an amount at least equal to such Borrowing Base Deficiency (in
this section, a "Mandatory Prepayment Amount"), or (2) give notice to
Administrative Agent electing to prepay such Mandatory Prepayment Amount in
three (3) (or fewer) monthly installments, or (3) within thirty (30) days
after receipt of notice of such Borrowing Base Deficiency, deliver to the
Administrative Agent such deeds of trust and mortgages, in form
23
and substance satisfactory to Administrative Agent, on oil and gas
properties of the Borrower not then currently included in the Borrowing
Base and having, in the sole and absolute discretion of the Lenders, an
incremental Borrowing Base value at least equal to one hundred percent
(100%) of such Borrowing Base Deficiency, or (4) will cure such Borrowing
Base Deficiency by a combination of the actions required by Section
2.10(a)(i), within the time periods required thereby. Each such installment
shall equal or exceed one-third of such Borrowing Base Deficiency; the
first such installment shall be paid with in sixty (60) days of the giving
of such notice by the Borrower and the subsequent installments shall be due
and payable at one month intervals thereafter until such Borrowing Base
Deficiency has been eliminated.
(ii) Net Sales Proceeds of Asset Sales.
(A) Borrower shall prepay the Loans in an amount equal to 100% of
the Net Sales Proceeds from the sale of any property included in the
Borrowing Base except pursuant to the first sentence of Section
6.2(d)(iii) within one (1) Business Day of receipt of any such net
proceeds. Such prepayments shall be applied first to the principal of
the Loans until the Loans are paid in full and then to be held as LC
Collateral in an amount equal to the aggregate amount of Matured LC
Obligations pursuant to Section 3.6.
(B) In the event a Borrowing Base Deficiency exists and is
continuing, Borrower shall prepay the Loans in an amount equal to such
Borrowing Base Deficiency from the Net Sales Proceeds from the sale of
any property (excluding sales of inventory in the ordinary course) not
included in the Borrowing Base within one (1) Business Day of receipt
of any such net proceeds. Application of such Net Sales Proceeds
shall be applied to the principal of the Loans until the Loans are
paid in full and then to be held as LC Collateral in an amount equal
to the aggregate amount of Matured LC Obligations pursuant to Section
3.6.
(b) Optional Prepayments. Borrower may, upon one Business Day's notice to
Administrative Agent, from time to time and without premium or penalty prepay
the Notes, in whole or in part, so long as the aggregate amounts of all partial
prepayments of principal on the Notes equals $500,000 or any higher integral
multiple of $100,000 or the outstanding balance on the applicable Notes, if
less. Such prepayments shall be applied as directed by Borrower.
(c) General Provisions Regarding Payments. Each prepayment of principal of
the Loans under this section shall be accompanied by all interest then accrued
and unpaid on the principal so prepaid. Any principal or interest prepaid
pursuant to this section shall be in addition to, and not in lieu of, all
payments otherwise required to be paid under the Loan Documents at the time of
such prepayment.
Section 2.11 Payments to Lenders. Borrower will make each payment which
it owes under the Loan Documents to Administrative Agent for the account of the
Lender to whom such payment
24
is owed. Each such payment must be received by Administrative Agent not later
than 11:00 a.m., Central time, on the date such payment becomes due and payable,
in lawful money of the United States of America, without set-off, deduction or
counterclaim, and in immediately available funds. Any payment received by
Administrative Agent after such time will be deemed to have been made on the
next following Business Day. Should any such payment become due and payable on a
day other than a Business Day, the maturity of such payment shall be extended to
the next succeeding Business Day, and, in the case of a payment of principal or
past due interest, interest shall accrue and be payable thereon for the period
of such extension as provided in the Loan Document under which such payment is
due. When Administrative Agent collects or receives money on account of the
Obligations, Administrative Agent shall distribute all money so collected or
received, and Lenders shall apply all such money they receive from
Administrative Agent, as follows:
(a) first, for the payment of all Obligations which are then due (and if
such money is insufficient to pay all such Obligations, first to any
reimbursements due Administrative Agent under Section 6.1(i) or 8.3 or Issuing
Bank under Section 3.3(a), and then to the partial payment of all other
Obligations then due in proportion to the amounts thereof, or as Lenders shall
otherwise agree);
(b) then for the prepayment of amounts owing under the Loan Documents
(other than principal on the Notes) if so specified by Borrower;
(c) then for the prepayment of principal on the Notes, together with
accrued and unpaid interest on the principal so prepaid;
(d) then, for the payment or prepayment of any other Obligations; and
(e) last, for the pro rata payment of any other indebtedness or obligations
to Lenders secured by the Security Documents.
All payments applied to principal or interest on any Note shall be applied first
to any interest then due and payable, then to principal then due and payable,
and last to any prepayment of principal and interest in compliance with Section
2.10. All distributions of amounts described in any of subsections (b), (c) or
(d) above shall be made by Administrative Agent pro rata to Administrative Agent
and each Lender then owed Obligations described in such subsection in proportion
to all amounts owed to Administrative Agent and all Lenders which are described
in such subsection; provided that if any Lender then owes payments to Issuing
Bank for the purchase of a participation under Section 3.3(c) hereof, any
amounts otherwise distributable under this section to such Lender shall be
deemed to belong to Issuing Bank, to the extent of such unpaid payments, and
Administrative Agent shall apply such amounts to make such unpaid payments
rather than such amounts to such Lender.
Section 2.12 Initial Borrowing Base. During the period from the date
hereof to the first Evaluation Date the Borrowing Base shall be $16,000,000.
25
Section 2.13 Subsequent Determinations of Borrowing Base.
(a) By each Evaluation Date Borrower shall furnish to each Lender all
information, reports and data which Administrative Agent has then reasonably
requested concerning Related Persons' businesses and properties (including
Related Persons' oil and gas properties and interests and the reserves and
production relating thereto), together with the Engineering Report described in
Section 6.1(b)(iv), if an Engineering Report is then due. Within thirty (30)
days after receiving such information, reports and data, or as promptly
thereafter as practicable, all Lenders shall agree upon an amount for the
Borrowing Base, which, if all Lenders do not agree on such amount, shall be the
lowest amount determined by any Lender, and Administrative Agent shall by notice
to Borrower designate such amount as the new Borrowing Base available to
Borrower hereunder, which designation shall take effect immediately on the date
such notice is sent (a "Determination Date") and shall remain in effect until
but not including the next date as of which the Borrowing Base is redetermined.
If Borrower does not furnish all such information, reports and data by the date
specified in the first sentence of this section, Administrative Agent may
nonetheless designate the Borrowing Base at any amount which Lenders determine,
and may redesignate the Borrowing Base from time to time thereafter at any
amount which all Lenders redetermine, until each Lender receives all such
information, reports and data, whereupon Lenders shall designate a new Borrowing
Base as described above. Lenders shall determine the amount of the Borrowing
Base based upon the loan collateral value which they, in their sole discretion
and in accordance with their respective normal practices and standards for oil
and gas loans as such practices and standards exist at the particular time,
assign to the various oil and gas properties of Related Persons at the time in
question and based upon such other factors (including without limitation the
assets, liabilities, cash flow, business, properties, prospects, management and
ownership of Borrower and its Related Persons) as they, in their sole discretion
and in accordance with their respective normal practices and standards for oil
and gas loans as such practices and standards exist at the particular time, deem
significant. It is expressly understood that Lenders and Administrative Agent
have no obligation to agree upon or designate the Borrowing Base at any
particular amount, whether in relation to the Maximum Loan Amount or otherwise,
and that Lenders' commitments to advance funds hereunder is determined by
reference to the Borrowing Base from time to time in effect, which Borrowing
Base shall be used for calculating commitment fees under Section 2.7(a) and, to
the extent permitted by law and regulatory authorities, for the purposes of
Section 2.15. Semiannual redeterminations and additional redeterminations at
the request of the Lenders or Administrative Agent shall be at no cost to
Borrower. Additional redeterminations at Borrower's request shall be subject to
a $5,000 engineering fee payable by Borrower to the Administrative Agent for its
own account.
(b) The Borrower may include additional oil and gas properties of the
Borrower acquired from time to time as Collateral for the Obligations, which may
then be included in the calculation of the Borrowing Base, by the Borrower (A)
giving written notice to the Administrative Agent of such properties to be
included, (B) subjecting such properties to liens securing the Obligations
(pursuant to Security Documents satisfactory to the Administrative Agent), (C)
including such properties in an Engineering Report submitted to the
Administrative Agent and (D) delivering to the Administrative Agent title
opinions addressed to the Administrative Agent for the benefit of the Lenders
covering all of such properties and other legal opinions from counsel acceptable
to the
26
Administrative Agent, in its sole discretion, in form, scope and substance
acceptable to the Administrative Agent opining favorably as to, among such other
matters as may be required by the Administrative Agent, (1) the Borrower's
ownership of such properties and (2) matters of the type covered by the opinions
delivered pursuant to Section 4.1 (m) and the opinion attached hereto as
Exhibit F.
Section 2.14 Borrower's Reduction of Borrowing Base. Until the Final
Maturity Date Borrower may, during the fifteen-day period beginning on each
Determination Date (each such period in this section, an "Option Period"),
reduce the Borrowing Base from the amount designated by Administrative Agent to
any lesser amount. To exercise such option Borrower must within an Option
Period send notice to Administrative Agent of the amount of the Borrowing Base
chosen by Borrower. If Borrower does not affirmatively exercise this option
during an Option Period the Borrowing Base shall be the amount designated by
Administrative Agent. Any choice by Borrower of a Borrowing Base shall be
effective as of the first day of the Option Period during which such choice was
made and shall continue in effect the next date as of which the Borrowing Base
is redetermined.
Section 2.15 Alternate Rate of Interest. If prior to the commencement of
any Interest Period for a LIBOR Rate Portion:
(a) the Administrative Agent determines (which determination shall be
conclusive absent manifest error) that adequate and reasonable means do not
exist for ascertaining the Adjusted LIBOR Rate or the LIBOR Rate, as applicable,
for such Interest Period; or
(b) the Administrative Agent is advised by the Majority Lenders that the
Adjusted LIBOR Rate for such Interest Period will not adequately and fairly
reflect the cost to such Lenders (or Lender) of making or maintaining their
Loans (or its Loan) included in such LIBOR Rate Portion for such Interest
Period;
then the Administrative Agent shall give notice thereof to the Borrower and the
Lenders by telephone or telecopy as promptly as practicable thereafter and,
until the Administrative Agent notifies the Lenders that the circumstances
giving rise to such notice no longer exist, (i) any Rate Election that requests
the conversion of any Base Rate Portion to, or continuation of any LIBOR Rate
Portion as, a LIBOR Rate Portion shall be ineffective and (ii) any requests for
an Advance as a LIBOR Rate Portion shall be made as a Base Rate Portion.
Section 2.16 Increased Costs. (a) If any Change in Law shall:
(i) impose, modify or deem applicable any reserve, special deposit or
similar requirement against assets of, deposits with or for the account of,
or credit extended by, any Lender (except any such reserve requirement
reflected in the Adjusted LIBOR Rate) or the Issuing Bank; or
27
(ii) impose on any Lender or the Issuing Bank or the London interbank
market any other condition affecting this Agreement or LIBOR Rate Loans
made by such Lender or any Letter of Credit or participation therein;
and the result of any of the foregoing shall be to increase the cost to such
Lender of making or maintaining any LIBOR Rate Loan (or of maintaining its
obligation to make any such Loan) or to increase the cost to such Lender or the
Issuing Bank of participating in, issuing or maintaining any Letter of Credit or
to reduce the amount of any sum received or receivable by such Lender or the
Issuing Bank hereunder (whether of principal, interest or otherwise), then the
Borrower will pay to such Lender or the Issuing Bank, as the case may be, such
additional amount or amounts as will compensate such Lender or the Issuing Bank,
as the case may be, for such additional costs incurred or reduction suffered.
(b) If any Lender or the Issuing Bank determines that any Change in Law
regarding capital requirements has or would have the effect of reducing the rate
of return on such Lender's or the Issuing Bank's capital or on the capital of
such Lender's or the Issuing Bank's holding company, if any, as a consequence of
this Agreement or the Loans made by, or participations in Letters of Credit held
by, such Lender, or the Letters of Credit issued by the Issuing Bank, to a level
below that which such Lender or the Issuing Bank or such Lender's or the Issuing
Bank's holding company could have achieved but for such Change in Law (taking
into consideration such Lender's or the Issuing Bank's policies and the policies
of such Lender's or the Issuing Banks holding company with respect to capital
adequacy), then from time to time the Borrower will pay to such Lender or the
Issuing Bank, as the case may be, such additional amount or amounts as will
compensate such Lender or the Issuing Bank or such Lender's or the Issuing Banks
holding company for any such reduction suffered.
(c) A certificate of a Lender or the Issuing Bank setting forth in
reasonable detail the amount or amounts necessary to compensate such Lender or
the Issuing Bank or its holding company, as the case may be, as specified in
paragraph (a) or (b) of this Section shall be delivered to the Borrower and
shall be conclusive absent manifest error. The Borrower shall pay such Lender
or the Issuing Bank, as the case may be, the amount shown as due on any such
certificate within ten (10) days after receipt thereof.
(d) Failure or delay on the part of any Lender or the Issuing Bank to
demand compensation pursuant to this Section shall not constitute a waiver of
such Lender's or the Issuing Bank's right to demand such compensation; provided
that the Borrower shall not be required to compensate a Lender or the Issuing
Bank pursuant to this Section for any increased costs or reductions incurred
more than ninety (90) days prior to the date that such Lender or the Issuing
Bank, as the case may be, notifies the Borrower of the Change in Law giving rise
to such increased costs or reductions and of such Lender's or the Issuing Bank's
intention to claim compensation therefor; provided further that, if the Change
in Law giving rise to such increased costs or reductions is retroactive, then
the 90-day period referred to above shall be extended to include the period of
retroactive effect thereof.
28
Section 2.17 Break Funding Payments. In the event of (a) the payment of
any principal of any LIBOR Rate Loan other than on the last day of an Interest
Period applicable thereto (including as a result of an Event of Default), (b)
the conversion of any LIBOR Rate Loan other than on the last day of the Interest
Period applicable thereto, (c) the failure to borrow, convert, continue or
prepay any Revolving Loan on the date specified in any notice delivered pursuant
hereto, or (d) the assignment of any LIBOR Rate Loan other than on the last day
of the Interest Period applicable thereto as a result of a request by the
Borrower pursuant to Section 2.19, then, in any such event, the Borrower shall
compensate each Lender for the loss, cost and expense attributable to such
event. In the case of a LIBOR Rate Loan, such loss, cost or expense to any
Lender shall be deemed to include an amount determined by such Lender to be the
excess, if any, of (i) the amount of interest which would have accrued on the
principal amount of such Loan had such event not occurred, at the LIBOR Rate
that would have been applicable to such Loan, for the period from the date of
such event to the last day of the then current Interest Period therefor (or, in
the case of a failure to borrow, convert or continue, for the period that would
have been the Interest Period for such Loan), over (ii) the amount of interest
which would accrue on such principal amount for such period at the interest rate
which such Lender would bid were it to bid, at the commencement of such period,
for dollar deposits of a comparable amount and period from other banks in the
eurodollar market. A certificate of any Lender setting forth in reasonable
detail any amount or amounts that such Lender is entitled to receive pursuant to
this Section shall be delivered to the Borrower and shall be conclusive absent
manifest error. The Borrower shall pay such Lender the amount shown as due on
any such certificate within ten (10) days after receipt thereof.
Section 2.18 Taxes. (a) Any and all payments by or on account of any
obligation of the Borrower hereunder shall be made free and clear of and without
deduction for any Indemnified Taxes or Other Taxes; provided that if the
Borrower shall be required to deduct any Indemnified Taxes or Other Taxes from
such payments, then (i) the sum payable shall be increased as necessary so that
after making all required deductions (including deductions applicable to
additional sums payable under this Section) the Administrative Agent, Lender or
Issuing Bank (as the case may be) receives an amount equal to the sum it would
have received had no such deductions been made, (ii) the Borrower shall make
such deductions and (iii) the Borrower shall pay the full amount deducted to the
relevant Governmental Authority in accordance with applicable law.
(b) In addition, the Borrower shall pay any Other Taxes to the relevant
Governmental Authority in accordance with applicable law.
(c) The Borrower shall indemnify the Administrative Agent each Lender and
the Issuing Bank, within ten (10) days after written demand therefor, for the
full amount of any Indemnified Taxes or Other Taxes paid by the Administrative
Agent, such Lender or the Issuing Bank, as the case may be, on or with respect
to any payment by or on account of any obligation of the Borrower hereunder
(including Indemnified Taxes or Other Taxes imposed or asserted on or
attributable to amounts payable under this Section) and any penalties, interest
and removable expenses arising therefrom or with respect thereto, whether or not
such Indemnified Taxes or Other Taxes were correctly or legally imposed or
asserted by the relevant Governmental Authority. A certificate as to the amount
of such payment or liability delivered to the Borrower by a Lender or the
Issuing
29
Bank, or by the Administrative Agent on its own behalf or on behalf of a Lender
or the Issuing Bank, shall be conclusive absent manifest error.
(d) As soon as practicable after any payment of Indemnified Taxes or Other
Taxes by the Borrower to a Governmental Authority, the Borrower shall deliver to
the Administrative Agent the original or a certified copy of a receipt issued by
such Governmental Authority evidencing such payment, a copy of the return
reporting such payment or other evidence of such payment reasonably satisfactory
to the Administrative Agent.
(e) Any Foreign Lender that is entitled to an exemption from or reduction
of 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, such
properly completed and executed documentation prescribed by applicable law or
reasonably requested by the Borrower as will permit such payments to be made
without withholding or at a reduced rate.
Section 2.19 Mitigation Obligations; Replacement of Lenders. (a) If any
Lender requests compensation under Section 2.16, or if the Borrower is required
to pay any additional amount to any Lender or any Governmental Authority for the
account of any Lender pursuant to Section 2.17, then such Lender shall use
reasonable efforts to designate a different lending office for funding or
booking its Loans hereunder or to assign its rights and obligations hereunder to
another of its offices, branches or affiliates, if, in the judgment of such
Lender, such designation or assignment (i) would eliminate or reduce amounts
payable pursuant to Section 2.16 or 2.18, as the case may be, in the future and
(ii) would not subject such Lender to any unreimbursed cost or expense and would
not otherwise be disadvantageous to such Lender.
(b) If any Lender requests compensation under Section 2.16, or if the
Borrower is required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 2.18,
or if any Lender defaults in its obligation to fund Loans hereunder, then the
Borrower may, at its sole expense and effort, upon notice to such Lender and the
Administrative Agent, require such Lender to assign and delegate, without
recourse (in accordance with and subject to the restrictions contained in
Section 10.11), all its interests, rights and obligations under this Agreement
to an assignee that shall assume such obligations (which assignee may be another
Lender, if a Lender accepts such assignment); provided that (i) the Borrower
shall have received the prior written consent of the Administrative Agent and
the Issuing Bank, which consent shall not unreasonably be withheld, (ii) such
Lender shall have received payment of an amount equal to the outstanding
principal of its Loans and participations in LC Disbursements, accrued interest
thereon, accrued fees and all other amounts payable to it hereunder, from the
assignee (to the extent of such outstanding principal and accrued interest and
fees) or the Borrower (in the case of all other amounts) and (iii) in the case
of any such assignment resulting from a claim for compensation under Section
2.16 or payments required to be made pursuant to Section 2.18, such assignment
will result in a reduction in such compensation or payments.
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ARTICLE III - Letters of Credit
Section 3.1 Letters of Credit. Subject to the terms and conditions
hereof, Borrower may until the Final Maturity Date request Issuing Bank to issue
one or more Letters of Credit, provided that, after taking such Letter of Credit
into account:
(a) the sum of the aggregate amount of Advances outstanding at such time
plus the aggregate amount of LC Obligations at such time, does not exceed the
Borrowing Base at such time;
(b) the aggregate amount of LC Obligations at such time does not exceed
$20,000,000;
(c) the expiration date of such Letter of Credit is prior to the end of the
Final Maturity Date;
(d) such Letter of Credit is to be used for general corporate purposes of
Related Persons;
(e) such Letter of Credit is not directly or indirectly used to assure
payment of or otherwise support any Person's Indebtedness for borrowed money;
(f) the issuance of such Letter of Credit will be in compliance with all
applicable governmental restrictions, policies, and guidelines and will not
subject Issuing Bank to any cost not anticipated on the date hereof;
(g) the form and terms of such Letter of Credit are acceptable to
Administrative Agent and Issuing Bank in their sole and absolute discretion; and
(h) all other conditions in this Agreement to the issuance of such Letter
of Credit have been satisfied.
Issuing Bank will honor any such request if the foregoing conditions (a) through
(h) (in this Section 3.1 called the "LC Conditions") have been met as of the
date of issuance of such Letter of Credit.
Section 3.2 Requesting Letters of Credit. Borrower must make written
application for any Letter of Credit at least three Business Days before the
date on which Borrower desires for Issuing Bank to issue such Letter of Credit.
By making any such written application Borrower shall be deemed to have
represented and warranted that the LC Conditions described in Section 3.1 will
be met as of the date of issuance of such Letter of Credit. Each such written
application for a standby or commercial Letter of Credit must be made in writing
using the forms therefor customarily used by Issuing Bank, the terms and
provisions of which are hereby incorporated herein by reference (or in such
other form as may mutually be agreed upon by Issuing Bank and Borrower).
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Section 3.3 Reimbursement and Participations.
(a) Reimbursement by Borrower. Each Matured LC Obligation shall constitute
a Loan by Issuing Bank to Borrower. The Borrower hereby agrees to reimburse the
Issuing Bank, forthwith, for each payment or disbursement made by the Issuing
Bank to settle its obligations under any draft drawn under any Letter of Credit,
with interest on the amount so paid or disbursed by the Issuing Bank from and
including the date of payment or disbursement to, but not including, the date
the Issuing Bank is reimbursed therefor or the Lenders are deemed to have made a
Loan in respect thereof pursuant to the following proviso, as the case may be,
at the rate set forth for Base Rate Loans; provided, however, that if any such
payment or disbursement shall not be reimbursed to the Issuing Bank after any
grace period for the payment thereof as provided in Section 8.1 herein and if
the Final Maturity Date shall not have occurred, then the Matured LC Obligation
in respect thereof shall automatically, without notice from or to the Borrower
and without any further authorization from the Borrower (and whether or not the
amount thereof satisfies the conditions of Section 2.4 and whether or not the
conditions of Article IV are satisfied), be deemed to be a Loan, made by each of
the Lenders to the Borrower in their respective Percentage Shares of the Issuing
Bank's payments or disbursements bearing interest determined pursuant to Section
2.6 and the related Matured LC Obligation shall be deemed paid simultaneously
with such funding of the deemed Loan; provided further, however, that if any
such payment or disbursement shall not be reimbursed to the Issuing Bank and a
Loan shall not be deemed to have been made notwithstanding the preceding proviso
due to failure to meet the applicable conditions in Article IV or otherwise,
then the Matured LC Obligation in respect thereof shall be due and payable, with
interest accruing thereon at the Late Payment Rate.
(b) Letter of Credit Advances. If the beneficiary of any Letter of Credit
makes a draft or other demand for payment thereunder then Borrower may, during
the interval between the making thereof and the honoring thereof by Issuing
Bank, request Lenders to make Advances to Borrower in the amount of such draft
or demand, which Advances shall be made concurrently with Issuing Bank's payment
of such draft or demand and shall be immediately used by Issuing Bank to repay
the amount of the resulting Matured LC Obligation. Such a request by Borrower
shall be made in compliance with all of the provisions hereof, provided that for
the purposes of clauses (b) and (c) of the first sentence of Section 2.1 the
amount of such Advances shall be considered but the amount of the Matured LC
Obligation to be concurrently paid by such Advances shall not be considered.
(c) Participation by Lenders. Issuing Bank irrevocably agrees to grant and
hereby grants to each Lender, and to induce Issuing Bank to issue Letters of
Credit hereunder, each Lender irrevocably agrees to accept and purchase and
hereby accepts and purchases from Issuing Bank, on the terms and conditions
hereinafter stated and for such Lender's own account and risk an undivided
interest equal to such Lender's Percentage Share of Issuing Bank's obligations
and rights under each Letter of Credit issued hereunder and the amount of each
Matured LC Obligation paid by Issuing Bank thereunder. Each Lender
unconditionally and irrevocably agrees with Issuing Bank that, if a Matured LC
Obligation is paid under any Letter of Credit for which Issuing Bank is not
reimbursed in full by Borrower in accordance with the terms of this Agreement
and the related LC Application (including any reimbursement by means of
concurrent Advances or by the application of LC
32
Collateral), such Lender shall within two (2) Business Days (in all
circumstances and without set-off or counterclaim) pay to Issuing Bank on
demand, in immediately available funds at Issuing Bank's address for notices
hereunder, such Lender's Percentage Share of such Matured LC Obligation (or any
portion thereof which has not been reimbursed by Borrower), together with
interest thereon, for each day from the date such amount was paid by Issuing
Bank under such Letter of Credit until the date such amount is paid to
Administrative Agent at the Federal Funds Rate. If any Lender fails to make such
payment to Issuing Bank within such two Business Day period, such Lender shall
in addition to such amount pay interest thereon, for each day from the date such
amount was paid by Issuing Bank under such Letter of Credit until the date such
amount is paid or repaid to Administrative Agent, at the Base Rate. Each
Lender's obligation to pay Issuing Bank pursuant to the terms of this subsection
is irrevocable and unconditional.
(d) Distributions to Participants. Whenever Issuing Bank has in accordance
with this section received from any Lender payment of such Lender's Percentage
Share of any Matured LC Obligation, if Issuing Bank thereafter receives any
payment of such Matured LC Obligation or any payment of interest thereon
(whether directly from Borrower or by application of LC Collateral or otherwise,
and excluding only interest for any period prior to Issuing Bank's demand that
such Lender make such payment of its Percentage Share), Issuing Bank will
distribute to such Lender its Percentage Share of the amounts so received by
Issuing Bank; provided, however, that if any such payment received by Issuing
Bank must thereafter be returned by Issuing Bank, such Lender shall return to
Issuing Bank the portion thereof which Issuing Bank has previously distributed
to it.
(e) Calculations. A written advice setting forth in reasonable detail the
amounts owing under this section, submitted by Issuing Bank to Borrower or any
Lender from time to time, shall be conclusive, absent manifest error, as to the
amounts thereof.
Section 3.4 Letter of Credit Fees. In consideration of Issuing Bank's
issuance of Letters of Credit, Borrower agrees to pay (i) to the Administrative
Agent for the account of each Lender a participation fee with respect to its
participations in Letters of Credit, which shall accrue at the LIBOR Spread then
in effect with respect to Loans after giving effect thereto on the average daily
amount of such Lender's Percentage Share of the LC Obligations during the period
from and including the Closing Date to but excluding the later of the date on
which such Lender's Commitment terminates and the date on which such Lender
ceases to participate in any LC Obligations, and (ii) to the Issuing Bank a
fronting fee, which shall accrue at the rate of 0.125% per annum on the average
daily amount of the LC Obligations during the period from and including the
Closing Date to but excluding the later of the date of termination of the
Commitments and the date on which there ceases to be any LC Obligations, as well
as the Issuing Bank's standard fees with respect to the amendment, renewal or
extension of any Letter of Credit or processing of drawings thereunder.
Participation fees and fronting fees shall be due and payable in arrears, on the
last Business Day of each Fiscal Quarter and on the Final Maturity Date
commencing on the first such date to occur after the Closing Date; provided that
all such fees shall be payable on the date on which the Commitments terminate
and any such fees accruing after the date on which the Commitments terminate
shall be payable on demand. Any other fees payable to the Issuing Bank pursuant
to this paragraph shall be payable within ten (10) days after demand. All
participation fees
33
and fronting fees shall be computed on the basis of a year of 360 days and shall
be payable for the actual number of days elapsed (including the first day but
excluding the last day).
Section 3.5 No Duty to Inquire.
(a) Drafts and Demands. Issuing Bank is authorized and instructed to
accept and pay drafts and demands for payment under any Letter of Credit without
requiring, and without responsibility for, any determination as to the existence
of any event giving rise to said draft, either at the time of acceptance of
payment or thereafter. Issuing Bank and Lenders may act in reliance upon any
drafts or demand for payment believed in good faith to have been authorized,
whether or not made by an authorized officer, representative or agent of any
beneficiary under any Letter of Credit, and payment by Issuing Bank to a
beneficiary when requested by any such purported officer, representative or
agent is hereby authorized and approved. Borrower agrees to hold Issuing Bank
and each Lender harmless and indemnified against any liability or claim in
connection with or arising out of the subject matter of this section, WHICH
INDEMNITY SHALL APPLY WHETHER OR NOT ANY SUCH LIABILITY OR CLAIM IS IN ANY WAY
OR TO ANY EXTENT CAUSED, IN WHOLE OR IN PART, BY ANY NEGLIGENT ACT OR OMISSION
OF ANY KIND BY ISSUING BANK OR ANY LENDER, provided only that Issuing Bank or
such Lender shall not be entitled to indemnification for that portion, if any,
of any liability or claim which is proximately caused by its own individual
gross negligence or willful misconduct as determined in a final judgment.
(b) Extension of Maturity. If the maturity of any Letter of Credit is
extended by its terms or by law or governmental action, if any extension of the
maturity or time for presentation of drafts or any other modification of the
terms of any Letter of Credit is made at the request of any Related Person, or
if the amount of any Letter of Credit is increased at the request of any Related
Person, this Agreement shall be binding upon all Related Persons with respect to
such Letter of Credit as so extended, increased or otherwise modified, with
respect to drafts and property covered thereby, and with respect to any action
taken by Issuing Bank or any of Issuing Bank's correspondents in accordance with
such extension, increase or other modification.
(c) Transferees of Letters of Credit. If any Letter of Credit provides
that it is transferable, Issuing Bank shall have no duty to determine the proper
identity of anyone appearing as transferee of such Letter of Credit, nor shall
Issuing Bank be charged with responsibility of any nature or character for the
validity or correctness of any transfer or successive transfers, and payment by
Issuing Bank to any purported transferee or transferees as determined by Issuing
Bank is hereby authorized and approved, and Borrower further agrees to hold
Issuing Bank and each Lender harmless and indemnified against any liability or
claim in connection with or arising out of the foregoing, WHICH INDEMNITY SHALL
APPLY WHETHER OR NOT ANY SUCH LIABILITY OR CLAIM IS IN ANY WAY OR TO ANY EXTENT
CAUSED, IN WHOLE OR IN PART, BY ANY NEGLIGENT ACT OR OMISSION OF ANY KIND BY
ISSUING BANK OR ANY LENDER, provided only that Issuing Bank or such Lender shall
not be entitled to indemnification for that portion, if any, of any liability or
claim which is caused by its own individual gross negligence or willful
misconduct.
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Section 3.6 LC Collateral.
(a) LC Obligations in Excess of Borrowing Base or upon Termination of
Commitments. (i) If, after the making of all mandatory prepayments required
under Section 2.10, the aggregate amount of all Advances outstanding plus all LC
Obligations outstanding including LC Obligations secured by cash collateral
pursuant to Section 3.6 will exceed the Borrowing Base, then Borrower will
immediately pay to Issuing Bank an amount in cash equal to such excess, or (ii)
should any LC Obligations remain outstanding on the Final Maturity Date, then
Borrower will immediately pay Issuing Bank an amount in cash equal to the
aggregate amount of such Issuing Bank's Matured LC Obligations. Issuing Bank
will hold such amount as security for the remaining LC Obligations ("LC
Collateral") until such LC Obligations become Matured LC Obligations, at which
time such LC Collateral may be applied to such Matured LC Obligations. Neither
this subsection nor the following subsection shall, however, limit or impair any
rights which Issuing Bank may have under any other document or agreement
relating to any Letter of Credit or LC Obligation, including any LC Application,
or any rights which Issuing Bank or Lenders may have to otherwise apply any
payments by Borrower and LC Collateral under Section 2.11.
(b) Acceleration of LC Obligations. If the Obligations or any part thereof
become immediately due and payable pursuant to Section 8.1 then, unless Majority
Lenders otherwise specifically elect to the contrary (which election may
thereafter be retracted by Majority Lenders at any time), all LC Obligations
shall become immediately due and payable without regard to whether or not actual
drawings or payments on the Letters of Credit have occurred, and Borrower shall
be obligated to pay to Issuing Bank immediately an amount equal to the aggregate
LC Obligations which are then outstanding. All amounts so paid shall first be
applied to Matured LC Obligations and then held by Issuing Bank as LC Collateral
until such LC Obligations become Matured LC Obligations, at which time such LC
Collateral shall be applied to such Matured LC Obligations.
(c) Investment of LC Collateral. Pending application thereof, all LC
Collateral shall be invested by Issuing Bank in such interest-bearing
investments as Issuing Bank may choose in its sole discretion reasonably
exercised. All interest on such investments shall be reinvested or applied to
Matured LC Obligations. When all Obligations have been satisfied in full,
including all LC Obligations, all Letters of Credit have expired or been
terminated, and all of Borrower's reimbursement obligations in connection
therewith have been satisfied in full, Issuing Bank shall release any remaining
LC Collateral. Borrower hereby assigns and grants to Issuing Bank a continuing
security interest in all LC Collateral paid by it to Issuing Bank, all
investments purchased with such LC Collateral, and all proceeds thereof to
secure its Matured LC Obligations and its Obligations under this Agreement, the
Notes, and the other Loan Documents, and Borrower agrees that such LC Collateral
and investments shall be subject to all of the terms and conditions of the
Mortgage. Borrower further agrees that Issuing Bank shall have all of the
rights and remedies of a secured party under the Uniform Commercial Code as
adopted in the State of Texas with respect to such security interest and that an
Event of Default under this Agreement shall constitute a default for purposes of
such security interest.
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ARTICLE IV - Conditions Precedent to Lending
Section 4.1 Documents to be Delivered. No Lender has any obligation to
make its first Advance, and Issuing Bank has no obligation to issue the first
Letter of Credit, unless Administrative Agent shall have received all of the
following duly executed and delivered in multiple counterparts for each Lender
and in form, substance and date satisfactory to Administrative Agent:
(a) This Agreement and any other documents that Lenders are to execute in
connection herewith.
(b) Each Note.
(c) The following certificates of Borrower:
(i) An "Omnibus Certificate" of the Secretary or Assistant Secretary
of Borrower, as applicable, which shall contain the names and signatures of
the officers of Borrower authorized to execute Loan Documents and which
shall certify to the truth, correctness and completeness of the following
exhibits attached thereto: (1) a copy of resolutions duly adopted by the
members of Borrower and in full force and effect at the time this Agreement
is entered into, authorizing the execution of this Agreement and the other
Loan Documents delivered or to be delivered in connection herewith and the
consummation of the transactions contemplated herein and therein, (2) a
copy of the Limited Liability Company Agreement of Borrower and all
amendments thereto, certified by the Secretary of State of Delaware, and
(3) a copy of the regulations of Borrower; and
(ii) A "Compliance Certificate" of the Chief Financial Officer of the
Borrower of even date with such Advance in which such officer certifies to
the satisfaction of the conditions set out in subsections (a), (b) and (c)
of Section 4.2.
(d) A certificate (or certificates) of the due formation, valid existence
and good standing of Borrower in its state of organization, issued by the
appropriate authorities of such jurisdiction.
(e) A favorable opinion of ▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P., counsel for the Related
Persons, substantially in the form set forth in Exhibit F.
(f) An amendment to each Pledge Agreement, dated as of the date hereof,
duly executed by each of Spinnaker Exploration Company and WP Spinnaker
Holdings, Inc., a Delaware corporation, together with the certificates, if any,
evidencing the membership or other interests pledged pursuant to the Pledge
Agreement, which certificates shall in each case be accompanied by undated
powers of attorney duly executed in blank, or, if any securities pledged
pursuant to a Pledge Agreement are uncertificated securities, confirmation and
evidence satisfactory to Administrative Agent that the security interest in such
uncertificated securities has been transferred to and perfected by
Administrative Agent in accordance with the Uniform Commercial Code, as in
effect in the State of Texas.
36
(g) An amendment and restatement of each Guaranty, dated as of the date
hereof, duly executed by Spinnaker Exploration Company and WP Spinnaker
Holdings, Inc., a Delaware corporation, together with resolutions duly adopted
by the Board of Directors of each such Guarantor and in full force and effect at
the time this Agreement is entered into, authorizing execution of each such
Guaranty and such favorable opinions of counsel as Administrative Agent shall
request.
(h) The Administrative Agent shall have received an amendment to the
Mortgage duly executed and delivered by the Borrower in form and substance
satisfactory to the Administrative Agent for the prompt completion of all
recording and filing of the Security Documents as may be necessary or, in the
reasonable opinion of the Administrative Agent, desirable to create or continue,
as appropriate, a valid perfected first Lien against the Collateral covered by
the Mortgage, together with executed copies of proper Uniform Commercial Code
Form UCC-1 and UCC-3 statements, necessary or in the opinion of the
Administrative Agent, desirable, to create in the Administrative Agent for the
benefit of the Administrative Agent, the Issuer and the Lenders all Liens and
other rights of any Person as a valid, perfected first priority Lien in the
Collateral described in the Mortgage.
(i) [Reserved]
(j) Each Security Document listed in the Security Schedule, or an amendment
thereto or an amendment and restatement thereto, together with the delivery of
such certificate, stock powers and instruments required to be delivered pursuant
to the Security Documents.
(k) Certificates of Borrower's good standing and due qualification to do
business, issued by appropriate officials in any states in which Borrower owns
property subject to Security Documents.
(l) Documents similar to those specified in subsections (c)(i) and (d) of
this section with respect to each Guarantor.
(m) Administrative Agent shall have received true and correct copies of
such documents or instruments as may be reasonably requested by Administrative
Agent including, without limitation, any debt instrument security agreement or
other material contract to which any Related Party may be a party.
(n) Administrative Agent shall have received true and complete copies of
detailed consolidated annual projections for Spinnaker Exploration Company,
certified as of the Closing Date by the chief financial officer of Borrower as
having been prepared in good faith by Borrower, which certificate shall state
that such officer has no reason to believe that the projections are incorrect or
misleading in any material respect, it being recognized by Administrative Agent
and Lenders that such projections as to future events depend on such assumptions
and are not to be viewed as facts and that actual results during the period
covered by any such projections may differ from the projected results.
37
(o) Administrative Agent shall have received the results of a lien search
(which lien search shall be satisfactory to Administrative Agent and which shall
have been conducted within thirty (30) days prior to the Closing Date by
Borrower or Borrower's counsel) in each of the jurisdictions where assets of any
Related Person are located, and such search shall reveal no Liens on any of the
assets of any Related Person except for Liens permitted by Section 6.2(b) and
other Liens approved by Administrative Agent and the Majority Lenders.
(p) Borrower's payment to Administrative Agent of all fees then due to
Administrative Agent and Lenders hereunder and under the Fee Letter and all
reasonable legal fees of Administrative Agent's counsel for which invoices in
reasonable detail are received at least ten (10) days prior to the date of the
first Advance.
(q) Administrative Agent shall have received from Borrower a certificate of
insurance of the Borrower evidencing that the Borrower is carrying insurance in
accordance with Section 6.1 (h) hereof and that such insurance is in full force
and effect.
Section 4.2 Additional Conditions Precedent. No Lender has any
obligation to make any Advance (including its first), and Issuing Bank has no
obligation to issue any Letter of Credit (including the first) unless the
following conditions precedent have been satisfied:
(a) In the case of all Advances, all representations and warranties made by
any Related Person in any Loan Document shall be true on and as of the date of
such Advance or the date of issuance of such Letter of Credit and after giving
effect thereto as if such representations and warranties had been made as of the
date of such Advance or the date of issuance of such Letter of Credit, unless
any such representation or warranty was expressly limited to earlier date.
(b) In the case of all Advances, no Default shall exist at the date of such
Advance or the date of issuance of such Letter of Credit or result therefrom.
(c) In the case of all Advances, no act, event or condition shall have
occurred which has resulted in a Material Adverse Effect.
(d) The making of such Advance or the issuance of such Letter of Credit
shall not be prohibited by any law or any regulation or order of any court or
governmental agency or authority and shall not subject any Lender or Issuing
Bank to any penalty or other onerous condition under or pursuant to any such
law, regulation or order.
(e) No suit, action, investigation, inquiry or other proceeding (including,
without limitation, the enactment or promulgation of a statute or rule) by or
before any arbitrator or any Governmental Authority shall be pending and no
preliminary or permanent injunction or order by a state or federal court shall
have been entered in connection with any Loan Document, or any of the
transactions contemplated hereby or thereby, which, in the judgment of
Administrative Agent, would have a Material Adverse Effect.
38
(f) The Administrative Agent shall have received (i) with respect to Loans,
a Request for Advance duly completed, executed and delivered by Borrower as
required by Section 2.4, and (ii) with respect to Letters of Credit, a written
application as required by Section 3.2.
ARTICLE V - Representations and Warranties
Section 5.1 Borrower's Representations and Warranties. To confirm each
Lender's understanding concerning Related Persons and Related Persons'
businesses, properties and obligations and to induce Administrative Agent and
each Lender to enter into this Agreement and to make the Loans and issue Letters
of Credit, Borrower represents and warrants to Administrative Agent and each
Lender that:
(a) No Default. Neither Borrower, any Guarantor nor any Subsidiary is in
default in the performance of any of the covenants and agreements contained
herein or in any other Loan Documents. No event has occurred and is continuing
which constitutes a Default.
(b) Organization and Good Standing. Each Related Person is duly organized,
validly existing and in good standing under the laws of its state of
organization, having all powers required to carry on its business and enter into
and carry out the reactions contemplated hereby. Each such Related Person is
duly qualified, in good standing, and authorized to do business in all other
jurisdictions within the United States wherein the character of the properties
owned or held by it, if any, or the nature of the business transacted by it
makes such qualification necessary, except where the failure so to qualify will
not have any Material Adverse Effect. Each such Related Person has taken all
actions and procedures customarily taken in order to enter, for the purpose of
conducting business or owning property, each jurisdiction outside the United
States wherein the character of the properties owned or held by it, if any, or
the nature of the business transacted by it, if any, makes such actions and
procedures desirable.
(c) Authorization. Each Related Person has duly taken all action necessary
to authorize the execution and delivery by it of the Loan Documents to which it
is a party and to authorize the consummation of the transactions contemplated
thereby and the performance of its obligations thereunder. Borrower is duly
authorized to borrow funds hereunder.
(d) No Conflicts or Consents. The execution and delivery by the various
Related Persons of the Loan Documents to which each is a party, the performance
by each of its obligations under such Loan Documents, and the consummation of
the transactions contemplated by the various Loan Documents, do not and will not
(i) conflict with any provision of (1) any domestic or foreign law, statute,
rule or regulation, (2) the organizational documents of any Related Person, or
(3) any agreement, judgment, license, order or permit applicable to or binding
upon any Related Person, (ii) result in the acceleration of any Indebtedness
owed by any Related Person, or (iii) result in or require the creation of any
Lien upon any assets or properties of any Related Person except as expressly
contemplated in the Loan Documents. Except as expressly contemplated in the
Loan Documents, no consent, approval, authorization or order of, and no notice
to or filing with any court or Governmental Authority or third party is required
in connection with the execution, delivery or
39
performance by any Related Person of any Loan Document or to consummate any
transactions contemplated by the Loan Documents.
(e) Enforceable Obligations. This Agreement is, and the other Loan
Documents when duly executed and delivered will be, legal, valid and binding
obligations of each Related Person which is a party hereto or thereto,
enforceable in accordance with their terms except as such enforcement may be
limited by bankruptcy, insolvency or similar laws of general application
relating to the enforcement of creditors' rights and subject to general
principles of equity, regardless of whether considered in a proceeding in equity
or at law.
(f) Initial Financial Statements. The Initial Financial Statements of
Spinnaker Exploration Company fairly present (i) Spinnaker Exploration
Company's consolidated, financial position at the date thereof, (ii) the
consolidated results of Spinnaker Exploration Company, and (iii) Spinnaker
Exploration Company's consolidated cash flows for the period thereof. Since the
date of the audited annual Initial Financial Statements no act, event or
condition has occurred which would have a material adverse effect upon the
assets, business, properties, operations or financial condition, of the Related
Persons, taken as a whole. The Initial Financial Statements of Spinnaker
Exploration Company were prepared in accordance with GAAP.
(g) Other Restrictions. No Related Person is subject to or restricted by
any franchise, contract, deed, charter restriction, or other instrument or
restriction which may be reasonably expected to have a Material Adverse Effect.
(h) Full Disclosure. No certificate, statement or other information
delivered in writing herewith or heretofore by any Related Person to
Administrative Agent or any Lender in connection with the negotiation of this
Agreement or in connection with any transaction contemplated hereby contains any
untrue statement known to a Related Person of a material fact or omits to state
any material fact known to my Related Person (other than industry-wide risks
normally associated with the types of businesses conducted by the Related
Persons) necessary to make the statements contained herein or therein not
materially misleading as of the date made or deemed made, taken as a whole.
There is no fact known to any Related Person that has not been disclosed to
Administrative Agent and each Lender in writing which could materially and
adversely affect Borrower's consolidated properties, assets, operations
businesses, or condition (financial or otherwise). To the best knowledge of
Borrower, there are no statements or conclusions in any Engineering Report which
are based upon or include misleading information or fail to take into account
material information regarding the matters reported therein, it being understood
that each Engineering Report is necessarily based upon professional opinions,
estimates and projections and that Borrower does not warrant that such opinions,
estimates and projections will ultimately prove to have been accurate. Borrower
has heretofore delivered to Administrative Agent and each Lender true, correct
and complete copies of the Initial Financial Statements and the Initial
Engineering Report.
(i) Litigation. There are no actions, suits or legal, equitable,
arbitrative or administrative proceedings pending, or to the knowledge of any
Related Person threatened, against any Related Person before any federal, state,
municipal or other court, department, commission, body, board,
40
bureau, agency, or instrumentality, domestic or foreign, which do or may have a
Material Adverse Effect, and there are no outstanding judgments, injunctions,
writs, rulings or orders by any such governmental entity against any Related
Person or any Related Person's property, which have or may have a reasonable
possibility of causing a Material Adverse Effect.
(j) ERISA Liabilities. All currently existing ERISA Plans are listed in
the Disclosure Schedule or a Disclosure Report. No Termination Event has
occurred with respect to any ERISA Plan and the Related Persons are in
compliance with ERISA in all material respects. No Related Person is required to
contribute to, or has any other absolute or contingent liability in respect of,
any "multiemployer plan" as defined in Section 4001 of ERISA. No "accumulated
funding deficiency" (as defined in Section 412(a) of the Internal Revenue Code
of 1986, as amended) exists with respect to any ERISA Plan, whether or not
waived by the Secretary of the Treasury or his delegate, and the current value
of each ERISA Plan's benefits does not exceed the current value of such ERISA
Plan's assets available for the payment of such benefits by more than $500,000.
(k) Environmental and Other Laws. Except as would not have a Material
Adverse Effect (or with respect to (iii), (iv) and (v) below, where the failure
to take such actions would not have a Material Adverse Effect):
(i) Neither any property of any Related Person or any Subsidiary nor
the operations conducted thereon violate any Environmental Laws;
(ii) Without limitation of clause (a) above, no property of any
Related Person or any Subsidiary nor the operations currently conducted
thereon or, to the best knowledge of any of the Related Persons, by any
prior owner or operator of such property or operation, are in violation of
or subject to any existing, pending or, to the Related Person's knowledge,
threatened action, suit, investigation, inquiry or proceeding by or before
any Governmental Authority or to any remedial obligations under
Environmental Laws;
(iii) All notices, permits, licenses or similar authorizations, if any,
required pursuant to Environmental Laws to be obtained or filed in
connection with the operation or use of the property of any Related Persons
and each Subsidiary have been duly obtained or filed, and the Related
Persons and each Subsidiary are in compliance with the terms and conditions
of all such notices, permits, licenses and similar authorizations;
(iv) All Hazardous Materials, solid waste, and oil and gas exploration
and production wastes, if any, generated at the property of any Related
Person or any Subsidiary have in the past been transported, treated and
disposed of in accordance with Environmental Laws and so as not to pose an
imminent and substantial endangerment to public health or welfare or the
environment, and, to the best knowledge of each Related Person, all such
transport carriers and treatment and disposal facilities have been and are
operating in compliance with Environmental Laws and so as not to pose an
imminent and substantial endangerment to public health or welfare or the
environment, and are not the subject of any
41
existing, pending or, to each Related Person's knowledge, threatened
action, investigation or inquiry by any Governmental Authority in
connection with any Environmental Laws;
(v) The Related Persons have taken all steps reasonably necessary to
determine and have determined that no Hazardous Materials, solid waste, or
oil and gas exploration and production wastes, have been disposed of or
otherwise released and there has been no threatened release of any
Hazardous Materials on or to any property of the Related Persons or any
Subsidiary except, in each case, in compliance with Environmental Laws and
so as not to pose an imminent and substantial endangerment to public health
or welfare or the environment; and
(vi) None of the Related Persons nor any Subsidiary has any known
contingent liability in connection with any release or threatened release
of any oil, Hazardous Materials or solid waste into the environment.
(l) Names and Places of Business. No Related Person has, during the
preceding five Years, been known by, or used any other corporate, trade, or
fictitious name (except Spinnaker Exploration Company's name previously was
Spinco Exploration Corp.). Except as otherwise indicated pursuant to Section
6.1(d), the chief executive office and principal place of business of each
Related Person is located at the address set out in Section 10.3. Except as
indicated in the Disclosure Schedule or a Disclosure Report, no Related Person
has any other office or place of business.
(m) Borrower's Subsidiaries. As of the Closing Date, Borrower does not
have any Subsidiary or own any interest in any other Person except those listed
in the Disclosure Schedule or a Disclosure Report. As of the Closing Date, no
Related Person is a member of any general or limited partnership, joint venture
or association of any type whatsoever except associations, joint ventures or
other relationships (i) which are established pursuant to a standard form
operating agreement or similar agreement or which are partnerships for purposes
of federal income taxation only, (ii) which are not corporations or partnerships
(or subject to the Uniform Partnership Act) under applicable state law, and
(iii) whose businesses are limited to the exploration, development and operation
of oil, gas or mineral properties and interests owned directly by the parties in
such associations, joint ventures or relationships. As of the Closing Date,
Borrower owns, directly or indirectly, the equity interest in each of its
Subsidiaries which is indicated in the Disclosure Schedule.
(n) Title to Properties. Each Related Person has valid and defensible
title to, or a valid leasehold or like interest in, all of the real property
interests constituting the Mortgaged Property and all of its other material
properties and assets, free and clear of all Prohibited Liens and of all
material impediments to the use of such properties and assets in such Related
Person's ordinary course of business.
(o) Government Regulation. No Related Person is subject to regulation
under the Public Utility Holding Company Act of 1935, the Federal Power Act, the
Investment Company Act of 1940
42
(as any of the preceding acts have been amended) or any other statute, law,
regulation or decree which regulates the incurring by such Person of
Indebtedness, including statutes, laws, regulations or decrees relating to
common contract carriers or the sale of electricity, gas, steam, water or other
public utility services.
(p) Permits and Licenses. Each Related Person possesses all permits,
licenses, patents, patent rights or licenses, trademarks, trademark rights,
trade names and copyrights which are material to the conduct of its business.
(q) Taxes. Each Related Person has filed or caused to be filed all tax
returns which, to the knowledge of such Related Person, 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 (i) where extensions have been obtained and (ii) any such
impositions as to which the amount or validity 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 such Related Person); no
tax Lien has been filed, and, to the knowledge of Borrower, no claim is being
asserted, with respect to any such tax, fee or other charge.
(r) Insurance. The Disclosure Schedule sets forth a complete and correct
list of all insurance policies and programs in effect on the Closing Date with
respect to the properties and businesses of each Related Person specifying for
each such policy and program, (i) the amount thereof, (ii) the risks insured
against thereby, (iii) the name of the insurer and each insured party thereunder
and (iv) the policy or other identification number thereof.
(s) Year 2000.
(i) All device, systems, machinery, information technology, computer
software and hardware, and other date sensitive technology jointly and
severally the "Systems") necessary for each Related Person to carry on its
business as presently conducted and as contemplated to be conducted in the
future are Year 2000 Compliant or will be Year 2000 Compliant within a
period of time calculated to result in no material disruption of any of its
business operations. For purposes of these provisions, "Year 2000
Compliant" means that such Systems are designed to be used prior to, during
and after the Gregorian calendar year 2000 A.D. and will operate during
each such time period without error relating to date data, specifically
including any error relating to, or the product of, date data which
represents or references different centuries or more than one century.
(ii) Each Related Person has: (1) undertaken a detailed inventory,
review, and assessment of all areas within its business and operations that
could be adversely affected by the failure of it to be Year 2000 Compliant
on a timely basis; (2) developed a detailed plan and time line for becoming
Year 2000 Compliant on a timely basis; and (3) to date, implemented that
plan in accordance with that timetable in all material respects.
43
(iii) Each Related Person has made or will make written inquiry of
each of its key suppliers, vendors, and customers, and will attempt to
obtain in writing confirmations from all such persons, as to whether such
persons have initiated programs to become Year 2000 Compliant and on the
basis of such confirmations, each Related Person reasonably believes that
all such persons will be or become so compliant. For purposes hereof, "key
suppliers, vendors, and customers" refers to those suppliers, vendors, and
customers of each Related Person whose business failure would, with
reasonable probability, result in a Material Adverse Effect.
ARTICLE VI - Covenants of Borrower
Section 6.1 Affirmative Covenants. To conform with the terms and
conditions under which each Lender is willing to have credit outstanding to
Borrower, and to induce Administrative Agent and each Lender and Issuing Bank to
enter into this Agreement and make the Loans and issue Letters of Credit,
Borrower warrants, covenants and agrees that until the full and final payment of
the Obligations and the termination of this Agreement, unless Majority Lenders
have previously agreed otherwise:
(a) Payment and Performance. Borrower will pay all amounts due by Borrower
under the Loan Documents to which it is a party in accordance with the terms
thereof and will observe, perform and comply with every covenant, term and
condition expressed or implied in the Loan Documents applicable to Borrower.
Borrower will cause the other Related Persons to observe, perform and comply
with every such term, covenant and condition applicable to the other Related
Persons in the Loan Documents to which they are a party.
(b) Books, Financial Statements and Reports. Each Related Person will at
all times obtain full and accurate books of account and records. Borrower will
maintain and will cause each Related Person to maintain a standard system of
accounting and will furnish the following statements and reports to
Administrative Agent and Lender at Borrower's expense:
(i) As soon as available, and in any event within ninety (90) days
after the end of each Fiscal Year, complete audited consolidated financial
statements of Spinnaker Exploration Company together with an annual budget
for the current year in form and substance satisfactory to the
Administrative Agent in its sole discretion and all notes thereto, prepared
in reasonable detail in accordance with GAAP in all material respects,
together with an opinion, based on an audit using generally accepted
auditing standards, by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ or other independent certified
public accountants of recognized national standing selected by Spinnaker
Exploration Company and acceptable to the Administrative Agent, stating
that such consolidated financial statements have been so prepared. These
financial statements shall contain a consolidated balance sheet as of the
end of such Fiscal Year and consolidated statements of earnings, of cash
flows, and of changes in owners' equity for such Fiscal Year, each setting
forth in comparative form the corresponding figures for the preceding
Fiscal Year. In addition, within ninety (90) days after the end of each
Fiscal Year Borrower will furnish a certificate signed by such accountants
stating that in making the
44
examination and reporting on the consolidated financial statements
described above they aid not conclude that any Default existed at the end
of such Fiscal Year or at the time of their report, or, if they did
conclude that a Default existed, specifying its nature and period of
existence.
(ii) As soon as available, and in any event within sixty (60) days
after the end of each Fiscal Quarter, complete unaudited consolidated
financial statements from Spinnaker Exploration Company and consolidated
balance sheet as of the end of such Fiscal Quarter and consolidated
statements of earnings and cash flows for the period from the beginning of
the then current Fiscal Year to the end of such Fiscal Quarter, all in
reasonable detail and prepared in accordance with GAAP, subject to changes
resulting from normal year-end adjustments and without footnotes. In
addition Borrower will, together with each such set of financial statements
and each set of financial statements furnished under subsection (b)(i) of
this section furnish a certificate in the form of Exhibit E signed by the
chief financial officer of Borrower stating that such financial statements
are accurate and complete in all material respects, stating that he/she has
reviewed the Loan Documents, containing calculations showing compliance (or
non-compliance) at the end of such Fiscal Quarter with the requirements of
Sections 6.2(a), (k), (1) and (m), and stating that no Default exists at
the end of such Fiscal Quarter or at the time of such certificate or
specifying the nature and period of existence of any such Default.
(iii) Promptly upon their becoming available, copies of all (A)
financial statements, reports, notices and proxy statements sent by any
Related Person to its stockholders or members and (B) all statements and
reports sent to any Related Person or filed with or otherwise provided to
any Governmental Authority (including without limitation, the Federal
Energy Regulatory Commission or the Texas Natural Resource Conservation
Committee and any successor agencies) which describe or relate to any event
which could reasonably be expected to have a Material Adverse Effect;
(iv) By March 15 of each year, an Engineering Report prepared as of
January 1 of such year by ▇▇▇▇▇ ▇▇▇▇▇ Company, or other independent
petroleum engineers chosen by Borrower and reasonably acceptable to
Administrative Agent, and by August 15 of each year, an Engineering Report
prepared by Borrower's in-house engineering staff as of July 1 of such
year. Each such report shall cover all proved oil and gas reserves
attributable to the properties and interests owned by any Related Person
which are (i) located in or offshore of the United States and (ii) to
comprise the Borrowing Base. Each such report shall take into account any
"over-produced" status under gas balancing arrangements, and shall contain
information and analysis comparable in scope to that contained in the
Initial Engineering Report, and shall be accompanied by such additional
data concerning pricing, operating costs, quantities of production from the
oil and gas properties of the Related Persons, purchasers of production,
and other information and engineering and geological data as Administrative
Agent may reasonably request.
45
(v) As soon as available, and in any event within thirty (30) days
after the end of each Fiscal Quarter, (A) a report describing by lease or
unit the gross volume of production, oil and gas prices and sales
attributable to production during such Fiscal Quarter from the properties
described in subsection (b)(iv) above and comparing (and describing) the
related severance taxes, other taxes, and leasehold operating expenses and
capital costs attributable thereto and incurred during such Fiscal Quarter
to such annual budget as has been previously delivered pursuant to
subsection (b)(i) above, (B) a summary prepared by the Borrower of its cost
of undeveloped leasehold and internal reserve estimate and PV-10 for proved
oil and gas reserves not included in the most recent Engineering Report and
(C) an update of the Borrower providing a qualitative discussion of
drilling operations for such quarter, including, but not limited to,
drilling successes and failures.
(vi) As soon as available, and in any event within thirty (30) days
after the end of each Fiscal Quarter, a hedging report prepared by Borrower
regarding any Hedging Agreement entered into by Borrower and in effect as
of the end of such Fiscal Quarter. Each such hedging report shall be in
form satisfactory to Administrative Agent and shall include unit volumes,
pricing, term, counterparty and date of such contracts.
(vii) Within ten (10) days after entering into a contract, whether
written or oral, for the sale or transfer of any Mortgaged Property, a
schedule of all of the Mortgaged Property so sold since the date of the
most recent Engineering Report, cross-referencing same to the Engineering
Report last delivered hereunder, and the details of such sales including
the Net Sales Proceeds received by the Borrower in connection with each
sale. Contemporaneously with the consummation of any such sale or transfer
with respect to Mortgaged Property included in the Borrowing Base, the
Borrowing Base shall be subject to adjustment, if any, pursuant to Section
6.2(d)(iii) hereof.
(viii) As soon as available, and in any event within thirty (30) days
after the end of each calendar month of Borrower, a lease operating
statement for such month, concerning those fields that comprise at least
ninety percent (90%) of the Borrower's total production.
(ix) Promptly after sending or filing thereof, copies of all reports
which the Borrower sends to any of its securityholders, and all reports and
registration statements which the Borrower or any of its Subsidiaries files
with the Securities and Exchange Commission or any successor agency or any
national securities exchange.
(c) Other Information and Inspections. Each Related Person will furnish to
Administrative Agent and each Lender any information which Administrative Agent
may from time to time reasonably request in writing concerning any covenant,
provision or condition of the Loan Documents or any matter in connection with
the Related Persons' businesses and operations. At any reasonable time and from
time to time, upon reasonable notice, each Related Person shall, and shall cause
its Subsidiaries to, permit the Administrative Agent and any Lender or any of
its agents or representatives thereof, to (a) examine and make copies of and
abstracts from the records and books of account of, and visit and inspect at its
reasonable discretion the properties of, any such Related Person and any such
Subsidiary, and (b) discuss the affairs, finances and accounts of any such
Related
46
Person and any such Subsidiary with any of their respective officers or
directors; provided, however, notwithstanding the provisions of 8.3 the
Administrative Agent or the Lender for whose benefit such inspection and
visitation is made assumes sole responsibility for the condition of any property
of any such Related Person or its Subsidiaries so visited and inspected, the
access and egress thereto (including, but not limited to wharves, docks, and
helicopter landing areas), and any vice or defect therein or thereon, and
assumes all responsibility for and hereby releases and indemnifies each Related
Person, its Affiliates, and their officers, directors, employees, and agents
against any claim for damage or injury to or by the Administrative Agent or such
Lender (or the representatives thereof) or to any such Related Person's or its
Subsidiaries' property which may be occasioned by inspection and visitation of
any such Related Person's or its Subsidiaries' property; provided, however, that
neither any Related Person nor any of its Subsidiaries shall be required to
disclose to the Administrative Agent, any Lender or any agents or
representatives thereof any information which is the subject of attorney-client
privilege or attorney's work-product privilege properly asserted by the
applicable Person to prevent the loss of such privilege in connection with such
information. The expense of any exercise by the Administrative Agent or any
Lender of its rights under this Section 6.1 (c) shall not be incurred by the
Borrower unless a Default has occurred and is continuing at the time of the
request or visit.
(d) Notice of Material Events and Change of Address. Borrower will
promptly, after it has knowledge, notify Administrative Agent and each Lender:
(i) of the occurrence of any act, condition or event which is
reasonably likely to have a Material Adverse Effect;
(ii) of the occurrence of any Default;
(iii) of the acceleration of the maturity of any Indebtedness owed by
any Related Person or of any default by any Related Person under any
indenture, mortgage, agreement, contract or other instrument to which any
of them is a party or by which any of them or any of their properties is
bound, if such acceleration or default might have a Material Adverse
Effect;
(iv) of the occurrence of any Termination Event;
(v) of any claim in an amount equal to 1% of Spinnaker Exploration
Company's consolidated shareholder equity (based upon the most recent
financial statements delivered pursuant to Section 6.1(b)), or more, any
notice of potential liability under any Environmental Laws which might
exceed such amount, or any other claim asserted against any Related Person
or with respect to any Related Person's properties which might exceed such
amount;
(vi) of the institution of any material action, suit, proceedings,
governmental investigation or arbitration against or affecting any Related
Person not previously disclosed
47
in writing to Administrative Agent pursuant to this Section 6.1 or any
material development in action, suit, proceeding, governmental
investigation or arbitration already disclosed in either case which is
likely to constitute a Material Adverse Effect; and
(vii) copies of all notices of default, notices, amendments, waivers
and other documents delivered or received by any Related Person pursuant to
the terms of the PGS Data Contract (excluding minor correspondence, notices
of delivery of data and the like).
Upon the occurrence of any of the foregoing the Related Persons will take all
necessary or appropriate steps to remedy promptly any such material adverse
change, Default, acceleration, default or Termination Event to protect against
any such adverse claim, to defend any such suit or proceeding, and to resolve
all controversies on account of any of the foregoing. Borrower will also notify
Administrative Agent in writing at least thirty (30) days prior to the date that
any Related Person changes its name or the location of its chief executive
office or principal place of business or the place where it keeps its books and
records concerning the Collateral, furnishing with such notice any necessary
financing statement amendments or requesting Administrative Agent and its
counsel to prepare the same.
(e) Maintenance of Properties. Each Related Person will maintain,
preserve, protect, and keep all Collateral and all other material property
(specifically excluding properties no longer capable of producing hydrocarbons
in economically reasonable quantities) used or useful in the conduct of its
business in good condition, ordinary wear and tear excepted, and in compliance
with all applicable laws, rules and regulations (except where non-compliance is
not reasonably likely to have a Material Adverse Effect), and will from time to
time make all repairs, renewals and replacements needed to enable the business
and operations carried on in connection therewith to be conducted at all times.
Without limitation of the foregoing, (i) each Related Person shall, or shall
make reasonable and customary efforts to, cause its oil and gas properties to be
maintained, developed, protected and operated in a good and workmanlike manner
in material compliance with all title documents, laws and contracts and (ii)
each Related Person shall, or shall make reasonable and customary efforts to,
use its reasonable efforts to cause its oil and gas properties to be developed
in accordance with Spinnaker Exploration Company's annual budget provided to
Administrative Agent (A) prior to the Closing Date and (B) subsequent to the
Closing Date pursuant to subsection (b)(i) above, in each case as such plans and
projections may be revised by Borrower thereafter (such revisions to be
delivered to Administrative Agent upon its reasonable request). All
hydrocarbons which any Related Person takes and/or markets from its oil and gas
properties shall be sold at such prices and on such terms as would be sought and
obtained by a reasonably prudent operator.
(f) Maintenance of Existence and Qualifications. Each Related Person will
maintain and preserve its existence and its material rights, privileges,
permits, licenses and franchises necessary to conduct its business in full force
and effect and will qualify to do business in all states or jurisdictions where
required by applicable law, except where the failure so to qualify will not have
any Material Adverse Effect.
48
(g) Payment of Trade Debt, Taxes, etc. Each Related Person will (i) timely
file (including any automatic extensions for filing) all required tax returns;
(ii) timely pay all taxes, assessments, and other governmental charges or levies
imposed upon it or upon its income, profits or property; (iii) within ninety
(90) days after the same becomes due pay all Indebtedness owed by it on ordinary
trade terms to vendors, suppliers and other Persons providing goods and services
used by it in the ordinary course of its business; (iv) pay all other material
claims (including, without limitation, claims for labor, services, materials and
supplies) that have become due and payable and that by law have or may become a
Lien on its such property or assets, prior to the time when any penalty or fine
may be incurred with respect thereto; and (v) maintain appropriate accruals and
reserves for all of the foregoing in accordance with GAAP. Each Related Person
may, however, delay paying or discharging and of the foregoing so long as it is
in good faith contesting the validity thereof by appropriate proceedings and has
set aside on its books adequate reserves therefor.
(h) Insurance. Each Related Person will keep or cause to be kept
adequately insured by financially sound and reputable insurers its equipment,
vehicles and all other property of a character usually insured by similar
Persons engaged in the same or similar businesses and reasonably satisfactory to
Administrative Agent. Each Related Person shall at all times maintain insurance
against its liability for injury to persons or property as is customary for the
industry, which insurance shall be by financially sound and reputable insurers
and reasonably satisfactory to Administrative Agent.
(i) Payment of Expenses. Whether or not the transactions contemplated by
this Agreement are consummated, Borrower will promptly (and in any event, within
thirty (30) days after any invoice or other statement or notice) pay all
reasonable costs (excluding advertising costs) and expenses incurred by or on
behalf of (i) Administrative Agent and its Affiliates (including reasonable
attorneys' fees) in connection with (1) the negotiation, syndication,
preparation, execution and delivery of the Loan Documents, and any and all
consents, waivers or other documents or instruments relating thereto, (2) the
filing, recording, refiling and re-recording of any Loan Documents and any other
documents or instruments or further assurances required to be filed or recorded
or refiled or rerecorded by the terms of any Loan Document, and (3) the
borrowings hereunder and other action reasonably required in the course of
administration hereof, and (ii) Administrative Agent or any Lender (including
reasonable attorneys' fees) in connection with the defense or enforcement of the
Loan Documents or the defense of Administrative Agent's or any Lender's exercise
of its rights thereunder (including costs and expenses of determining whether
and how to carry out such defense or enforcement).
(j) Preservation of Oil and Gas Properties. Borrower shall at all times at
Borrower's own expense use reasonable commercial efforts to do all things
reasonably necessary to keep unimpaired each Related Persons' rights and
remedies in their oil and gas properties. Without limiting the foregoing, each
Related Person shall use reasonable commercial efforts to pay or cause to be
paid, promptly as and when due and payable, all delay rentals, royalties and
other indebtedness payable to the lessor of such oil and gas properties. Should
any adverse claim be made against, or a cloud develop upon, or material title
defect exist upon, the title of any Related Person to any part of its oil and
gas properties, such Related Person agrees that it will promptly defend such
claim or
49
take appropriate action to remove such cloud or clear such title defect at such
Related Person's expense. Subject to Section 6.2(d), each Related Person shall
maintain at all times title to all their respective properties as represented by
Section 5.1(n), free and clear of Liens, other than the Liens permitted by
Section 6.2(b). Notwithstanding the foregoing, nothing in this Section 6.1(j)
shall prevent any Related Person from plugging and abandoning any ▇▇▇▇▇ if,
based on its good faith assessment, it is economical to do so, or prevent any
Related Person from assigning leases by customary farm-ins or non-consent
provisions in the good faith exercise of the prudent operator standard.
(k) Compliance with Agreements and Law. Each Related Person will perform
all material obligations it is required to perform under the terms of each
indenture, mortgage, deed of trust, security agreement, lease, franchise,
agreement, contract or other instrument or obligation to which it is a party or
by which it or any of its properties is bound. Each Related Person will conduct
its business and affairs in material compliance with all laws, regulations, and
orders applicable thereto, including Environmental Laws.
(l) Year 2000.
(i) Each Related Person shall furnish such additional information,
statements and other reports with respect to its activities, course of
action and progress towards becoming Year 2000 Compliant as Administrative
Agent may request from time to time.
(ii) In the event of any change in circumstances that causes or will
likely cause any of the Related Persons' representations and warranties
with respect to its being or becoming Year 2000 Compliant to no longer be
true (hereinafter, referred to as a "Change in Circumstances") then such
Related Person shall promptly, and in any event within ten (10) days of
receipt of information regarding a Change in Circumstances, provide
Administrative Agent with written notice (the "Notice") that describes in
reasonable detail the Change in Circumstances and how such Change in
Circumstances caused or will likely cause such Related Person's
representations and warranties with respect to being or becoming Year 2000
Compliant to no longer be true. Each Related Person shall, within ten (10)
days of a request, also provide Administrative Agent with any additional
information Administrative Agent requests of such Related Person in
connection with the Notice and/or a Change in Circumstances.
(iii) Each Related Person shall give any representative of
Administrative Agent access during all business hours to, and permit such
representative to examine, copy or make excerpts from, any and all books,
records and documents in the possession of such Related Person and relating
to its affairs, and to inspect any of the properties and Systems of such
Related Person, and to project test the Systems to determine if they are
Year 2000 Compliant in an integrated environment, all at the sole cost and
expense of Administrative Agent.
Section 6.2 Negative Covenants. To conform with the terms and
conditions under which each Lender is willing to have credit outstanding to
Borrower, and to induce Administrative Agent
50
and each Lender and Issuing Bank to enter into this Agreement and make the Loans
and issue Letters of Credit, Borrower warrants, covenants and agrees that until
the full and final payment of the Obligations and the termination of this
Agreement, unless Majority Lenders have previously agreed otherwise:
(a) Indebtedness. No Related Person will create, incur, assume or suffer
to exist any Indebtedness except:
(i) the Obligations;
(ii) Indebtedness arising under Hedging Agreements as permitted
hereunder;
(iii) miscellaneous items of Indebtedness not described in subsections
(i) and (ii), incurred for purchase money indebtedness, Capitalized Lease
Obligations and leases substantially equivalent to title retention or
conditional sales agreements, sales and leasebacks, and other Indebtedness
incurred in the ordinary course of business for the purchase of equipment,
computers, furniture, automobiles and similar incidentals (and not for
working capital or acquisitions) which do not in the aggregate (taking into
account all such Indebtedness of all Related Persons) exceed $1,000,000 at
any one time outstanding; and
(iv) Indebtedness owing to another Related Person permitted by Section
6.2(g).
(b) Limitation on Liens. No Related person will create, incur, assume or
suffer or permit to exist any Lien upon any of the properties or assets which it
now owns or hereafter acquires, except:
(i) Liens which secure Obligations only;
(ii) Liens which secure Indebtedness permitted by Section 6.2(a)(iii);
(iii) Liens for taxes or assessments on real or personal property
which are not yet past due, or Liens for taxes and assessments on real or
personal property which are past due but for which adequate reserves with
respect thereto are maintained on its books in accordance with GAAP and
which are being diligently contested in good faith by appropriate
proceedings and have not proceeded to judgment;
(iv) imperfections and irregularities in title to any property (which
indirectly or together with any other such property has an aggregate fair
market value in excess of $500,000) which in the aggregate do not
materially impair the fair market value or use of such property for the
purposes for which it is or may reasonably be expected to be held;
(v) easements, exceptions, reservations, servitudes, permits, surface
leases and other rights in respect of surface leases, zoning, planning,
environmental and similar
51
restrictions, laws or ordinances or agreements for the purpose of
pipelines, conduits, cables, wire communication lines, power lines and
substations, streets, roads, trails, walkways, drainage, irrigation, water,
and sewage purposes, dikes, canals, ditches, the removal of oil, gas, coal,
or other minerals, or for the joint or common use of real property or
rights-of-way and other like purposes affecting real property (which
indirectly or together with any other such property has an aggregate fair
market value in excess of $500,000) which in the aggregate, are not
substantial in amount, and which do not, in any case, materially burden or
impair the fair market value or use of such property for the purposes for
which it is or may reasonably be expected to be held;
(vi) non-consensual Liens imposed by law (other than a Lien imposed by
ERISA), including carrier's, mechanics', materialmen's, landlord's,
warehousemen's or other similar Liens, with respect to obligations not
incurred in connection with any violations of law and which are not
delinquent or, if delinquent, are being diligently contested in good faith
by appropriate proceedings, and for which adequate reserves with respect
thereto are maintained on its books in accordance with GAAP;
(vii) Liens consisting of pledges or deposits made in connection with
obligations under unemployment insurance, social security, workers'
compensation laws or similar legislation;
(viii) Liens consisting of pledges or deposits of property to secure
insurance in the ordinary course of business, the performance of bids,
tenders, contracts (other than contracts for the payment of money), leases,
licenses, franchises, performance bonds and other obligations of a like
nature incurred in the ordinary course of business;
(ix) Liens consisting of deposits of property to secure statutory
obligations of Borrower in the ordinary course of its business;
(x) Liens consisting of pledges or deposits of cash or cash
equivalents to secure Hedging Agreements with counterparties that are not
Lenders; provided that no more than $5,000,000 is subject to such Liens at
any one time in the aggregate; provided further that the conditions of
Section 6.2(n)(iii) are satisfied;
(xi) Liens consisting of deposits of property to secure (or in lieu of
surety, appeal or customer bonds in proceedings to which Borrower is a
party in the ordinary course of its business;
(xii) Liens arising under operating, farmout, pooling or unitization
agreements of Borrower of the scope and nature customary in the oil and gas
industry; and
(xiii) Liens for lessor's royalties, overriding royalties, and
division orders and sales contracts covering hydrocarbons, reversionary
interests and similar burdens; and any
52
operator's Liens or similar Liens arising in the ordinary course of the oil
and gas operations of the Related Persons and securing obligations that are
not past due;
provided that no Lien referred to above in subsections (ii) through (iii),
inclusive, shall (1) secure Indebtedness (except in subsection (ii)), (2) in the
aggregate materially detract from the value of the oil and gas properties of the
Related Persons or materially impair the use thereof in the operation of the
business of the Related Persons, (3) individually or in the aggregate, operate
to reduce the net revenue interest of the Related Persons in any of the
Mortgaged Property owned by the Related Persons to less than the net revenue
interest set forth in the Engineering Report most recently delivered by Borrower
to the Administrative Agent, or (4) be disadvantageous in any material respect
to Administrative Agent and the Lenders.
(c) Limitation on Fundamental Changes, Issuances of Securities. Except as
expressly provided in this subsection, no Related Person shall enter into any
transaction of acquisition of a Person or merger, consolidation or amalgamation,
or liquidate, wind up or dissolve itself (or suffer any liquidation or
dissolution), or convey, sell lease, assign, transfer or otherwise dispose of,
all or substantially all of its property, business or assets. Any Subsidiary of
Borrower may, however, be merged into or consolidated with (i) another
Subsidiary of Borrower, so long as a direct wholly-owned Subsidiary of Borrower
which is a Guarantor is the surviving business entity, or (ii) Borrower, so long
as Borrower is the surviving business entity. In addition, any Person may be
merged into or consolidated with any Related Person so long as such Related
Person is the surviving business entity and no Default exists or will be created
thereby. Any wholly-owned Subsidiary of Borrower may sell, lease, transfer or
otherwise dispose of any or all of its assets (upon voluntary liquidation or
otherwise) to Borrower or any other direct wholly-owned Subsidiary of Borrower
which is a Guarantor. Borrower will not issue any membership interests other
than common membership interests in Borrower and any options or warrants giving
the holders thereof only the right to acquire such interests. No Subsidiary of
Borrower will issue any additional securities or any options, warrants or other
rights to acquire such additional securities except to Borrower and only to the
extent not otherwise forbidden under the terms hereof. No Subsidiary of
Borrower will allow any diminution of Borrower's interest (direct or indirect)
therein. Except in connection with a Permitted Initial Public Offering,
Borrower will not suffer to exist any sale, transfer or other disposition of the
stock of or rights with respect to Borrower or any Subsidiary, and Borrower will
not issue any additional securities or any options, warrants or other rights to
acquire such additional securities.
(d) Limitation on Sales of Property. No Related Person will sell,
transfer, lease, exchange, alienate or dispose of any properties valued in the
Borrowing Base or any of its other assets or properties or any interest therein
except:
(i) equipment which is worthless or obsolete or which is replaced by
equipment of equal suitability and value;
(ii) inventory (including oil and gas sold as produced and seismic
data) which is sold for cash only in the ordinary course of business on
ordinary trade terms;
53
(iii) in the period subsequent to the then most recent Determination
Date, sales of interests in oil and gas properties, or portions thereof,
which are included in the Borrowing Base whose value, if any, as set forth
in the Engineering Report most recently finished to Administrative Agent
and Lenders as of the time of sale does not in the aggregate in such period
exceed $500,000. In the event the Lenders, in their sole discretion,
permit any Related Person to sell any such properties which are included in
the Borrowing Base in excess of such $500,000 in any such period, (1)
Administrative Agent shall have the right to require a Borrowing Base re-
determination, at Borrower's cost, and (2) the Net Sales Proceeds therefrom
shall be applied as set forth in Section 2.10(a)(ii)(B). Any sale,
transfer or other disposition of Mortgaged Property shall contemporaneously
with the consummation of such sale, transfer or other disposition, reduce
the Borrowing Base then in effect by an amount equal to the loan value (as
reasonably determined by the Lenders in accordance with the standards
stated in this Agreement), attributable to all Mortgaged Property so sold,
transferred or disposed;
(iv) provided that no Event of Default exists and is continuing, sales
of interests in oil and gas properties, or portions thereof, which are not
proved reserves as shown in the most recent Engineering Report delivered
pursuant hereto; and
(v) second licenses to information under the PGS Data Contract,
provided that in the event a Borrowing Base Deficiency exists and is
continuing, Borrower shall prepay the Loans in an amount equal to such
Borrowing Base Deficiency from the Net Sales Proceeds from the sale of such
second licenses within one (1) Business Day of recipient of any such net
proceeds. Application of such Net Sales Proceeds shall be applied to the
principal of the Loans until the Loans are paid in full and then to be held
as LC Collateral in an amount equal to the aggregate amount of Matured LC
Obligations pursuant to Section 3.6.
(e) Limitation on Dividends and Redemption. No Related Person will declare
or pay any dividends on or make any other distribution in respect of any
interest in it, nor will any Related Person directly or indirectly make any
capital contribution to or purchase, redeem, acquire or retire any securities in
any Related Person (whether such interests are now or hereafter issued,
outstanding or created), or cause or permit any reduction or retirement of the
capital stock of any Related Person, except as expressly provided in this
section. Such dividends, distributions, contributions, purchases, redemptions,
acquisitions, retirements or reductions may be made (i) by any Related Person
other than Borrower without limitation to Borrower; (ii) by any Related Person
to Guarantors which are Subsidiaries of Borrower, to the extent that such
Guarantors are using funds so contributed or paid for activities in which
Borrower could invest directly under Section 6.2(f); (iii) by Borrower to the
members of Borrower, provided such distribution is solely used directly or
indirectly to pay either current taxes or employee compensation paid within the
ordinary course of business (including) bonuses and payments under employment
contracts existing on the Closing Date) and (iv) by Spinnaker Exploration
Company as provided in Section 2(c) of the Certificate of Designation,
Preferences and Rights of Series A Convertible Preferred Stock as such section
exists on the Closing Date; provided that no such dividends, distributions,
contributions, purchases, redemptions,
54
acquisitions, retirements or reductions shall be permitted if (a) a Default or
Event of Default has occurred and is continuing, (b) a Default or Event of
Default would occur as a result thereof, or (c) a Borrowing Base Deficiency
exists. The Borrower may make a dividend in the form of the conversion of some
of its equity owned by Spinnaker Exploration Company to subordinated
Indebtedness owing to Spinnaker Exploration Company in the aggregate amount of
$25,000,000 to the extent such Indebtedness is permitted by Section 6.2(g)(ii)
hereof. Spinnaker Exploration Company may redeem no more than 21,920 shares of
its common stock from ▇▇▇▇▇ ▇▇▇▇▇▇ at $2.50 per share.
(f) Limitation on Investments. No Related Person will make any significant
acquisitions or, or capital contributions to, or other investments in, any
properties or Person, other than:
(i) Permitted Investments; investments permitted by Section 6.2(g);
and demand and time deposits with The Frost National Bank not to exceed
$250,000 at any one time;
(ii) in its existing lines of business;
(iii) to Subsidiaries of the Borrower which are Guarantors;
(iv) pledges or deposits of cash or cash equivalents to secure Hedging
Agreements with counterparties that are not Lenders; provided that no more
than $5,000,000 is subject to such Liens at any one time in the aggregate;
provided further that the conditions of Section 6.2(n)(iii) are satisfied;
(v) investments in connection with or related to farm-out, farm-in,
joint operating, joint venture or area of mutual interest agreements,
gathering systems, pipelines or other similar or customary arrangements
entered into in the ordinary course of business only insofar as they do not
(i) reduce the net revenue interest of the Related Persons in any property
included in the Borrowing Base below the undivided net revenue interest
specified for such Related Persons in the most recent Engineering Report
utilized by the Lenders in determining the then effective Borrowing Base
and/or (ii) increase the undivided working interest without a corresponding
increase in the net revenue interest specified for such Related Persons in
the most recent Engineering Report utilized by the Lenders in determining
the then effective Borrowing Base.
Notwithstanding the foregoing, investments by Spinnaker Exploration Company
and WP Spinnaker Holdings, Inc. shall be limited to their interests in Borrower
or Permitted Investments and investments permitted by Section 6.2(g).
(g) Limitation on Credit Extensions. Except for Permitted Investments, no
Related Person will extend credit, make advances or make loans other than (i)
normal and prudent extensions of credit to customers buying goods and services
in the ordinary course of business, which extensions shall not be for longer
periods than those extended by similar businesses operated in a normal and
prudent manner, (ii) loans to another Related Person that is a Guarantor or to
the
55
Borrower (to the extent (and only to the extent) repayment thereof shall be
subordinated by an agreement in the form of Exhibit I to payment of the
Obligations); provided that, in addition to the limits set forth in Exhibit I,
any payment of interest made before the Final Maturity Date on any such
subordinated debt shall be permitted only if (A) such payment is solely used
directly or indirectly to pay either current taxes or employee compensation paid
within the ordinary course of business (including bonuses and payments under
employment contracts existing on the Closing Date and (B) no Borrowing Base
Deficiency exists, and (iii) advances to operators under operating agreements
entered into by the Borrower in the ordinary course of business.
(h) Transactions with Affiliates. No Related Person will engage in any
transaction with any of its Affiliates on terms which are less favorable to it
than those which would have been obtainable at the time in arm's-length dealing
with Persons other than such Affiliates, provided that such restrictions shall
not apply to transactions among Related Persons.
(i) Certain Contracts; Amendments; Multiemployer ERISA Plans. Except as
expressly provided for in the Loan Documents, no Related Person will, directly
or indirectly, enter into, create, or otherwise allow to exist any contract or
other consensual restriction on the ability of any Subsidiary of Borrower: (i)
to pay dividends or make other distributions to Borrower, (ii) to redeem equity
interests held in it by Borrower, (iii) to repay loans and other indebtedness
owing by it to Borrower, or (iv) to transfer any of its assets to Borrower. No
Related Person will enter into any "take-or-pay"contract or other contract or
arrangement for the purchase of goods or services which obligates it to pay for
such goods or service regardless of whether they are delivered or furnished to
it. No Related Person will amend or permit any amendment to its charter
documents or bylaws or the PGS Data Contract to the material detriment of
Administrative Agent or any Lender. No Related Person will incur any obligation
to contribute to any "multiemployer plan" as defined in Section 4001 of ERISA.
(j) Fiscal Year. No Related Person will change its fiscal year.
(k) Current Ratio. The ratio of Borrower's consolidated current assets as
of the end of each Fiscal Quarter to Borrower's consolidated current liabilities
as of the end of such Fiscal Quarter will never be less than 1.00 to 1.00. For
purposes of this subsection, Borrower's consolidated current ratio will be
calculated (i) including availability under this Agreement as current assets,
and (ii) excluding as current liabilities any payments of principal on the Notes
which are required to be repaid within one year from the time of calculation.
(l) [Reserved].
(m) [Reserved].
(n) Hedging. Borrower will not enter into any Hedging Agreement except for
Hedging Agreements that do not violate the following requirements:
56
(i) at no time will the aggregate amounts maturing in any month under
any floor hedging contracts or collar hedging contracts entered into prior
to the date hereof exceed at any time one hundred percent (100%) of (x) the
estimated production for such month from proved producing reserves of
Related Persons, less (y) any such estimated production subject to forward
sales transactions permitted under clause (ii) below.
(ii) at no time will amounts maturing in any month under any forward
sales transactions, calls or other derivative products (except as expressly
provided above) for the sale of crude oil and/or natural gas exceed at any
time fifty percent (50%) of (x) the estimated production for such month
from proved producing reserves of Related Persons, less (y) any such
estimated production subject to floor or collar permitted by clause (i)
immediately preceding oil and gas contracts permitted under clause (i)
above.
(iii) at no time will any Hedging Agreement of any nature (including
any such contracts described in clauses (i) and (ii) above) (x) contain any
term or provision which could require Borrower to meet margin calls, or
otherwise to put up any money, Letter of Credit or other asset against the
event of its nonperformance, prior to actual default in performing its
obligations thereunder where the aggregate amount of any such money, Letter
of Credit and other assets exceeds $5,000,000 (or, if less, the amount
available to Borrower hereunder immediately prior to putting up such money,
Letter of Credit or other asset) or (y) have a counterparty with a minimum
long-term unsecured Indebtedness rating less than "BBB" by Standard & Poors
Corporation or "Baa" by ▇▇▇▇▇'▇ Investors Services, Inc.
ARTICLE VII - Security
Section 7.1 The Security. The Obligations will be secured by the
Security Documents listed in the Security Schedule and any additional Security
Documents hereafter delivered by any Related Person and accepted by
Administrative Agent.
Section 7.2 Agreement to Deliver Security Documents. Borrower agrees to
deliver and to cause its Subsidiaries to deliver, to further secure the
Obligations whenever requested by Administrative Agent in its sole and absolute
discretion, deeds of trust, mortgages, chattel mortgages, security agreements,
financing statements and other Security Documents in form and substance
satisfactory to Administrative Agent for the purpose of granting, confirming,
and perfecting first and prior liens or security interests in any proved oil and
gas Properties and the equity interests of the Borrower and is Subsidiaries now
owned or hereafter acquired by any of the Related Persons, subject only to Liens
permitted by Section 6.2(b) hereof. Borrower also agrees to deliver to the
extent not already delivered, whenever requested by Administrative Agent in its
sole and absolute discretion (a) favorable title information (including, if
reasonably requested by the Administrative Agent, title opinions) acceptable to
Administrative Agent with respect to any Related Person's properties and
interests covering oil and gas properties as described on Schedule 3 hereto (as
such Schedule may be amended, supplemented or otherwise modified from time to
time) constituting at least 80% of the present value, determined by the Lenders
in their sole and absolute discretion and in accordance with their normal
practices and standards for oil and gas loans as it
57
exists at the particular time, of the Related Persons' Properties and
demonstrating that such Related Person has good and defensible title to such
properties and interests, free and clear of all Prohibited Liens and covering
such other matters as Administrative Agent may reasonably request and (b)
favorable opinions of counsel satisfactory to Administrative Agent in its sole
discretion opining that the forms of Mortgage are sufficient to create valid
first deed of trust or mortgage liens in such properties and interests and first
priority assignments of and security interests in the oil and gas attributable
to such properties and interests and proceeds thereof. In the case of any
Related Person granting a Lien in favor of Administrative Agent upon any assets
having a present value in excess of $1,000,000 located in a new jurisdiction,
Borrower will at its own expense, obtain and furnish to Administrative Agent all
such opinions of legal counsel as Administrative Agent may reasonably request in
connection with any such security, instrument or act of such Related Person.
Section 7.3 Perfection and Protection of Security Interests and Liens.
Borrower will from time to time deliver to Administrative Agent any financing
statements, continuation statements, extension agreements and other documents,
properly completed and executed (and acknowledged when required) by the Related
Persons in form and substance satisfactory to Administrative Agent, which
Administrative Agent requests for the purpose of perfecting, confirming, or
protecting any Liens or other rights in Collateral securing any Obligations.
Section 7.4 Bank Accounts; Offset. To ensure the repayment of the
Obligations, Borrower hereby grants to Administrative Agent, each of its
Affiliates and each Lender and Issuing Bank a security interest, a lien, and a
right of offset, each of which shall be in addition to all other interests,
liens, and rights of Administrative Agent or any Lender or Issuing Bank at
common law, under the Loan Documents, or otherwise, and each of which shall be
upon and against (a) any and all moneys, securities or other property (and the
proceeds therefrom) of Borrower now or hereafter held or received by or in
transit to Administrative Agent or any Lender or Issuing Bank from or for the
account of Borrower, whether for safekeeping, custody, pledge, transmission,
collection or otherwise, (b) any and all deposits (general or special, time or
demand, provisional or final), other than deposits of funds held by Borrower for
the benefit of third parties, of Borrower with Administrative Agent or any
Lender or Issuing Bank, and (c) any other credits and claims of Borrower at any
time existing against Administrative Agent or any Lender or Issuing Bank,
including claims under certificates of deposit. At any time and from time to
time after the occurrence of any Default, each of Administrative Agent and any
Lender and Issuing Bank is hereby authorized to foreclose upon, or to offset
against the Obligations then due and payable (in either case without notice to
Borrower), any and all items hereinabove referred to. The remedies of
foreclosure and offset are separate and cumulative, and either may be exercised
independently of the other without regard to procedures or restrictions
applicable to the other.
Section 7.5 Additional Subsidiaries. Within five (5) Business Days
after Borrower or any Subsidiary creates, acquires or otherwise forms a
Subsidiary, Borrower shall:
(a) execute and deliver, or cause the Person owning all of the outstanding
equity interests in such Subsidiary to execute and deliver, to Administrative
Agent on behalf of the Lenders, a Pledge Agreement, pursuant to which all of the
outstanding equity interests in such Subsidiary shall
58
be pledged to Administrative Agent on behalf of the Lenders, together with any
certificates representing all equity interests so pledged, if any, and for each
such certificate representing shares of stock, a stock power executed in blank;
(b) cause such Subsidiary to execute and deliver to Administrative Agent on
behalf of the Lenders (i) a guaranty (ii) an agreement substantially similar to
the security agreements executed and delivered on the Closing Date and (iii) a
Mortgage as to all real property interests containing any proved reserves owned
or leased by such Subsidiary;
(c) cause such Subsidiary to execute and deliver to Administrative Agent on
behalf of the Lenders appropriate financing statements covering the Collateral
of such Subsidiary;
(d) deliver or cause to be delivered to Administrative Agent on behalf of
the Lenders all agreements, documents, instruments and other writings described
in Section 4.1(c)(i), (d) and (k), with respect to such Subsidiary; and
(e) deliver or cause to be delivered to Administrative Agent on behalf of
the Lenders all such information regarding the condition (financial or
otherwise), business and operations of such Subsidiary as Administrative Agent
or any Lender through Administrative Agent may reasonably request.
Section 7.6 Production Proceeds. Notwithstanding that, by the terms of
the various Security Documents, Related Persons are and will be assigning to
Administrative Agent and Lenders all of the "Production Proceeds" (as defined
therein) accruing to the property covered thereby, so long as no Event of
Default has occurred Related Persons may continue to receive from the purchasers
of production all such Production Proceeds, subject, however, to the Liens
created under the Security Documents, which Liens are hereby affirmed and
ratified. Upon the occurrence of an Event of Default, Administrative Agent and
Lenders may exercise all rights and remedies granted under the Security
Documents, including the right to obtain possession of all Production Proceeds
then held by any Related Person or to receive directly from the purchasers of
production all other Production Proceeds. In no case shall any failure, whether
purposed or inadvertent, by Administrative Agent or Lenders to collect directly
any such Production Proceeds constitute in any way a waiver, remission or
release of any of their rights under the Security Documents, nor shall any
release of any Production Proceeds by Administrative Agent or Lenders to any
Related Person constitute a waiver, remission, or release of any other
Production Proceeds or of any rights of Administrative Agent or Lenders to
collect other Production Proceeds thereafter.
ARTICLE VIII - Events of Default and Remedies
Section 8.1 Events of Default. Each of the following events constitutes
an Event of Default under this Agreement:
(a) Any Related Person fails to pay any interest within three (3) days of
the date when due, or any Related Person fails to pay any other Obligation when
due and payable, whether at a date
59
for the payment of a fixed installment or as a contingent or other payment
becomes due and payable or as a result of acceleration or otherwise;
(b) Any Related Person fails (other than as referred to in subsection (a)
above) to duly observe, perform or comply with any covenant, agreement,
condition or provision of Section 6.2.
(c) Any Related Person fails (other than as referred to in subsection (a)
and (b) above) to duly observe, perform or comply with any covenant, agreement,
condition or provision of this Agreement or any other Loan Document and such
failure remains unremedied for a period of thirty (30) days from such failure;
(d) Any representation or warranty previously, presently or hereafter made
in writing by or on behalf of any Related Person in connection with any Loan
Document shall prove to have been false or incorrect in any material respect on
any date on or as of which made, or any Loan Document at any time ceases to be
valid, binding and enforceable as warranted in Section 5.1(e) for any reason
other than its release or subordination by Administrative Agent, or any Related
Person or any Affiliate thereof shall so assert;
(e) [Reserved]
(f) Any Related Person fails to duly comply with any material term of any
agreement or instrument, if such agreement or instrument is materially
significant to Spinnaker Exploration Company on a consolidated basis, and such
failure is not remedied within the applicable period of grace (if any) provided
in such agreement or instrument;
(g) Any Related Person shall (i) fail to pay Indebtedness having a
principal amount in excess of $100,000 in the aggregate (other than the amounts
referred to in Section 8.1 (a)), or any interest or premium thereon, when due
(or, if permitted by the terms of the relevant document, within any applicable
grace period), whether such Indebtedness shall become due by scheduled maturity,
by required prepayment, by acceleration, by demand or otherwise; or (ii) fail to
perform any term, covenant or condition on its part to be performed under any
agreement or instrument evidencing, securing or relating to Indebtedness having
a principal amount in excess of $100,000 in the aggregate, when required to be
performed, and such failure shall continue after the applicable grace period, if
any, specified in such agreement or instrument, if the effect of such failure is
to accelerate, or to permit the holder or holders of such Indebtedness to
accelerate, the maturity of such Indebtedness;
(h) A Change in Control shall occur;
(i) Either (i) any "accumulated funding deficiency" (as defined in Section
412(a) of the Internal Revenue Code of 1986, as amended) in excess of $100,000
exists with respect to any ERISA Plan, whether or not waived by the Secretary of
the Treasury or his delegate, or (ii) any Termination Event occurs with respect
to any ERISA Plan and the then current value of such ERISA Plan's benefit
liabilities exceeds the then current value of such ERISA Plan's assets available
for
60
the payment of such benefit liabilities by more than $100,000 (or in the case of
a Termination Event involving the withdrawal of a substantial employer, the
withdrawing employer's Proportionate share of such excess exceeds such amount);
(j) The PGS Data Contract shall terminate, expire or cease to be in full
force and effect and the Borrower is required to return or is prohibited from
using substantially all of the data received under such contract;
(k) Any Related Person:
(i) suffers the entry against it of a judgment, decree or order for
relief by a court of competent jurisdiction in an involuntary proceeding
commenced under any applicable bankruptcy, insolvency or other similar law
of any jurisdiction now or hereafter in effect, including the federal
Bankruptcy Code, as from time to time amended, or has any such proceeding
commenced against it which remains undismissed for a period of sixty (60)
days; or
(ii) commences a voluntary case under any applicable bankruptcy,
insolvency or similar law now or hereafter in effect, including the federal
Bankruptcy Code, as from time to time amended; or applies for or consents
to the entry of an order for relief in an involuntary case under any such
law; or makes a general assignment for the benefit of creditors; or fails
generally to pay (or admits in writing its inability to pay) its debts as
such debts become due; or takes action to authorize any of the foregoing;
or
(iii) suffers the appointment of or taking possession by a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar official
of all or a substantial part of its assets or of any part of the Collateral
in a proceeding brought against or initiated by it, and such appointment or
taking possession is either made ineffective nor discharged within sixty
(60) days after the making hereof, or such appointment or taking possession
is at any time consented to, requested by, or acquiesced to by it; or
(iv) suffers the entry against it of one or more final judgments,
orders, writs, warrants of attachment or similar process for the payment of
money in excess of $100,000 in the aggregate, unless the same is discharged
within thirty (30) days after the date of entry thereof or an appeal or
appropriate proceeding for review thereof is taken within such period and a
stay of execution pending such appeal is obtained; or
(v) suffers a writ or warrant of attachment or any similar process to
be issued by any court against all or any substantial part of its assets or
any part of the Collateral, and such writ or warrant of attachment or any
similar process is not stayed or released within fifteen (15) days after
the entry or levy thereof or after any stay is vacated or set aside; or
(l) any of the Security Documents shall cease, for any reason, to be in
full force and effect, or any Related Person or any Affiliate thereof shall so
assert or any of the security interests
61
created by the Security Documents shall cease to be enforceable and of the same
effect and priority purported to be created thereby, and such shall not be
remedied with fifteen (15) days after notice from Administrative Agent.
Upon the occurrence of an Event of Default described in subsection (k)(i),
(k)(ii) or (k)(iii) of this section, all of the Obligations shall thereupon be
immediately due and payable, without demand, presentment, notice of demand or of
dishonor and nonpayment, protest, notice of protest, notice of intention to
accelerate, declaration or notice of acceleration, or any other notice or
declaration of any kind, all of which are hereby expressly waived by Borrower
and each other Related Person who at any time ratifies or approves this
Agreement. During the continuance of any other Event of Default, Administrative
Agent at any time and from time to time may (and upon written instructions from
Majority Lenders, Administrative Agent shall), without notice to Borrower and
any other Related Person, declare any or all of the Obligations immediately due
and payable, and all such Obligations shall thereupon be immediately due and
payable, without demand, presentment, notice of demand or of dishonor and
nonpayment, protest, notice of protest, notice of intention to accelerate,
declaration or notice of acceleration, or any other notice or declaration of any
kind, all of which are hereby expressly waived by Borrower and each other
Related Person who at any time ratifies or approves this Agreement. After any
such acceleration (whether automatic or due to any declaration by Administrative
Agent), any obligation of any Lender to make any further Advances or Issuing
Bank to issue any additional Letters of Credit shall be permanently terminated.
Section 8.2 Remedies. If any Default shall occur, each Lender may
protect and enforce its rights under the Loan Documents by any appropriate
proceedings, including proceedings for specific performance of any covenant or
agreement contained in any Loan Document, and each Lender may enforce the
payment of any Obligations due it; or enforce any other legal or equitable right
which it may have. All rights, remedies and powers conferred upon
Administrative Agent and Lenders under the Loan Documents shall be deemed
cumulative and not exclusive of any other rights, remedies or powers available
under the Loan Documents or at law or in equity.
Section 8.3 Payment of Expenses, Indemnities, etc. The Borrower agrees:
(a) whether or not the transactions hereby contemplated are consummated, to
pay all reasonable expenses of the Administrative Agent in the administration
(both before and after the execution hereof and including advice of counsel as
to the rights and duties of the Administrative Agent and the Lenders with
respect thereto) of, and in connection with the negotiation, syndication,
investigation, preparation, execution and delivery of, recording or filing of,
preservation of rights under, enforcement of, and refinancing, renegotiation or
restructuring of, the Loan Documents and any amendment, waiver or consent
relating thereto (including, without limitation, the reasonable fees and
disbursements of counsel and other outside consultants for the Administrative
Agent and, in the case of enforcement, the reasonable fees and disbursements of
counsel for the Administrative Agent and any of the Lenders); and promptly
reimburse the Administrative Agent for all amounts expended, advanced or
incurred by the Administrative Agent or the Lenders to satisfy any obligation of
the Borrower under this Agreement or any other Loan Document, including without
limitation, all costs and expenses of foreclosure;
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(b) TO INDEMNIFY THE ADMINISTRATIVE AGENT AND EACH LENDER AND EACH OF THEIR
AFFILIATES AND EACH OF THEIR OFFICERS, DIRECTORS, EMPLOYEES, REPRESENTATIVES,
AGENTS, ATTORNEYS, ACCOUNTANTS AND EXPERTS ("INDEMNIFIED PARTIES") FROM, HOLD
EACH OF THEM HARMLESS AGAINST AND PROMPTLY UPON DEMAND PAY OR REIMBURSE EACH OF
THEM FOR, THE INDEMNITY MATTERS WHICH MAY BE INCURRED BY OR ASSERTED AGAINST OR
INVOLVE ANY OF THEM (WHETHER OR NOT ANY OF THEM IS DESIGNATED A PARTY THERETO)
AS A RESULT OF, ARISING OUT OF OR IN ANY WAY RELATED TO (I) ANY ACTUAL OR
PROPOSED USE BY THE BORROWER OF THE PROCEEDS OF ANY OF THE LOANS OR LETTERS OF
CREDIT, (II) THE EXECUTION, DELIVERY AND PERFORMANCE OF THE LOAN DOCUMENTS,
(III) THE OPERATIONS OF THE BUSINESS OF THE RELATED PERSON AND THE SUBSIDIARIES,
(IV) THE FAILURE OF ANY RELATED PERSON TO COMPLY WITH THE TERMS OF ANY OTHER
LOAN DOCUMENT OR THIS AGREEMENT, OR WITH ANY GOVERNMENTAL REQUIREMENT, (V) ANY
INACCURACY OF ANY REPRESENTATION OR ANY BREACH OF ANY WARRANTY OF ANY RELATED
PERSON SET FORTH IN ANY OF THE LOAN DOCUMENTS, (VI) THE ISSUANCE, EXECUTION AND
DELIVERY OR TRANSFER OF OR PAYMENT OR FAILURE TO PAY UNDER ANY LETTER OF CREDIT,
(VII) ANY ASSERTION THAT THE LENDERS WERE NOT ENTITLED TO RECEIVE THE PROCEEDS
RECEIVED PURSUANT TO THE LOAN DOCUMENTS OR (VIII) ANY OTHER ASPECT OF THE LOAN
DOCUMENTS, INCLUDING, WITHOUT LIMITATION, THE REASONABLE FEES AND DISBURSEMENTS
OF COUNSEL AND ALL OTHER REASONABLE EXPENSES INCURRED IN CONNECTION WITH
INVESTIGATING, DEFENDING OR PREPARING TO DEFEND ANY SUCH ACTION, SUIT,
PROCEEDING (INCLUDING ANY INVESTIGATIONS, LITIGATION OR INQUIRIES) OR CLAIM AND
INCLUDING ALL INDEMNITY MATTERS ARISING BY REASON OF THE ORDINARY NEGLIGENCE OF
ANY INDEMNIFIED PARTY, BUT EXCLUDING ALL INDEMNITY MATTERS ARISING SOLELY BY
REASON OF CLAIMS BETWEEN THE LENDERS OR ANY LENDER AND THE AGENT OR A LENDER'S
SHAREHOLDERS AGAINST THE AGENT OR LENDER OR BY REASON OF THE GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT ON THE PART OF ANY INDEMNIFIED PARTY; AND
(c) TO INDEMNIFY AND HOLD HARMLESS FROM TIME TO TIME THE INDEMNIFIED PARTY
FROM AND AGAINST ANY AND ALL LOSSES, CLAIMS, COST RECOVERY ACTIONS,
ADMINISTRATIVE ORDERS OR PROCEEDINGS, DAMAGES AND LIABILITIES TO WHICH ANY SUCH
PERSON MAY BECOME SUBJECT (I) UNDER ANY ENVIRONMENTAL LAW APPLICABLE TO ANY
RELATED PERSON OR ANY OF ITS PROPERTIES, INCLUDING WITHOUT LIMITATION, THE
TREATMENT OR DISPOSAL OF HAZARDOUS SUBSTANCES ON ANY OF THEIR PROPERTIES, (II)
AS A RESULT OF THE BREACH OR NON-COMPLIANCE BY ANY RELATED PERSON WITH ANY
ENVIRONMENTAL LAW APPLICABLE TO ANY RELATED PERSON, (III) DUE TO PAST OWNERSHIP
BY ANY RELATED PERSON OF ANY OF ITS PROPERTIES OR PAST ACTIVITY ON ANY OF ITS
PROPERTIES WHICH, THOUGH LAWFUL AND FULLY PERMISSIBLE AT THE TIME, RESULTS IN
PRESENT LIABILITY, (IV) THE PRESENCE, USE, RELEASE, STORAGE, TREATMENT OR
DISPOSAL OF HAZARDOUS SUBSTANCES
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ON OR AT ANY OF THE PROPERTIES OWNED OR OPERATED BY ANY RELATED PERSON OR (V)
ANY OTHER ENVIRONMENTAL, HEALTH OR SAFETY CONDITION IN CONNECTION WITH THE LOAN
DOCUMENTS, PROVIDED, HOWEVER, NO INDEMNITY SHALL BE AFFORDED UNDER THIS SECTION
8.3(C) IN RESPECT OF ANY PROPERTY FOR ANY OCCURRENCE ARISING FROM THE ACTS OR
OMISSIONS OF THE AGENT OR ANY LENDER DURING THE PERIOD AFTER WHICH SUCH PERSON,
ITS SUCCESSORS OR ASSIGNS, OR THEIR AGENTS OR REPRESENTATIVES, SHALL HAVE
OBTAINED POSSESSION OF SUCH PROPERTY (WHETHER BY FORECLOSURE OR DEED IN LIEU OF
FORECLOSURE, AS MORTGAGEE-IN-POSSESSION OR OTHERWISE).
(d) No Indemnified Party may settle any claim to be indemnified without the
consent of the indemnitor, such consent not to be unreasonably withheld;
provided, that the indemnitor may not reasonably withhold consent to any
settlement that an Indemnified Party proposes, if the indemnitor does not have
the financial ability to pay all its obligations outstanding and asserted
against the indemnitor at that time, including, without limitation, the maximum
potential claims pending or to the knowledge of the indemnitee threatened
against the Indemnified Party to be indemnified pursuant to this Section 8.3.
(e) In the case of any indemnification hereunder, the Administrative Agent
or Lender, as appropriate shall give notice to the Borrower of any such claim or
demand being made against the Indemnified Party and the Borrower shall have the
non-exclusive right to join in the defense against any such claim or demand
provided that if the Borrower provides a defense, the Indemnified Party shall
bear its own cost of defense unless there is a conflict between the Borrower and
such Indemnified Party.
(f) THE FOREGOING INDEMNITIES SHALL EXTEND TO THE INDEMNIFIED PARTIES
NOTWITHSTANDING THE SOLE OR CONCURRENT NEGLIGENCE OF EVERY KIND OR CHARACTER
WHATSOEVER, WHETHER ACTIVE OR PASSIVE, WHETHER AN AFFIRMATIVE ACT OR AN
OMISSION, INCLUDING WITHOUT LIMITATION, ALL TYPES OF NEGLIGENT CONDUCT
IDENTIFIED IN THE RESTATEMENT (SECOND) OF TORTS OF ONE OR MORE OF THE
INDEMNIFIED PARTIES OR BY REASON OF STRICT LIABILITY IMPOSED WITHOUT FAULT ON
ANY ONE OR MORE OF THE INDEMNIFIED PARTIES. TO THE EXTENT THAT AN INDEMNIFIED
PARTY IS FOUND TO HAVE COMMITTED AN ACT OF GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT, THIS CONTRACTUAL OBLIGATION OF INDEMNIFICATION SHALL CONTINUE BUT
SHALL ONLY EXTEND TO THE PORTION OF THE CLAIM THAT IS DEEMED TO HAVE OCCURRED BY
REASON OF EVENTS OTHER THAN THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH
INDEMNIFIED PARTY.
ARTICLE IX - Administrative Agent
Section 9.1 Appointment and Authority. Each Lender hereby irrevocably
authorizes Administrative Agent, and Administrative Agent hereby undertakes, to
receive payments of principal, interest and other amounts due hereunder as
specified herein and to take all other actions
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and to exercise such powers under the Loan Documents as are specifically
delegated to Administrative Agent by the terms hereof or thereof, together with
all other powers reasonably incidental thereto. The relationship of
Administrative Agent to Lenders is only that of one commercial bank acting as
administrative agent for others, and nothing in the Loan Documents shall be
construed to constitute Administrative Agent a trustee or other fiduciary for
any holder of any of the Notes or of any participation therein nor to impose on
Administrative Agent duties and obligations other than those expressly provided
for in the Loan Documents. With respect to any matters not expressly provided
for in the Loan Documents and any matters which the Loan Documents place within
the discretion of Administrative Agent, Administrative Agent shall not be
required to exercise any discretion or take any action, and it may request
instructions from Lenders with respect to any such matter, in which case it
shall be required to act or to refrain from acting (and shall be fully protected
and free from liability to all Lenders in so acting or refraining from acting)
upon the instructions of Majority Lenders (including itself), provided, however,
that Administrative Agent shall not be required to take any action which exposes
it to a risk of personal liability that it considers unreasonable or which is
contrary to the Loan Documents or to applicable law. Upon receipt by
Administrative Agent from Borrower of any communication calling for action on
the part of Lenders or upon notice from any Lender to Administrative Agent of
any Default or Event of Default, Administrative Agent shall promptly notify each
Lender thereof.
Section 9.2 Exculpation, Administrative Agent's Reliance, Etc. Neither
Administrative Agent nor any of its directors, officers, agents, attorneys, or
employees shall be liable for any action taken or omitted to be taken by any of
them under or in connection with the Loan Documents, INCLUDING THEIR NEGLIGENCE
OF ANY KIND, except that each shall be liable for its own gross negligence or
willful misconduct. Without limiting the generality of the foregoing,
Administrative Agent (a) may treat the payee of any Note as the holder thereof
until Administrative Agent receives written notice of the assignment or transfer
thereof in accordance with this Agreement, signed by such payee and in form
satisfactory to Administrative Agent; (b) may consult with legal counsel
(including counsel for Borrower), independent public accountants and other
experts selected by it and shall not be liable for any action taken or omitted
to be taken in good faith by it in accordance with the advice of such counsel,
accountants or experts; (c) makes no warranty or representation to any Lender
and shall not be responsible to any Lender for any statements, warranties or
representations made in or in connection with the Loan Documents; (d) shall not
have any duty to ascertain or to inquire as to the performance or observance of
any of the terms, covenants or conditions of the Loan Documents on the part of
any Related Person, or to inspect the property (including the books and records)
of any Related Person; (e) shall not be responsible to any Lender for the due
execution, legality, validity, enforceability, genuineness, sufficiency or value
of any Loan Document or any instrument or document furnished in connection
therewith; (f) may rely upon the representations and warranties of the Related
Persons and the Lenders in exercising its powers hereunder; and (g) shall incur
no liability under or in respect of the Loan Documents by acting upon any
notice, consent, certificate or other instrument or writing (including any
telecopy, telegram, cable or telex) believed by it to be genuine and signed or
sent by the proper Person or Persons.
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Section 9.3 Lenders' Credit Decisions. Each Lender acknowledges that it
has, independently and without reliance upon Administrative Agent or any other
Lender, made its own analysis of Borrower and the transactions contemplated
hereby and its own independent decision to enter into this Agreement and the
other Loan Documents. Each Lender also acknowledges that it will independently
and without reliance upon Administrative Agent or any other Lender and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
the Loan Documents.
Section 9.4 Indemnification. Each Lender agrees to indemnify
Administrative Agent (to the extent not reimbursed by Borrower within ten (10)
days after demand) from and against such Lenders' Percentage Share of any and
all liabilities, obligations, claims, losses, damages, penalties, fines,
actions, judgments, suits, settlements, costs, expenses or disbursements
(including reasonable fees of attorneys, accountants, experts and advisors) of
any kind or nature whatsoever (in this section collectively called "liabilities
and costs") which to any extent (in whole or in part) may be imposed on,
incurred by, or asserted against Administrative Agent growing out of, resulting
from or in any other way associated with any of the Collateral, the Loan
Documents and the transactions and events (including the enforcement thereof) at
any time associated therewith or contemplated therein (including any violation
or noncompliance with any Environmental Laws by any Person or any liabilities or
duties of any Person with respect to Hazardous Materials found in or released
into the environment). THE FOREGOING INDEMNIFICATION SHALL APPLY WHETHER OR NOT
SUCH LIABILITIES AND COSTS ARE IN ANY WAY OR TO ANY EXTENT CAUSED, IN WHOLE OR
IN PART, BY ANY NEGLIGENT ACT OR OMISSION OF ANY KIND BY ADMINISTRATIVE AGENT,
PROVIDED ONLY THAT NO LENDER SHALL BE OBLIGATED UNDER THIS SECTION TO INDEMNIFY
ADMINISTRATIVE AGENT FOR THAT PORTION, IF ANY, OF ANY LIABILITIES AND COSTS
WHICH IS PROXIMATELY CAUSED BY ADMINISTRATIVE AGENT'S OWN INDIVIDUAL GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT, AS DETERMINED IN A FINAL JUDGMENT. Cumulative
of the foregoing, each Lender agrees to reimburse Administrative Agent promptly
upon demand for such Lender's Percentage Share of any costs and expenses to be
paid to Administrative Agent by Borrower under Section 6.1(i) to the extent that
Administrative Agent is not timely reimbursed for such expenses by Borrower as
provided in such section. As used in this section the term "Administrative
Agent" shall refer not only to the Person designated as such in Section 1.1. but
also to each director, officer, agent, attorney, employee, representative and
Affiliate of such Person.
Section 9.5 Rights as Lender. In its capacity as a Lender,
Administrative Agent shall have the same rights and obligations as any Lender
and may exercise such rights as though it were not Administrative Agent. Bank
of Montreal, any successor Administrative Agent, or any of their respective
Affiliates may accept deposits from, lend money to, act as Trustee under
indentures of, and generally engage in any kind of business with any Related
Person or their Affiliates, including without limitation equity investments by
Bank of Montreal or any of its Affiliates, all as if Bank of Montreal were not
Administrative Agent hereunder and without any duty to account therefor to any
other Lender.
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Section 9.6 Sharing of Set-Offs and Other Payments. Each of
Administrative Agent and Lender agrees that if it shall, whether through the
exercise of rights under Security Documents or rights of banker's lien, set off,
or counterclaim against any Related Person or otherwise, obtain payment of a
portion of the aggregate Obligations owed to it which, taking into account all
distributions made by Administrative Agent under Section 2.11, causes
Administrative Agent or such Lender to have received more than it would have
received had such payment been received by Administrative Agent and distributed
pursuant to Section 2.11, then (a) it shall be deemed to have simultaneously
purchased and shall be obligated to purchase interests in the Obligations as
necessary to cause Administrative Agent and all lenders to share all payments as
provided for in Section 2.11, and (b) such other adjustments shall be made from
time to time as shall be equitable to ensure that Administrative Agent and all
Lenders share all payments of Obligations as provided in Section 2.11; provided,
however, that nothing herein contained shall in any way affect the right of
Administrative Agent or any Lender to obtain payment (whether by exercise of
rights of banker's lien, set-off or counterclaim or otherwise) of indebtedness
other than the Obligations. Borrower expressly consents to the foregoing
arrangements and agrees that any holder of any such interest or other
participation in the Obligations, whether or not acquired pursuant to the
foregoing arrangements, may to the fullest extent permitted by law exercise any
and all rights of banker's lien, set-off, or counterclaim as fully as if such
holder were a holder of the Obligations in the amount of such interest or other
participation. If all or any part of any funds transferred pursuant to this
section is thereafter recovered from the seller under this section which
received the same, the purchase provided for in this section shall be deemed to
have been rescinded to the extent of such recovery, together with interest, if
any, if interest is required pursuant to court order to be paid on account of
the possession of such funds prior to such recovery.
Section 9.7 Investments. Whenever Administrative Agent in good faith
determines that it is uncertain about how to distribute to Lenders any funds
which it has received, or whenever Administrative Agent in good faith determines
that there is any dispute among Lenders about how such funds should be
distributed, Administrative Agent may choose to defer distribution of the funds
which are the subject of such uncertainty or dispute. If Administrative Agent
in good faith believes that the uncertainty or dispute will not be promptly
resolved, or if Administrative Agent is otherwise required to invest funds
pending distribution to Lenders, Administrative Agent shall invest such funds
pending distribution; all interest on any such investment shall be distributed
upon the distribution of such investment and in the same proportion and to the
same Persons as such investment. All moneys received by Administrative Agent
for distribution to Lenders (other than to the Person which is Administrative
Agent in its separate capacity as a Lender) shall be held by Administrative
Agent pending such distribution solely as Administrative Agent for such Lenders,
and Administrative Agent shall have no equitable title to any portion thereof.
Section 9.8 Benefit of Article IX. The provisions of this Article
(other than the following Section 9.9) are intended solely for the benefit of
Administrative Agent and Lenders, and no Related Person shall be entitled to
rely on any such provisions or assert any such provision in a claim or defense
against Administrative Agent or any Lender. Administrative Agent and Lenders
may waive or amend such provisions as they desire without any notice to or
consent of Borrower or any other Related Person.
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Section 9.9 Resignation. Administrative Agent may (and upon written
direction of Directing Lenders collectively having Percentage Shares totaling in
the aggregate (i) prior to the occurrence of an Event of Default, eighty percent
(80%) of all Directing Lenders' Percentage Shares and (ii) upon the occurrence
and during the continuance of an Event of Default, at least sixty-six and two-
thirds percent (66 2/3%) of all Directing Lenders' Percentage Shares,
Administrative Agent shall) resign at any time by giving written notice thereof
to Lenders and Borrower. For purposes of the foregoing sentence, "Directing
Lenders" means all Lenders other than Administrative Agent. Each such notice
shall set forth the date of such resignation. Upon any such resignation
Majority Lenders shall have the right to appoint a successor Administrative
Agent, subject to Borrower's written consent, such consent not to be
unreasonably withheld. A successor must be appointed for any retiring
Administrative Agent, and such Administrative Agent's resignation shall become
effective when such successor accepts such appointment. If, within thirty (30)
days after the date of the retiring Administrative Agent's resignation, no
successor Administrative Agent has been appointed and has accepted such
appointment then the refiring Administrative Agent may appoint a successor
Administrative Agent, which shall be a commercial bank organized or licensed to
conduct a banking or trust business under the laws of the United States of
America or of any state thereof. Upon the acceptance of any appointment as
Administrative Agent hereunder by a successor Administrative Agent, the retiring
Administrative Agent shall be discharged from its duties and obligations under
this Agreement and other Loan Documents. After any retiring Administrative
Agent's resignation hereunder the provisions of this Article IX shall continue
to inure to its benefit as to any actions taken or omitted to be taken by it
while it was Administrative Agent under the Loan Documents.
Section 9.10 Documentation Agent. The Documentation Agent shall not have
any obligations, liabilities, responsibilities or duties under this Agreement or
the other Loan Documents. Without limiting the foregoing, the Documentation
Agent shall not have or be deemed to have any fiduciary relationship with any
Lender or the Administrative Agent. Each Lender acknowledges that it has not
relied, and will not rely, on any of the Lenders so identified or on the
Documentation Agent in deciding to enter into this Agreement or in taking or not
taking action hereunder.
ARTICLE X - Miscellaneous
Section 10.1 Waivers and Amendments; Acknowledgments.
(a) Waivers and Amendments. No failure or delay (whether by course of
conduct or otherwise) by Administrative Agent or any Lender in exercising any
right, power or remedy which Administrative Agent or such Lender may have under
any of the Loan Documents shall operate as a waiver thereof or of any other
right, power or remedy, nor shall any single or partial exercise by
Administrative Agent or such Lender of any such right, power or remedy preclude
any other or further exercise thereof or of any other right, power or remedy.
No waiver of any provision of any Loan Document and no consent to any departure
therefrom shall ever be effective unless it is in writing and signed as provided
below in this section, and then such waiver or consent shall be effective only
in the specific instances and for the purposes for which given and to the extent
specified in such writing. No notice to or demand on any Related Person shall
in any case of itself
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entitle any Related Person to any other or further notice or demand in similar
or other circumstances. This Agreement and the other Loan Documents set forth
the entire understanding between the parties hereto with respect to the
transactions contemplated herein and therein and supersede all prior discussions
and understandings with respect to the subject matter hereof and thereof, and no
waiver, consent, release, modification or amendment or of supplement to this
Agreement or the other Loan Documents shall be valid or effective against any
party hereto unless the same is in writing and signed by (i) if such party is
Borrower, by Borrower, (ii) if such party is Administrative Agent, by
Administrative Agent and (iii) if such party is a Lender, by such Lender or by
Administrative Agent on behalf of Lenders with the written consent of Majority
Lenders. Notwithstanding the foregoing or anything to the contrary herein,
Administrative Agent shall not without the prior consent of each individual
Lender, execute and deliver on behalf of such Lender any waiver or amendment
which would: (1) waive any of the conditions specified in Article IV, (2)
increase the Maximum Loan Amount applicable to Lender, as the case may be, or
subject such Lender to any additional obligations, (3) reduce any fees
hereunder, or the principal of, or interest on, such Lender's Notes, (4)
postpone any date fixed for any payment of any fees hereunder, or principal of,
or interest on, such Lender's Notes, (5) amend the definition herein of
"Majority Lenders" or otherwise change the aggregate amount of Percentage Shares
which is required for Administrative Agent, Lenders or any of them to take any
particular action under the Loan Documents, (6) release Borrower from its
obligation to pay such Lender's Notes or any Guarantor from its guaranty of such
payment, (7) reduce the number of Lenders required to agree on the Borrowing
Base, (8) reduce the number of Lenders required to or to consent to an
assignment or transfer of any Related Person's rights, duties or obligations
under Section 10.4 to less than all Lenders, or (9) in any period between
Determination Dates, release any Collateral valued in the Borrowing Base whose
aggregate value exceeds $500,000.
(b) Acknowledgments and Admissions. Borrower hereby represents, warrants,
acknowledges and admits that (i) it has been advised by counsel in the
negotiation, execution and delivery of the Loan Documents to which it is a
party, (ii) it has made an independent decision to enter into this Agreement and
the other Loan Documents to which it is a party, without reliance on any
representation, warranty, covenant or undertaking by Administrative Agent or any
Lender, whether written, oral or implicit, other than as expressly set out in
this Agreement or in another Loan Document delivered on or after the date
hereof, (iii) there are no representations, warranties, covenants, undertakings
or agreements by Administrative Agent or any Lender as to the Loan Documents
except as expressly set out in this Agreement or in another Loan Document
delivered on or after the date hereof, (iv) neither Administrative Agent nor any
Lender has any fiduciary obligation toward Borrower with respect to any Loan
Document or the transactions contemplated thereby, (v) the relationship pursuant
to the Loan Documents between Borrower, on one hand, and Administrative Agent
and each Lender, on the other hand, is and shall be solely that of debtor and
creditor, respectively, (vi) no partnership or joint venture exists with respect
to the Loan Documents between any of Borrower, Administrative Agent and Lenders,
(vii) Administrative Agent is not Borrower's Administrative Agent, but
Administrative Agent for Lenders, (viii) should an Event of Default or Default
occur or exist Administrative Agent and each Lender will determine in its sole
discretion and for its own reasons what remedies and actions it will or will,
not exercise or take at that time, (ix) without limiting any of the foregoing,
Borrower is not relying upon any representation
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or covenant by Administrative Agent or any Lender, or any representative thereof
and no such representation or covenant has been made, that Administrative Agent
or any Lender will, at the time of an Event of Default or Default, or at any
other time, waive, negotiate, discuss, or take or refrain from taking any action
permitted under the Loan Documents with respect to any such Event of Default or
Default or any other provision of the Loan Documents, and (x) Administrative
Agent and all Lenders have relied upon the truthfulness of the acknowledgments
in this section in deciding to execute and deliver this Agreement and to make
their Loans.
Section 10.2 Survival of Agreements; Cumulative Nature. All of the
Related Persons' various representations, warranties, covenants and agreements
in the Loan Documents shall survive the execution and delivery of this Agreement
and the other Loan Documents and the performance hereof and thereof, including
the making or granting of the Loans and the delivery of the Notes and the other
Loan Documents, and shall further survive until all of the Obligations are paid
in full to Administrative Agent, Lenders and Issuing Bank and all of
Administrative Agent's, Lenders' and Issuing Bank's obligations to Borrower are
terminated. The rights, powers, and privileges granted to Administrative Agent,
Lenders and Issuing Bank in the Loan Documents, are cumulative, and, except for
expressly specified waivers and consents, no Loan Document shall be construed in
the context of another to diminish, nullify, or otherwise reduce the benefit to
Administrative Agent, any Lender or Issuing Bank of any such right, power or
privilege.
Section 10.3 Notices. All notices, requests, consents, demands and other
communications required or permitted under any Loan Document shall be in
writing, unless otherwise specifically provided in such Loan Document (provided
that Administrative Agent may give telephonic notices to Lenders), and shall be
deemed sufficiently given or furnished if delivered by personal delivery, by
telecopy or telex, by delivery service with proof of delivery, or by registered
or certified United States mail, postage prepaid, to Borrower and the other
Related Persons at the address of Borrower specified on the signature pages
hereto and to Administrative Agent, Issuing Bank and the other Lenders at their
addresses specified on the signature pages hereto (unless changed by similar
notice in writing given by the particular Person whose address is to be
changed). Any such notice or communication shall be deemed to have been given
(a) in the case of personal delivery or delivery service, as of the date of
first attempted delivery during regular business hours at the address provided
herein, (b) in the case of telecopy of telex, upon receipt, or (c) in the case
of registered or certified United States mail, three (3) days after deposit in
the mail; provided, however, that no Request for Advance or Rate Election shall
become effective until actually received by Administrative Agent.
Section 10.4 Parties in Interest. All grants, covenants and agreements
contained in the Loan Documents shall bind and inure to the benefit of the
parties thereto and their respective successors and assigns; provided, however,
that no Related Person may assign or transfer any of its rights or delegate any
of its duties or obligations under any Loan Document without the prior written
consent of all Lenders. Neither Borrower nor any Affiliates of Borrower shall
directly or indirectly purchase or otherwise retire any Obligations owed to any
Lender nor will any lender accept any offer to do so, unless each Lender shall
have received substantially the same offer with respect to the same Percentage
Share of the Obligations owed to it. If Borrower or any Affiliate of Borrower
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at any time purchases some but less than all of the Obligations owed to
Administrative Agent, Issuing Bank and all Lenders, such purchaser shall not be
entitled to any rights of Administrative Agent, Issuing Bank or Lender under the
Loan Documents unless and until Borrower or its Affiliates have purchased all of
the Obligations.
Section 10.5 Governing Law; Submission to Process.
Except to the extent that the law of another jurisdiction is expressly
elected in a Loan Document, the Loan Documents shall be deemed contracts and
instruments made under the laws of the State of Texas and shall be construed and
enforced in accordance with and governed by the laws of the State of Texas and
the laws of the United States of America. Borrower hereby irrevocably submits
itself to the non-exclusive jurisdiction of the state and federal courts sitting
in the State of Texas or in the United States District Court for the Southern
District of Texas and agrees and consents that service of process may be made
upon it, in any legal proceeding relating to the Loan Documents or the
Obligations by any means allowed under Texas or federal law. The parties hereto
hereby waive and agree not to assert, by way of motion, as a defense or
otherwise, that any such proceeding is brought in an inconvenient forum or that
venue thereof is improper and further agrees to a transfer of any such
proceeding to a federal court sitting in the Southern District for the State of
Texas, to the extent that it has subject matter jurisdiction, and otherwise to a
state court in Texas, upon request therefor by Administrative Agent, if such
proceeding is originally brought in another court.
Section 10.6 Maximum Interest. It is the intention of the parties hereto
to conform strictly to applicable usury laws and, anything herein to the
contrary notwithstanding, the obligations of each Borrower to each Lender and
the Issuer under this Agreement shall be subject to the limitation that payments
of interest shall not be required to the extent that receipt thereof would be
contrary to provisions of law applicable to such Lender or the Issuer limiting
rates of interest which may be charged or collected by such Lender or the
Issuer. Accordingly, if the transactions contemplated hereby would be usurious
under applicable law (including the Federal and state laws of the United States
of America, or of any other jurisdiction whose laws may be mandatorily
applicable) with respect to a Lender or the Issuer then, in that event,
notwithstanding anything to the contrary in this Agreement, it is agreed as
follows: (i) the provisions of this Section 10.6 shall govern and control; (ii)
the aggregate of all consideration which constitutes interest under applicable
law that is contracted for, charged or received under this Agreement, or under
any of the other aforesaid agreements or otherwise in connection with this
Agreement by such Lender or the Issuer shall under no circumstances exceed the
maximum amount of interest allowed by applicable law (such maximum lawful
interest rate, if any, with respect to such Lender or the Issuer herein called
the "Highest Lawful Rate"), and any excess shall be credited to such Borrower by
such Lender or the Issuer (or, if such consideration shall have been paid in
full, such excess promptly refunded to such Borrower); (ii all sums paid, or
agreed to be paid, to such Lender or the Issuer for the use, forbearance and
detention of the indebtedness of such Borrower to such Lender or the Issuer
hereunder shall, to the extent permitted by applicable law, be amortized,
prorated, allocated and spread throughout the full term of such indebtedness
until payment in full so that the actual rate of interest is uniform throughout
the full term thereof; and (iv if at any time the interest provided
71
pursuant to Article II together with any other fees payable pursuant to this
Agreement and deemed interest under applicable law, exceeds that amount which
would have accrued at the Highest Lawful Rate, the amount of interest and any
such fees to accrue to such Lender or the Issuer pursuant to this Agreement
shall be limited, notwithstanding anything to the contrary in this Agreement to
that amount which would have accrued at the Highest Lawful Rate, but any
subsequent reductions, as applicable, shall not reduce the interest to accrue to
such Lender or the Issuer pursuant to this Agreement below the Highest Lawful
Rate until the total amount of interest accrued pursuant to this Agreement and
such fees deemed to be interest equals the amount of interest which would have
accrued to such Lender or the Issuer if a varying rate per annum equal to the
interest provided pursuant to Article II had at all times been in effect, plus
the amount of fees which would have been received but for the effect of this
Section 10.6. For purposes of Tex. Fin. Code ▇▇▇. Ch. 303, as amended, to the
extent, if any, applicable to a Lender or the Issuer, each Borrower agrees that
the Highest Lawful Rate shall be the "weekly ceiling" as defined in said
Article, provided that such Lender and the Issuer may also rely, to the extent
permitted by applicable laws, on alternative maximum rates of interest under
other laws applicable to such Lender or such Issuer, as the case may be, if
greater. Tex. Fin. Code ▇▇▇. Ch. 346 (which regulates certain revolving credit
loan accounts and revolving tri-party accounts) shall not apply to this
Agreement or the Notes.
Section 10.7 Termination; Limited Survival. In its sole and absolute
discretion Borrower may at any time that no Obligations are owing elect in a
written notice delivered to Administrative Agent to terminate this Agreement.
Upon receipt by Administrative Agent of such a notice, if no obligations are
then owing this Agreement and all other Loan Documents shall thereupon be
terminated and the parties thereto released from all prospective obligations
thereunder. Notwithstanding the foregoing or anything herein to the contrary,
any waivers or admissions made by any Related Person in any Loan Document any
Obligations under Sections 2.15 through 2.19, and any obligations which any
Person may have to indemnify or compensate Administrative Agent or any Lender
shall survive any termination of this Agreement or any other Loan Document. At
the request and expense of Borrower, Administrative Agent shall prepare and
execute all necessary instruments to reflect and effect such termination of the
Loan Documents. Administrative Agent is hereby authorized to execute all such
instruments on behalf of all Lenders, without the joinder of or further action
by any Lender.
Section 10.8 Severability. If any term or provision of any Loan Document
shall be determined to be illegal or unenforceable all other terms and
provisions of the Loan Documents shall nevertheless remain effective and shall
be enforced to the fullest extent permitted by applicable law.
Section 10.9 Counterparts. This Agreement may be separately executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to constitute one
and the same Agreement.
Section 10.10 WAIVER OF JURY TRIAL, PUNITIVE DAMAGES, ETC. EACH OF
BORROWER, ADMINISTRATIVE AGENT AND LENDERS HEREBY KNOWINGLY, VOLUNTARILY,
INTENTIONALLY, AND IRREVOCABLY (a) WAIVES, TO THE MAXIMUM EXTENT IT MAY LAWFULLY
AND EFFECTIVELY DO SO, ANY RIGHT IT
72
MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR
DIRECTLY OR INDIRECTLY AT ANY TIME ARISING OUT OF, UNDER OR IN CONNECTION WITH
THE LOAN DOCUMENTS OR ANY TRANSACTION CONTEMPLATED THEREBY OR ASSOCIATED
THEREWITH, BEFORE OR AFTER MATURITY; (b) WAIVES, TO THE MAXIMUM EXTENT IT MAY
LAWFULLY AND EFFECTIVELY DO SO, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY
SUCH LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES, OR
DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES; AND (c) ACKNOWLEDGES THAT
IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS AND
THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY BY, AMONG OTHER THINGS, THE
MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN TIES SECTION.
Section 10.11 Assignments and Participations.
(a) Assignments. Each Lender shall have the right to sell, assign or
transfer all or any part of such Lender's Notes, commitment to make Advances,
Loans and rights and obligations relating to Letters of Credit and the
associated rights and obligations under all Loan Documents to one or more
purchasers; provided, (i) each such sale, assignment, or transfer shall be with
the consent of Borrower and the consent of Administrative Agent, which in each
case will not be unreasonably withheld, (ii) no such consent of the Borrower
shall be required if an Event of Default exists, and (iii) any such sale,
assignment or transfer shall be pro rata among the Commitments. The assignee,
transferee or recipient shall have, to the extent of such sale, assignment, or
transfer, the same rights, benefits and obligations as it would if it were such
Lender and a holder of such Notes, including, without limitation, the right to
vote on decisions requiring consent or approval of all Lenders or Majority
Lenders and the obligation to fund its Percentage Share of any Advances or Loans
and payments made under Letters of Credit. Each Lender in making each such
sale, assignment, or transfer must dispose of a pro rata portion of each Loan
made by such Lender and such Lender's LC Obligations, each such sale, assignment
or transfer shall be in a principal amount not less than $5,000,000 (except
assignments to Affiliates of Administrative Agent or any Lender which may be in
an amount equal to or greater than $1,000,000) and no Lender may offer to sell
its Notes and Loans or interests therein in violation of any securities laws.
No such assignment shall become effective until (I) the assigning Lender
delivers to Administrative Agent copies of all written assignments and other
documents evidencing any such assignment or related thereto and an Agreement to
be Bound in the form of Exhibit H, providing for the assignee's ratification and
agreement to be bound by the terms of this Agreement and the other Loan
Documents and (II) Administrative Agent shall have received from assignor or
assignee an assignment fee in the amount of $3,500. Within five (5) Business
Days after its receipt of notice that the Administrative Agent has received
copies of any assignment and the other documents relating thereto, the assignee
shall notify Borrower of the outstanding principal balance of the Notes payable
to such Lender and shall execute and deliver to Administrative Agent (for
delivery to the relevant assignee) new Notes evidencing such assignee's assigned
Loans and, if the assignor Lender has retained a portion of its Loans,
replacement Notes in the principal amount of the Loans retained by the assignor
Lender (such Notes to be in exchange for, but not in payment of, the Notes held
by such Lender). Anything
73
in this Section 10.11 to the contrary notwithstanding, any Lender may at any
time, without the consent of Borrower or Administrative Agent, assign and pledge
all or any portion of its Commitments and the Loans owing to it to any Federal
Reserve Bank (and its transferees) as collateral security pursuant to Regulation
A and any Operating Circular issued by the Federal Reserve Bank. No such
assignment shall release the assigning Lender from its obligations hereunder.
(b) Participations. Each Lender shall have the right to grant
participations in all or any part of such Lender's Notes, commitment to make
Advances, Loans and rights and Obligations relating to Letters of Credit and the
associated rights and obligations under all Loan Documents to one or more
purchasers; provided that (i) each Lender granting a participation shall retain
the right to vote hereunder, and no participant shall be entitled to vote
hereunder on decisions requiring consent or approval of Majority Lenders (except
as set forth in (iii) below) or with respect to determining the Borrowing Base,
(ii) each Lender and Borrower shall be entitled to deal with the Lender granting
a participation in the same manner as if no participation had been granted,
(iii) no participant shall ever have any right by reason of its participation to
exercise any of the rights of Lenders hereunder, except that any Lender may
agree with any participant that such Lender will not, without the consent of
such participant, consent to any amendment or waiver described in Section
10.1(a) requiring approval of 100% of the Lenders, and (iv) without the
Borrower's prior written consent (not to be unreasonably withheld) no Lender
will offer any participation to any prospective participant if such participant
or any affiliates thereof, to the knowledge of the Lenders selling the
participations, is in the energy industry. Borrower agrees that if amounts
outstanding under this Agreement and the Notes 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 be deemed to have the right of set off
in respect of its participating interest in amounts owing under this Agreement
and any Note to the same extent as if the amount of its participating interest
were owing directly to it as a Lender under this Agreement or any Note, provided
that such participant shall only be entitled to such right of set off if it
shall have agreed in the agreement pursuant to which it shall have acquired its
participating interest to share with the Lenders and the proceeds thereof as
provided in subsection 9.6. The Company also agrees that each participant shall
be entitled to the benefits of subsections 2.15, 2.16, 2.18 and 8.3 with respect
to its participation in the Commitments and the Loans outstanding from time to
time; provided, that no participant shall be entitled to receive any greater
amount pursuant to such subsections 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) Distribution of Information. It is understood and agreed that any
Lender may provide to assignees and participants and prospective assignees and
participants financial information and reports and data concerning the Related
Persons and their and properties and operations which was provided to such
Lender pursuant to this Agreement, subject to Section 10.12.
(d) [Reserved].
74
(e) Blue Sky Limitation. Notwithstanding any other provision of Section
10.11(a) or (b), no transfer or assignment of the interests or obligations of
any Lender or any grant of participations therein shall be permitted if such
transfer, assignment or grant would require the Borrower to file a registration
statement with the Securities and Exchange Commission or to qualify the Loans
under the "Blue Sky" laws of any state.
Section 10.12 Confidentiality. In the event that the Borrower or any
other Related Person (hereinafter called the "Subject Entities") provides to the
Administrative Agent or the Lenders written confidential information or, if
communicated as confidential, oral confidential information belonging to any
Subject Entity, the Administrative Agent and the Lenders shall thereafter
maintain such information in confidence in accordance with the standards of care
and diligence that each utilizes in maintaining its own confidential
information. This obligation of confidence shall not apply to such portions of
the information which (i) are in the public domain, (ii) hereafter become part
of the public domain without the Administrative Agent or the Lenders breaching
their obligation of confidence to any Subject Entity, (iii) are previously known
by the Administrative Agent or the Lenders from some source other than any
Subject Entity, (iv) are hereafter developed by the Administrative Agent or the
Lenders without using a Subject Entity's information, (v) are hereafter obtained
by or available to the Administrative Agent or the Lenders from a third party
who owes no obligation of confidence to any Subject Entity with respect to such
information, (vi) are disclosed with a Subject Entity's consent, (vii) must be
disclosed either pursuant to any governmental requirement or to Persons
regulating the activities of the Administrative Agent or the Lenders, or (viii)
as may be required by law or regulation or order of any Governmental Authority
in any judicial, arbitration or governmental proceeding. Further, the
Administrative Agent or a Lender may disclose any such information to any other
Lender, any independent petroleum engineers or consultants, any independent
certified public accountants, any legal counsel employed by such Person in
Connection with this Agreement or any other Loan Document, including without
limitation, the enforcement or exercise of all rights and remedies thereunder,
or any assignee or participant (including prospective assignees to which the
Borrower has consented and participants) in the Loans; provided, however, that
the Administrative Agent or the Lenders shall receive a written confidentiality
agreement with the same terms as this confidentiality provision from the Person
to whom such information is disclosed such that said Person shall have the same
obligation to maintain the confidentiality of such information as is imposed
upon the Administrative Agent and the Lenders hereunder. Notwithstanding
anything to the contrary provided herein, this obligation of confidence shall
cease three (3) years from the date the information was furnished, unless the
Borrower requests in writing at least thirty (30) days prior to the expiration
of such three year period, to maintain the confidentiality of such information
for an additional three year period.
Section 10.13 Renewal and Continuation of Existing Loans. On the Closing
Date, all of the Prior Indebtedness outstanding on such date shall hereby be
restructured, rearranged, renewed, extended and continued as provided in this
Agreement and all Loans outstanding under the Original Credit Agreement shall on
the Closing Date become Loans outstanding hereunder.
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Section 10.14 Release of Collateral. Following the Closing Date and the
filing of the Security Documents to the extent required, the Lenders hereby
authorize and instruct the Administrative Agent to release the Liens on the
Collateral described on Schedule 5.
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THIS WRITTEN AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, this Agreement is executed as of the date first written
above.
BORROWER: SPINNAKER EXPLORATION COMPANY, L.L.C.
--------
By: SPINNAKER EXPLORATION COMPANY,
as Managing Member
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: VP, CFO, Secretary
Address:
Two ▇▇▇▇▇ Center
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
S-1
LENDER SCHEDULE
LENDER PERCENTAGE SHARE PRINCIPAL AMOUNT
---------------------- ----------------- ----------------
Bank of Montreal 60.▇▇▇▇▇▇▇▇% $15,000,000
Credit Suisse First Boston 40.00000000% $10,000,000