EXECUTION COPY
SECOND LIEN TERM LOAN AGREEMENT
DATED AS OF
NOVEMBER 14, 2005
AMONG
QUEST CHEROKEE, LLC
QUEST RESOURCE CORPORATION,
AS BORROWERS,
GUGGENHEIM CORPORATE FUNDING, LLC,
AS ADMINISTRATIVE AGENT,
AND
THE LENDERS PARTY HERETO
LEAD ARRANGER AND SOLE BOOKRUNNER
GUGGENHEIM CORPORATE FUNDING, LLC
TABLE OF CONTENTS
Page
ARTICLE I
Definitions and Accounting Matters
Section 1.01 Terms Defined Above..........................................1
Section 1.02 Certain Defined Terms........................................1
Section 1.03 Terms Generally; Rules of Construction......................19
Section 1.04 Accounting Terms and Determinations; GAAP...................20
ARTICLE II
The Term Loans
Section 2.01 Term Loans..................................................20
Section 2.02 Loans.......................................................20
Section 2.03 Requests for the Loans......................................21
Section 2.04 Funding the Loans...........................................21
Section 2.05 Termination.................................................22
Section 2.06 [RESERVED]..................................................22
Section 2.07 Intercreditor Agreement.....................................22
ARTICLE III
Payments of Principal and Interest; Prepayments; Fees
Section 3.01 Repayment of the Loans......................................22
Section 3.02 Interest....................................................22
Section 3.03 Intercreditor Agreement.....................................23
Section 3.04 Prepayments.................................................23
Section 3.05 Fees........................................................24
ARTICLE IV
Payments; Pro Rata Treatment; Sharing of Set-offs
Section 4.01 Payments Generally; Pro Rata Treatment; Sharing of
Set-offs....................................................24
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Section 4.02 Presumption of Payment by the Borrowers.....................25
Section 4.03 Certain Deductions by the Administrative Agent..............25
Section 4.04 Disposition of Proceeds.....................................25
ARTICLE V
Increased Costs; Break Funding Payments; Taxes; Illegality
Section 5.01 Increased Costs.............................................26
Section 5.02 Break Funding Payments......................................27
Section 5.03 Taxes.......................................................27
Section 5.04 Mitigation Obligations; Replacement of Lenders..............28
Section 5.05 Illegality..................................................29
ARTICLE VI
Conditions Precedent
Section 6.01 Effective Date..............................................29
Section 6.02 Each Credit Event...........................................32
ARTICLE VII
Representations and Warranties
Section 7.01 Organization; Powers........................................33
Section 7.02 Authority; Enforceability...................................33
Section 7.03 Approvals; No Conflicts.....................................33
Section 7.04 Financial Condition; No Material Adverse Change.............34
Section 7.05 Litigation..................................................35
Section 7.06 Environmental Matters.......................................35
Section 7.07 Compliance with the Laws and Agreements; No Defaults........36
Section 7.08 Investment Company Act......................................36
Section 7.09 Public Utility Holding Company Act..........................36
Section 7.10 Taxes.......................................................37
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Section 7.11 ERISA.......................................................37
Section 7.12 Disclosure; No Material Misstatements.......................38
Section 7.13 Insurance...................................................39
Section 7.14 Restriction on Liens........................................39
Section 7.15 Subsidiaries................................................39
Section 7.16 Location of Business and Offices............................39
Section 7.17 Properties; Titles, Etc.....................................39
Section 7.18 Maintenance of Properties...................................40
Section 7.19 Gas Imbalances, Prepayments.................................41
Section 7.20 Marketing of Production.....................................41
Section 7.21 Swap Agreements.............................................41
Section 7.22 Use of Proceeds.............................................42
Section 7.23 Solvency....................................................42
Section 7.24 Operating Expenses..........................................42
ARTICLE VIII
Affirmative Covenants
Section 8.01 Financial Statements; Ratings Change; Other Information.....43
Section 8.02 Notices of Material Events..................................46
Section 8.03 Existence; Conduct of Business..............................46
Section 8.04 Payment of Obligations......................................46
Section 8.05 Performance of Obligations under Loan Documents.............47
Section 8.06 Operation and Maintenance of Properties.....................47
Section 8.07 Insurance...................................................48
Section 8.08 Books and Records; Inspection Rights........................48
Section 8.09 Compliance with Laws........................................48
Section 8.10 Environmental Matters.......................................48
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Section 8.11 Further Assurances..........................................49
Section 8.12 Reserve Reports.............................................50
Section 8.13 Title Information...........................................51
Section 8.14 Additional Collateral.......................................52
Section 8.15 ERISA Compliance............................................52
Section 8.16 Swap Agreements.............................................53
Section 8.17 Marketing Activities........................................53
ARTICLE IX
Negative Covenants
Section 9.01 Financial Covenants.........................................53
Section 9.02 Debt........................................................54
Section 9.03 Liens.......................................................55
Section 9.04 Dividends, Distributions and Redemptions....................56
Section 9.05 Investments, Loans and Advances.............................56
Section 9.06 Nature of Business; International Operations................57
Section 9.07 Limitation on Leases........................................58
Section 9.08 Proceeds of Notes...........................................58
Section 9.09 ERISA Compliance............................................58
Section 9.10 Sale or Discount of Receivables.............................59
Section 9.11 Mergers, Etc................................................60
Section 9.12 Sale of Properties..........................................60
Section 9.13 Environmental Matters.......................................61
Section 9.14 Transactions with Affiliates................................61
Section 9.15 Subsidiaries................................................61
Section 9.16 Negative Pledge Agreements; Dividend Restrictions...........61
Section 9.17 Gas Imbalances, Take-or-Pay or Other Prepayments............62
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Section 9.18 Swap Agreements.............................................62
ARTICLE X
Events of Default; Remedies
Section 10.01 Events of Default...........................................62
Section 10.02 Remedies....................................................65
ARTICLE XI
The Administrative Agent
Section 11.01 Appointment; Powers.........................................66
Section 11.02 Duties and Obligations of Administrative Agent..............66
Section 11.03 Action by Administrative Agent..............................66
Section 11.04 Reliance by Administrative Agent............................67
Section 11.05 Subagents...................................................67
Section 11.06 Resignation or Removal of Administrative Agent..............68
Section 11.07 Administrative Agent as a Lender............................68
Section 11.08 No Reliance.................................................68
Section 11.09 Authority of Administrative Agent to Release Collateral and
Liens.......................................................69
Section 11.10 The Arranger................................................69
ARTICLE XII
Miscellaneous
Section 12.01 Notices.....................................................69
Section 12.02 Waivers; Amendments.........................................70
Section 12.03 Expenses, Indemnity; Damage Waiver..........................71
Section 12.04 Successors and Assigns......................................74
Section 12.05 Survival; Revival; Reinstatement............................76
Section 12.06 Counterparts; Integration; Effectiveness....................77
Section 12.07 Severability................................................78
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Section 12.08 Right of Setoff.............................................78
Section 12.09 GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS..78
Section 12.10 Headings....................................................79
Section 12.11 Confidentiality.............................................79
Section 12.12 Interest Rate Limitation....................................80
Section 12.13 EXCULPATION PROVISIONS......................................81
Section 12.14 Collateral Matters; Swap Agreements.........................81
Section 12.15 No Third Party Beneficiaries................................82
Section 12.16 USA Patriot Act Notice......................................82
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ANNEXES, EXHIBITS AND SCHEDULES
Annex I Commitments
Exhibit A Form of Note
Exhibit B Form of Borrowing Request
Exhibit C Form of Compliance Certificate
Exhibit D-1 Form of Legal Opinion of Special Counsel to the Borrower
Exhibit D-2 Form of Legal Opinion of Local Counsel
Exhibit E-1 Security Instruments
Exhibit E-2 Form of Guaranty Agreement
Exhibit E-3 Form of Security Agreement
Exhibit E-4 Form of Intercreditor Agreement
Exhibit F Form of Assignment and Assumption
Schedule 7.03 Approvals
Schedule 7.05 Litigation
Schedule 7.14 Liens
Schedule 7.15 Subsidiaries
Schedule 7.19 Gas Imbalances
Schedule 7.20 Marketing Contracts
Schedule 7.21 Swap Agreements
Schedule 9.05 Investments
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EXECUTION COPY
THIS SECOND LIEN TERM LOAN AGREEMENT dated as of November 14, 2005, is
among: Quest Cherokee, LLC ("Cherokee") a limited liability company duly formed
and existing under the laws of the State of Delaware, and Quest Resource
Corporation, a corporation duly formed and existing under the laws of the State
of Nevada (the "Company" and, collectively with Cherokee, the "Borrowers"); each
of the Lenders from time to time party hereto; and Guggenheim Corporate Funding,
LLC (in its individual capacity, "Guggenheim"), as administrative agent for the
Lenders (in such capacity, together with its successors in such capacity, the
"Administrative Agent").
R E C I T A L S
---------------
A. The Borrowers have requested that the Lenders provide one or more term
loans to the Borrowers having an aggregate principal amount of up to
$100,000,000 and the Lenders have agreed to do so on the terms and conditions
hereinafter set forth.
B. Therefore, for and in consideration of the mutual covenants and
agreements herein contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Borrowers, the
Administrative Agent and the Lenders, hereby agree as follows:
ARTICLE I
Definitions and Accounting Matters
Section 1.01 Terms Defined Above. As used in this Agreement, each term
defined above has the meaning indicated above.
Section 1.02 Certain Defined Terms. As used in this Agreement, the
following terms have the meanings specified below: ---------------------
"Adjusted LIBO Rate" means, with respect to Loan for any Interest
Period, an interest rate per annum (rounded upwards, if necessary, to the next
1/100th of 1%) equal to (a) the LIBO Rate for such Interest Period multiplied by
(b) the Statutory Reserve Rate.
"Administrative Questionnaire" means an Administrative Questionnaire in
a form supplied by the Administrative Agent.
"Affiliate" of any Person shall mean (i) any Person directly or
indirectly controlled by, controlling or under common control with such first
Person, (ii) any director or officer of such first Person or of any Person
referred to in clause (i) above and (iii) if any Person in clause (i) above is
an individual, any member of the immediate family (including parents, spouse and
children) of such individual and any trust whose principal beneficiary is such
individual or one or more members of such immediate family and any Person who is
controlled by any such member or trust. For purposes of this definition, any
Person which owns directly or indirectly 10% or more of the securities having
ordinary voting power for the election of directors or other governing body of a
corporation or 10% or more of the partnership or other ownership interests of
any other Person (other than as a limited partner of such other Person) will be
deemed to
"control" (including, with its correlative meanings, "controlled by" and "under
common control with") such corporation or other Person.
"Agreement" means this Second Lien Term Loan Agreement, as the same may
from time to time be amended, modified, supplemented or restated.
"Applicable Margin" means a rate per annum equal to 6.00%.
"Approved Counterparty" means (a) any revolving lender party to the
Senior Credit Agreement or any Affiliate of such lender or (b) any other Person
whose long term senior unsecured debt rating is A/A2 by S&P or ▇▇▇▇▇'▇ (or their
equivalent) or higher or (c) any other Person approved by the Administrative
Agent.
"Approved Fund" means any Person (other than a natural person) that is
engaged in making, purchasing, holding or investing in bank loans and similar
extensions of credit in the ordinary course of its business and that is
administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an
entity or an Affiliate of an entity that administers or manages a Lender.
"Approved Petroleum Engineers" means ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ & Associates,
Inc. or any other independent petroleum engineers selected by Borrowers and
reasonably acceptable to the Administrative Agent.
"ArcLight Notes" means those certain promissory notes of Cherokee in
the original principal amount of $66 million payable to the order of Cherokee
Energy Partners, LLC.
"ArcLight Transaction" means the purchase by certain of the Company's
Subsidiaries of all of the outstanding Class A Units of Cherokee owned by
Cherokee Energy Partners LLC and the repayment by Cherokee of the ArcLight
Notes.
"Arranger" means Guggenheim Corporate Funding, LLC, in its capacity as
the lead arranger and sole bookrunner hereunder.
"Assignment and Assumption" means an assignment and assumption entered
into by a Lender and an assignee (with the consent of any party whose consent is
required by Section 12.04(b)), and accepted by the Administrative Agent, in the
form of Exhibit G or any other form approved by the Administrative Agent.
"Board" means the Board of Governors of the Federal Reserve System of
the United States of America or any successor Governmental Authority.
"Board of Directors" means, with respect to any Person, (i) in the case
of any corporation, the board of directors, (ii) in the case of any limited
liability company, the board of managers, (iii) in the case of any partnership,
the board of directors of the general partner and (iv) in any other case, the
functional equivalent of the forgoing.
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"Borrowing Request" means a request by the Borrower for the Loans in
accordance with Section 2.03.
"Business Day" means any day that is not a Saturday, Sunday or other
day on which commercial banks in The City of New York are authorized or required
by law or executive order to close; and if such day relates to a payment or
prepayment of principal of or interest on, or the Interest Period for, a Loan or
a notice by the Borrower with respect to any such payment, prepayment or
Interest Period, any day which is also a day on which dealings in Dollar
deposits are carried out in the London interbank market.
"Capital Leases" means, in respect of any Person, all leases which
shall have been, or should have been, in accordance with GAAP, recorded as
capital leases on the balance sheet of the Person liable (whether contingent or
otherwise) for the payment of rent thereunder.
"Cash Equivalent" means cash held in dollars and all Investments of the
type identified in Section 9.05(c) through 9.05(f) inclusive.
"Casualty Event" means any loss, casualty or other insured damage to,
or any nationalization, taking under power of eminent domain or by condemnation
or similar proceeding of, any Property of the Borrowers or any of their
Subsidiaries having a fair market value in excess of $1,000,000.
"Change in Control" means (a) the acquisition of ownership, directly or
indirectly, beneficially or of record, by any Person or group (within the
meaning of the Securities Exchange Act of 1934 and the rules of the SEC
thereunder as in effect on the date thereof), of Equity Interests representing
more than 35% of the aggregate ordinary voting power represented by the issued
and outstanding Equity Interests of either Borrower, or (b) occupation of a
majority of the seats (other than vacant seats) on the Board of Directors of
either Borrower by Persons who were neither (i) nominated by the Board of
Directors of such Borrower nor (ii) appointed by the directors so nominated.
"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, for
purposes of Section 5.01(b), by any lending office of such Lender or by such
Lender'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" shall mean November 14, 2005.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and any successor statute.
"Commitment" means, with respect to each Lender, the commitment of such
Lender to make a Loan hereunder on the Effective Date, expressed as an amount
representing the principal amount of the Loan to be made by such Lender
hereunder and
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"Commitments" means the aggregate amount of the Commitments of all Lenders. The
amount of each Lender's Commitment is set forth on Annex I. The aggregate amount
of the Lenders' Commitments is $100,000,000.
"Consolidated Net Income" means with respect to the Borrowers and their
Consolidated Subsidiaries, for any period, the aggregate of the net income (or
loss) of the Borrowers and their Consolidated Subsidiaries after allowances for
taxes for such period, determined on a consolidated basis in accordance with
GAAP; provided that there shall be excluded from such net income (to the extent
otherwise included therein) the following: (a) the net income of any Person in
which either Borrower or any Consolidated Subsidiary has an interest (which
interest does not cause the net income of such other Person to be consolidated
with the net income of such Borrower and the Consolidated Subsidiaries in
accordance with GAAP), except to the extent of the amount of dividends or
distributions actually paid in cash during such period by such other Person to
such Borrower or Consolidated Subsidiary, as the case may be; (b) the net
income(or loss) during such period of any Consolidated Subsidiary to the extent
that the declaration or payment of dividends or similar distributions or
transfers or loans by that Consolidated Subsidiary is not at the time permitted
by operation of the terms of its charter or any agreement, instrument or
Governmental Requirement applicable to such Consolidated Subsidiary or is
otherwise restricted or prohibited, in each case determined in accordance with
GAAP; (c) any extraordinary non-cash gains or losses during such period; and (d)
any gains or losses attributable to writeups or writedowns of assets; and
provided further that if either Borrower or any Consolidated Subsidiary shall
acquire or dispose of any Property during such period, then Consolidated Net
Income shall be calculated after giving pro forma effect to such acquisition,
merger or disposition, as if such acquisition, merger or disposition had
occurred on the first day of such period.
"Consolidated Subsidiaries" means each Subsidiary of either Borrower
(whether now existing or hereafter created or acquired) the financial statements
of which shall be (or should have been) consolidated with the financial
statements of such Borrower in accordance with GAAP.
"Control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of a Person, whether
through the ability to exercise voting power, by contract or otherwise. For the
purposes of this definition, and without limiting the generality of the
foregoing, any Person that owns directly or indirectly 10% or more of the Equity
Interests having ordinary voting power for the election of the directors or
other governing body of a Person (other than as a limited partner of such other
Person) will be deemed to "control" such other Person. "Controlling" and
"Controlled" have meanings correlative thereto.
"Credit Facility" shall mean the revolving loans and secured
commitments under the Senior Credit Agreement.
"Credit Facility Agent" shall mean the administrative agent under the
Senior Credit Agreement.
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"Debt" means, for any Person, the sum of the following (without
duplication): (a) all obligations of such Person for borrowed money or evidenced
by bonds, bankers' acceptances, debentures, notes or other similar instruments
(including principal and due but unpaid interest fees and charges); (b) all
obligations of such Person (whether contingent or otherwise) in respect of
bankers' acceptances, letters of credit, surety or other bonds and similar
instruments; (c) all accounts payable and all accrued expenses, liabilities or
other obligations of such Person to pay the deferred purchase price of Property
or services (excluding trade accounts payable and accrued obligations incurred
in the ordinary course of business on normal trade terms that are not past due
by more than ninety (90) days); (d) the principal portion of all obligations
under Capital Leases; (e) the principal portion of all obligations under
Synthetic Leases; (f) all Debt (as defined in the other clauses of this
definition) and other obligations of others secured by (or for which the holder
of such Debt has an existing right, contingent or otherwise, to be secured by) a
Lien on any Property of such Person, whether or not such Debt is assumed by such
Person but limited to the fair market value of such Property; (g) all Debt (as
defined in the other clauses of this definition) and other obligations of others
guaranteed by such Person or in which such Person otherwise assures a creditor
against loss of the Debt or obligations of others (howsoever such assurance
shall be made) to the extent of the lesser of the amount of such Debt and the
maximum stated amount of such guarantee or assurance against loss; (h) all
obligations or undertakings of such Person to maintain or cause to be maintained
the financial position or covenants of others or to purchase the Debt or
Property (excluding obligations to purchase equipment or inventory in the
ordinary course of business) of others; (i) obligations to deliver commodities,
goods or services, including, without limitation, Hydrocarbons, in consideration
of one or more advance payments, other than gas balancing arrangements in the
ordinary course of business; (j) obligations to pay for goods or services
whether or not such goods or services are actually received or utilized by such
Person (excluding trade accounts payable and accrued obligations incurred in the
ordinary course of business on normal trade terms that are not past due by more
than ninety (90) days); (k) any Debt of any entity (including for purposes of
this clause (k), a partnership) for which such Person is liable either by
agreement, by operation of law or by a Governmental Requirement but only to the
extent of such liability; (l) Disqualified Capital Stock; and (m) the
undischarged balance of any production payment created by such Person or for the
creation of which such Person directly or indirectly received payment. The Debt
of any Person shall include all obligations of such Person of the character
described above to the extent such Person remains legally liable in respect
thereof notwithstanding that any such obligation is not included as a liability
of such Person under GAAP.
"Default" means any event or condition which constitutes an Event of
Default or which upon notice, lapse of time or both would, unless cured or
waived, become an Event of Default.
"Disqualified Capital Stock" means any Equity Interest that, by its
terms (or by the terms of any security into which it is convertible or for which
it is exchangeable) or upon the happening of any event, matures or is
mandatorily redeemable for any consideration other than other Equity Interests
(which would not constitute Disqualified Capital Stock), pursuant to a sinking
fund obligation or otherwise, or is convertible or
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exchangeable for Debt or redeemable for any consideration other than other
Equity Interests (which would not constitute Disqualified Capital Stock) at the
option of the holder thereof, in whole or in part, on or prior to the date that
is one year after the earlier of (a) the Maturity Date and (b) the date on which
there are no Loans or other obligations hereunder outstanding.
"dollars" or "$" refers to lawful money of the United States of America.
"EBITDA" means, for any period, the sum of Consolidated Net Income for
such period plus the following expenses or charges to the extent deducted from
Consolidated Net Income in such period: interest, income taxes, depreciation,
depletion, amortization and other noncash charges (including unrealized losses
on Swap Agreements), plus costs and expenses directly incurred in connection
with the Transactions and including the Equity Offering, the ArcLight
Transaction and any write-off of transaction closing costs relating to
Cherokee's prior credit facility with UBS, AG, Stamford Branch and ArcLight
Notes, minus all noncash income (including unrealized gains on Swap Agreements)
added to Consolidated Net Income.
"Effective Date" means the date on which the conditions specified in
Section 6.01 are satisfied (or waived in accordance with Section 12.02).
"Environmental Laws" means any and all Governmental Requirements
pertaining in any way to health, safety, the environment or the preservation or
reclamation of natural resources, in effect in any and all jurisdictions in
which either Borrower or any Subsidiary is conducting or at any time has
conducted business, or where any Property of either Borrower or any Subsidiary
is located, including without limitation, the Oil Pollution Act of 1990 ("OPA"),
as amended, the Clean Air Act, as amended, the Comprehensive Environmental,
Response, Compensation, and Liability Act of 1980 ("CERCLA"), as amended, the
Federal Water Pollution Control Act, as amended, the Occupational Safety and
Health Act of 1970, as amended, the Resource Conservation and Recovery Act of
1976 ("RCRA"), as amended, the Safe Drinking Water Act, as amended, the Toxic
Substances Control Act, as amended, the Superfund Amendments and Reauthorization
Act of 1986, as amended, the Hazardous Materials Transportation Act, as amended,
and other environmental conservation or protection Governmental Requirements.
The term "oil" shall have the meaning specified in OPA, the terms "hazardous
substance" and "release" (or "threatened release") have the meanings specified
in CERCLA, and the terms "oil and gas waste" "solid waste" and "disposal" (or
"disposed") have the meanings specified in RCRA or applicable state counterpart
environmental laws; provided, however, that (a) in the event either OPA, CERCLA,
RCRA or any such applicable state counterpart environmental law is amended so as
to broaden the meaning of any term defined thereby, such broader meaning shall
apply subsequent to the effective date of such amendment and (b) to the extent
the laws of the state or other jurisdiction in which any Property of either
Borrowers or any Subsidiary is located establish a meaning for "oil," "hazardous
substance," "release," "solid waste," "disposal" or "oil and gas waste" which is
broader than that specified in either OPA, CERCLA, RCRA or any such applicable
state counterpart environmental law, such broader meaning shall apply.
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"Equity Interests" means shares of capital stock, partnership
interests, membership interests in a limited liability company, beneficial
interests in a trust or other equity ownership interests in a Person, and any
warrants, options or other rights entitling the holder thereof to purchase or
acquire any such shares or interests.
"Equity Offering" has the meaning assigned such term in Section
6.01(o).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute.
"ERISA Affiliate" means each trade or business (whether or not
incorporated) which together with either Borrower or any Subsidiary of either
Borrower would be deemed to be a "single employer" within the meaning of section
4001(b)(1) of ERISA or subsection (b), (c), (m) or (o) of section 414 of the
Code.
"ERISA Event" means (a) a "Reportable Event" described in section 4043
of ERISA and the regulations issued thereunder, (b) the withdrawal of either
Borrower, a Subsidiary of either Borrower or any ERISA Affiliate from a Plan
during a plan year in which it was a "substantial employer" as defined in
section 4001(a)(2) of ERISA, (c) the filing of a notice of intent to terminate a
Plan or the treatment of a Plan amendment as a termination under section 4041 of
ERISA, (d) the institution of proceedings to terminate a Plan by the PBGC, (e)
receipt of a notice of withdrawal liability pursuant to Section 4202 of ERISA or
(f) 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 Plan.
"Event of Default" has the meaning assigned such term in Section 10.01.
"Excepted Liens" means: (a) Liens for Taxes, assessments or other
governmental charges or levies which are not delinquent or which are being
contested in good faith by appropriate action and for which adequate reserves
have been maintained in accordance with GAAP; (b) Liens in connection with
workers' compensation, unemployment insurance or other social security, old age
pension or public liability obligations which are not delinquent or which are
being contested in good faith by appropriate action and for which adequate
reserves have been maintained in accordance with GAAP; (c) statutory landlord's
liens, operators', vendors', carriers', warehousemen's, repairmen's, mechanics',
suppliers', workers', materialmen's, construction or other like Liens arising by
operation of law in the ordinary course of business or incident to the
exploration, development, operation and maintenance of Oil and Gas Properties
each of which is in respect of obligations that are not delinquent or which are
being contested in good faith by appropriate action and for which adequate
reserves have been maintained in accordance with GAAP; (d) contractual Liens
which arise in the ordinary course of business and which do not secure
obligations for borrowed money under operating agreements, joint venture
agreements, oil and gas partnership agreements, oil and gas leases, farm-out
agreements, division orders, contracts for the sale, transportation or physical
exchange of oil and natural gas, unitization and pooling declarations and
agreements, area of mutual interest agreements, royalty agreements, overriding
royalty
7
agreements, marketing agreements, processing agreements, net profits agreements,
development agreements, gas balancing or deferred production agreements,
injection, repressuring and recycling agreements, salt water or other disposal
agreements, seismic or other geophysical permits or agreements, and other
agreements which are usual and customary in the oil and gas business and are for
claims which are not delinquent or which are being contested in good faith by
appropriate action and for which adequate reserves have been maintained in
accordance with GAAP, provided that any such Lien referred to in this clause
does not materially impair the use of the Property covered by such Lien for the
purposes for which such Property is held by either Borrower or any Subsidiary or
materially impair the value of such Property subject thereto; (e) Liens arising
solely by virtue of any statutory, common law provisions or contractual Liens
contained in standard deposit account agreements relating to banker's liens,
rights of set-off or similar rights and remedies and burdening only deposit
accounts or other funds maintained with a creditor depository institution,
provided that no such deposit account is a dedicated cash collateral account or
is subject to restrictions against access by the depositor in excess of those
set forth by regulations promulgated by the Board and no such deposit account is
intended by the Borrowers or any of their Subsidiaries to provide collateral to
the depository institution; (f) easements, restrictions, servitudes, permits,
conditions, covenants, exceptions or reservations in any Property of either
Borrower or any Subsidiary for the purpose of roads, pipelines, transmission
lines, transportation lines, distribution lines for the removal of gas, oil,
coal or other minerals or timber, and other like purposes, or for the joint or
common use of real estate, rights of way, facilities and equipment, that do not
secure any monetary obligations and which in the aggregate do not materially
impair the use of such Property for the purposes of which such Property is held
by such Borrower or any Subsidiary or materially impair the value of such
Property subject thereto; (g) Liens on cash or securities pledged to secure
performance of tenders, surety and appeal bonds, government contracts,
performance and return of money bonds, bids, trade contracts, leases, statutory
obligations, regulatory obligations, insurance premiums and other obligations of
a like nature incurred in the ordinary course of business and (h) judgment and
attachment Liens not giving rise to an Event of Default, provided that any
appropriate legal proceedings which may have been duly initiated for the review
of such judgment shall not have been finally terminated or the period within
which such proceeding may be initiated shall not have expired and no action to
enforce such Lien has been commenced; provided, further that Liens described in
clauses (a) through (e) shall remain "Excepted Liens" only for so long as no
action to enforce such Lien has been commenced and no intention to subordinate
the first priority Lien granted in favor of the Administrative Agent and the
Lenders is to be hereby implied or expressed by the permitted existence of such
Excepted Liens.
"Excluded Taxes" means, with respect to the Administrative Agent, any
Lender, or any other recipient of any payment to be made by or on account of any
obligation of either Borrower or any Guarantor hereunder or under any other Loan
Document, (a) income or franchise taxes imposed on (or measured by) its net
income by the United States of America or such other 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
8
either Borrower or any Guarantor is located and (c) in the case of a Foreign
Lender (other than an assignee pursuant to a request by either Borrower under
Section 5.04(b)), 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 5.03(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 with respect
to such withholding tax pursuant to Section 5.03.
"Federal Funds Effective Rate" means, for any day, the weighted average
(rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on
overnight Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers, as published on the next succeeding Business
Day by the Federal Reserve Bank of New York, or, if such rate is not so
published for any day that is a Business Day, the average (rounded upwards, if
necessary, to the next 1/100 of 1%) of the quotations for such day for such
transactions received by the Administrative Agent from three Federal funds
brokers of recognized standing selected by it.
"Fee Letter" shall mean that certain letter agreement between
Guggenheim and the Borrowers dated October 31, 2005, concerning certain fees in
connection with this Agreement and any agreements or instruments executed in
connection therewith, as the same may be amended or replaced from time to time.
"Financial Officer" means, for any Person, the chief financial officer,
principal accounting officer, treasurer or controller of such Person. Unless
otherwise specified, all references herein to a Financial Officer means a
Financial Officer of the Borrower.
"Financial Statements" means the financial statement or statements of
the Company and its Consolidated Subsidiaries referred to in Section 7.04(a).
"Foreign Lender" means any Lender that is organized under the laws of a
jurisdiction other than that in which either 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 generally accepted accounting principles in the United
States of America as in effect from time to time subject to the terms and
conditions set forth in Section 1.04.
"Gas Balancing Obligations" means those obligations set forth on
Schedule 7.19.
"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 over either Borrower, any Subsidiary, any of their Properties, the
Administrative Agent or any Lender.
9
"Governmental Requirement" means any applicable law, statute, code,
ordinance, order, determination, rule, regulation, judgment, decree, injunction,
franchise, permit, certificate, license, authorization or other directive or
requirement, whether now or hereinafter in effect, including, without
limitation, Environmental Laws, energy regulations and occupational, safety and
health standards or controls, of any Governmental Authority.
"Guarantors" means, collectively as of the Effective Date, each of the
following: STP Cherokee, Inc., Quest Oil & Gas Corporation, Quest Energy
Service, Inc., Ponderosa Gas Pipeline Company, Inc., Producers Service,
Incorporated, ▇-▇ Gas Gathering, LLC, Bluestem Pipeline, LLC and Quest Cherokee
Oilfield Service, LLC, and any future Subsidiaries of either Borrower.
"Guaranty Agreement" means an agreement executed by the Guarantors in
substantially the form of Exhibit F-2 unconditionally guarantying on a joint and
several basis, payment of the Indebtedness, as the same may be amended, modified
or supplemented from time to time.
"Highest Lawful Rate" means, with respect to each Lender, the maximum
nonusurious interest rate, if any, that at any time or from time to time may be
contracted for, taken, reserved, charged or received on its Loans, or on other
Indebtedness under laws applicable to such Lender which are presently in effect
or, to the extent allowed by law, under such applicable laws which may hereafter
be in effect and which allow a higher maximum nonusurious interest rate than
applicable laws allow as of the date hereof.
"Hydrocarbon Interests" means all rights, titles, interests and estates
now or hereafter acquired in and to oil and gas leases, oil, gas and mineral
leases, or other liquid or gaseous Hydrocarbon leases, mineral fee interests,
overriding royalty and royalty interests, net profit interests and production
payment interests, including any reserved or residual interests of whatever
nature.
"Hydrocarbons" means oil, gas, coal bed methane gas, casinghead gas,
drip gasoline, natural gasoline, condensate, distillate, liquid hydrocarbons,
gaseous hydrocarbons and all products refined or separated therefrom.
"Indebtedness" means any and all amounts owing or to be owing by either
Borrower or any Guarantor (a) to the Administrative Agent or any Lender under
any Loan Document and (b) to any lender or any Affiliate of a lender under under
any Swap Agreement between either Borrower or any Subsidiary and such lender or
Affiliate of a lender while such Person (or in the case of its Affiliate, the
Person affiliated therewith) is a lender thereunder, (c) to any Approved
Counterparty under any Swap Agreement to which either Borrower or any Subsidiary
is a party if such Swap Agreement by its terms states that it is secured by the
Security Instruments and (d) all renewals, extensions and/or rearrangements of
any of the above.
"Indemnitee" shall have the meaning assigned such term in Section
12.03(b).
10
"Indemnity Matters" shall mean any and all actions, suits, proceedings
(including any investigations, litigation or inquiries), claims, demands and
causes of action made or threatened against a Person and, in connection
therewith, all losses, liabilities, damages (including, without limitation,
consequential damages) or reasonable costs and expenses of any kind or nature
whatsoever incurred by such Person whether caused by the sole or concurrent
negligence of such Person seeking indemnification.
"Indemnified Taxes" means Taxes other than Excluded Taxes.
"Initial Reserve Report" means the report prepared by the Approved
Petroleum Engineers with respect to certain Oil and Gas Properties of the
Borrowers and their Subsidiaries as of July 1, 2005, a copy of which has been
delivered to the Administrative Agent.
"Intercreditor Agreement" means the agreement dated as of such date
herewith between the Administrative Agent and the administrative agent under the
Senior Credit Agreement, substantially in form of Exhibit E-4, or any
substantially similar agreement entered into on the occasion of any refinancing
of the Senior Credit Agreement or this Agreement.
"Interest Payment Date" means, with respect to any Loan, the date
immediately following the last day of each Interest Period applicable to such
Loan, provided that if any Interest Payment Date would fall on a day other than
a Business Day, such Interest Payment Date shall be the next succeeding Business
Day unless such next succeeding Business Day would fall in the next calendar
month, in which case such Interest Payment Date shall be on the next preceding
Business Day.
"Interest Period" means, with respect to each Loan, the period
commencing on and including the Effective Date or the numerically corresponding
day in any month, as applicable, and ending on, but excluding, the numerically
corresponding day in the immediately succeeding month. Notwithstanding the
foregoing: (i) no Interest Period may end after the Final Maturity Date; (ii)
each Interest Period which would otherwise end on a day which is not a Business
Day shall end on the next succeeding Business Day (or, if such next succeeding
Business Day falls in the next succeeding calendar month, on the next preceding
Business Day); and (iii) no Interest Period shall have a duration of less than
one month.
"Investment" means, for any Person: (a) the acquisition (whether for
cash, Property, services or securities or otherwise) of Equity Interests of any
other Person or any agreement to make any such acquisition (including, without
limitation, any "short sale" or any sale of any securities at a time when such
securities are not owned by the Person entering into such short sale); (b) the
making of any deposit with, or advance, loan or other extension of credit to,
any other Person (including the purchase of Property from another Person subject
to an understanding or agreement, contingent or otherwise, to resell such
Property to such Person, but excluding any such advance, loan or extension of
credit having a term not exceeding ninety (90) days representing the purchase
price of inventory or supplies sold by such Person in the ordinary course of
business) or (c) the
11
entering into of any guarantee of, or other contingent obligation with respect
to, Debt of any other Person and (without duplication) any amount committed to
be advanced, lent or extended to such Person.
"Knowledge" means, with respect to an individual, his or her actual
knowledge and with respect to any corporation, limited liability company,
partnership or other business entity, the actual knowledge of any executive
officer, general partner or individual being a member of the executive
management of such entity.
"Lenders" means the Persons listed on Annex I and any Person that shall
have become a party hereto pursuant to an Assignment and Assumption, other than
any such Person that ceases to be a party hereto pursuant to an Assignment and
Assumption.
"LIBO Rate" means, with respect to any Loan for any Interest Period,
the rate per annum (rounded upwards, if necessary, to the nearest 1/100th of 1%)
equal to the average of the offered quotations for 30-day LIBO appearing on Page
3750 of the Dow ▇▇▇▇▇ Market Service (or on any successor or substitute page of
such Service, or any successor to or substitute for such Service, providing rate
quotations comparable to those currently provided on such page of such Service,
as determined by the Administrative Agent from time to time for purposes of
providing quotations of interest rates applicable to dollar deposits in the
London interbank market) at approximately 11:00 a.m., London time, two Business
Days prior to the commencement of such Interest Period. In the event that such
rate is not available at such time for any reason, then the "LIBO Rate" with
respect to such Loan for such Interest Period shall be the rate per annum
(rounded upwards, if necessary, to the next 1/100th of 1%) quoted by
Administrative Agent at or before 11:00 a.m., New York, New York time (or, as
soon thereafter as practicable), two (2) Business Days before the first day of
such Interest Period, to be the arithmetic average of the prevailing rates per
annum at the time of determination and in accordance with the then existing
practice in the applicable market, for the offering to Administrative Agent by
one or more prime banks selected by Administrative Agent in its sole discretion,
in the London interbank market, of deposits in dollars for delivery on the first
day of such Interest Period and having a maturity equal (or as nearly equal as
may be) to the length of such Interest Period and in an amount equal (or as
nearly equal as may be) to the Loans to which such Interest Period relates. Each
determination by Administrative Agent of the LIBO Rate shall be conclusive and
binding, absent manifest error, and may be computed using any reasonable
averaging and attribution method.
"Lien" means any interest in Property securing an obligation owed to,
or a claim by, a Person other than the owner of the Property, whether such
interest is based on the common law, statute or contract, and whether such
obligation or claim is fixed or contingent, and including but not limited to (a)
the lien or security interest arising from a mortgage, encumbrance, pledge,
security agreement, conditional sale or trust receipt or a lease, consignment or
bailment for security purposes or (b) production payments and the like payable
out of Oil and Gas Properties. The term "Lien" shall include easements,
restrictions, servitudes, permits, conditions, covenants, exceptions or
reservations affecting Property. For the purposes of this Agreement, either
Borrower and/or any of their Subsidiaries shall be deemed to be the owner of any
Property which it has acquired
12
or holds subject to a conditional sale agreement, or leases under a financing
lease or other arrangement pursuant to which title to the Property has been
retained by or vested in some other Person in a transaction intended to create a
financing.
"Loan" means the term loan made by each Lender to the Borrowers
pursuant to this Agreement.
"Loan Documents" means this Agreement, the Notes, the Fee Letter, the
Security Instruments and the Intercreditor Agreement.
"Majority Lenders" means the Administrative Agent and Lenders having
Loans representing at least a majority of the outstanding principal amount of
the Loans (without regard to any sale by a Lender of a participation in any Loan
under Section 12.04(c)).
"Material Adverse Effect" means a material adverse effect on (a) the
business, operations, Property, condition (financial or otherwise) or prospects
of each of the Borrowers and its Subsidiaries taken as a whole, (b) the ability
of either Borrower, any Subsidiary or any Guarantor to perform any of its
obligations under any Loan Document, (c) the validity or enforceability of any
Loan Document or (d) the rights and remedies of or benefits available to the
Administrative Agent or any Lender under any Loan Document.
"Material Indebtedness" means Debt (other than the Loans), or
obligations in respect of one or more Swap Agreements, of any one or more of the
Borrowers and their Subsidiaries in an aggregate principal amount exceeding
$2,500,000. For purposes of determining Material Indebtedness, the "principal
amount" of the obligations of a Borrower or any Subsidiary in respect of any
Swap Agreement at any time shall be the maximum aggregate amount (giving effect
to any netting agreements) that such Borrower or such Subsidiary would be
required to pay if such Swap Agreement were terminated at such time.
"Maturity Date" means November 14, 2011.
"Moody's" means ▇▇▇▇▇'▇ Investors Service, Inc. and any successor
thereto that is a nationally recognized rating agency.
"Mortgaged Property" means any Property owned by either Borrower or any
Guarantor, which is subject to the Liens existing and to exist under the terms
of the Security Instruments.
"Multiemployer Plan" means a Plan which is a multiemployer plan as
defined in section 3(37) or 4001 (a)(3) of ERISA.
"Net Cash Proceeds" means (a) in connection with any asset sale, the
proceeds thereof in the form of cash and Cash Equivalents (including any such
proceeds received by way of deferred payment of principal pursuant to a note or
installment receivable or purchase price adjustment receivable or otherwise, but
only as and when received) of such asset sale, net of attorneys' fees,
accountants' fees, investment banking fees,
13
broker's or finder's fees, amounts required to be applied to the repayment of
Indebtedness secured by a Lien expressly permitted hereunder on any asset that
is the subject of such asset sale (other than any Lien pursuant to a Security
Instrument) and other customary fees and expenses actually incurred in
connection therewith and net of taxes paid or reasonably estimated to be payable
as a result thereof (after taking into account any available tax credits or
deductions related to such asset sale and any tax sharing arrangements) and (b)
in connection with any issuance or sale of equity securities or debt securities
or instruments or the incurrence of loans, the cash proceeds received from such
issuance or incurrence, net of attorneys' fees, investment banking fees,
accountants' fees, underwriting discounts and commissions and other customary
fees and expenses actually incurred in connection therewith.
"Notes" means the promissory notes of the Borrowers as requested by a
Lender and described in Section 2.02(b) and being substantially in the form of
Exhibit A, together with all amendments, modifications, replacements, extensions
and rearrangements thereof.
"Oil and Gas Properties" means (a) Hydrocarbon Interests; (b) the
Properties now or hereafter pooled or unitized with Hydrocarbon Interests; (c)
all presently existing or future unitization, pooling agreements and
declarations of pooled units and the units created thereby (including without
limitation all units created under orders, regulations and rules of any
Governmental Authority) which may affect all or any portion of the Hydrocarbon
Interests; (d) all operating agreements, contracts and other agreements,
including production sharing contracts and agreements, which relate to any of
the Hydrocarbon Interests or the production, sale, purchase, exchange or
processing of Hydrocarbons from or attributable to such Hydrocarbon Interests;
(e) all Hydrocarbons in and under and which may be produced and saved or
attributable to the Hydrocarbon Interests, including all oil in tanks, and all
rents, issues, profits, proceeds, products, revenues and other incomes from or
attributable to the Hydrocarbon Interests; (f) all tenements, hereditaments,
appurtenances and Properties in any manner appertaining, belonging, affixed or
incidental to the Hydrocarbon Interests and (g) all Properties, rights, titles,
interests and estates described or referred to above, including any and all
Property, real or personal, now owned or hereinafter acquired and situated upon,
used, held for use or useful in connection with the operating, working or
development of any of such Hydrocarbon Interests or Property (excluding drilling
rigs, automotive equipment, rental equipment or other personal Property which
may be on such premises for the purpose of drilling a well or for other similar
temporary uses) and including any and all oil ▇▇▇▇▇, gas ▇▇▇▇▇, injection ▇▇▇▇▇
or other ▇▇▇▇▇, buildings, structures, fuel separators, liquid extraction
plants, plant compressors, pumps, pumping units, field gathering systems, tanks
and tank batteries, fixtures, valves, fittings, machinery and parts, engines,
boilers, meters, apparatus, equipment, appliances, tools, implements, cables,
wires, towers, casing, tubing and rods, surface leases, rights-of-way, easements
and servitudes together with all additions, substitutions, replacements,
accessions and attachments to any and all of the foregoing. The term Oil and Gas
Properties shall not include the Pipeline.
"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
14
made hereunder or from the execution, delivery or enforcement of, or otherwise
with respect to, this Agreement and any other Loan Document.
"Participant" has the meaning assigned to such term in Section
12.04(c)(i).
"PBGC" means the Pension Benefit Guaranty Corporation, or any successor
thereto.
"Percentage Share" means with respect to any Lender, the percentage of
the aggregate Commitments represented by such Lender's Commitment as such
percentage is set forth on Annex I as such amount may be adjusted pursuant to
any Assignment and Assumption under Section 12.04.
"Permitted Refinancing Debt" means Debt (for purposes of this
definition, "new Debt") incurred in exchange for, or proceeds of which are used
to refinance, all of any other Debt (the "Refinanced Debt"); provided that (a)
such new Debt is in an aggregate principal amount not in excess of the sum of
(i) the aggregate principal amount then outstanding of the Refinanced Debt (or,
if the Refinanced Debt is exchanged or acquired for an amount less than the
principal amount thereof to be due and payable upon a declaration of
acceleration thereof, such lesser amount) and (ii) an amount necessary to pay
any fees and expenses, including premiums, related to such exchange or
refinancing; (b) such new Debt has a stated maturity no earlier than the stated
maturity of the Refinanced Debt and an average life no shorter than the average
life of the Refinanced Debt; (c) such new Debt does not have a stated interest
rate in excess of the stated interest rate of the Refinanced Debt; (d) such new
Debt does not contain any covenants which are more onerous to the Borrowers and
their Subsidiaries than those imposed by the Refinanced Debt and (e) such new
Debt (and any guarantees thereof) is subordinated in right of payment to the
Indebtedness (or, if applicable, the Guaranty Agreement) to at least the same
extent as the Refinanced Debt.
"Person" means any natural person, corporation, limited liability
company, trust, joint venture, association, company, partnership, Governmental
Authority or other entity.
"Pipeline" means the pipeline owned and operated by Bluestem Pipeline,
LLC.
"Plan" means any employee pension benefit plan, as defined in section
3(2) of ERISA, which (a) is currently or hereafter sponsored, maintained or
contributed to by either Borrowers, a Subsidiary or an ERISA Affiliate or (b)
was at any time during the six calendar years preceding the date hereof,
sponsored, maintained or contributed to by such Borrower or a Subsidiary or an
ERISA Affiliate.
"Property" means any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible, including, without
limitation, cash, securities, accounts and contract rights.
"Proved Mineral Interests" means, collectively, Proved Producing
Mineral Interests, Proved Nonproducing Mineral Interests, and Proved Undeveloped
Mineral Interests.
15
"Proved Nonproducing Mineral Interests" means all Hydrocarbon Interests
which constitute proved developed nonproducing reserves as classified by the
Society of Petroleum Engineers.
"Proved Producing Mineral Interests" means all Hydrocarbon Interests
which constitute proved developed producing reserves as classified by the
Society of Petroleum Engineers.
"Proved Undeveloped Mineral Interests" means all Hydrocarbon Interests
which constitute proved undeveloped reserves as classified by the Society of
Petroleum Engineers.
"PV-10 Value" shall mean, as of any date of determination, the present
value of future cash flows from Proved Mineral Interests on the Borrowers'
Hydrocarbon Interests as set forth in the most recent Reserve Report delivered
pursuant to Section 8.12, utilizing the Three-Year Strip Price for natural gas
(▇▇▇▇▇ Hub), quoted in the New York Mercantile Exchange (or its successor), as
of the date as of which the information set forth in such Reserve Report is
provided (as adjusted for basis differentials) and utilizing a 10% discount
rate. PV-10 Value shall be adjusted to give effect to the commodity hedging
agreements of the Borrowers then in effect.
"Redemption" means with respect to any Debt, the repurchase,
redemption, prepayment, repayment, defeasance or any other acquisition or
retirement for value (or the segregation of funds with respect to any of the
foregoing) of such Debt. "Redeem" has the correlative meaning thereto.
"Register" has the meaning assigned such term in Section 12.04(b)(iv).
"Regulation D" means Regulation D of the Board, as the same may be
amended, supplemented or replaced from time to time.
"Related Parties" means, with respect to any specified Person, such
Person's Affiliates and the respective directors, officers, employees, agents
and advisors (including attorneys, accountants and experts) of such Person and
such Person's Affiliates.
"Remedial Work" has the meaning assigned such term in Section 8.10(a).
"Reserve Report" means the Initial Reserve Report and each other report
setting forth, as of each December 31st or June 30th (or such other specified
"as of" date contemplated by Section 8.12(d)), the oil and gas reserves
attributable to the Oil and Gas Properties of the Borrowers and their
Subsidiaries, together with a projection of the rate of production and future
net income, taxes, operating expenses and capital expenditures with respect
thereto as of such date, consistent with SEC reporting requirements at the time
and reflecting (and conforming to the definition of) PV-10 Value, provided that
each such report hereafter delivered must (a) separately report on Proved
Mineral Interests, Proved Producing Mineral Interests, Proved Nonproducing
Mineral Interests and Proved Undeveloped Mineral Interests and separately
calculate the PV-10 Value of each such
16
category of Proved Mineral Interests for the Borrowers' and their Subsidiaries'
interests, (b) take into account the Borrowers' actual experiences with
leasehold operating expenses and other costs in determining projected leasehold
operating expenses and other costs, (c) identify and take into account any
"over-produced" or "under-produced" status under gas balancing arrangements, and
(d) contain information and analysis comparable in scope to that contained in
the Initial Reserve Report.
"Responsible Officer" means, as to any Person, the Chief Executive
Officer, the President, any Financial Officer or any Vice President of such
Person. Unless otherwise specified, all references to a Responsible Officer
herein shall mean a Responsible Officer of either Borrower.
"Restricted Payment" means any dividend or other distribution (whether
in cash, securities or other Property) with respect to any Equity Interests in
either Borrower, or any payment (whether in cash, securities or other Property),
including any sinking fund or similar deposit, on account of the purchase,
redemption, retirement, acquisition, cancellation or termination of any such
Equity Interests in either Borrower or any option, warrant or other right to
acquire any such Equity Interests in either Borrower.
"SEC" means the Securities and Exchange Commission or any successor
Governmental Authority.
"Secured Parties" has the meaning assigned to such term in the Security
Agreement.
"Security Agreement" means an agreement executed by the Borrowers and
the Guarantors in substantially the form of Exhibit F, as the same may be
amended, restated, modified or supplemented from time to time.
"Security Instruments" means the Guaranty Agreement, the Security
Agreement, mortgages, deeds of trust and other agreements, instruments or
certificates described or referred to in Exhibit F-1, and any and all other
agreements, instruments or certificates now or hereafter executed and delivered
by the Borrowers or any other Person (other than Swap Agreements constituting
Indebtedness or participation or similar agreements between any Lender and any
other lender or creditor with respect to any Indebtedness pursuant to this
Agreement) in connection with, or as security for the payment or performance of
the Indebtedness, any Notes or this Agreement, as such agreements may be
amended, modified, supplemented or restated from time to time.
"Senior Credit Agreement" means that certain Senior Credit Agreement
entered into on the Effective Date among the Borrowers, Guggenheim Corporate
Funding, LLC, as administrative agent for the revolving lenders party thereto
and the other agents and revolving lenders from time to time parties thereto and
any "Loan Documents" (as defined therein) executed in connection therewith, in
each case, as hereafter amended or supplemented from time to time, subject to
Section 9.03(g) and Section 9.02(h).
17
"S&P" means Standard & Poor's Ratings Services, a division of The
▇▇▇▇▇▇-▇▇▇▇ Companies, Inc., and any successor thereto that is a nationally
recognized rating agency.
"Statutory Reserve Rate" means a fraction (expressed as a decimal), the
numerator of which is the number one and the denominator of which is the number
one minus the aggregate of the maximum reserve percentages (including any
marginal, special, emergency or supplemental reserves) expressed as a decimal
established by the Board to which the Administrative Agent is subject with
respect to the LIBO Rate, for eurocurrency funding (currently referred to as
"Eurocurrency Liabilities" in Regulation D of the Board). Such reserve
percentages shall include those imposed pursuant to such Regulation D. Loans
shall be deemed to constitute eurocurrency funding and to be subject to such
reserve requirements without benefit of or credit for proration, exemptions or
offsets that may be available from time to time to any Lender under such
Regulation D or any comparable regulation. The Statutory Reserve Rate shall be
adjusted automatically on and as of the effective date of any change in any such
reserve percentage.
"Subsidiary" means: (a) any Person of which at least a majority of the
outstanding Equity Interests having by the terms thereof ordinary voting power
to elect a majority of the Board of Directors or other governing body of such
Person (irrespective of whether or not at the time Equity Interests of any other
class or classes of such Person 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 the Borrowers or one or more of their respective Subsidiaries
or by the Borrowers and/or one or more of their respective Subsidiaries and (b)
any partnership of which the Borrowers or any of their respective Subsidiaries
is a general partner. Unless otherwise indicated herein, each reference to the
term "Subsidiary" shall mean a Subsidiary of one of the Borrowers.
"Swap Agreement" means any agreement with respect to any swap, forward,
future or derivative transaction, collar or option or similar agreement, whether
exchange traded, "over-the-counter" or otherwise, involving, or settled by
reference to, one or more rates, currencies, commodities, equity or debt
instruments or securities, or economic, financial or pricing indices or measures
of economic, financial or pricing risk or value or any similar transaction or
any combination of these transactions; provided that no phantom stock or similar
plan providing for payments only on account of services provided by current or
former directors, officers, employees or consultants of either of the Borrowers
or any of the Subsidiaries shall be a Swap Agreement.
"Synthetic Leases" means, in respect of any Person, all leases which
shall have been, or should have been, in accordance with GAAP, treated as
operating leases on the financial statements of the Person liable (whether
contingently or otherwise) for the payment of rent thereunder and which were
properly treated as indebtedness for borrowed money for purposes of U.S. federal
income taxes, if the lessee in respect thereof is obligated to either purchase
for an amount in excess of, or pay upon early termination an amount in excess
of, 80% of the residual value of the Property subject to such operating lease
upon expiration or early termination of such lease.
18
"Taxes" means any and all present or future taxes, levies, imposts,
duties, deductions, charges or withholdings imposed by any Governmental
Authority.
"Three-Year Strip Price" shall mean, as of any date of determination,
(a) for the 36-month period commencing with the month immediately following the
month in which the date of determination occurs, the monthly futures contract
prices for crude oil and natural gas for the 36 succeeding months as quoted on
the applicable commodities exchange or other price quotation source as
contemplated in the definition of "PV-10 Value" and (b) for periods after such
36-month period, the average of such quoted prices for the period from and
including the 25th month in such 36-month period through the 36th month in such
period.
"Total Debt" means, at any date, all Debt (exclusive of Debt related to
Swap Agreements) of either of the Borrowers and its Consolidated Subsidiaries on
a consolidated basis, less (i) Cash Equivalents, (ii) undrawn letters of credit
issued for the account of such Borrower and/or any of its Subsidiaries, and
(iii) surety bonds permitted under Section 9.02(e).
"Transactions" means, with respect to (a) each Borrower, the
execution, delivery and performance by such Borrower of this Agreement and each
other Loan Document, the borrowing of Loans, the use of the proceeds thereof,
and the grant of Liens by such Borrower on Mortgaged Properties and other
Properties pursuant to the Security Instruments and (b) each Guarantor, the
execution, delivery and performance by such Guarantor of each Loan Document to
which it is a party, the guaranteeing of the Indebtedness and the other
obligations under the Guaranty Agreement by such Guarantor and such Guarantor's
grant of the security interests and provision of collateral under the Security
Agreement, and the grant of Liens by such Guarantor on Mortgaged Properties and
other Properties pursuant to the Security Instruments.
"Wholly-Owned Subsidiary" means any Subsidiary of which all of the
outstanding Equity Interests (other than any directors' qualifying shares
mandated by applicable law), on a fully-diluted basis, are owned by one of the
Borrowers or by one or more of the Wholly-Owned Subsidiaries or by one of the
Borrowers and one or more of the Wholly-Owned Subsidiaries.
Section 1.03 Terms Generally; Rules of Construction. The definitions of
terms herein shall apply equally to the singular and plural forms of the terms
defined. Whenever the context may require, any pronoun shall include the
corresponding masculine, feminine and neuter forms. The words "include",
"includes" and "including" shall be deemed to be followed by the phrase "without
limitation". The word "will" shall be construed to have the same meaning and
effect as the word "shall". Unless the context requires otherwise (a) any
definition of or reference to any agreement, instrument or other document herein
shall be construed as referring to such agreement, instrument or other document
as from time to time amended, supplemented or otherwise modified (subject to any
restrictions on such amendments, supplements or modifications set forth herein),
(b) any reference herein to any law shall be construed as referring to such law
as amended, modified, codified or reenacted, in whole or in part, and in effect
from time to time, (c)
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any reference herein to any Person shall be construed to include such Person's
successors and assigns (subject to the restrictions contained herein), (d) the
words "herein", "hereof" and "hereunder", and words of similar import, shall be
construed to refer to this Agreement in its entirety and not to any particular
provision hereof, (e) with respect to the determination of any time period, the
word "from" means "from and including" and the word "to" means "to and
including" and (f) any reference herein to Articles, Sections, Annexes, Exhibits
and Schedules shall be construed to refer to Articles and Sections of, and
Annexes, Exhibits and Schedules to, this Agreement. No provision of this
Agreement or any other Loan Document shall be interpreted or construed against
any Person solely because such Person or its legal representative drafted such
provision.
Section 1.04 Accounting Terms and Determinations; GAAP. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
determinations with respect to accounting matters hereunder shall be made, and
all financial statements and certificates and reports as to financial matters
required to be furnished to the Administrative Agent or the Lenders hereunder
shall be prepared, in accordance with GAAP, applied on a basis consistent with
the Financial Statements except for changes in which Borrower's independent
registered public accounting firm concurs and which are disclosed to
Administrative Agent on the next date on which financial statements are required
to be delivered to the Lenders pursuant to Section 8.01(a); provided that,
unless the Borrowers and the Majority Lenders shall otherwise agree in writing,
no such change shall modify or affect the manner in which compliance with the
covenants contained herein is computed such that all such computations shall be
conducted utilizing financial information presented consistently with prior
periods.
ARTICLE II
The Term Loans
Section 2.01 Term Loans. Subject to the terms and conditions set forth
herein, each Lender severally agrees to make on the Effective Date a Loan to the
Borrowers in a principal amount equal to the amount of such Lender's Commitment,
provided that the aggregate principal amount of all such Loans by all Lenders
hereunder shall equal $100,000,000. The Commitments are not revolving in nature,
and amounts repaid or prepaid may not be reborrowed under any circumstance.
Section 2.02 Loans.
-----
(a) Several Obligations. Each Loan shall be made on the
Effective Date by the Lenders ratably in accordance with their respective
Commitments. The failure of any Lender to fund its Loan shall not relieve any
other Lender of its obligations hereunder; provided that the Commitments are
several and no Lender shall be responsible for any other Lender's failure to
fund its Loan as required.
(b) Notes. Each Lender shall maintain in accordance with its
usual practice an account or accounts evidencing the indebtedness of the
Borrower to such Lender resulting from each Loan made by such Lender, including
the amounts of principal and interest payable and paid to such Lender from time
to time hereunder. The
20
Administrative Agent shall maintain accounts in which it shall record (i) the
amount of each Loan made hereunder, (ii) the amount of any principal or interest
due and payable or to become due and payable from the Borrowers to each Lender
hereunder and (iii) the amount of any sum received by the Administrative Agent
hereunder for the account of the Lenders and each Lender's share thereof. The
entries made in the accounts maintained pursuant to this Section 2.02(b) shall
be prima facie evidence of the existence and amounts of the obligations recorded
therein; provided that the failure of any Lender or the Administrative Agent to
maintain such accounts or any error therein shall not in any manner affect the
obligation of the Borrowers to repay the Loans in accordance with the terms of
this Agreement. Any Lender may request that Loans made by it be evidenced by a
Note. In such event, the Borrowers shall prepare, execute and deliver to such
Lender one or more Notes payable to the order of such Lender and substantially
in the form of Exhibit A. Thereafter, the Loans evidenced by such Note and
interest thereon shall at all times (including after assignment pursuant to
Section 12.04) be represented by one or more Notes in such form payable to the
order of the payee named therein (or, if such Note is a registered note, to such
payee and its registered assigns).
Section 2.03 Requests for the Loans. Not later than 12:00 noon, New York
City time, on the Effective Date, the Borrowers shall request the Loans by
notifying the Administrative Agent by telephone, fax (or electronic
communication, if arrangements for doing so have been approved by the
Administrative Agent), and shall confirm such request by delivering to the
Administrative Agent and the Lenders a written Borrowing Request in
substantially the form of Exhibit B and signed by the Borrowers. Such
telephonic, electronic or written request shall specify the following
information in compliance with Section 2.02:
(i) the aggregate amount of each requested Loan; and
(ii) the location and number of the applicable
Borrower's account to which funds are to be disbursed, which shall comply with
the requirements of Section 2.04.
Promptly following receipt of a Borrowing Request in accordance with this
Section 2.03, the Administrative Agent shall advise each Lender of the details
thereof and of the amount of such Lender's Loan to be made.
Section 2.04 Funding the Loans.
-----------------
(a) Each Lender shall make its Loan on the Effective Date by
wire transfer of immediately available funds by 2:00 p.m., New York, New York
time, to the account of the Administrative Agent most recently designated by it
for such purpose by notice to the Lenders.
(b) Funding to the Borrower. With respect to any Loans made
hereunder, the Administrative Agent will make such Loans available to the
Borrowers no later than 3:00 p.m. New York City time by promptly paying by wire
transfer the
21
amounts so received, in like funds, to one or more accounts designated by the
Borrowers in the applicable Borrowing Request.
Section 2.05 Termination. The Commitments shall terminate at 3.00 p.m., New
York, New York time on the Effective Date. At the close of business on the
Effective Date, any portion of the Commitments not utilized by the Borrowers
shall be permanently canceled.
Section 2.06 [RESERVED]
Section 2.07 Intercreditor Agreement. The Loans, the Notes, if any, this
Agreement and the other Loan Documents; the rights and remedies of the Lenders
and the Administrative Agent hereunder and thereunder and the Liens created
thereby are subject to the Intercreditor Agreement.
ARTICLE III
Payments of Principal and Interest; Prepayments; Fees
Section 3.01 Repayment of the Loans. On the Maturity Date, the Borrowers
shall repay the outstanding principal amount of the Loans in full.
Section 3.02 Interest.
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(a) Interest Rate. Except as otherwise provided in Section
3.02(b), the Loans shall bear interest at the Adjusted LIBO Rate for each
Interest Period plus the Applicable Margin, but in no event to exceed the
Highest Lawful Rate.
(b) Post-Default Rate. Notwithstanding the foregoing, if any
principal of or interest on any Loan or any fee or other amount payable by the
Borrowers or any Guarantor hereunder or under any other Loan Document is not
paid when due, whether at stated maturity, upon acceleration or otherwise, the
Indebtedness shall bear interest, after as well as before judgment, at a rate
per annum equal to two and one-half percent (2.5%) plus the Interest Rate
provided in Section 3.02(a), but in no event to exceed the Highest Lawful Rate.
(c) Interest Payment Dates. Accrued interest on each Loan shall
be payable in arrears on each Interest Payment Date; provided that (i) interest
accrued pursuant to Section 3.02(b) shall be payable on demand and (ii) in the
event of any prepayment of any Loan, accrued interest on the principal amount
prepaid shall be payable on the date of such prepayment.
(d) Interest Rate Computations. All interest hereunder shall be
computed on the basis of a year of 360 days, unless such computation would
exceed the Highest Lawful Rate, in which case interest shall be computed on the
basis of a year of 365 days (or 366 days in a leap year), payable for the actual
number of days elapsed (including the first day but excluding the last day). The
applicable Adjusted LIBO Rate or LIBO Rate shall be determined by the
Administrative Agent, and such determination shall be conclusive absent manifest
error, and be binding upon the parties hereto.
22
Section 3.03 Intercreditor Agreement. All terms of this Article III are
subject to the terms of the Intercreditor Agreement.
Section 3.04 Prepayments.
-----------
(a) Optional Prepayments. To the extent permitted under the
Intercreditor Agreement and subject to any breakage funding costs payable
pursuant to Section 5.02 and subject to prior notice in accordance with Section
3.04(b), the Borrowers shall have the right to prepay the Loans, in whole on any
Business Day or in part on the last day of any Interest Period, as follows:
(i) at any time during the period commencing on the
Effective Date to and including the first anniversary of the Effective Date, no
optional prepayment shall be permitted; and
(ii) at any time after the first anniversary of the
Effective Date, optional prepayments shall be made at the prices (expressed as
percentages of the outstanding principal amount) set forth below, if prepaid
during each successive 12-month period beginning on November 15 of each year
indicated below:
Year Prepayment Price
--------------------- ----------------
2006 103%
2007 102%
2008 101%
2009 and thereafter 100%
provided that, in any event, each prepayment is in an amount that is an integral
multiple of $1,000,000 and not less than $1,000,000, or if such amount is less
than $1,000,000, the outstanding principal amount of the Loans. Accrued and
unpaid interest on the principal amount prepaid, all outstanding and unpaid fees
and expenses, and the prepayment price set forth in this Section 3.04(a), shall
be paid on the prepayment date.
(b) Notice and Terms of Optional Prepayment. The Borrower shall
notify the Administrative Agent by telephone, electronic communication and/or
fax (confirmed by telecopy) of any prepayment hereunder not later than 12:00
noon, New York City time, seven (7) Business Days before the date of prepayment.
Each such notice shall be irrevocable and effective upon receipt by the
Administrative Agent and shall specify the prepayment date and the principal
amount of the Loans or portion thereof to be prepaid. Promptly following receipt
of any such notice, the Administrative Agent shall advise the Lenders of the
contents thereof. Each prepayment shall be applied ratably to the Loans of all
Lenders in accordance with their Percentage Shares. Prepayments shall be
accompanied by accrued and unpaid interest to the extent required by Section
3.02.
23
(c) Mandatory Prepayment. The Net Cash Proceeds of any asset
sale under Section 9.12(d), to the extent not applied in the manner specified
therein, shall be used to repay the Loans. Such payment shall be due on the
121st day after the asset sale giving rise to such Net Cash Proceeds.
Section 3.05 Fees.
----
(a) Administrative Agent Fees. The Borrowers agree to pay to the
Administrative Agent, for its own account, fees payable in the amounts and at
the times separately agreed upon between the Borrowers and the Administrative
Agent.
(b) Payment of Fees. All fees payable hereunder shall be paid on
the dates due, in immediately available funds, to the Administrative Agent. Fees
paid shall not be refundable under any circumstances.
ARTICLE IV
Payments; Pro Rata Treatment; Sharing of Set-offs
Section 4.01 Payments Generally; Pro Rata Treatment; Sharing of Set-offs.
-----------------------------------------------------------
(a) Payments. The Borrowers shall make each payment required to
be made by them hereunder (whether of principal, interest or fees, or of amounts
payable under Section 5.01, Section 5.02, Section 5.03 or otherwise) prior to
12:00 noon, New York City time, on the date when due, in immediately available
funds, without defense, deduction, recoupment, set-off or counterclaim. Any
amounts received after such time on any date may, in the discretion of the
Administrative Agent, be deemed to have been received on the next succeeding
Business Day for purposes of calculating interest thereon. All such payments
shall be made to the Administrative Agent at its offices specified in Section
12.01, as expressly provided herein and except that payments pursuant to Section
5.01, Section 5.02, Section 5.03 and Section 12.03 shall be made directly to the
Persons entitled thereto. The Administrative Agent shall distribute any such
payments received by it for the account of any other Person to the appropriate
recipient promptly following receipt thereof. If any payment hereunder shall be
due on a day that is not a Business Day, except as otherwise set forth herein
the date for payment shall be extended to the next succeeding Business Day, and,
in the case of any payment accruing interest, interest thereon shall be payable
for the period of such extension. All payments hereunder shall be made in
dollars.
(b) Application of Insufficient Payments. If at any time
insufficient funds are received by and available to the Administrative Agent to
pay fully all amounts of principal, interest and fees then due hereunder, such
funds shall be applied (i) first, towards payment of interest and fees then due
hereunder, ratably among the parties entitled thereto in accordance with the
amounts of interest and fees then due to such parties, and (ii) second, towards
payment of principal then due hereunder, ratably among the parties entitled
thereto in accordance with the amounts of principal then due to such parties.
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(c) Sharing of Payments by Lenders. If any Lender shall, by
exercising any right of set-off or counterclaim or otherwise, obtain payment in
respect of any principal of or interest on its Loan resulting in such Lender
receiving payment of a greater proportion of the aggregate amount of its Loan
and accrued interest thereon than the proportion received by any other Lender,
then the Lender receiving such greater proportion shall purchase (for cash at
face value) participations in the Loans of other Lenders to the extent necessary
so that the benefit of all such payments shall be shared by the Lenders ratably
in accordance with their Percentage Shares of the aggregate amount of principal
of and accrued interest on their respective Loans; provided that (i) if any such
participations are purchased and all or any portion of the payment giving rise
thereto is recovered, such participations shall be rescinded and the purchase
price restored to the extent of such recovery, without interest, and (ii) the
provisions of this Section 4.01(c) shall not be construed to apply to any
payment made by the Borrowers pursuant to and in accordance with the express
terms of this Agreement or any payment obtained by a Lender as consideration for
the assignment of or sale of a participation in its Loan to any assignee or
participant, other than to the Borrowers or any Subsidiary or Affiliate thereof
(as to which the provisions of this Section 4.01(c) shall apply). The Borrowers
consent to the foregoing and agree, to the extent it may effectively do so under
applicable law, that any Lender acquiring a participation pursuant to the
foregoing arrangements may exercise against each of the Borrowers rights of
set-off and counterclaim with respect to such participation as fully as if such
Lender were a direct creditor of such Borrower in the amount of such
participation.
Section 4.02 Presumption of Payment by the Borrowers. Unless the
Administrative Agent shall have received notice from the Borrowers prior to the
date on which any payment is due to the Administrative Agent for the account of
the Lenders that the Borrowers will not make such payment, the Administrative
Agent may assume that the Borrowers have made such payment on such date in
accordance herewith and may, in reliance upon such assumption, distribute to the
Lenders the amount due. In such event, if the Borrowers have not in fact made
such payment, then each of the Lenders severally agrees to repay to the
Administrative Agent forthwith on demand the amount so distributed to such
Lender with interest thereon, for each day from and including the date such
amount is distributed to it to but excluding the date of payment to the
Administrative Agent, at the greater of the Federal Funds Effective Rate and a
rate determined by the Administrative Agent in accordance with banking industry
rules on interbank compensation.
Section 4.03 Certain Deductions by the Administrative Agent. If any Lender
shall fail to make any payment required to be made by it pursuant to Section
4.02, then the Administrative Agent may, in its discretion (notwithstanding any
contrary provision hereof), apply any amounts thereafter received by the
Administrative Agent for the account of such Lender to satisfy such Lender's
obligations under such Section until all such unsatisfied obligations are fully
paid.
Section 4.04 Disposition of Proceeds. The Security Instruments contain an
assignment by each of the Borrowers and/or the Guarantors unto and in favor of
the Administrative Agent for the benefit of the Lenders of all of each
Borrower's or each
25
Guarantor's interest in and to production and all proceeds attributable thereto
which may be produced from or allocated to the Mortgaged Property. The Security
Instruments further provide in general for the application of such proceeds to
the satisfaction of the Indebtedness and other obligations described therein and
secured thereby. Notwithstanding the assignment contained in such Security
Instruments, unless an Event of Default has occurred and is continuing, (a) the
Administrative Agent and the Lenders agree that they will neither notify the
purchaser or purchasers of such production nor take any other action to cause
such proceeds to be remitted to the Administrative Agent or the Lenders, but the
Lenders will instead permit such proceeds to be paid to the Borrowers and their
Subsidiaries and (b) the Lenders hereby authorize the Administrative Agent to
take such actions as may be necessary to cause such proceeds to be paid to the
Borrowers and/or such Subsidiaries.
ARTICLE V
Increased Costs; Break Funding Payments; Taxes; Illegality
Section 5.01 Increased Costs.
---------------
(a) Changes in Law. 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 LIBO Rate); or
(ii) impose on any Lender or the London interbank market
any other condition affecting this Agreement or Loans of such Lender;
and the result of any of the foregoing shall be to increase the cost to such
Lender of making or maintaining any Loan or to reduce the amount of any sum
received or receivable by such Lender (whether of principal, interest or
otherwise), then the Borrowers will pay to such Lender such additional amount or
amounts as will compensate such Lender for such additional costs incurred or
reduction suffered.
(b) Capital Requirements. If any Lender 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 capital or on the capital of such
Lender's holding company, if any, as a consequence of this Agreement or the Loan
made by such Lender, to a level below that which such Lender or the or such
Lender's holding company could have achieved but for such Change in Law (taking
into consideration such Lender's policies and the policies of such Lender's
holding company with respect to capital adequacy), then from time to time the
Borrowers will pay to such Lender such additional amount or amounts as will
compensate such Lender or such Lender's holding company for any such reduction
suffered.
(c) Certificates. A certificate of a Lender setting forth the
amount or amounts necessary to compensate such Lender or its holding company, as
the case may be, as specified in Section 5.01(a) or (b) shall be delivered to
the Borrowers and shall be
26
conclusive absent manifest error. The Borrowers shall pay such Lender the amount
shown as due on any such certificate within 10 Business Days after receipt
thereof.
(d) Effect of Failure or Delay in Requesting Compensation.
Failure or delay on the part of any Lender to demand compensation pursuant to
this Section 5.01 shall not constitute a waiver of such Lender's right to demand
such compensation; provided that the Borrowers shall not be required to
compensate a Lender pursuant to this Section 5.01 for any increased costs or
reductions incurred more than 180 days prior to the date that such Lender
notifies the Borrowers of the Change in Law giving rise to such increased costs
or reductions and of such Lender'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 180-day period referred to above shall be
extended to include the period of retroactive effect thereof.
Section 5.02 Break Funding Payments. In the event of (a) the payment of any
principal of any Loan other than on the last day of an Interest Period
applicable thereto (including as a result of an Event of Default), (b) the
failure to prepay any Loan on the date specified in any notice delivered
pursuant hereto, or (c) the assignment of any Loan other than on the last day of
the Interest Period applicable thereto as a result of a request by the Borrowers
pursuant to Section 5.04(b), then, in any such event, the Borrowers shall
compensate each Lender for the loss, cost and expense attributable to such
event. 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 Adjusted LIBO 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 any amount or amounts that such Lender
is entitled to receive pursuant to this Section 5.02 shall be delivered to the
Borrowers and shall be conclusive absent manifest error. The Borrowers shall pay
such Lender the amount shown as due on any such certificate within 10 Business
Days after receipt thereof.
Section 5.03 Taxes.
-----
(a) Payments Free of Taxes. Any and all payments by or on
account of any obligation of the Borrowers or any Guarantor under any Loan
Document shall be made free and clear of and without deduction for any
Indemnified Taxes or Other Taxes; provided that if the Borrowers or any
Guarantor 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 5.03), the Administrative Agent
27
or any Lender (as the case may be) receives an amount equal to the sum it would
have received had no such deductions been made, (ii) the Borrowers or such
Guarantor shall make such deductions and (iii) the Borrowers or such Guarantor
shall pay the full amount deducted to the relevant Governmental Authority in
accordance with applicable law.
(b) Payment of Other Taxes by the Borrowers. The Borrowers shall
pay any Other Taxes to the relevant Governmental Authority in accordance with
applicable law.
(c) Indemnification by the Borrowers. The Borrowers shall
indemnify the Administrative Agent and each Lender, within 10 Business Days
after written demand therefor, for the full amount of any Indemnified Taxes or
Other Taxes paid by the Administrative Agent or such Lender on or with respect
to any payment by or on account of any obligation of the Borrowers hereunder
(including Indemnified Taxes or Other Taxes imposed or asserted on or
attributable to amounts payable under this Section 5.03) and any penalties,
interest and reasonable 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 of the
Administrative Agent or a Lender as to the amount of such payment or liability
under this Section 5.03 shall be delivered to the Borrowers and shall be
conclusive absent manifest error.
(d) Evidence of Payments. As soon as practicable after any
payment of Indemnified Taxes or Other Taxes by the Borrowers or a Guarantor to a
Governmental Authority, the Borrowers 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) Foreign Lenders. Any Foreign Lender that is entitled to an
exemption from or reduction of withholding tax under the law of the jurisdiction
in which either of the Borrowers is located, or any treaty to which such
jurisdiction is a party, with respect to payments under this Agreement or any
other Loan Document shall deliver to such 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 such Borrower as will permit such payments to be made
without withholding or at a reduced rate.
Section 5.04 Mitigation Obligations; Replacement of Lenders.
----------------------------------------------
(a) Designation of Different Lending Office. If any Lender
requests compensation under Section 5.01, or if the Borrowers are required to
pay any additional amount to any Lender or any Governmental Authority for the
account of any Lender pursuant to Section 5.03, then such Lender shall use
reasonable efforts to designate a different lending office for funding or
booking its Loan 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
28
amounts payable pursuant to Section 5.01 or Section 5.03, 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. The Borrowers
hereby agree to pay all reasonable costs and expenses incurred by any Lender in
connection with any such designation or assignment.
(b) Replacement of Lenders. If any Lender requests compensation
under Section 5.01, or if the Borrowers are required to pay any additional
amount to any Lender or any Governmental Authority for the account of any Lender
pursuant to Section 5.03, or if any Lender defaults in its obligation to fund
its Loan hereunder, or if any Lender is prevented from making its Loan under
Section 5.05, or if any Lender declines to vote in favor of an amendment, waiver
or other modification recommended by the Administrative Agent, then the
Borrowers may, at their 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 12.04(b)), 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
Borrowers shall have received the prior written consent of the Administrative
Agent, which consent shall not unreasonably be withheld, (ii) such Lender shall
have received payment of an amount equal to the outstanding principal of its
Loan, 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 Borrowers (in the case of all other amounts)
and (iii) in the case of any such assignment resulting from a claim for
compensation under Section 5.01 or payments required to be made pursuant to
Section 5.03, such assignment will result in a reduction in such compensation or
payments. A Lender shall not be required to make any such assignment and
delegation if, prior thereto, as a result of a waiver by such Lender or
otherwise, the circumstances entitling the Borrowers to require such assignment
and delegation cease to apply.
Section 5.05 Illegality. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for any Lender or its
applicable lending office to honor its obligation to make or maintain its Loan
hereunder, then such Lender shall promptly notify the Borrowers and the
Administrative Agent thereof and such Lender promptly shall assign such Loan
pursuant to Section 12.04 hereunder.
ARTICLE VI
Conditions Precedent
Section 6.01 Effective Date. The obligations of each Lender to make its
Loans hereunder shall not become effective until the date on which each of the
following conditions is satisfied (or waived in accordance with Section 12.02):
(a) The Administrative Agent and the Arranger shall have
received all fees and other amounts due and payable on or prior to the Effective
Date, including, to the extent invoiced, reimbursement or payment of all
out-of-pocket expenses required to be reimbursed or paid by the Borrowers
hereunder.
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(b) The Administrative Agent shall have received a certificate
of the Secretary or an Assistant Secretary of each of the Borrowers and each
Guarantor setting forth (i) resolutions of its Board of Directors with respect
to the authorization of such Borrower or such Guarantor to execute and deliver
the Loan Documents to which it is a party and to enter into the transactions
contemplated in those documents, (ii) the officers of such Borrower or such
Guarantor (y) who are authorized to sign the Loan Documents to which such
Borrower or such Guarantor is a party and (z) who will, until replaced by
another officer or officers duly authorized for that purpose, act as its
representative for the purposes of signing documents and giving notices and
other communications in connection with this Agreement and the transactions
contemplated hereby, (iii) specimen signatures of such authorized officers, and
(iv) the articles or certificate of incorporation and bylaws (or other
organizational documents) of such Borrower and such Guarantor, certified as
being true and complete. The Administrative Agent and the Lenders may
conclusively rely on such certificate until the Administrative Agent receives
notice in writing from such Borrower or such Guarantor to the contrary.
(c) The Administrative Agent shall have received certificates
of the appropriate state agencies with respect to the existence, qualification
and good standing of each Borrower and each Guarantor.
(d) The Administrative Agent shall have received a compliance
certificate which shall be substantially in the form of Exhibit C, duly and
properly executed by a Responsible Officer and dated as of the Effective Date.
(e) The Administrative Agent shall have received from each party
hereto counterparts (in such number as may be requested by the Administrative
Agent) of this Agreement signed on behalf of such party.
(f) The Administrative Agent shall have received duly executed
Notes, if requested, payable to the order of each Lender in a principal amount
equal to its Commitment dated as of the date hereof.
(g) The Administrative Agent shall have received an aged trial
balance of trade payables, acceptable in substance to the Administrative Agent.
(h) The Administrative Agent shall have received from each party
thereto duly executed counterparts (in such number as may be requested by the
Administrative Agent) of the Security Instruments, including the Guaranty
Agreement, the Security Agreement and the other Security Instruments described
on Exhibit E-1. In connection with the execution and delivery of the Security
Instruments, the Administrative Agent shall:
(i) be reasonably satisfied that the Security
Instruments create first priority, perfected Liens (subject only to Excepted
Liens identified in clauses (a) to (d) and (f) of the definition thereof, but
subject to the provisos at the end of such definition) on at least 80% of the
total value of the Oil and Gas Properties evaluated in the Initial Reserve
Report;
30
(ii) be reasonably satisfied that it has a Lien on all
Property constituting security for the Senior Credit Agreement.
(i) The Administrative Agent shall have received a certificate
of a Responsible Officer of each of the Borrower certifying that (i) such
Borrower shall be contemporaneously closing the Senior Credit Agreement pursuant
to which such Borrowers shall have not less than $100,000,000 of cash, Cash
Equivalents and availability under the Senior Credit Agreement.
(j) The Administrative Agent shall have received an opinion of
(i) ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ LLP, special counsel to each of the Borrowers,
substantially in the form of Exhibit D-1 hereto, and (ii) local counsel in
Oklahoma and any other jurisdictions requested by the Administrative Agent,
substantially in the form of Exhibit D-2.
(k) The Administrative Agent shall have received a certificate
of insurance coverage of each of the Borrowers evidencing that such Borrower is
carrying insurance in accordance with Section 7.13 including loss payable and
standard mortgagee provisions or endorsements on the Borrowers' insurance
policies in accordance with Section 8.07.
(l) The Administrative Agent shall have received title opinions
or other evidence of title acceptable to the Administrative Agent on Properties
representing at least 80% of the total proved value in the July 1, 2005 ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ Reserve Report and shall be satisfied with the status of title to the
Oil and Gas Properties evaluated in the Initial Reserve Report.
(m) The Administrative Agent shall be reasonably satisfied with
the environmental condition of the Oil and Gas Properties of each of the
Borrowers and its Subsidiaries.
(n) The Administrative Agent shall have received a certificate
of a Responsible Officer of each of the Borrowers certifying that such Borrower
has received all consents and approvals required by Section 7.03.
(o) The Administrative Agent shall have received the financial
statements referred to in Section 7.04(a) and the Initial Reserve Report
accompanied by a certificate covering the matters described in Section 8.12(c).
(p) The Administrative Agent shall have received appropriate UCC
search certificates reflecting no prior Liens encumbering the Properties of the
Borrowers, the Subsidiaries for Kansas and Oklahoma and any other jurisdiction
requested by the Administrative Agent; other than those being assigned or
released on or prior to the Effective Date or Liens permitted by Section 9.03.
(q) The Administrative Agent shall have received evidence that
Cherokee or one of its Subsidiaries has in place one or more commodity price
floors,
31
collars or price swaps with one or more Approved Counterparties, on terms which
are satisfactory to the Administrative Agent and Borrowers.
(r) The Administrative Agent shall have received evidence that
the Borrowers have received Net Cash Proceeds of not less than $175,000,000 in
connection with the issuance of Equity Interests simultaneously with the closing
of the facility evidenced by this Agreement on terms acceptable to the
Administrative Agent (the "Equity Offering").
(s) The Intercreditor Agreement shall have been duly executed
and shall be in full force and effect.
(t) The Administrative Agent shall have received evidence that
(i) Credit Agreement dated as of July 22, 2004 by and among Cherokee, UBS AG,
Stamford Branch, as Administrative Agent, and the lenders party thereto, as
amended, has been, or will simultaneously be, terminated and the obligations
thereunder satisfied and (ii) the ArcLight Transaction has been or will
simultaneously, closed.
(u) The Administrative Agent shall have received such other
documents as the Administrative Agent or special counsel to the Administrative
Agent may reasonably request.
The Administrative Agent shall have notified the Borrowers and the Lenders
of the Effective Date, and such notice shall be conclusive and binding.
Notwithstanding the foregoing, the obligations of the Lenders to make its Loans
hereunder shall not become effective unless each of the foregoing conditions is
satisfied (or waived pursuant to Section 12.02) at or prior to 2:00 p.m. New
York City time, on November 14, 2005 (and , in the event such conditions are not
so satisfied or waived, the Commitements shall terminate at such time).
Section 6.02 Each Credit Event. The obligation of each Lender to fund its
Loan is subject to the satisfaction of the following conditions:
(a) At the time of and immediately after giving effect to the
Loans, no Default shall have occurred and be continuing.
(b) At the time of and immediately after giving effect to the
Loans, no event, development or circumstance has occurred or shall then exist
that has resulted in, or could reasonably be expected to have, a Material
Adverse Effect.
(c) The representations and warranties of the Borrowers and the
Guarantors set forth in this Agreement and in the other Loan Documents shall be
true and correct in all material respects on and as of the Effective Date,
except to the extent any such representations and warranties are expressly
limited to an earlier date, in which case, on and as of the Effective Date, such
representations and warranties shall continue to be true and correct in all
material respects as of such specified earlier date.
32
(d) The making of such Loan, would not conflict with, or cause
any Lender to violate or exceed, any applicable Governmental Requirement, and no
Change in Law shall have occurred, and no litigation shall be pending or
threatened, which does or, with respect to any threatened litigation, seeks to,
enjoin, prohibit or restrain, the making or repayment of any Loan, or any
participations therein or the consummation of the transactions contemplated by
this Agreement or any other Loan Document.
(e) The receipt by the Administrative Agent of the applicable
Borrowing Request in accordance with Section 2.03.
ARTICLE VII
Representations and Warranties
The Borrower represents and warrants to the Lenders that:
Section 7.01 Organization; Powers. Each of the Borrowers and the
Subsidiaries is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization, has all requisite corporate or
limited liability company power and authority, and has all material governmental
licenses, authorizations, consents and approvals necessary, to own its assets
and to carry on its business as now conducted, and is qualified to do business
in, and is in good standing in, every jurisdiction where such qualification is
required, except where failure to have such power, authority, licenses,
authorizations, consents, approvals and qualifications could not reasonably be
expected to have a Material Adverse Effect.
Section 7.02 Authority; Enforceability. The Transactions are within each
Borrower's and each Guarantor's corporate or limited liability company powers
and have been duly authorized by all necessary corporate or limited liability
company and, if required, stockholder or member action (including, without
limitation, any action required to be taken by any class of directors or
managers of such Borrower, whether interested or disinterested, in order to
ensure the due authorization of the Transactions). Each Loan Document to which
each Borrower and each Guarantor is a party has been duly executed and delivered
by such Borrower and such Guarantor and constitutes a legal, valid and binding
obligation of such Borrower and such Guarantor, as applicable, enforceable in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting creditors' rights generally
and subject to general principles of equity, regardless of whether considered in
a proceeding in equity or at law.
Section 7.03 Approvals; No Conflicts. Except as set forth on Schedule 7.03,
the Transactions (a) do not require any consent or approval of, registration or
filing with, or any other action by, any Governmental Authority or any other
third Person, nor is any such consent, approval, registration, filing or other
action necessary for the validity or enforceability of any Loan Document or the
consummation of the Transactions, except such as have been obtained or made and
are in full force and effect other than (i) the recording and filing of the
Security Instruments as required by this Agreement and (ii) those third party
approvals or consents which, if not made or obtained, would not cause a
33
Default hereunder, could not reasonably be expected to have a Material Adverse
Effect or do not have an adverse effect on the enforceability of the Loan
Documents, (b) will not violate any applicable law or regulation or the charter,
by-laws or other organizational documents of either of the Borrowers or any
Subsidiary or, except as could not reasonably be expected to have a Material
Adverse Effect, any order of any Governmental Authority, (c) will not violate or
result in a default under any indenture, agreement or other instrument binding
upon either Borrower or any Subsidiary or its Properties, or give rise to a
right thereunder to require any payment to be made by such Borrower or such
Subsidiary, except any violation or default that could not reasonably be
expected to have a Material Adverse Effect and (d) will not result in the
creation or imposition of any Lien on any Property of either Borrower or any
Subsidiary (other than the Liens created by the Loan Documents).
Section 7.04 Financial Condition; No Material Adverse Change.
-----------------------------------------------
(a) Each of the Borrowers has heretofore furnished to the
Lenders (i) its consolidated balance sheet and statements of income,
stockholders equity and cash flows (x) as of and for the seven month transition
period ended December 31, 2004, reported on by Murrell, Hall, ▇▇▇▇▇▇▇▇ & Co.
PLLP, independent registered public accounting firm, and (y) as of and for the
fiscal quarter and the portion of the fiscal year ended June 30, 2005, reviewed
by Murrell, Hall, ▇▇▇▇▇▇▇▇ & Co PLLP. Such financial statements present fairly,
in all material respects, the financial position and results of operations and
cash flows of such Borrower and its Consolidated Subsidiaries as of such dates
and for such periods in accordance with GAAP, subject to year-end audit
adjustments and the absence of footnotes in the case of the unaudited quarterly
financial statements. The Company has heretofore furnished to the Lenders the
unaudited, pro forma consolidated balance sheet and statements of income,
stockholders equity and cash flows as of and for the six-month period ended June
30, 2005 adjusted to give effect to this Agreement, and the other transactions
contemplated by Section 6.01(h), certified by its chief financial officer as
presenting fairly, in all material respects, the consolidated pro forma
financial position and results of operations and cash flows of the Company and
its Consolidated Subsidiaries as of such date and for such period in accordance
with GAAP, subject to year-end audit adjustments and the absence of footnotes in
the case of the unaudited quarterly financial statements.
(b) Since December 31, 2004, (i) there has been no event,
development or circumstance that has had or could reasonably be expected to have
a Material Adverse Effect and (ii) the business of the Borrowers and their
respective Subsidiaries has been conducted only in the ordinary course
consistent with past business practices, in each case, except as disclosed in
the filings made with the SEC as of October 31, 2005 by the Company.
(c) Neither of the Borrowers nor any of their respective
Subsidiary has on the date hereof any material Debt (including Disqualified
Capital Stock) or any contingent liabilities, off-balance sheet liabilities or
partnerships, liabilities for taxes, unusual forward or long-term commitments or
unrealized or anticipated losses from any unfavorable commitments (other than
the Gas Balancing Obligations and the Swap
34
Agreements listed on Schedule 7.21) which are not referred to or reflected or
provided for in the Financial Statements.
Section 7.05 Litigation. Except as set forth on Schedule 7.05, there are no
actions, suits, investigations or proceedings by or before any arbitrator or
Governmental Authority pending against or, to the Knowledge of either of the
Borrowers, threatened against or affecting such Borrower or any Subsidiary (i)
not fully covered by insurance (except for normal deductibles) as to which there
is a reasonable possibility of an adverse determination that, if adversely
determined, could reasonably be expected, individually or in the aggregate, to
result in a Material Adverse Effect or (ii) that involve any Loan Document or
the Transactions.
Section 7.06 Environmental Matters. Except as could not be reasonably
expected to have a Material Adverse Effect (or with respect to (c), (d) and (e)
below, where the failure to take such actions could not be reasonably expected
to have a Material Adverse Effect):
(a) neither any Property of either Borrower or any Subsidiary
nor the operations conducted thereon violate any order or requirement of any
court or Governmental Authority or any Environmental Laws.
(b) no Property of either Borrower or any Subsidiary nor the
operations currently conducted thereon or, to the Knowledge of either Borrower,
by any prior owner or operator of such Property or operation, are in violation
of or subject to any existing, pending or threatened action, suit,
investigation, inquiry or proceeding by or before any court or Governmental
Authority or to any remedial obligations under Environmental Laws.
(c) all notices, permits, licenses, exemptions, approvals or
similar authorizations, if any, required to be obtained or filed in connection
with the operation or use of any and all Property of each Borrower and each
Subsidiary, including, without limitation, past or present treatment, storage,
disposal or release of a hazardous substance, oil and gas waste or solid waste
into the environment, have been duly obtained or filed, and each Borrower and
each Subsidiary is in compliance with the terms and conditions of all such
notices, permits, licenses and similar authorizations.
(d) all hazardous substances, solid waste and oil and gas waste,
if any, generated by the Borrowers or any Subsidiary at any and all Property of
the Borrowers 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 Knowledge of the Borrowers, 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 existing, pending or threatened action, investigation or inquiry
by any Governmental Authority in connection with any Environmental Laws.
35
(e) each of the Borrowers has taken all steps reasonably
necessary to determine and have determined that no oil, hazardous substances,
solid waste or oil and gas waste, have been disposed of or otherwise released
and there has been no threatened release of any oil, hazardous substances, solid
waste or oil and gas waste on or to any Property of such Borrower or any of its
Subsidiaries except in compliance with Environmental Laws and so as not to pose
an imminent and substantial endangerment to public health or welfare or the
environment.
(f) to the extent applicable, all Property of each Borrower and
each Subsidiary currently satisfies all design, operation, and equipment
requirements imposed by the OPA, and such Borrower does not have any reason to
believe that such Property, to the extent subject to the OPA, will not be able
to maintain compliance with the OPA requirements during the term of this
Agreement.
(g) neither Borrower and no Subsidiary has any known contingent
liability or Remedial Work in connection with any release or threatened release
of any oil, hazardous substance, solid waste or oil and gas waste into the
environment.
Section 7.07 Compliance with the Laws and Agreements; No Defaults.
----------------------------------------------------
(a) Each of the Borrowers and each Subsidiary is in compliance
with all Governmental Requirements applicable to it or its Property and all
agreements and other instruments binding upon it or its Property, and possesses
all licenses, permits, franchises, exemptions, approvals and other governmental
authorizations necessary for the ownership of its Property and the conduct of
its business, except where the failure to do so, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect.
(b) Neither of the Borrowers and no Subsidiary is in default nor
has any event or circumstance occurred which, but for the expiration of any
applicable grace period or the giving of notice, or both, would constitute a
default or would require either Borrower or any Subsidiary to Redeem or make any
offer to Redeem under any indenture, note, credit agreement or instrument
pursuant to which any Material Indebtedness is outstanding or by which a
Borrower or any Subsidiary or any of their Properties is bound.
(c) No Default has occurred and is continuing.
Section 7.08 Investment Company Act. Neither of the Borrowers and no
Subsidiary is an "investment company" within the meaning of, or subject to
regulation under, the Investment Company Act of 1940, as amended.
Section 7.09 Public Utility Holding Company Act. Neither of the Borrowers
or any Subsidiary is a "holding company," or a "subsidiary company" of a
"holding company," or an "affiliate" of a "holding company" or of a "subsidiary
company" of a "holding company," or a "public utility" within the meaning of, or
subject to regulation under, the Public Utility Holding Company Act of 1935, as
amended.
36
Section 7.10 Taxes. Each of the Borrowers and their respective Subsidiaries
has timely filed or caused to be filed all Tax returns and reports required to
have been filed and has paid or caused to be paid all Taxes required to have
been paid by it, except (a) Taxes that are being contested in good faith by
appropriate proceedings and for which such Borrower or such Subsidiary, as
applicable, has set aside on its books adequate reserves in accordance with GAAP
or (b) to the extent that the failure to do so could not reasonably be expected
to result in a Material Adverse Effect. The charges, accruals and reserves on
the books of each of the Borrowers and its respective Subsidiaries in respect of
Taxes and other governmental charges are, in the reasonable opinion of such
Borrower, adequate. No Tax Lien has been filed and, to the Knowledge of the
Borrower, no claim is being asserted with respect to any such Tax or other such
governmental charge.
Section 7.11 ERISA.
-----
(a) The Borrowers, the Subsidiaries and each ERISA Affiliate
have complied in all material respects with ERISA and, where applicable, the
Code regarding each Plan.
(b) Each Plan is, and has been, maintained in substantial
compliance with ERISA and, where applicable, the Code.
(c) No act, omission or transaction has occurred which could
result in imposition on either of the Borrowers, any Subsidiary or any ERISA
Affiliate (whether directly or indirectly) of (i) either a material civil
penalty assessed pursuant to subsections (c), (i) or (l) of section 502 of ERISA
or a material tax imposed pursuant to Chapter 43 of Subtitle D of the Code or
(ii) breach of fiduciary duty liability damages under section 409 of ERISA.
(d) No Plan (other than a defined contribution plan) or any
trust created under any such Plan has been terminated since September 2, 1974.
No material liability to the PBGC (other than for the payment of current
premiums which are not past due) by either of the Borrowers, any Subsidiary or
any ERISA Affiliate has been or is expected by either of the Borrowers, any
Subsidiary or any ERISA Affiliate to be incurred with respect to any Plan. No
ERISA Event with respect to any Plan has occurred.
(e) Full payment when due has been made of all amounts which the
Borrowers, the Subsidiaries or any ERISA Affiliate is required under the terms
of each Plan or applicable law to have paid as contributions to such Plan as of
the date hereof, and no accumulated funding deficiency (as defined in section
302 of ERISA and section 412 of the Code), whether or not waived, exists with
respect to any Plan.
(f) The actuarial present value of the benefit liabilities under
each Plan which is subject to Title IV of ERISA does not, as of the end of the
Borrowers' most recently ended fiscal year, exceed the current value of the
assets (computed on a plan termination basis in accordance with Title IV of
ERISA) of such Plan allocable to such
37
benefit liabilities. The term "actuarial present value of the benefit
liabilities" shall have the meaning specified in section 4041 of ERISA.
(g) Neither of the Borrowers, any of their respective
Subsidiaries or any ERISA Affiliate sponsors, maintains, or contributes to an
employee welfare benefit plan, as defined in section 3(1) of ERISA, including,
without limitation, any such plan maintained to provide benefits to former
employees of such entities, that may not be terminated by either Borrower, a
Subsidiary or any ERISA Affiliate in its sole discretion at any time without any
material liability.
(h) Neither of the Borrowers, any of their respective
Subsidiaries nor any ERISA Affiliate sponsors, maintains or contributes to, or
has at any time in the six-year period preceding the date hereof sponsored,
maintained or contributed to, any Multiemployer Plan.
(i) Neither of the Borrowers, any of their respective
Subsidiaries nor any ERISA Affiliate is required to provide security under
section 401(a)(29) of the Code due to a Plan amendment that results in an
increase in current liability for the Plan.
Section 7.12 Disclosure; No Material Misstatements. The Borrowers have
disclosed to the Administrative Agent and the Lenders all agreements,
instruments and corporate or other restrictions to which they or any of their
respective Subsidiaries is subject as of the date of this Agreement, and all
other matters known to either of them, as of the date of this Agreement that,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect. None of the reports, financial statements, certificates
or other information furnished by or on behalf of the Borrowers or any
Subsidiary to the Administrative Agent or any Lender or any of their Affiliates
in connection with the negotiation of this Agreement or any other Loan Document
or delivered hereunder or under any other Loan Document (as modified or
supplemented by other information so furnished), when taken together with all
other such furnished documents and information, contains any material
misstatement of fact or omits to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided that, with respect to projected financial
information, the Borrowers represent only that such information was prepared in
good faith based upon assumptions believed to be reasonable at the time. There
is no fact peculiar to the Borrowers or any Subsidiary which could reasonably be
expected to have a Material Adverse Effect or in the future is reasonably likely
to have a Material Adverse Effect and which has not been set forth in this
Agreement or the Loan Documents or the other documents, certificates and
statements furnished to the Administrative Agent or the Lenders by or on behalf
of the Borrowers or any Subsidiary prior to, or on, the date hereof in
connection with the transactions contemplated hereby. No statements or
conclusions exist in any Reserve Report which are based upon or include
misleading information or which fail to take into account material information
regarding the matters reported therein to the extent such misstatement,
misleading information or failure could reasonably be expected to have a
Material Adverse Effect.
38
Section 7.13 Insurance. The Borrowers have, and have caused all their
Subsidiaries to have, (a) all insurance policies sufficient for the compliance
by each of them with all material Governmental Requirements and all material
agreements and (b) insurance coverage in at least amounts and against such risk
(including, without limitation, public liability) that are usually insured
against by companies similarly situated and engaged in the same or a similar
business for the assets and operations of the Borrowers and their Subsidiaries.
The Administrative Agent and the Lenders have been named as additional insureds
in respect of such liability insurance policies and the Administrative Agent has
been named as loss payee with respect to Property loss insurance.
Section 7.14 Restriction on Liens. Other than as set forth in Schedule
7.14, neither of the Borrowers or any of their Subsidiaries is a party to any
material agreement or arrangement (other than Liens for secured debt permitted
by Section 9.03), or subject to any order, judgment, writ or decree, which
either restricts or purports to restrict its ability to grant Liens to the
Administrative Agent and the Lenders on or in respect of their Properties to
secure the Indebtedness and the Loan Documents.
Section 7.15 Subsidiaries. Except as set forth on Schedule 7.15 or as
disclosed in writing to the Administrative Agent (which shall promptly furnish a
copy to the Lenders), which shall be a supplement to Schedule 7.15, the
Borrowers have no Subsidiaries.
Section 7.16 Location of Business and Offices. The jurisdiction of
organization of Quest Resource Corporation is Nevada; its name as listed in the
public records of its jurisdiction of organization is Quest Resource
Corporation; and its organizational identification number in its jurisdiction of
organization is C4082-1982, the jurisdiction of organization of Quest Cherokee,
LLC is Delaware; its name as listed in the public records of its jurisdiction of
organization is Quest Cherokee, LLC; and its organizational identification
number is 3739332 (or, in each case, as set forth in a notice delivered to the
Administrative Agent pursuant to Section 8.01(m) in accordance with Section
12.01). The Borrowers' principal place of business and chief executive offices
are located at the address specified in Section 12.01 (or as set forth in a
notice delivered pursuant to Section 8.01(n) and Section 12.01(c)). Each
Subsidiary's jurisdiction of organization, name as listed in the public records
of its jurisdiction of organization, organizational identification number in its
jurisdiction of organization, and the location of its principal place of
business and chief executive office is stated on Schedule 7.15 (or as set forth
in a notice delivered pursuant to Section 8.01(n)).
Section 7.17 Properties; Titles, Etc.
-----------------------
(a) Each of the Borrowers and the Subsidiaries has good and
defensible title to, or valid and enforceable leasehold interests in, the Oil
and Gas Properties evaluated in the most recently delivered Reserve Report and
good title to all its personal Properties, in each case, free and clear of all
Liens except Liens permitted by Section 9.03. After giving full effect to the
Excepted Liens, the Borrower or the Subsidiary specified as the owner or lessee
owns the net interests in production attributable to the Hydrocarbon Interests
as reflected in the most recently delivered
39
Reserve Report, and the ownership or lease of such Properties shall not in any
material respect obligate such Borrower or such Subsidiary to bear the costs and
expenses relating to the maintenance, development and operations of each such
Property in an amount in excess of the working interest of each Property set
forth in the most recently delivered Reserve Report that is not offset by a
corresponding proportionate increase in such Borrower's or such Subsidiary's net
revenue interest in such Property.
(b) All material leases and agreements necessary for the conduct
of the business of the Borrowers and the Subsidiaries are valid and subsisting,
in full force and effect, and there exists no default or event or circumstance
which with the giving of notice or the passage of time or both would give rise
to a default under any such lease or leases, which could reasonably be expected
to have a Material Adverse Effect.
(c) The rights and Properties presently owned, leased or
licensed by the Borrowers and the Subsidiaries including, without limitation,
all easements and rights of way, include all rights and Properties necessary to
permit the Borrowers and the Subsidiaries to conduct their business in all
material respects in the same manner as its business has been conducted prior to
the date hereof.
(d) All of the Properties of the Borrowers and the Subsidiaries
which are reasonably necessary for the operation of their businesses are in good
working condition (ordinary wear and tear excepted) and are maintained in
accordance with prudent business standards.
(e) Each of the Borrowers and each Subsidiary owns, or is
licensed to use, all trademarks, tradenames, copyrights, patents and other
intellectual Property material to its business, and the use thereof by such
Borrower and such Subsidiary does not infringe upon the rights of any other
Person, except for any such infringements that, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect. The Borrowers and their Subsidiaries either own or have valid licenses
or other rights to use all databases, geological data, geophysical data,
engineering data, seismic data, maps, interpretations and other technical
information used in their businesses as presently conducted, subject to the
limitations contained in the agreements governing the use of the same, which
limitations are customary for companies engaged in the business of the
exploration and production of Hydrocarbons, with such exceptions as could not
reasonably be expected to have a Material Adverse Effect.
Section 7.18 Maintenance of Properties. Except for such acts or failures to
act as could not be reasonably expected to have a Material Adverse Effect, the
Oil and Gas Properties (and Properties unitized therewith) of the Borrowers and
their Subsidiaries have been maintained, operated and developed in a good and
workmanlike manner and in conformity with all Government Requirements and in
conformity with the provisions of all leases, subleases or other contracts
comprising a part of the Hydrocarbon Interests and other contracts and
agreements forming a part of the Oil and Gas Properties of the Borrowers and
their Subsidiaries. Specifically in connection with the foregoing, except for
those as could not be reasonably expected to have a Material Adverse Effect, (i)
no Oil and Gas Property of either of the Borrowers or any Subsidiary is subject
to having
40
allowable production reduced below the full and regular allowable (including the
maximum permissible tolerance) because of any overproduction (whether or not the
same was permissible at the time) and (ii) none of the ▇▇▇▇▇ comprising a part
of the Oil and Gas Properties (or Properties unitized therewith) of either of
the Borrowers or any Subsidiary is deviated from the vertical more than the
maximum permitted by Government Requirements, and such ▇▇▇▇▇ are, in fact,
bottomed under and are producing from, and the well bores are wholly within, the
Oil and Gas Properties (or in the case of ▇▇▇▇▇ located on Properties unitized
therewith, such unitized Properties) of such Borrower or such Subsidiary. All
pipelines, ▇▇▇▇▇, gas processing plants, platforms and other material
improvements, fixtures and equipment owned in whole or in part by the either of
the Borrowers or any of its Subsidiaries that are reasonably necessary to
conduct normal operations are being maintained in a state adequate to conduct
normal operations, and with respect to such of the foregoing which are operated
by either of the Borrowers or any of its Subsidiaries, in a manner consistent
with such Borrower's or such Subsidiaries' past practices (other than those the
failure of which to maintain in accordance with this Section 7.18 could not
reasonably be expected to have a Material Adverse Effect).
Section 7.19 Gas Imbalances, Prepayments. Except as set forth on Schedule
7.19 or on the most recent certificate delivered pursuant to Section 8.12(b), on
a net basis there are no gas imbalances, take or pay or other prepayments which
would require either of the Borrowers or any of its Subsidiaries to deliver
Hydrocarbons produced from the Oil and Gas Properties at some future time
without then or thereafter receiving full payment therefor exceeding 1.0 bcf of
gas (on an mcf equivalent basis) in the aggregate.
Section 7.20 Marketing of Production. Except for contracts listed and in
effect on the date hereof on Schedule 7.20, and thereafter either disclosed in
writing to the Administrative Agent or included in the most recently delivered
Reserve Report (with respect to all of which contracts the Borrowers represent
that they or their Subsidiaries are receiving a price for all production sold
thereunder which is computed substantially in accordance with the terms of the
relevant contract and are not having deliveries curtailed substantially below
the subject Property's delivery capacity), no material agreements exist which
are not cancelable on 60 days notice or less without penalty or detriment for
the sale of production from the Borrowers' or their Subsidiaries' Hydrocarbons
(including, without limitation, calls on or other rights to purchase production,
whether or not the same are currently being exercised) that (a) pertain to the
sale of production at a fixed price and (b) have a maturity or expiry date of
longer than six (6) months, from the date hereof.
Section 7.21 Swap Agreements. Schedule 7.21, as of the date hereof, and
after the date hereof, each report required to be delivered by either of the
Borrowers pursuant to Section 8.01(e), sets forth, a true and complete list of
all Swap Agreements of the Borrowers and each of their Subsidiaries, the type,
term, effective date, termination date and notional amounts or volumes, the net
▇▇▇▇ to market value thereof as of the most recent date available, all credit
support agreements relating thereto (including any margin required or supplied)
and the counterparty to each such agreement.
41
Section 7.22 Use of Proceeds. The proceeds of the Loans shall be used
first, to repay, except as otherwise set forth herein with respect to letters of
credit and Swap Agreements, all outstanding Debt of the Borrowers and, second,
to provide working capital for exploration and production operations, pipeline
construction, oil and gas lease acquisition, permitted acquisitions and for
general business purposes. The Borrowers and their Subsidiaries are not engaged
principally, or as one of its important activities, in the business of extending
credit for the purpose, whether immediate, incidental or ultimate, of buying or
carrying margin stock (within the meaning of Regulation T, U or X of the Board).
No part of the proceeds of any Loan will be used for any purpose which violates
the provisions of Regulations T, U or X of the Board.
Section 7.23 Solvency. After giving effect to the transactions contemplated
hereby, (a) the aggregate assets (after giving effect to amounts that could
reasonably be received by reason of indemnity, offset, insurance or any similar
arrangement), at a fair valuation, of the Borrowers and the Guarantors, taken as
a whole, will exceed the aggregate Debt of the Borrowers and the Guarantors on a
consolidated basis, as the Debt becomes absolute and matures, (b) each of the
Borrowers and the Guarantors will not have incurred or intended to incur, and
will not believe that it will incur, Debt beyond its ability to pay such Debt
(after taking into account the timing and amounts of cash to be received by each
of the Borrowers and the Guarantors and the amounts to be payable on or in
respect of its liabilities, and giving effect to amounts that could reasonably
be received by reason of indemnity, offset, insurance or any similar
arrangement) as such Debt becomes absolute and matures and (c) each of the
Borrowers and the Guarantors will not have (and will have no reason to believe
that it will have thereafter) unreasonably small capital for the conduct of its
business.
Section 7.24 Operating Expenses. As of the date of this Agreement:
------------------
(a) Borrowers have no unpaid bills with an invoice date earlier
than August 1, 2005 for improvements to their Oil and Gas Properties that could
give rise to mechanics', materialmen's or other similar liens arising by
operation of applicable law.
(b) With respect to the Operating Agreements relating to
Borrowers' Working Interest and Net Revenue Interest in the Properties:
(i) there are no outstanding calls for payments under
any Authority for Expenditure or payments which are due or which Borrowers or,
to the best of Borrowers' knowledge, any predecessor or predecessors of
Borrowers have committed to make which have not been or are not being paid
within the terms required; and
(ii) there are no operations under any of the Operating
Agreements with respect to which Borrowers have become a non-consenting party
nor are there any non-consenting penalties binding or that will become binding
upon Borrowers that are not reflected in the Net Revenue Interest or Working
Interest as set forth on Exhibit A to the Mortgage.
42
ARTICLE VIII
Affirmative Covenants
Until the principal of and interest on each Loan and all fees payable
hereunder and all other amounts payable under the Loan Documents (other than
contingent indemnity obligations) shall have been paid in full, the Borrowers
covenant and agree with the Lenders that:
Section 8.01 Financial Statements; Ratings Change; Other Information. The
Borrowers will furnish to the Administrative Agent and each Lender:
(a) Annual Financial Statements. As soon as available, but in
any event not later than 90 days after the end of each fiscal year of the
Company, its audited consolidated balance sheet and related statements of
operations, stockholders' equity and cash flows as of the end of and for such
year, setting forth in each case in comparative form the figures for the
previous fiscal year, all reported on by Murrell, Hall, ▇▇▇▇▇▇▇▇ & Co. PLLP or
another independent registered public accounting firm (without a "going concern"
or like qualification or exception and without any qualification or exception as
to the scope of such audit) to the effect that such consolidated financial
statements present fairly in all material respects the financial condition and
results of operations of the Company and its Consolidated Subsidiaries on a
consolidated basis in accordance with GAAP consistently applied.
(b) Quarterly Financial Statements. As soon as available, but in
any event not later than 45 days after the end of each of the first three fiscal
quarters of each fiscal year of the Company, its consolidated balance sheet and
related statements of operations, stockholders' equity and cash flows as of the
end of and for such fiscal quarter and the then elapsed portion of the fiscal
year, setting forth in each case in comparative form the figures for the
corresponding period or periods of (or, in the case of the balance sheet, as of
the end of) the previous fiscal year, all certified by one of its Financial
Officers as presenting fairly in all material respects the financial condition
and results of operations of the Company and its Consolidated Subsidiaries on a
consolidated basis in accordance with GAAP consistently applied, subject to
normal year-end audit adjustments and the absence of footnotes.
(c) Certificate of Financial Officer -- Compliance. Concurrently
with any delivery of financial statements under Section 8.01(a) or Section
8.01(b), a certificate of a Financial Officer in substantially the form of
Exhibit D hereto (i) certifying as to whether a Default has occurred and, if a
Default has occurred, specifying the details thereof and any action taken or
proposed to be taken with respect thereto, (ii) setting forth reasonably
detailed calculations demonstrating compliance with Section 8.13(b) and Section
9.01 and (iii) stating whether any change in GAAP or in the application thereof
has occurred since the date of the most recent audited financial statements
delivered pursuant to Section 8.01(a) and, if any such change has occurred,
specifying the effect of such change on the financial statements accompanying
such certificate.
43
(d) Certificate of Financial Officer -- Consolidating
Information. If, at any time, all of the Subsidiaries of the Company are not
Consolidated Subsidiaries, then concurrently with any delivery of financial
statements under Section 8.01(a) or Section 8.01(b), a certificate of a
Financial Officer setting forth consolidating spreadsheets that show all
unconsolidated Subsidiaries and the eliminating entries, in such form as would
be presentable to the auditors of the Company.
(e) Certificate of Financial Officer - Swap Agreements.
Concurrently with any delivery of financial statements under Section 8.01(a) and
Section 8.01(b), a certificate of a Financial Officer, in form and substance
satisfactory to the Administrative Agent, setting forth as of the last Business
Day of such fiscal quarter or fiscal year, a true and complete list of all Swap
Agreements of each of the Borrowers and each Subsidiary, listing the type, term,
effective date, termination date and notional amounts or volumes, the net
▇▇▇▇-to-market value therefor to the extent available, any new credit support
agreements relating thereto not listed on Schedule 7.21, any margin required or
supplied under any credit support document, and the counterparty to each such
agreement.
(f) Certificate of Insurer -- Insurance Coverage. Concurrently
with any delivery of financial statements under Section 8.01(a), a certificate
of insurance coverage from each insurer with respect to the insurance required
by Section 8.07, in form and substance satisfactory to the Administrative Agent,
and, if requested by the Administrative Agent or any Lender, copies of all
applicable policies.
(g) Other Accounting Reports. Promptly upon receipt thereof, a
copy of each other report or letter submitted to the Borrowers or any of their
Subsidiaries by independent accountants in connection with any annual, interim
or special audit made by them of the books of such Borrower or any such
Subsidiary, and a copy of any response by such Borrower or any such Subsidiary,
or the Board of Directors of such Borrower or any such Subsidiary, to such
letter or report.
(h) SEC and Other Filings; Reports to Shareholders. Promptly
after the same become publicly available, and upon the request of the Lenders,
copies of all periodic and other reports, proxy statements and other materials
filed by either of the Borrowers or any Subsidiary with the SEC, or with any
national securities exchange and distributed by either of the Borrowers to its
shareholders.
(i) Notices Under Material Instruments. Promptly after the
furnishing thereof, copies of any financial statement or report furnished to or
by any Person or notices furnished by the Borrowers to any other Person,
pursuant to the terms of any preferred stock designation, indenture, loan or
credit or other similar agreement, other than this Agreement and not otherwise
required to be furnished to the Lenders pursuant to any other provision of this
Section 8.01.
(j) Lists of Purchasers. Concurrently with the delivery of any
Reserve Report to the Administrative Agent pursuant to Section 8.12, a list of
Persons who purchase (or did purchase in the last six months) at least 80% of
the Hydrocarbons from the Borrowers and the Subsidiaries, taken as a whole.
44
(k) Notice of Sales of Oil and Gas Properties. In the event that
either of the Borrowers or any Subsidiary intends to sell, transfer, assign or
otherwise dispose of at least $500,000 worth of any Oil or Gas Properties or any
Equity Interests in any Subsidiary in accordance with Section 9.12, prior
written notice of such disposition, the price thereof and the anticipated date
of closing.
(l) Notice of Casualty Events. Prompt written notice, and in any
event within three Business Days, of the occurrence of any Casualty Event or the
commencement of any action or proceeding that could reasonably be expected to
result in a Casualty Event.
(m) Certificate of Responsible Officer--Total Debt. At the times
specified in Section 8.12(d) and promptly following any change to PV-10 pursuant
to Section 8.12(a) or Section 9.12, the Borrowers will promptly, but in any
event within fifteen (15) days after any such event, deliver a certificate of a
Responsible Officer of the Borrowers setting forth the PV-10 both prior to and
after giving effect to such event.
(n) Information Regarding Borrowers and Guarantors. Prompt
written notice (and in any event within thirty (30) days prior thereto) of any
change (i) in the Borrowers' or any Guarantor's corporate name or in any trade
name used to identify such Person in the conduct of its business or in the
ownership of its Properties, (ii) in the location of the Borrowers or any
Guarantor's chief executive office or principal place of business if either
Borrower or any Guarantor is not a registered organization under the Uniform
Commercial Code, (iii) in the Borrowers' or any Guarantor's identity or
corporate structure, (iv) in the Borrowers' or any Guarantor's jurisdiction of
organization or such Person's organizational identification number in such
jurisdiction of organization, and (v) in the Borrowers' or any Guarantor's
federal taxpayer identification number.
(o) Production Report and Lease Operating Statements. With the
delivery of quarterly financial statements under Section 8.01(b), a report
setting forth, for each calendar month during the then current fiscal year to
date on a production date basis, the volume of production and sales attributable
to production (and the prices at which such sales were made and the revenues
derived from such sales) for each such calendar month from the Oil and Gas
Properties, and setting forth the related ad valorem, severance and production
taxes and lease operating expenses attributable thereto and incurred for each
such calendar month.
(p) Notices of Certain Changes. Promptly, but in any event
within five (5) Business Days after the execution thereof, copies of any
amendment, modification or supplement to the certificate or articles of
incorporation, by-laws, any preferred stock designation or any other organic
document of either of the Borrowers or any Subsidiary that would reasonably be
expected to have a Material Adverse Effect on the ability of either of the
Borrowers or any Subsidiary to perform its obligations hereunder or under any
Loan Documents.
(q) Other Requested Information. Promptly following any request
therefor, such other information regarding the operations, business affairs and
financial
45
condition of the Borrowers or any Subsidiary (including, without limitation, any
Plan or Multiemployer Plan and any reports or other information required to be
filed under ERISA), or compliance with the terms of this Agreement or any other
Loan Document, as the Administrative Agent or any Lender may reasonably request.
(r) Delivery of Information Electronically. Notices to the
Administrative Agent and the Lenders under this Section 8.01 may be delivered or
furnished by electronic communications pursuant to procedures approved by the
Administrative Agent.
Section 8.02 Notices of Material Events. The Borrowers will furnish to the
Administrative Agent and each Lender prompt written notice of the following:
(a) the occurrence of any Default;
(b) the filing or commencement of, or the threat in writing of,
any action, suit, proceeding, investigation or arbitration by or before any
arbitrator or Governmental Authority against or affecting either of the
Borrowers or any Affiliate thereof not previously disclosed in writing to the
Lenders or any material adverse development in any action, suit, proceeding,
investigation or arbitration previously disclosed to the Lenders that, if
adversely determined, could reasonably be expected to result in liability in
excess of $1,000,000 not fully covered by insurance, subject to normal
deductibles;
(c) the occurrence of any ERISA Event that, alone or together
with any other ERISA Events that have occurred, could reasonably be expected to
result in liability of either of the Borrowers and its Subsidiaries in an
aggregate amount exceeding $1,000,000; and
(d) any other development that results in, or could reasonably
be expected to result in, a Material Adverse Effect.
Each notice delivered under this Section 8.02 shall be accompanied by a
statement of a Responsible Officer setting forth the details of the event or
development requiring such notice and any action taken or proposed to be taken
with respect thereto.
Section 8.03 Existence; Conduct of Business. Each of the Borrowers will,
and will cause each Subsidiary to, do or cause to be done all things necessary
to preserve, renew and keep in full force and effect its legal existence and the
rights, licenses, permits, privileges and franchises material to the conduct of
its business and maintain, if necessary, its qualification to do business in
each other jurisdiction in which its Oil and Gas Properties are located or the
ownership of its Properties requires such qualification, except where the
failure to so qualify could not reasonably be expected to have a Material
Adverse Effect; provided that the foregoing shall not prohibit any merger,
consolidation, liquidation or dissolution permitted under Section 9.11.
Section 8.04 Payment of Obligations. Each of the Borrowers will, and will
cause each Subsidiary to, pay its obligations, including Tax liabilities of the
Borrowers and all
46
of their Subsidiaries before the same shall become delinquent or in default
(provided, that Borrowers and their Subsidiaries shall have up to 60 days after
due date to pay trade payables arising in the ordinary course of business),
except where (a) the validity or amount thereof is being contested in good faith
by appropriate proceedings, (b) such Borrower or such Subsidiary has set aside
on its books adequate reserves with respect thereto in accordance with GAAP and
(c) the failure to make payment pending such contest could not reasonably be
expected to result in a Material Adverse Effect or result in the seizure or levy
of any Property of either of the Borrowers or any Subsidiary.
Section 8.05 Performance of Obligations under Loan Documents. The Borrowers
will pay the Loans according to the terms thereof, and the Borrowers will, and
will cause each Subsidiary to, do and perform every act and discharge all of the
obligations to be performed and discharged by them under the Loan Documents,
including, without limitation, this Agreement, at the time or times and in the
manner specified.
Section 8.06 Operation and Maintenance of Properties. Each of the
Borrowers, at its own expense, will, and will cause each Subsidiary to:
(a) operate its Oil and Gas Properties and other material
Properties or cause such Oil and Gas Properties and other material Properties to
be operated in a careful and efficient manner in accordance with the practices
of the industry and in compliance with all applicable contracts and agreements
and in compliance with all Governmental Requirements, including, without
limitation, applicable pro ration requirements and Environmental Laws, and all
applicable laws, rules and regulations of every other Governmental Authority
from time to time constituted to regulate the development and operation of its
Oil and Gas Properties and the production and sale of Hydrocarbons and other
minerals therefrom, except, in each case, where the failure to comply could not
reasonably be expected to have a Material Adverse Effect.
(b) keep and maintain all Property material to the conduct of
its business in good working order and condition, ordinary wear and tear
excepted, preserve, maintain and keep in good repair, working order and
efficiency (ordinary wear and tear excepted) all of its Oil and Gas Properties
and other Properties, including, without limitation, all equipment, machinery
and facilities except, in each case, where the failure to do so could not
reasonably be expected to have a Material Adverse Effect.
(c) promptly pay and discharge, or make reasonable and customary
efforts to cause to be paid and discharged, all delay rentals, royalties,
expenses and indebtedness accruing under the leases or other agreements
affecting or pertaining to its Oil and Gas Properties and will do all other
things necessary to keep unimpaired their rights with respect thereto and
prevent any forfeiture thereof or default thereunder except, in each case, where
the failure to do so could not reasonably be expected to have a Material Adverse
Effect.
(d) promptly perform or make reasonable and customary efforts to
cause to be performed, in accordance with industry standards, the obligations
required by
47
each and all of the assignments, deeds, leases, sub-leases, contracts and
agreements affecting its interests in its Oil and Gas Properties and other
material Properties except, in each case, where the failure to do so could not
reasonably be expected to have a Material Adverse Effect.
(e) to the extent one of the Borrowers is not the operator of
any Property, the Borrowers shall use reasonable efforts to cause the operator
to comply with this Section 8.06.
Section 8.07 Insurance. The Borrowers will, and will cause each Subsidiary
to, maintain, with financially sound and reputable insurance companies,
insurance in such amounts and against such risks as are customarily maintained
by companies engaged in the same or similar businesses operating in the same or
similar locations. The loss payable clauses or provisions in said insurance
policy or policies insuring any of the collateral for the Loans shall be
endorsed in favor of and made payable to the Administrative Agent as its
interests may appear, shall include a standard mortgagee provision and such
policies shall name the Administrative Agent and the Lenders as "additional
insureds" and provide that the insurer will endeavor to give at least 30 days
prior notice of any cancellation to the Administrative Agent.
Section 8.08 Books and Records; Inspection Rights. The Borrowers will, and
will cause each Subsidiary to, keep proper books of record and account in which
full, true and correct entries are made of all dealings and transactions in
relation to its business and activities. The Borrowers will, and will cause each
Subsidiary to, permit any representatives designated by the Administrative Agent
or any Lender, upon reasonable prior notice, to visit and inspect its
Properties, to examine and make extracts from its books and records, and to
discuss its affairs, finances and condition with its officers and independent
accountants, all at such reasonable times and as often as reasonably requested.
Section 8.09 Compliance with Laws. The Borrowers will, and will cause each
Subsidiary to, comply with all laws, rules, regulations and orders of any
Governmental Authority applicable to it or its Property, except where the
failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect.
Section 8.10 Environmental Matters.
---------------------
(a) The Borrowers shall at their sole expense: (i) comply, and
shall cause their Properties and operations and each Subsidiary and each
Subsidiary's Properties and operations to comply, with all applicable
Environmental Laws, the breach of which could be reasonably expected to have a
Material Adverse Effect; (ii) not dispose of or otherwise release, and shall
cause each Subsidiary not to dispose of or otherwise release, any oil, oil and
gas waste, hazardous substance, or solid waste on, under, about or from any of
the Borrowers' or their Subsidiaries' Properties or any other Property to the
extent caused by the Borrowers' or any of their Subsidiaries' operations except
in compliance with applicable Environmental Laws, the disposal or release of
which could
48
reasonably be expected to have a Material Adverse Effect; (iii) timely obtain or
file, and shall cause each Subsidiary to timely obtain or file, all notices,
permits, licenses, exemptions, approvals, registrations or other authorizations,
if any, required under applicable Environmental Laws to be obtained or filed in
connection with the operation or use of the Borrower's or their Subsidiaries'
Properties, which failure to obtain or file could reasonably be expected to have
a Material Adverse Effect; (iv) promptly commence and diligently prosecute to
completion, and shall cause each Subsidiary to promptly commence and diligently
prosecute to completion, any assessment, evaluation, investigation, monitoring,
containment, cleanup, removal, repair, restoration, remediation or other
remedial obligations (collectively, the "Remedial Work") in the event any
Remedial Work is required or reasonably necessary under applicable Environmental
Laws because of or in connection with the actual or suspected past, present or
future disposal or other release of any oil, oil and gas waste, hazardous
substance or solid waste on, under, about or from any of the Borrowers' or their
Subsidiaries' Properties, which failure to commence and diligently prosecute to
completion could reasonably be expected to have a Material Adverse Effect; and
(v) establish and implement, and shall cause each Subsidiary to establish and
implement, such procedures as may be necessary to continuously determine and
assure that the Borrowers' and their Subsidiaries' obligations under this
Section 8.10(a) are timely and fully satisfied, which failure to establish and
implement could reasonably be expected to have a Material Adverse Effect.
(b) The Borrowers will promptly, but in no event later than five
days of the occurrence of a triggering event, notify the Administrative Agent
and the Lenders in writing of any threatened action, investigation or inquiry by
any Governmental Authority or any threatened demand or lawsuit by any landowner
or other third party against either of the Borrowers or their Subsidiaries or
their Properties of which the Borrower has Knowledge in connection with any
Environmental Laws (excluding routine testing and corrective action) if the
Borrower reasonably anticipates that such action will result in liability
(whether individually or in the aggregate) in excess of $1,000,000, not fully
covered by insurance, subject to normal deductibles.
(c) The Borrowers will, and will cause each Subsidiary to,
provide environmental audits and tests in accordance with American Society of
Testing Materials standards (i) upon the occurrence and during the continuance
of an Event of Default if requested by the Administrative Agent, (ii) upon
request by the Administrative Agent and the Lenders if required to be obtained
by the Administrative Agent or the Lenders by any Governmental Authority, or
(iii) in connection with any future acquisitions of Oil and Gas Properties or
other real estate Properties with a fair market value in excess of $2,000,000,
unless waived by the Administrative Agent.
Section 8.11 Further Assurances.
------------------
(a) The Borrowers at their expense will, and will cause each
Subsidiary to, promptly execute and deliver to the Administrative Agent all such
other documents, agreements and instruments reasonably requested by the
Administrative Agent to comply with, cure any defects or accomplish the
conditions precedent, covenants and agreements of the Borrowers or any
Subsidiary, as the case may be, in the
49
Loan Documents, including the Notes, if requested, or to further evidence and
more fully describe the collateral intended as security for the Indebtedness, or
to correct any omissions in this Agreement or the Security Instruments, or to
perfect, protect or preserve any Liens created pursuant to this Agreement or any
of the Security Instruments or the priority thereof, or to make any recordings,
file any notices or obtain any consents, all as may be reasonably necessary or
appropriate, in the sole discretion of the Administrative Agent, in connection
therewith.
(b) Each of the Borrowers hereby authorizes the Administrative
Agent to file one or more financing or continuation statements, and amendments
thereto, relative to all or any part of the Mortgaged Property without the
signature of either of the Borrowers or any Guarantor where permitted by law. A
carbon, photographic or other reproduction of the Security Instruments or any
financing statement covering the Mortgaged Property or any part thereof shall be
sufficient as a financing statement where permitted by law.
Section 8.12 Reserve Reports.
---------------
(a) On or before March 1st and September 1st of each year,
commencing March 1, 2006, the Borrowers shall furnish to the Administrative
Agent and the Lenders a Reserve Report. The Reserve Report as of December 31 of
each year (and delivered on or before March 1 of the immediately following year)
shall be prepared by one or more Approved Petroleum Engineers, and the June 30
Reserve Report (delivered on or before September 1) of each year shall be
prepared either by or under the supervision of the chief engineer of the
Borrowers who shall certify such Reserve Report to be true and accurate and to
have been prepared in accordance with the procedures used in the immediately
preceding January 1 Reserve Report or by one or more Approved Petroleum
Engineers.
(b) In the event of a determination of the PV-10 as of a
specified date other than January 1 and July 1, the Borrowers shall furnish to
the Administrative Agent and the Lenders a Reserve Report prepared either by or
under the supervision of the chief engineer of the Borrowers who shall certify
such Reserve Report to be true and accurate and to have been prepared in
accordance with the procedures used in the immediately preceding January 1
Reserve Report or by one or more Approved Petroleum Engineers.
(c) With the delivery of each Reserve Report, the Borrowers
shall provide to the Administrative Agent and the Lenders 1) a certificate from
a Responsible Officer certifying that in all material respects: (i) the
information contained in the Reserve Report and any other information delivered
in connection therewith is true and correct, and no statements or conclusions
exist in such Reserve Report which are based upon or include misleading
information or which fail to take into account material information regarding
the matters reported therein to the extent such misstatement, misleading
information or failure could reasonably be expected to have a Material Adverse
Effect, (ii) the Borrowers or the Subsidiaries own good and defensible title to,
or valid and enforceable leasehold interests in, the Oil and Gas Properties
evaluated in such Reserve Report and such Properties are free of all Liens
except for Liens permitted by
50
Section 9.03, (iii) except as set forth on an exhibit to the certificate, on a
net basis there are no gas imbalances, take or pay or other prepayments in
excess of the volume specified in Section 7.19 with respect to its Oil and Gas
Properties evaluated in such Reserve Report which would require either of the
Borrowers or any Subsidiary to deliver Hydrocarbons either generally or produced
from such Oil and Gas Properties at some future time without then or thereafter
receiving full payment therefor, (iv) none of their Oil and Gas Properties have
been sold since the date of the last PV-10 determination except as set forth on
an exhibit to the certificate, which certificate shall list all of its Oil and
Gas Properties sold and in such detail as reasonably required by the
Administrative Agent, and (v) attached to the certificate is a list of all
marketing agreements entered into subsequent to the later of the date hereof or
the most recently delivered Reserve Report which the Borrowers could reasonably
be expected to have been obligated to list on Schedule 7.20 had such agreement
been in effect on the date hereof and 2) electronically, a schedule of the Oil
and Gas Properties evaluated by such Reserve Report that are Mortgaged
Properties and certifying that each Oil and Gas Property that constitutes
collateral for the Senior Credit Agreement also constitutes collateral for the
Indebtedness outstanding under this Agreement and demonstrating that the
percentage of value of such Mortgaged Properties complies with Section 8.14.
Section 8.13 Title Information.
-----------------
(a) On or before the delivery to the Administrative Agent and
the Lenders of each Reserve Report required by Section 8.12(a), the Borrowers
will deliver title information in form and substance acceptable to the
Administrative Agent covering enough of the Oil and Gas Properties (excluding
the Pipeline) evaluated by such Reserve Report that were not included in the
immediately preceding Reserve Report, so that the Administrative Agent shall be
reasonably satisfied with the status of title to or leasehold interests in the
Oil and Gas Properties evaluated by such Reserve Report representing not less
than 80% of the total value of such Properties, provided the Borrowers will not
be required to deliver any title opinions on Oil and Gas Properties that are not
Proved Mineral Interests.
(b) If the Borrowers have provided title information for
additional Properties under Section 8.13(a), the Borrowers shall, within 90 days
of notice from the Administrative Agent that title defects or exceptions exist
with respect to such additional Properties, either (i) cure any such title
defects or exceptions (including defects or exceptions as to priority) which are
not permitted by Section 9.03 raised by such information, (ii) substitute
acceptable Mortgaged Properties with no title defects or exceptions except for
Excepted Liens (other than Excepted Liens described in clauses (e), (g) and (h)
of such definition) having an equivalent value or (iii) deliver title
information in form and substance acceptable to the Administrative Agent so that
the Administrative Agent shall be reasonably satisfied with the status of title
to the Oil and Gas Properties evaluated by such Reserve Report.
(c) If the Borrowers are unable to cure any title defect
requested by the Administrative Agent or the Lenders to be cured within the
90-day period or the Borrowers do not comply with the requirements to provide
acceptable title information
51
on the Oil and Gas Properties evaluated in the most recent Reserve Report, such
default shall not be a Default, but instead the Administrative Agent and/or the
Majority Lenders shall have the right to exercise the following remedy in their
sole discretion from time to time, and any failure to so exercise this remedy at
any time shall not be a waiver as to future exercise of the remedy by the
Administrative Agent or the Lenders. To the extent that the Administrative Agent
or the Majority Lenders are not satisfied with title to any Mortgaged Property
after the 90-day period has elapsed, the Administrative Agent may send a notice
to the Borrowers and the Lenders that the then outstanding PV-10 shall be
reduced by an amount as determined by the Majority Lenders to cause the Borrower
to be in compliance with the requirement to provide acceptable title information
to the Oil and Gas Properties. This new PV-10 shall become effective immediately
after receipt of such notice.
Section 8.14 Additional Collateral.
---------------------
In connection with each redetermination of the PV-10, the Borrowers shall
review the Reserve Report and the list of current Mortgaged Properties (as
described in Section 8.12(c)(vi)) to ascertain whether the Mortgaged Properties
represent at least 80% of the total value of the Oil and Gas Properties
(excluding the Pipeline) evaluated in the most recently completed Reserve Report
after giving effect to exploration and production activities, acquisitions,
dispositions and production. In the event that the Mortgaged Properties do not
represent at least 80% of such total value, then each of the Borrowers shall,
and shall cause their Subsidiaries to, grant, within thirty (30) days of
delivery of the certificate required under Section 8.12(a), to the
Administrative Agent as security for the Indebtedness a first-priority Lien
interest (subject only to Excepted Liens of the type described in clauses (a) to
(d) and (f) of the definition thereof, but subject to the provisos at the end of
such definition) on additional Oil and Gas Properties (excluding the Pipeline)
not already subject to a Lien of the Security Instruments such that after giving
effect thereto, the Mortgaged Properties will represent at least 80% of such
total value. All such Liens will be created and perfected by and in accordance
with the provisions of mortgages, deeds of trust, security agreements and
financing statements or other Security Instruments, all in form and substance
reasonably satisfactory to the Administrative Agent and in sufficient executed
(and acknowledged where necessary or appropriate) counterparts for recording
purposes.
Section 8.15 ERISA Compliance. Each of the Borrowers will promptly furnish
and will cause the Subsidiaries and any ERISA Affiliate to promptly furnish to
the Administrative Agent (i) promptly after the filing thereof with the United
States Secretary of Labor, the Internal Revenue Service or the PBGC, copies of
each annual and other report with respect to each Plan or any trust created
thereunder, (ii) promptly upon becoming aware of the occurrence of any ERISA
Event or of any "prohibited transaction," as described in section 406 of ERISA
or in section 4975 of the Code, in connection with any Plan or any trust created
thereunder, a written notice signed by the President or the principal Financial
Officer of the applicable Borrower, Subsidiary or ERISA Affiliate, as the case
may be, specifying the nature thereof, what action such Borrower, Subsidiary or
the ERISA Affiliate is taking or proposes to take with respect thereto, and,
when known, any action taken or proposed by the Internal Revenue Service,
52
the Department of Labor or the PBGC with respect thereto, and (iii) promptly
upon receipt thereof, copies of any notice of the PBGC's intention to terminate
or to have a trustee appointed to administer any Plan. With respect to each Plan
(other than a Multiemployer Plan), each of the Borrowers will, and will cause
each Subsidiary and ERISA Affiliate to, (i) satisfy in full and in a timely
manner, without incurring any late payment or underpayment charge or penalty and
without giving rise to any Lien, all of the contribution and funding
requirements of section 412 of the Code (determined without regard to
subsections (d), (e), (f) and (k) thereof) and of section 302 of ERISA
(determined without regard to sections 303, 304 and 306 of ERISA), and (ii) pay,
or cause to be paid, to the PBGC in a timely manner, without incurring any late
payment or underpayment charge or penalty, all premiums required pursuant to
sections 4006 and 4007 of ERISA.
Section 8.16 Swap Agreements. The Borrowers shall or shall cause one or
more of their Subsidiaries to maintain the hedged position established by the
Swap Agreements required under Section 6.01(q) during the period specified
therein and shall neither assign, terminate or unwind any such Swap Agreements
nor sell any Swap Agreements if the effect of such action (when taken together
with any other Swap Agreements executed contemporaneously with the taking of
such action) would have the effect of canceling its positions under such Swap
Agreements required hereby.
Section 8.17 Marketing Activities. The Borrowers will not, and will not
permit any of their Subsidiaries to, engage in marketing activities for any
Hydrocarbons or enter into any contracts related thereto other than (i)
contracts for the sale of Hydrocarbons scheduled or reasonably estimated to be
produced from their proved Oil and Gas Properties during the period of such
contract, (ii) contracts for the sale of Hydrocarbons scheduled or reasonably
estimated to be produced from proved Oil and Gas Properties of third parties
during the period of such contract associated with the Oil and Gas Properties of
the Borrowers and their Subsidiaries that either of the Borrowers or one of its
Subsidiaries has the right to market pursuant to joint operating agreements,
unitization agreements or other similar contracts that are usual and customary
in the oil and gas business and (iii) other contracts for the purchase and/or
sale of Hydrocarbons of third parties (A) which have generally offsetting
provisions (i.e. corresponding pricing mechanics, delivery dates and points and
volumes) such that no "position" is taken and (B) for which appropriate credit
support has been taken to alleviate the material credit risks of the
counterparty thereto.
ARTICLE IX
Negative Covenants
Until the principal of and interest on each Loan and all fees payable
hereunder and all other amounts payable under the Loan Documents (other than
contingent indemnification obligations) have been paid in full, the Borrowers
covenant and agree with the Lenders that:
Section 9.01 Financial Covenants.
-------------------
53
(a) The Borrowers will have net sales of natural gas on
commercial terms customary in the local market of not less than 1,890 mmcf for
the quarter ending March 31, 2006; 2,380 mmcf for the quarter ending June 30,
2006; 3,080 mmcf for the quarter ending September 30, 2006; and 3,430 mmcf for
the quarter ending December 31, 2006.
(b) For purposes of this Section 9.01(b), "EBITDA" shall be
calculated using EBITDA for such quarter multiplied by four (4). The Borrowers
shall maintain a ratio of Total Debt to EBITDA of not more than the following
ratios for the quarters ending on the dates indicated below:
Ratio Period
4.5 to 1.0 for the quarter ending March 31, 2007,
4.25 to 1.0 for the quarter ending June 30, 2007,
4.00 to 1.0 for the quarter ending September 30, 2007,
3.75 to 1.0 for the quarter ending December 31, 2007,
3.50 to 1.0 for the quarter ending March 31, 2008,
3.25 to 1.0 for the quarter ending June 30, 2008, and
3.0 to 1.0 for each quarter ending on or after September 30, 2008
(c) The Borrowers shall not permit the ratio of (i) PV-10, as
set forth on the most recent Reserve Report delivered pursuant to Section 8.12
to (ii) Total Debt to be less than 1.5 to 1.0.
Section 9.02 Debt. The Borrowers will not, and will not permit any
Subsidiary to, incur, create, assume or suffer to exist any ---- Debt, except:
(a) the Loans, any Notes or other Indebtedness arising under the
Loan Documents or any guaranty of or suretyship arrangement for the Loans, any
Notes or other Indebtedness arising under the Loan Documents.
(b) Debt of the Borrowers and their Subsidiaries existing on the
date hereof that is reflected in the Financial Statements.
(c) accounts payable and accrued expenses, liabilities or other
obligations to pay the deferred purchase price of Property or services, from
time to time incurred in the ordinary course of business which are not greater
than sixty (60) days past the due date or which are being contested in good
faith by appropriate action and for which adequate reserves have been maintained
in accordance with GAAP.
(d) Debt (including guarantees) under Capital Leases and
purchase money obligations not to exceed $2,500,000 in the aggregate.
54
(e) Debt (including guarantees) associated with bonds or surety
obligations required by Governmental Requirements or any other Person in
connection with the operation of the Oil and Gas Properties.
(f) intercompany Debt between the Borrowers, between either of
the Borrowers and any Subsidiary or between Subsidiaries to the extent permitted
by Section 9.05(g); provided that such Debt is not held, assigned, transferred,
negotiated or pledged to any Person other than either of the Borrowers or one of
their Wholly-Owned Subsidiaries, and, provided further, that any such Debt owed
by either a Borrower or a Guarantor shall be subordinated to the Indebtedness on
terms set forth in the Security Agreement.
(g) endorsements of negotiable instruments for collection in the
ordinary course of business.
(h) Debt under the Senior Credit Agreement that does not exceed
$100,000,000 in the aggregate.
(i) Debt in connection with Swap Agreements and permitted in
accordance with Section 9.18.
(j) reimbursement obligations under (i) letters of credit
outstanding on the date of this Agreement and (ii) other letters of credit
provided the aggregate undrawn face amount of such other letters of credit does
not exceed $20,000,000.
(k) guarantees of Debt otherwise permitted under Section 9.02.
(l) Permitted Refinancing Debt.
(m) other Debt, not otherwise permitted above, not to exceed
$2,000,000 in the aggregate at any one time outstanding.
Section 9.03 Liens. Neither of the Borrowers will, and will not permit any
Subsidiary to, create, incur, assume or permit to exist any Lien on any of its
Properties (now owned or hereafter acquired), except:
(a) Liens securing the payment of any Indebtedness.
(b) Excepted Liens.
(c) Liens securing Capital Leases and purchase money obligations
permitted by Section 9.02(d) but only on the Property under lease or purchased.
(d) Liens to secure obligations under any Swap Agreement
permitted by Section 9.18.
(e) Liens in existence on the date of this Agreement and shown
on Schedule 7.14.
55
(f) Liens securing reimbursement obligations in connection with
letters of credit outstanding on the date of this Agreement and other letters of
credit provided the aggregate undrawn face amount of such other letters of
credit does not exceed $20,000,000.
(g) Liens securing Permitted Refinancing Debt.
(h) Liens on Property securing the Senior Credit Agreement
permitted by Section 9.02(h) provided; however, that no Lien shall be granted on
any Property to secure the Senior Credit Agreement unless the Lien is also being
granted to secure the Indebtedness, this Agreement and the other Loan Documents.
(i) Liens on Property not constituting collateral for the
Indebtedness and not otherwise permitted by the foregoing clauses of this
Section 9.03; provided that the aggregate principal or face amount of all Debt
secured under this Section 9.03(i) shall not exceed $2,000,000 at any time.
Section 9.04 Dividends, Distributions and Redemptions.
----------------------------------------
Restricted Payments. Neither of the Borrowers will or will permit
any of their Subsidiaries to, declare or make, or agree to pay or make, directly
or indirectly, any Restricted Payment, return any capital to its stockholders or
make any distribution of its Property to its Equity Interest holders, except (i)
the Company may declare and pay dividends with respect to its Equity Interests
payable solely in additional shares of its Equity Interests (other than
Disqualified Capital Stock), (ii) Subsidiaries (including Cherokee) may declare
and pay dividends ratably with respect to their Equity Interests, (iii) such
Borrower may make Restricted Payments pursuant to and in accordance with stock
option plans or other benefit plans for management or employees of the Borrower
and its Subsidiaries, (iv) such Borrower may terminate its directors' or
employees' option agreements or restricted stock agreements under any of such
Borrower's incentive stock plans provided; however, that the aggregate amounts
paid by the Borrower in respect thereof do not exceed $1,000,000.
Section 9.05 Investments, Loans and Advances. The Borrowers will not, and
will not permit any Subsidiary to, make or permit to remain outstanding any
Investments in or to any Person, except that the foregoing restriction shall not
apply to:
(a) Investments reflected in the Financial Statements or which
are disclosed to the Lenders in Schedule 9.05;
(b) accounts receivable arising in the ordinary course of
business;
(c) direct obligations of the United States or any agency
thereof, or obligations guaranteed by the United States or any agency thereof,
in each case maturing within one year from the date of acquisition thereof;
(d) commercial paper maturing within one year from the date of
acquisition thereof rated in the highest grade by S&P or ▇▇▇▇▇'▇;
56
(e) demand deposits, deposits maturing within one year from the
date of acquisition thereof with, including certificates of deposit issued by,
any Lender or any office located in the United States of any other bank or trust
company which is organized under the laws of the United States or any state
thereof, has capital, surplus and undivided profits aggregating at least
$100,000,000 (as of the date of such bank or trust company's most recent
financial reports) and has a short term deposit rating of no lower than A2 or
P2, as such rating is set forth from time to time, by S&P or ▇▇▇▇▇'▇,
respectively;
(f) deposits in money market funds investing exclusively in
Investments described in Section 9.05(c), Section 9.05(d) or Section 9.05(e);
(g) Investments (i) made by either Borrower in or to any
Subsidiary, or (ii) made by any Subsidiary in or to either Borrower or any other
Subsidiary, or (iii) made by either Borrower or any Subsidiary in or to any
entity that upon the making of such Investment would become a Subsidiary;
(h) subject to the limits in Section 9.07, Investments in direct
ownership interests in additional Oil and Gas Properties and gas gathering
systems related thereto or related to farm-out, farm-in, joint operating, joint
venture or area of mutual interest agreements, gathering systems, pipelines or
other similar arrangements which are usual and customary in the oil and gas
exploration and production business located within the geographic boundaries of
the United States of America;
(i) loans or advances to employees, officers or directors in the
ordinary course of business of either Borrower or any of its Subsidiaries, in
each case only as permitted by applicable law, including Section 402 of the
Sarbanes Oxley Act of 2002, but in any event not to exceed $100,000 in the
aggregate at any time; and
(j) Investments in stock, obligations or securities received in
settlement of debts arising from Investments permitted under this Section 9.05
owing to either Borrower or any Subsidiary as a result of a bankruptcy or other
insolvency proceeding of the obligor in respect of such debts or upon the
enforcement of any Lien in favor of either Borrower or any of its Subsidiaries;
provided that such Borrower shall give the Administrative Agent prompt written
notice in the event that the aggregate amount of all Investments held at any one
time under this Section 9.05(j) exceeds $1,000,000;
(k) consideration received in connection with permitted asset
sales.
(l) lease, utility and similar deposits in the ordinary course
of business.
(m) Investments in permitted Swap Agreements.
Section 9.06 Nature of Business; International Operations. Neither of the
Borrowers nor any Subsidiary will allow any material change to be made in the
character of its business as an independent oil and gas exploration, production
and gathering
57
company or will acquire or make any other expenditure (whether such expenditure
is capital, operating or otherwise) in or related to, any Oil and Gas Properties
not located within the geographical boundaries of the United States.
Section 9.07 Limitation on Leases. Neither Borrower nor any Subsidiary will
create, incur, assume or suffer to exist any obligation for the payment of rent
or hire of Property of any kind whatsoever (real or personal but excluding
Capital Leases and leases of Hydrocarbon Interests, pipeline leases or
compressor leases), under leases or lease agreements which would cause the
aggregate amount of all payments made by the Borrowers and the Subsidiaries
pursuant to all such leases or lease agreements, including, without limitation,
any residual payments at the end of any lease, to exceed $5,000,000 in any
period of twelve consecutive calendar months during the life of such leases.
Section 9.08 Proceeds of Notes. The Borrowers will not permit the proceeds
of the Loans to be used for any purpose other than those permitted by Section
7.22. Neither the Borrowers nor any Person acting on behalf of either Borrower
has taken or will take any action which might cause any of the Loan Documents to
violate Regulations T, U or X or any other regulation of the Board or to violate
Section 7 of the Securities Exchange Act of 1934 or any rule or regulation
thereunder, in each case as now in effect or as the same may hereinafter be in
effect. If requested by the Administrative Agent, the Borrowers will furnish to
the Administrative Agent and each Lender a statement to the foregoing effect in
conformity with the requirements of FR Form U-1 or such other form referred to
in Regulation U, Regulation T or Regulation X of the Board, as the case may be.
Section 9.09 ERISA Compliance. None of the Borrowers and the Subsidiaries
will at any time:
(a) engage in, or permit any ERISA Affiliate to engage in, any
transaction in connection with which either Borrower, a Subsidiary or any ERISA
Affiliate could be subjected to either a material civil penalty assessed
pursuant to subsections (c), (i) or (l) of section 502 of ERISA or a material
tax imposed by Chapter 43 of Subtitle D of the Code.
(b) terminate, or permit any ERISA Affiliate to terminate, any
Plan in a manner, or take any other action with respect to any Plan, which could
result in any material liability of either Borrower, a Subsidiary or any ERISA
Affiliate to the PBGC.
(c) fail to make, or permit any ERISA Affiliate to fail to make,
full payment when due of all amounts which, under the provisions of any Plan,
agreement relating thereto or applicable law, either Borrower, a Subsidiary or
any ERISA Affiliate is required to pay as contributions thereto.
(d) permit to exist, or allow any ERISA Affiliate to permit to
exist, any accumulated funding deficiency within the meaning of section 302 of
ERISA or section 412 of the Code, whether or not waived, with respect to any
Plan.
58
(e) permit, or allow any ERISA Affiliate to permit, the
actuarial present value of the benefit liabilities under any Plan maintained by
either Borrower, a Subsidiary or any ERISA Affiliate which is regulated under
Title IV of ERISA to exceed the current value of the assets (computed on a plan
termination basis in accordance with Title IV of ERISA) of such Plan allocable
to such benefit liabilities. The term "actuarial present value of the benefit
liabilities" shall have the meaning specified in section 4041 of ERISA.
(f) contribute to or assume an obligation to contribute to, or
permit any ERISA Affiliate to contribute to or assume an obligation to
contribute to, any Multiemployer Plan.
(g) acquire, or permit any ERISA Affiliate to acquire, an
interest in any Person that causes such Person to become an ERISA Affiliate with
respect to either Borrower or a Subsidiary or with respect to any ERISA
Affiliate of either Borrower or a Subsidiary if such Person sponsors, maintains
or contributes to, or at any time in the six-year period preceding such
acquisition has sponsored, maintained, or contributed to, (1) any Multiemployer
Plan, or (2) any other Plan that is subject to Title IV of ERISA under which the
actuarial present value of the benefit liabilities under such Plan exceeds the
current value of the assets (computed on a plan termination basis in accordance
with Title IV of ERISA) of such Plan allocable to such benefit liabilities.
(h) incur, or permit any ERISA Affiliate to incur, a liability
to or on account of a Plan under sections 515, 4062, 4063, 4064, 4201 or 4204 of
ERISA.
(i) contribute to or assume an obligation to contribute to, or
permit any ERISA Affiliate to contribute to or assume an obligation to
contribute to, any employee welfare benefit plan, as defined in section 3(1) of
ERISA, including, without limitation, any such plan maintained to provide
benefits to former employees of such entities, that may not be terminated by
such entities in their sole discretion at any time without any material
liability.
(j) amend, or permit any ERISA Affiliate to amend, a Plan
resulting in an increase in current liability such that either Borrower, a
Subsidiary or any ERISA Affiliate is required to provide security to such Plan
under section 401(a)(29) of the Code.
Section 9.10 Sale or Discount of Receivables. Except for receivables
obtained by either Borrower or any Subsidiary out of the ordinary course of
business or the settlement of joint interest billing accounts in the ordinary
course of business or discounts granted to settle collection of accounts
receivable or the sale of defaulted accounts arising in the ordinary course of
business in connection with the compromise or collection thereof and not in
connection with any financing transaction, neither Borrower nor any Subsidiary
will discount or sell (with or without recourse) any of its notes receivable or
accounts receivable.
59
Section 9.11 Mergers, Etc. Neither Borrower will, or will permit any
Subsidiary to, merge into or consolidate with any other Person, or permit any
other Person to merge into or consolidate with it, or sell, transfer, lease or
otherwise dispose of (whether in one transaction or in a series of transactions)
all or substantially all of its Property to any other Person (whether now owned
or hereafter acquired) (any such transaction, a "consolidation"), or liquidate
or dissolve; provided that any Subsidiary may participate in a consolidation
with either Borrower (provided that such Borrower shall be the continuing or
surviving entity) or any other Subsidiary and if one of such Subsidiaries is a
Wholly-Owned Subsidiary, then the surviving Person shall be a Wholly-Owned
Subsidiary.
Section 9.12 Sale of Properties. The Borrowers will not, and will not
permit any Subsidiary to, sell, assign, farm-out, convey or otherwise transfer
any Property except for (a) the sale of Hydrocarbons in the ordinary course of
business; (b) farmouts of undeveloped acreage and assignments in connection with
such farmouts; (c) the sale or transfer of equipment that is no longer necessary
for the business of either Borrower or such Subsidiary or is replaced by
equipment of at least comparable value and use; (d) the sale, or other
disposition (including Casualty Events) of any Oil and Gas Property or any
interest therein or any Subsidiary owning Oil and Gas Properties; provided that
(i) the consideration received in respect of such sale or other disposition
shall be cash, (ii) the consideration received in respect of such sale or other
disposition shall be equal to or greater than the fair market value of the Oil
and Gas Property interest therein or Subsidiary subject of such sale, lease or
other disposition (as reasonably determined by the Board of Directors of either
Borrower and, if requested by the Administrative Agent, the Borrowers shall
deliver a certificate of a Responsible Officer of either Borrower certifying to
that effect); provided that if a "Borrowing Base" deficiency under the Senior
Credit Agreement shall exist, then the Lenders agree that fair market value
shall have been obtained if any of the following conditions are met: (1) the
Majority Lenders have consented, such consent not to be unreasonably withheld or
delayed, to such sale, lease or other disposition, (2) the sale, lease or other
disposition occurs pursuant to an auction held in accordance with procedures
that are ordinary and customary in the oil and gas industry or (3) the sale,
lease or other disposition occurs pursuant to a non-binding bid process
conducted by the Borrowers or a regionally or nationally recognized oil and gas
asset disposition advisory company in accordance with procedures that are
customary in the oil and gas industry, (iii) at such time and after giving
effect to such sale, lease or other disposition, no Borrowing Base deficiency
under the Senior Credit Agreement shall exist, provided, that the condition that
no Borrowing Base deficiency under the Senior Credit Agreement shall exist at
the time of any such sale, lease or other disposition shall not apply if the
Borrowers notify the Administrative Agent that proceeds of such sale, lease or
other disposition shall be used to remedy a Borrowing Base deficiency under the
Senior Credit Agreement and the Borrowers in fact use such proceeds to remedy
such Borrowing Base deficiency, to the extent thereof, with any surplus proceeds
being used for one or more of the purposes permitted by clause (v) of this
Section 9.12(d), (iv) if such sale or other disposition of Oil and Gas Property
or Subsidiary owning Oil and Gas Properties included in the most recently
delivered Reserve Report during any period between two successive determinations
of PV-10 is sold for a price in excess of 5% of the Borrowing Base of the Senior
Credit Agreement, individually or in the aggregate, then
60
the PV-10 shall be reduced, effective immediately upon such sale or disposition,
by an amount equal to the value, if any, assigned such Property in the most
recently delivered Reserve Report and (v) an amount equal to 100% of the net
proceeds received from such sale, lease or other disposition shall be used
within 120 days of such disposition: (1) to acquire Property, plant and
equipment or any business entity used or useful in carrying on the business of
the Borrowers and their Subsidiaries and having a fair market value at least
equal to the fair market value of the Properties sold, leased or otherwise
disposed of or to improve or replace any existing Property of the Borrowers and
their Subsidiaries used or useful in carrying on the business of the Borrowers
and their Subsidiaries, (2) to repay or retire Debt under the Senior Credit
Agreement (with a permanent reduction in the commitments thereunder) or (3) to
prepay the Loans; and (e) sales and other dispositions of Properties not
regulated by Section 9.12(a) to (d) having a fair market value not to exceed
$1,000,000 during any 12-month period.
Section 9.13 Environmental Matters. The Borrowers will not, and will not
permit any Subsidiary to, cause or permit any of its Property to be in violation
of, or do anything or permit anything to be done which will subject any such
Property to any Remedial Work under any Environmental Laws, assuming disclosure
to the applicable Governmental Authority of all relevant facts, conditions and
circumstances, if any, pertaining to such Property where such violations or
remedial obligations could reasonably be expected to have a Material Adverse
Effect.
Section 9.14 Transactions with Affiliates. The Borrowers will not, and will
not permit any Subsidiary to, enter into any transaction, including, without
limitation, any purchase, sale, lease or exchange of Property or the rendering
of any service, with any Affiliate (other than between and among Borrowers and
Wholly-Owned Subsidiaries of either Borrower) unless such transactions are
otherwise permitted under this Agreement and are upon fair and reasonable terms
no less favorable to it than it would obtain in a comparable arm's length
transaction with a Person not an Affiliate other than (a) Investments under
Section 9.05(i), (b) reasonable and customary director, officer and employee
compensation (including bonuses) and other benefits (including retirement,
health, stock option and other benefit plans) and indemnification arrangements,
in each case approved by the Board of Directors, and (c) any transaction with an
Affiliate where the only consideration paid is capital stock that is not
Disqualified Capital Stock.
Section 9.15 Subsidiaries. The Borrowers will not, and will not permit any
Subsidiary to, create or acquire any Subsidiary unless the Borrowers give
written notice to the Administrative Agent of such creation or acquisition and
complies with Section 8.14. The Borrowers shall not, and shall not permit any
Subsidiary to, sell, assign or otherwise dispose of any Equity Interests in any
Subsidiary except in compliance with Section 9.12(d).
Section 9.16 Negative Pledge Agreements; Dividend Restrictions. The
Borrower will not, and will not permit any Subsidiary to, create, incur, assume
or suffer to exist any contract, agreement or understanding (other than this
Agreement, the Security Instruments, Liens permitted by Section 9.03(c), the
Intercreditor Agreement and the Senior Credit Agreement or listed on Schedule
7.14) which in any way prohibits or
61
restricts the granting, conveying, creation or imposition of any Lien on any of
its Property in favor of the Administrative Agent and the Lenders or restricts
any Subsidiary from paying dividends or making distributions to a Borrower or
any Guarantor, or which requires the consent of or notice to other Persons in
connection therewith.
Section 9.17 Gas Imbalances, Take-or-Pay or Other Prepayments. The
Borrowers will not allow gas imbalances, take-or-pay or other prepayments with
respect to the Oil and Gas Properties of either Borrower or any Subsidiary that
would require such Borrower or such Subsidiary to deliver Hydrocarbons at some
future time without then or thereafter receiving full payment therefor to exceed
1.5 bcf of gas (on an mcf equivalent basis) in the aggregate.
Section 9.18 Swap Agreements. The Borrowers will not, and will not permit
any Subsidiary to, enter into any Swap Agreements with any Person other than (a)
Swap Agreements in respect of commodities (i) with an Approved Counterparty and
(ii) the notional volumes for which (when aggregated with other commodity Swap
Agreements then in effect other than basis differential swaps on volumes already
hedged pursuant to other Swap Agreements) do not exceed, as of the date such
Swap Agreement is executed, 85% of the reasonably anticipated projected
production (as shown in the Borrowers' most recent Reserve Report) from proved,
developed, producing Oil and Gas Properties for each month during the period
during which such Swap Agreement is in effect for each of crude oil and natural
gas, calculated separately, (b) Swap Agreements in respect of interest rates
with an Approved Counterparty, as follows: (i) Swap Agreements effectively
converting interest rates from fixed to floating, the notional amounts of which
(when aggregated with all other Swap Agreements of the Borrowers and their
Subsidiaries then in effect effectively converting interest rates from fixed to
floating) do not exceed 50% of the then outstanding principal amount of the
Borrowers' Debt for borrowed money which bears interest at a fixed rate and (ii)
Swap Agreements effectively converting interest rates from floating to fixed,
the notional amounts of which (when aggregated with all other Swap Agreements of
the Borrowers and their Subsidiaries then in effect effectively converting
interest rates from floating to fixed) do not exceed 75% of the then outstanding
principal amount of the Borrowers' Debt for borrowed money which bears interest
at a floating rate, and (c) Swap Agreements required under Section 6.01(q) or as
provided in the Swap Agreements listed on Schedule 7.21. In no event shall any
Swap Agreement contain any requirement, agreement or covenant for the Borrowers
or any Subsidiary to post collateral or margin to secure their obligations under
such Swap Agreement or to cover market exposures, except to the extent permitted
by Section 9.03(d).
ARTICLE X
Events of Default; Remedies
Section 10.01 Events of Default. One or more of the following events shall
constitute an "Event of Default":
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(a) the Borrowers shall fail to pay any principal of any Loan
when and as the same shall become due and payable, whether at the due date
thereof or at a date fixed for prepayment thereof or otherwise.
(b) the Borrowers shall fail to pay any interest on any Loan or
any fee or any other amount (other than an amount referred to in Section
10.01(a)) payable under any Loan Document, when and as the same shall become due
and payable, and such failure shall continue unremedied for a period of three
Business Days.
(c) any representation or warranty made or deemed made by or on
behalf of the Borrowers or any Subsidiary in or in connection with any Loan
Document or any amendment or modification of any Loan Document or waiver under
such Loan Document, or in any report, certificate, financial statement or other
document furnished pursuant to or in connection with any Loan Document or any
amendment or modification thereof or waiver thereunder, shall prove to have been
incorrect in any material respect when made or deemed made.
(d) the Borrowers or any Subsidiary shall fail to observe or
perform any covenant, condition or agreement contained in Section 8.01(i),
Section 8.01(m), Section 8.02, Section 8.03, Section 8.15 or in ARTICLE IX.
(e) the Borrowers or any Subsidiary shall fail to observe or
perform any covenant, condition or agreement contained in this Agreement (other
than those specified in Section 10.01(a), Section 10.01(b) or Section 10.01(d))
or any other Loan Document, and such failure shall continue unremedied for a
period of 30 days after the earlier to occur of (A) notice thereof from the
Administrative Agent to the Borrowers (which notice will be given at the request
of any Lender) or (B) a Responsible Officer of either Borrower or such
Subsidiary has Knowledge of such default.
(f) the Borrowers or any Subsidiary shall fail to make any
payment (whether of principal or interest and regardless of amount) in respect
of any Material Indebtedness prior to the longer of (i) three (3) Business Days
after the same shall become due and payable or (ii) the expiration of any
applicable grace or notice and cure period, except that with respect to trade
payables, Borrowers and their Subsidiaries shall have 60 days after due date to
make payment.
(g) any event or condition occurs that results in any Material
Indebtedness becoming due prior to its scheduled maturity or that enables or
permits (with or without the giving of notice, the lapse of time or both) the
holder or holders of any Material Indebtedness or any trustee or agent on its or
their behalf to cause any Material Indebtedness to become due, or to require the
Redemption thereof or any offer to Redeem to be made in respect thereof, prior
to its scheduled maturity or require either Borrower or any Subsidiary to make
an offer in respect thereof, except that with respect to trade payables,
Borrowers and their Subsidiaries shall have 60 days after due date to make
payment.
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(h) an involuntary proceeding shall be commenced or an
involuntary petition shall be filed seeking (i) liquidation, reorganization or
other relief in respect of either Borrower or any Subsidiary or its debts, or of
a substantial part of its assets, under any Federal, state or foreign
bankruptcy, insolvency, receivership or similar law now or hereafter in effect
or (ii) the appointment of a receiver, trustee, custodian, sequestrator,
conservator or similar official for either Borrower or any Subsidiary or for a
substantial part of its assets, and, in any such case, such proceeding or
petition shall continue undismissed for 60 days or an order or decree approving
or ordering any of the foregoing shall be entered.
(i) either Borrower or any Subsidiary shall (i) voluntarily
commence any proceeding or file any petition seeking liquidation, reorganization
or other relief under any Federal, state or foreign bankruptcy, insolvency,
receivership or similar law now or hereafter in effect, (ii) consent to the
institution of, or fail to contest in a timely and appropriate manner, any
proceeding or petition described in Section 10.01(h), (iii) apply for or consent
to the appointment of a receiver, trustee, custodian, sequestrator, conservator
or similar official for either Borrower or any Subsidiary or for a substantial
part of its assets, (iv) file an answer admitting the material allegations of a
petition filed against it in any such proceeding, (v) make a general assignment
for the benefit of creditors or (vi) take any action for the purpose of
effecting any of the foregoing.
(j) either Borrower or any Subsidiary shall become unable, admit
in writing its inability or fail generally to pay its debts as they become due.
(k) one or more judgments for the payment of money in an
aggregate amount in excess of $2,250,000 (to the extent not covered by
independent third party insurance provided by insurers as to which the insurer
does not dispute coverage and is not subject to an insolvency proceeding) shall
be rendered against either Borrower, any Subsidiary or any combination thereof
and the same shall remain undischarged for a period of 30 consecutive days
during which execution shall not be effectively stayed, or any action shall be
legally taken by a judgment creditor to attach or levy upon any assets of either
Borrower or any Subsidiary to enforce any such judgment.
(l) the Loan Documents after delivery thereof shall for any
reason, except to the extent permitted by the terms thereof, cease to be in full
force and effect and valid, binding and enforceable in accordance with their
terms against either Borrower or a Subsidiary party thereto or shall be
repudiated by any of them, or cease to create a valid and perfected Lien of the
priority required thereby on any of the collateral purported to be covered
thereby, except to the extent permitted by the terms of this Agreement, or
either Borrower or any Subsidiary or any of their Affiliates shall so state in
writing.
(m) the Intercreditor Agreement, after delivery thereof shall
for any reason, except to the extent permitted by the terms thereof, cease to be
in full force and effect and valid, binding and enforceable in accordance with
its terms against the Borrowers, any party thereto or holder of the Debt
governed thereby or shall be repudiated by any of them.
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(n) an ERISA Event shall have occurred that, in the opinion of
the Majority Lenders, when taken together with all other ERISA Events that have
occurred, could reasonably be expected to result in liability of either Borrower
or any Subsidiary in an aggregate amount exceeding $1,750,000.
(o) a Change in Control shall occur.
Section 10.02 Remedies.
--------
(a) In the case of an Event of Default other than one described
in Section 10.01(h), Section 10.01(i) or Section 10.01(j), at any time
thereafter during the continuance of such Event of Default, the Administrative
Agent, at the direction of the Majority Lenders, shall, by notice to the
Borrowers, take either or both of the following actions, at the same or
different times: (i) terminate the Commitments, and thereupon the Commitments
shall terminate immediately, and (ii) declare the Notes, if any, and the Loans
then outstanding to be due and payable in whole (or in part, in which case any
principal not so declared to be due and payable may thereafter be declared to be
due and payable), and thereupon the principal of the Loans so declared to be due
and payable, together with accrued interest thereon and all fees and other
obligations of the Borrowers and the Subsidiaries accrued hereunder and under
the Loans, the Notes, if any, and the other Loan Documents (including, without
limitation, shall become due and payable immediately, without presentment,
demand, protest, notice of intent to accelerate, notice of acceleration or other
notice of any kind, all of which are hereby waived by the Borrowers and each
Subsidiary; and in case of an Event of Default described in Section 10.01(h),
Section 10.01(i) or Section 10.01(j), the Notes, if any, and the principal of
the Loans then outstanding, together with accrued interest thereon and all fees
and the other obligations of the Borrowers and Subsidiaries accrued hereunder
and under the Loans, the Notes, if any, and the other Loan Documents, shall
automatically become due and payable, without presentment, demand, protest or
other notice of any kind, all of which are hereby waived by the Borrowers and
each Subsidiary.
(b) In the case of the occurrence of an Event of Default, the
Administrative Agent and the Lenders will have all other rights and remedies
available at law and equity.
(c) All proceeds realized from the liquidation or other
disposition of collateral or otherwise received after maturity of the Loans,
whether by acceleration or otherwise, shall be applied: first, to reimbursement
of expenses and indemnities provided for in this Agreement and the Security
Instruments; second, to accrued interest on the Loans; third, to fees; fourth,
pro rata to principal outstanding on the Loans and to obligations under Swap
Agreements described in clause (c) of the definition of "Indebtedness"; fifth,
to any other Indebtedness; and any excess shall be paid to the Borrowers or as
otherwise required by any Governmental Requirement.
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ARTICLE XI
The Administrative Agent
Section 11.01 Appointment; Powers. Each of the Lenders hereby irrevocably
appoints the Administrative Agent as its agent and authorizes the Administrative
Agent to enter into the Intercreditor Agreement on behalf of such Lender (each
Lender hereby agreeing to be bound by the terms of the Intercreditor Agreement
as if it were a party thereto) and to take such other actions on its behalf and
to exercise such powers as are delegated to the Administrative Agent by the
terms hereof and the other Loan Documents, together with such actions and powers
as are reasonably incidental thereto.
Section 11.02 Duties and Obligations of Administrative Agent. The
Administrative Agent shall not have any duties or obligations except those
expressly set forth in the Loan Documents. Without limiting the generality of
the foregoing, (a) the Administrative Agent shall not be subject to any
fiduciary or other implied duties, regardless of whether a Default has occurred
and is continuing, (b) the Administrative Agent shall not have any duty to take
any discretionary action or exercise any discretionary powers, except as
provided in Section 11.03, and (c) except as expressly set forth herein, the
Administrative Agent shall not have any duty to disclose, and shall not be
liable for the failure to disclose, any information relating to the Borrowers or
any of their Subsidiaries that is communicated to or obtained by the bank
serving as Administrative Agent or any of its Affiliates in any capacity. The
Administrative Agent shall be deemed not to have knowledge of any Default unless
and until written notice thereof is given to the Administrative Agent by either
Borrower or a Lender, and shall not be responsible for or have any duty to
ascertain or inquire into (i) any statement, warranty or representation made in
or in connection with this Agreement or any other Loan Document, (ii) the
contents of any certificate, report or other document delivered hereunder or
under any other Loan Document or in connection herewith or therewith, (iii) the
performance or observance of any of the covenants, agreements or other terms or
conditions set forth herein or in any other Loan Document, (iv) the validity,
enforceability, effectiveness or genuineness of this Agreement, any other Loan
Document or any other agreement, instrument or document, (v) the satisfaction of
any condition set forth in ARTICLE VI or elsewhere herein, other than to confirm
receipt of items expressly required to be delivered to the Administrative Agent
or as to those conditions precedent expressly required to be to the
Administrative Agent's satisfaction, (vi) the existence, value, perfection or
priority of any collateral security or the financial or other condition of the
Borrowers and their Subsidiaries or any other obligor or guarantor, or (vii) any
failure by either Borrower or any other Person (other than itself) to perform
any of its obligations hereunder or under any other Loan Document or the
performance or observance of any covenants, agreements or other terms or
conditions set forth herein or therein.
Section 11.03 Action by Administrative Agent. The Administrative Agent
shall not have any duty to take any discretionary action or exercise any
discretionary powers, except discretionary rights and powers expressly
contemplated hereby that the Administrative Agent is required to exercise in
writing as directed by the Majority Lenders (or such other number or percentage
of the Lenders as shall be necessary under
66
the circumstances as provided in Section 12.02) and in all cases the
Administrative Agent shall be fully justified in failing or refusing to act
hereunder or under any other Loan Documents unless it shall (a) receive written
instructions from the Majority Lenders or the Lenders, as applicable (or such
other number or percentage of the Lenders as shall be necessary under the
circumstances as provided in Section 12.02) specifying the action to be taken
and (b) be indemnified to its satisfaction by the Lenders against any and all
liability and expenses which may be incurred by it by reason of taking or
continuing to take any such action. The instructions as aforesaid and any action
taken or failure to act pursuant thereto by the Administrative Agent shall be
binding on all of the Lenders. If a Default has occurred and is continuing, then
the Administrative Agent shall take such action with respect to such Default as
shall be directed by the requisite Lenders in the written instructions (with
indemnities) described in this Section 11.03, provided that, unless and until
the Administrative Agent shall have received such directions, the Administrative
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default as it shall deem advisable in
the best interests of the Lenders. In no event, however, shall the
Administrative Agent be required to take any action which exposes the
Administrative Agent to personal liability or which is contrary to this
Agreement, the Loan Documents or applicable law. The Administrative Agent shall
not be liable for any action taken or not taken by it with the consent or at the
request of the Majority Lenders or the Lenders (or such other number or
percentage of the Lenders as shall be necessary under the circumstances as
provided in Section 12.02), and otherwise the Administrative Agent shall not be
liable for any action taken or not taken by it hereunder or under any other Loan
Document or under any other document or instrument referred to or provided for
herein or therein or in connection herewith or therewith, except for its own
gross negligence or willful misconduct.
Section 11.04 Reliance by Administrative Agent. The Administrative Agent
shall be entitled to rely upon, and shall not incur any liability for relying
upon, any notice, request, certificate, consent, statement, instrument, document
or other writing believed by it to be genuine and to have been signed or sent by
the proper Person. The Administrative Agent also may rely upon any statement
made to it orally or by telephone and believed by it to be made by the proper
Person, and shall not incur any liability for relying thereon and each of the
Borrowers and the Lenders hereby waives the right to dispute the Administrative
Agent's record of such statement, except in the case of gross negligence or
willful misconduct by the Administrative Agent. The Administrative Agent may
consult with legal counsel (who may be counsel for the Borrowers), independent
accountants and other experts selected by it, and shall not be liable for any
action taken or not taken by it in accordance with the advice of any such
counsel, accountants or experts. The Administrative Agent may deem and treat the
payee of the Note, if any, as the holder thereof for all purposes hereof unless
and until a written notice of the assignment or transfer thereof permitted
hereunder shall have been filed with the Administrative Agent.
Section 11.05 Subagents. The Administrative Agent may perform any and all
its duties and exercise its rights and powers by or through any one or more
sub-agents appointed by the Administrative Agent. The Administrative Agent and
any such sub-agent may perform any and all its duties and exercise its rights
and powers through their
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respective Related Parties. The exculpatory provisions of the preceding Sections
of this ARTICLE XI shall apply to any such sub-agent and to the Related Parties
of the Administrative Agent and any such sub-agent, and shall apply to their
respective activities as Administrative Agent.
Section 11.06 Resignation or Removal of Administrative Agent. Subject to
the appointment and acceptance of a successor Administrative Agent as provided
in this Section 11.06, the Administrative Agent may resign at any time by
notifying the Lenders, and the Borrowers, and the Administrative Agent may be
removed at any time with or without cause by the Majority Lenders. Upon any such
resignation or removal, the Majority Lenders shall have the right, with the
consent of the Borrowers, which consent shall not be unreasonably withheld or
delayed, to appoint a successor. If no successor shall have been so appointed
and shall have accepted such appointment within 30 days after the retiring
Administrative Agent gives notice of its resignation or removal of the retiring
Administrative Agent, then the retiring Administrative Agent may, on behalf of
the Lenders, appoint a successor Administrative Agent. Upon the acceptance of
its appointment as Administrative Agent hereunder by a successor, such successor
shall succeed to and become vested with all the rights, powers, privileges and
duties of the retiring Administrative Agent, and the retiring Administrative
Agent shall be discharged from its duties and obligations hereunder. The fees
payable by the Borrowers to a successor Administrative Agent shall be the same
as those payable to its predecessor unless otherwise agreed between the
Borrowers and such successor. After the Administrative Agent's resignation
hereunder, the provisions of this ARTICLE XI and Section 12.03 shall continue in
effect for the benefit of such retiring Agent, its sub-agents and their
respective Related Parties in respect of any actions taken or omitted to be
taken by any of them while it was acting as Administrative Agent.
Section 11.07 Administrative Agent as a Lender. Each bank serving as an
Administrative Agent hereunder shall have the same rights and powers in its
capacity as a Lender as any other Lender and may exercise the same as though it
were not an Administrative Agent, and such bank and its Affiliates may accept
deposits from, lend money to and generally engage in any kind of business with
either of the Borrowers or any Subsidiary or other Affiliate thereof as if it
were not an Administrative Agent hereunder.
Section 11.08 No Reliance. Each Lender acknowledges that it has,
independently and without reliance upon the Administrative Agent or any other
Lender and based on such documents and information as it has deemed appropriate,
made its own credit analysis and decision to enter into this Agreement and each
other Loan Document to which it is a party. Each Lender also acknowledges that
it will, independently and without reliance upon the Administrative Agent or any
other Lender and based on such documents and information as it shall from time
to time deem appropriate, continue to make its own decisions in taking or not
taking action under or based upon this Agreement, any other Loan Document, any
related agreement or any document furnished hereunder or thereunder. The
Administrative Agent shall not be required to keep themselves informed as to the
performance or observance by either Borrower or any of its Subsidiaries of this
Agreement, the Loan Documents or any other
68
document referred to or provided for herein or to inspect the Properties or
books of the Borrower or its Subsidiaries. Except for notices, reports and other
documents and information expressly required to be furnished to the Lenders by
the Administrative Agent hereunder, neither the Administrative Agent nor the
Arranger shall have any duty or responsibility to provide any Lender with any
credit or other information concerning the affairs, financial condition or
business of the Borrowers (or any of their Affiliates) which may come into the
possession of such Administrative Agent or any of its Affiliates. In this
regard, each Lender acknowledges that each of Sidley ▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇ LLP and
▇▇▇▇▇▇ and ▇▇▇▇▇, LLP is acting in this transaction as special counsel to the
Arranger only in respect of the Senior Credit Agreement. Each other party hereto
will consult with its own legal counsel to the extent that it deems necessary in
connection with the Loan Documents and the matters contemplated therein.
Section 11.09 Authority of Administrative Agent to Release Collateral and
Liens. Each Lender hereby authorizes the Administrative Agent to release any
collateral that is permitted to be sold or released pursuant to the terms of the
Loan Documents. Each Lender hereby authorizes the Administrative Agent to
execute and deliver to the Borrowers, at the Borrowers' sole cost and expense,
any and all releases of Liens, termination statements, assignments or other
documents reasonably requested by the Borrowers in connection with any sale or
other disposition of Property to the extent such sale or other disposition is
permitted by the terms of Section 9.12 or is otherwise authorized by the terms
of the Loan Documents. The Lenders hereby authorize the Administrative Agent, at
its option and in its discretion, to release any Lien granted to or held by the
Administrative Agent upon any Mortgaged Property (i) upon payment and
satisfaction of all of the Indebtedness (other than contingent indemnity
obligations and Indebtedness in respect of Swap Agreements) at any time arising
under or in respect of this Agreement or the Loan Documents or the transactions
contemplated hereby or thereby; (ii) as permitted by, but only in accordance
with, the terms of the applicable Loan Document; or (iii) if approved,
authorized or ratified in writing by the Majority Lenders, unless such release
is required to be approved by all of the Lenders hereunder.
Section 11.10 The Arranger. The Arranger shall have no duties,
responsibilities or liabilities under this Agreement and the other Loan
Documents.
ARTICLE XII
Miscellaneous
Section 12.01 Notices.
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(a) Except in the case of notices and other communications
expressly permitted to be given by telephone (and subject to Section 12.01(b)),
all notices and other communications provided for herein shall be in writing and
shall be delivered by hand or overnight courier service, mailed by certified or
registered mail or sent by telecopy, as follows:
(i) if to the Borrowers, to them at Quest Resource
Corporation, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
Attention: ▇▇▇▇▇
69
▇▇▇▇▇ (Telecopy No. (▇▇▇) ▇▇▇-▇▇▇▇), with a copy to Stincon ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ LLP,
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
(Telecopy No. (▇▇▇) ▇▇▇-▇▇▇▇);
(ii) if to the Administrative Agent, to it at Guggenheim
Partners, ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention:
▇▇▇▇ ▇▇▇▇▇▇▇ (Telecopy No. (▇▇▇) ▇▇▇-▇▇▇▇); and
(iii) if to any Lender, to it at its address (or
telecopy number) set forth in its Administrative Questionnaire.
(b) Notices and other communications to the Lenders hereunder
may be delivered or furnished by electronic communications pursuant to
procedures approved by the Administrative Agent; provided that the foregoing
shall not apply to notices pursuant to ARTICLE II, ARTICLE III, ARTICLE IV and
ARTICLE V unless otherwise agreed by the Administrative Agent and the applicable
Lender. The Administrative Agent or the Borrowers may, in their discretion,
agree to accept notices and other communications to it hereunder by electronic
communications pursuant to procedures approved by it; provided that approval of
such procedures may be limited to particular notices or communications.
(c) Any party hereto may change its address or telecopy number
for notices and other communications hereunder by notice to the other parties
hereto. All notices and other communications given to any party hereto in
accordance with the provisions of this Agreement shall be deemed to have been
given on the date of receipt.
Section 12.02 Waivers; Amendments.
-------------------
(a) No failure on the part of the Administrative Agent or any
Lender to exercise and no delay in exercising, and no course of dealing with
respect to, any right, power or privilege, or any abandonment or discontinuance
of steps to enforce such right, power or privilege, under any of the Loan
Documents shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, power or privilege under any of the Loan Documents
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies of the Administrative Agent
and the Lenders hereunder and under the other Loan Documents are cumulative and
are not exclusive of any rights or remedies that they would otherwise have. No
waiver of any provision of this Agreement or any other Loan Document or consent
to any departure by the Borrowers therefrom shall in any event be effective
unless the same shall be permitted by Section 12.02(b), and then such waiver or
consent shall be effective only in the specific instance and for the purpose for
which given. Without limiting the generality of the foregoing, the making of a
Loan shall not be construed as a waiver of any Default, regardless of whether
the Administrative Agent or any Lender may have had notice or knowledge of such
Default at the time.
(b) Neither this Agreement nor any provision hereof nor any
Security Instrument nor any provision thereof may be waived, amended or modified
except
70
pursuant to an agreement or agreements in writing entered into by the Borrowers
and the Majority Lenders or by the Borrowers and the Administrative Agent with
the consent of the Majority Lenders; provided that no such agreement shall (i)
increase the Commitment of any Lender without the written consent of such
Lender, (ii) modify the definition of PV-10 without the consent of each Lender,
(iii) reduce the principal amount of the Loan or reduce the rate of interest
thereon, or reduce any fees payable hereunder, or reduce any other Indebtedness
hereunder or under any other Loan Document, without the written consent of each
Lender affected thereby, (iv) postpone the scheduled date of payment or
prepayment of the principal amount of the Loan, or any interest thereon, or any
fees payable hereunder, or any other Indebtedness hereunder or under any other
Loan Document, or reduce the amount of, waive or excuse any such payment, or
postpone or extend the Maturity Date without the written consent of each Lender
affected thereby, (v) change Section 4.01(b) or Section 4.01(c) in a manner that
would alter the pro rata sharing of payments required thereby, without the
written consent of each Lender, (vi) waive or amend Section 6.01, Section 8.14,
or Section 10.02(c), or change the definition of the term "Subsidiary", without
the written consent of each Lender, (vii) release any Guarantor (except as set
forth in the Guaranty Agreement), release a substantial portion of the
collateral (other than as provided in Section 11.09), or reduce the percentage
set forth in Section 8.14 to less than 80%, without the written consent of each
Lender, or (viii) change any of the provisions of this Section 12.02(b) or the
definition of "Majority Lenders" or any other provision hereof specifying the
number or percentage of Lenders required to waive, amend or modify any rights
hereunder or under any other Loan Documents or make any determination or grant
any consent hereunder or any other Loan Documents, without the written consent
of each Lender; provided further that no such agreement shall amend, modify or
otherwise affect the rights or duties of the Administrative Agent hereunder or
under any other Loan Document without the prior written consent of the
Administrative Agent. Notwithstanding the foregoing, any supplement to Schedule
7.15 (Subsidiaries) shall be effective simply by delivering to the
Administrative Agent a supplemental schedule clearly marked as such and, upon
receipt, the Administrative Agent will promptly deliver a copy thereof to the
Lenders.
Section 12.03 Expenses, Indemnity; Damage Waiver.
----------------------------------
(a) The Borrowers jointly and severally agree to pay (i) all
reasonable out-of-pocket expenses incurred by the Administrative Agent and its
Affiliates, including, without limitation, the reasonable fees, charges and
disbursements of counsel and other outside consultants for the Administrative
Agent, the reasonable travel, photocopy, mailing, courier, telephone and other
similar expenses, including all Intralinks expenses, and the cost of
environmental audits and surveys and appraisals, in connection with the
syndication of the credit facilities provided for herein, the preparation,
negotiation, execution, delivery and administration (both before and after the
execution hereof and including advice of counsel to the Administrative Agent as
to the rights and duties of the Administrative Agent and the Lenders with
respect thereto) of this Agreement and the other Loan Documents and any
amendments, modifications or waivers of or consents related to the provisions
hereof or thereof (whether or not the transactions contemplated hereby or
thereby shall be consummated), (ii) all costs, expenses, Taxes, assessments and
other charges incurred by the Administrative Agent or any Lender in connection
with any
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filing, registration, recording or perfection of any security interest
contemplated by this Agreement or any Security Instrument or any other document
referred to therein, (iii) all reasonable out-of-pocket expenses incurred by the
Administrative Agent or any Lender, including the reasonable fees, charges and
disbursements of any counsel for the Administrative Agent or any Lender, in
connection with the enforcement or protection of its rights in connection with
this Agreement or any other Loan Document, including its rights under this
Section 12.03, or in connection with the Loans made hereunder, including,
without limitation, all such reasonable out-of-pocket expenses incurred during
any workout, restructuring or negotiations in respect of such Loans.
(b) THE BORROWERS SHALL INDEMNIFY THE ADMINISTRATIVE AGENT, THE
ARRANGER, AND EACH LENDER, AND EACH RELATED PARTY OF ANY OF THE FOREGOING
PERSONS (EACH SUCH PERSON BEING CALLED AN "INDEMNITEE") AGAINST, AND HOLD EACH
INDEMNITEE HARMLESS FROM, ANY AND ALL LOSSES, CLAIMS, DAMAGES, LIABILITIES AND
RELATED EXPENSES, INCLUDING THE FEES, CHARGES AND DISBURSEMENTS OF ANY COUNSEL
FOR ANY INDEMNITEE, INCURRED BY OR ASSERTED AGAINST ANY INDEMNITEE ARISING OUT
OF, IN CONNECTION WITH, OR AS A RESULT OF (i) THE EXECUTION OR DELIVERY OF THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY AGREEMENT OR INSTRUMENT CONTEMPLATED
HEREBY OR THEREBY, THE PERFORMANCE BY THE PARTIES HERETO OR THE PARTIES TO ANY
OTHER LOAN DOCUMENT OF THEIR RESPECTIVE OBLIGATIONS HEREUNDER OR THEREUNDER OR
THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED HEREBY OR BY ANY OTHER LOAN
DOCUMENT, (ii) THE FAILURE OF THE BORROWERS OR ANY SUBSIDIARY TO COMPLY WITH THE
TERMS OF ANY LOAN DOCUMENT, INCLUDING THIS AGREEMENT, OR WITH ANY GOVERNMENTAL
REQUIREMENT, (iii) ANY INACCURACY OF ANY REPRESENTATION OR ANY BREACH OF ANY
WARRANTY OR COVENANT OF THE BORROWERS OR ANY SUBSIDIARY SET FORTH IN ANY OF THE
LOAN DOCUMENTS OR ANY INSTRUMENTS, DOCUMENTS OR CERTIFICATIONS DELIVERED IN
CONNECTION THEREWITH, (iv) ANY LOAN OR THE USE OF THE PROCEEDS THEREFROM, (v)
ANY OTHER ASPECT OF THE LOAN DOCUMENTS, (vi) THE OPERATIONS OF THE BUSINESS OF
THE BORROWERS AND THEIR SUBSIDIARIES BY THE BORROWERS AND THEIR SUBSIDIARIES,
(vii) ANY ASSERTION THAT THE LENDERS WERE NOT ENTITLED TO RECEIVE THE PROCEEDS
RECEIVED PURSUANT TO THE SECURITY INSTRUMENTS, (viii) ANY ENVIRONMENTAL LAW
APPLICABLE TO EITHER BORROWER OR ANY SUBSIDIARY OR ANY OF ITS PROPERTIES,
INCLUDING WITHOUT LIMITATION, THE PRESENCE, GENERATION, STORAGE, RELEASE,
THREATENED RELEASE, USE, TRANSPORT, DISPOSAL, ARRANGEMENT OF DISPOSAL OR
TREATMENT OF OIL, OIL AND GAS WASTES, SOLID WASTES OR HAZARDOUS SUBSTANCES ON
ANY OF THEIR PROPERTIES, (ix) THE BREACH OR NON-COMPLIANCE BY EITHER BORROWER OR
ANY SUBSIDIARY WITH SUCH ENVIRONMENTAL LAW APPLICABLE TO SUCH BORROWER OR ANY
SUBSIDIARY, (x) THE PAST OWNERSHIP BY SUCH BORROWER OR SUCH SUBSIDIARY OF ANY OF
ITS
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PROPERTIES OR PAST ACTIVITY ON ANY OF ITS PROPERTIES WHICH, THOUGH LAWFUL AND
FULLY PERMISSIBLE AT THE TIME, COULD RESULT IN PRESENT LIABILITY, (xi) THE
PRESENCE, USE, RELEASE, STORAGE, TREATMENT, DISPOSAL, GENERATION, THREATENED
RELEASE, TRANSPORT, ARRANGEMENT FOR TRANSPORT OR ARRANGEMENT FOR DISPOSAL OF
OIL, OIL AND GAS WASTES, SOLID WASTES OR HAZARDOUS SUBSTANCES ON OR AT ANY OF
THE PROPERTIES OWNED OR OPERATED BY EITHER BORROWER OR ANY SUBSIDIARY OR ANY
ACTUAL OR ALLEGED PRESENCE OR RELEASE OF HAZARDOUS MATERIALS ON OR FROM ANY
PROPERTY OWNED OR OPERATED BY EITHER BORROWER OR ANY OF ITS SUBSIDIARIES, (xii)
ANY ENVIRONMENTAL LIABILITY RELATED IN ANY WAY TO THE BORROWER OR ANY OF ITS
SUBSIDIARIES, OR (xiii) ANY OTHER ENVIRONMENTAL, HEALTH OR SAFETY CONDITION IN
CONNECTION WITH THE LOAN DOCUMENTS, OR (xiv) ANY ACTUAL OR PROSPECTIVE CLAIM,
LITIGATION, INVESTIGATION OR PROCEEDING RELATING TO ANY OF THE FOREGOING,
WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY AND REGARDLESS OF WHETHER
ANY INDEMNITEE IS A PARTY THERETO, AND SUCH INDEMNITY SHALL EXTEND TO EACH
INDEMNITEE 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
INDEMNITEES OR BY REASON OF STRICT LIABILITY IMPOSED WITHOUT FAULT ON ANY ONE OR
MORE OF THE INDEMNITEES; PROVIDED THAT SUCH INDEMNITY SHALL NOT, AS TO ANY
INDEMNITEE, BE AVAILABLE TO THE EXTENT THAT SUCH LOSSES, CLAIMS, DAMAGES,
LIABILITIES OR RELATED EXPENSES ARE DETERMINED BY A COURT OF COMPETENT
JURISDICTION BY FINAL AND NONAPPEALABLE JUDGMENT TO HAVE RESULTED FROM THE GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH INDEMNITEE.
(c) To the extent that the Borrowers fail to pay any amount
required to be paid by it to the Administrative Agent under Section 12.03(a) or
(b), each Lender severally agrees to pay to the Administrative Agent such
Lender's Percentage Share (determined as of the time that the applicable
unreimbursed expense or indemnity payment is sought) of such unpaid amount;
provided that the unreimbursed expense or indemnified loss, claim, damage,
liability or related expense, as the case may be, was incurred by or asserted
against the Administrative Agent in its capacity as such.
(d) To the extent permitted by applicable law, the Borrowers
shall not assert, and hereby waive, any claim against any Indemnitee, on any
theory of liability, for special, indirect, consequential or punitive damages
(as opposed to direct or actual damages) arising out of, in connection with, or
as a result of, this Agreement, any other Loan Document or any agreement or
instrument contemplated hereby or thereby, the Transactions, or any Loan or the
use of the proceeds thereof.
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(e) All amounts due under this Section 12.03 shall be payable
not later than 10 Business Days after written demand therefor.
Section 12.04 Successors and Assigns.
----------------------
(a) The provisions of this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns permitted hereby, except that (i) the Borrowers may not assign or
otherwise transfer any of their rights or obligations hereunder without the
prior written consent of each Lender (and any attempted assignment or transfer
by the Borrowers without such consent shall be null and void) and (ii) no Lender
may assign or otherwise transfer its rights or obligations hereunder except in
accordance with this Section 12.04. Nothing in this Agreement, expressed or
implied, shall be construed to confer upon any Person (other than the parties
hereto, their respective successors and assigns permitted hereby, Participants
(to the extent provided in Section 12.04(c)) and, to the extent expressly
contemplated hereby, the Related Parties of each of the Administrative Agent and
the Lenders) any legal or equitable right, remedy or claim under or by reason of
this Agreement.
(b) (i) Subject to the conditions set forth in Section 12.04(b)
(ii), any Lender may assign to one or more assignees all or a portion of its
rights and obligations under this Agreement (including all or a portion of its
Commitment and the Loans at the time owing to it) with the prior written consent
(such consent not to be unreasonably withheld) of:
(A) the Borrowers, provided that no consent of
the Borrowers shall be required for an assignment to a Lender, an Affiliate of a
Lender, an Approved Fund or, if an Event of Default has occurred and is
continuing, any other assignee; and
(B) the Administrative Agent, provided that no
consent of the Administrative Agent shall be required for an assignment to an
assignee that is a Lender immediately prior to giving effect to such assignment.
(ii) Assignments shall be subject to the following
additional conditions:
(A) except in the case of an assignment to a
Lender or an Affiliate of a Lender or an assignment of the entire remaining
amount of the assigning Lender's Commitment or Loans, the amount of the
Commitment or Loans of the assigning Lender subject to each such assignment
(determined as of the date the Assignment and Assumption with respect to such
assignment is delivered to the Administrative Agent) shall not be less than
$5,000,000 unless each of the Borrowers and the Administrative Agent otherwise
consent, provided that no such consent of the Borrowers shall be required if an
Event of Default has occurred and is continuing;
(B) each partial assignment shall be made as an
assignment of a proportionate part of all the assigning Lender's rights and
obligations under this Agreement;
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(C) the parties to each assignment shall execute
and deliver to the Administrative Agent an Assignment and Assumption, together
with a processing and recordation fee of $3,500; and
(D) the assignee, if it shall not be a Lender,
shall deliver to the Administrative Agent an Administrative Questionnaire.
(iii) Subject to Section 12.04(b)(iv) and the acceptance
and recording thereof, from and after the effective date specified in each
Assignment and Assumption the assignee thereunder shall be a party hereto and,
to the extent of the interest assigned by such Assignment and Assumption, have
the rights and obligations of a Lender under this Agreement, and the assigning
Lender thereunder shall, to the extent of the interest assigned by such
Assignment and Assumption, be released from its obligations under this Agreement
(and, in the case of an Assignment and Assumption covering all of the assigning
Lender's rights and obligations under this Agreement, such Lender shall cease to
be a party hereto but shall continue to be entitled to the benefits of Section
5.01, Section 5.02, Section 5.03 and Section 12.03 and subject to the
obligations under Section 5.04). Any assignment or transfer by a Lender of
rights or obligations under this Agreement that does not comply with this
Section 12.04 shall be treated for purposes of this Agreement as a sale by such
Lender of a participation in such rights and obligations in accordance with
Section 12.04(c).
(iv) The Administrative Agent, acting for this purpose
as an agent of the Borrowers, shall maintain at one of its offices a copy of
each Assignment and Assumption delivered to it and a register for the
recordation of the names and addresses of the Lenders, and Commitments and
principal amount of the Loans, each Lender pursuant to the terms hereof from
time to time (the "Register"). The entries in the Register shall be conclusive,
and the Borrowers, the Administrative Agent, and the Lenders may treat each
Person whose name is recorded in the Register pursuant to the terms hereof as a
Lender hereunder for all purposes of this Agreement, notwithstanding notice to
the contrary. The Register shall be available for inspection by the Borrowers
and any Lender, at any reasonable time and from time to time upon reasonable
prior notice.
(v) Upon its receipt of a duly completed Assignment and
Assumption executed by an assigning Lender and an assignee, the assignee's
completed Administrative Questionnaire (unless the assignee shall already be a
Lender hereunder), the processing and recordation fee referred to in Section
12.04(b) and any written consent to such assignment required by Section
12.04(b), the Administrative Agent shall accept such Assignment and Assumption
and record the information contained therein in the Register. No assignment
shall be effective for purposes of this Agreement unless it has been recorded in
the Register as provided in this Section 12.04(b).
(c) (i) Any Lender may, without the consent of the Borrowers or
the Administrative Agent, sell participations to one or more banks or other
entities (a "Participant") in all or a portion of such Lender's rights and
obligations under this Agreement (including all or a portion of its Commitment
and the Loans owing to it);
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provided that (A) such Lender's obligations under this Agreement shall remain
unchanged, (B) such Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations and (C) the Borrowers, the
Administrative Agent, and the other Lenders shall continue to deal solely and
directly with such Lender in connection with such Lender's rights and
obligations under this Agreement. Any agreement or instrument pursuant to which
a Lender sells such a participation shall provide that such Lender shall retain
the sole right to enforce this Agreement and to approve any amendment,
modification or waiver of any provision of this Agreement; provided that such
agreement or instrument may provide that such Lender will not, without the
consent of the Participant, agree to any amendment, modification or waiver
described in the proviso to Section 12.02 that affects such Participant. In
addition such agreement must provide that the Participant be bound by the
provisions of Section 12.03. Subject to Section 12.04(c)(ii), the Borrowers
agree that each Participant shall be entitled to the benefits of Section 5.01,
Section 5.02 and Section 5.03 to the same extent as if it were a Lender and had
acquired its interest by assignment pursuant to Section 12.04(b). To the extent
permitted by law, each Participant also shall be entitled to the benefits of
Section 12.08 as though it were a Lender, provided such Participant agrees to be
subject to Section 4.01(c) as though it were a Lender.
(ii) A Participant shall not be entitled to receive any
greater payment under Section 5.01 or Section 5.03 than the applicable Lender
would have been entitled to receive with respect to the participation sold to
such Participant, unless the sale of the participation to such Participant is
made with the Borrowers' prior written consent. A Participant that would be a
Foreign Lender if it were a Lender shall not be entitled to the benefits of
Section 5.03 unless the Borrowers are notified of the participation sold to such
Participant and such Participant agrees, for the benefit of the Borrowers, to
comply with Section 5.03(e) as though it were a Lender.
(d) Any Lender may at any time pledge or assign a security
interest in all or any portion of its rights under this Agreement to secure
obligations of such Lender, including, without limitation, any pledge or
assignment to secure obligations to a Federal Reserve Bank, and this Section
12.04(d) shall not apply to any such pledge or assignment of a security
interest; provided that no such pledge or assignment of a security interest
shall release a Lender from any of its obligations hereunder or substitute any
such pledgee or assignee for such Lender as a party hereto.
(e) Notwithstanding any other provisions of this Section 12.04,
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 Borrowers and the Guarantors to file a registration
statement with the SEC or to qualify the Loans under the "Blue Sky" laws of any
state.
Section 12.05 Survival; Revival; Reinstatement.
--------------------------------
(a) All covenants, agreements, representations and warranties
made by the Borrowers herein and in the certificates or other instruments
delivered in connection with or pursuant to this Agreement or any other Loan
Document shall be considered to
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have been relied upon by the other parties hereto and shall survive the
execution and delivery of this Agreement and the making of any Loans, regardless
of any investigation made by any such other party or on its behalf and
notwithstanding that the Administrative Agent, or any Lender may have had notice
or knowledge of any Default or incorrect representation or warranty at the time
any credit is extended hereunder, and shall continue in full force and effect as
long as the principal of or any accrued interest on any Loan or any fee or any
other amount payable under this Agreement is outstanding and unpaid. The
provisions of Section 5.01, Section 5.02, Section 5.03 and Section 12.03 and
ARTICLE XI shall survive and remain in full force and effect regardless of the
consummation of the transactions contemplated hereby, the repayment of the
Loans, the termination of this Agreement, any other Loan Document or any
provision hereof or thereof.
(b) To the extent that any payments on the Indebtedness or
proceeds of any collateral are subsequently invalidated, declared to be
fraudulent or preferential, set aside or required to be repaid to a trustee,
debtor in possession, receiver or other Person under any bankruptcy law, common
law or equitable cause, then to such extent, the Indebtedness so satisfied shall
be revived and continue as if such payment or proceeds had not been received and
the Administrative Agent's and the Lenders' Liens, security interests, rights,
powers and remedies under this Agreement and each Loan Document shall continue
in full force and effect. In such event, each Loan Document shall be
automatically reinstated and the Borrowers shall take such action as may be
reasonably requested by the Administrative Agent and the Lenders to effect such
reinstatement.
Section 12.06 Counterparts; Integration; Effectiveness.
----------------------------------------
(a) This Agreement may be executed in counterparts (and by
different parties hereto on different counterparts), each of which shall
constitute an original, but all of which when taken together shall constitute a
single contract.
(b) THIS AGREEMENT, THE OTHER LOAN DOCUMENTS AND ANY SEPARATE
LETTER AGREEMENTS WITH RESPECT TO FEES PAYABLE TO THE ADMINISTRATIVE AGENT
CONSTITUTE THE ENTIRE CONTRACT AMONG THE PARTIES RELATING TO THE SUBJECT MATTER
HEREOF AND THEREOF AND SUPERSEDE ANY AND ALL PREVIOUS AGREEMENTS AND
UNDERSTANDINGS, ORAL OR WRITTEN, RELATING TO THE SUBJECT MATTER HEREOF AND
THEREOF. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL
AGREEMENT AMONG THE PARTIES HERETO AND THERETO 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.
(c) Except as provided in Section 6.01, this Agreement shall
become effective when it shall have been executed by the Administrative Agent
and when the Administrative Agent shall have received counterparts hereof which,
when taken together, bear the signatures of each of the other parties hereto,
and thereafter shall be
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binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns. Delivery of an executed counterpart of a signature page
of this Agreement by telecopy shall be effective as delivery of a manually
executed counterpart of this Agreement.
Section 12.07 Severability. Any provision of this Agreement or any other
Loan Document held to be invalid, illegal or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such invalidity,
illegality or unenforceability without affecting the validity, legality and
enforceability of the remaining provisions hereof or thereof; and the invalidity
of a particular provision in a particular jurisdiction shall not invalidate such
provision in any other jurisdiction.
Section 12.08 Right of Setoff. If an Event of Default shall have occurred
and be continuing, each Lender and each of its Affiliates is hereby authorized
at any time and from time to time, to the fullest extent permitted by law, to
set off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other obligations (of whatsoever
kind, including, without limitations obligations under Swap Agreements) at any
time owing by such Lender or Affiliate to or for the credit or the account of
the Borrowers or any Subsidiary against any of and all the obligations of the
Borrowers or any Subsidiary owed to such Lender now or hereafter existing under
this Agreement or any other Loan Document, irrespective of whether or not such
Lender shall have made any demand under this Agreement or any other Loan
Document and although such obligations may be unmatured. The rights of each
Lender under this Section 12.08 are in addition to other rights and remedies
(including other rights of setoff), which such Lender or its Affiliates may
have.
Section 12.09 GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS.
----------------------------------------------------------
(a) THIS AGREEMENT AND THE NOTES, IF ANY, SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THE LOAN
DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED
STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND
DELIVERY OF THIS AGREEMENT, EACH PARTY HEREBY ACCEPTS FOR ITSELF AND (TO THE
EXTENT PERMITTED BY LAW) IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. EACH PARTY HEREBY
IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION
TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT
MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN
SUCH RESPECTIVE JURISDICTIONS. THIS SUBMISSION TO JURISDICTION IS NON-EXCLUSIVE
AND DOES NOT PRECLUDE A PARTY FROM OBTAINING JURISDICTION
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OVER ANOTHER PARTY IN ANY COURT OTHERWISE HAVING JURISDICTION.
(c) EACH PARTY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF
ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING
OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO IT AT THE
ADDRESS SPECIFIED IN SECTION 12.01 OR SUCH OTHER ADDRESS AS IS SPECIFIED
PURSUANT TO SECTION 12.01 (OR ITS ASSIGNMENT AND ASSUMPTION), SUCH SERVICE TO
BECOME EFFECTIVE TEN (10) DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT
THE RIGHT OF A PARTY OR ANY HOLDER OF ANY NOTE TO SERVE PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED
AGAINST ANOTHER PARTY IN ANY OTHER JURISDICTION.
(d) EACH PARTY HEREBY (i) IRREVOCABLY AND UNCONDITIONALLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, TRIAL BY JURY IN ANY LEGAL
ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND
FOR ANY COUNTERCLAIM THEREIN; (ii) IRREVOCABLY WAIVES, TO THE MAXIMUM EXTENT NOT
PROHIBITED BY LAW, 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; (iii) CERTIFIES THAT NO PARTY
HERETO NOR ANY REPRESENTATIVE OR AGENT OF COUNSEL FOR ANY PARTY HERETO HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD NOT, IN
THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS, AND (iv)
ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT, THE LOAN
DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION 12.09.
Section 12.10 Headings. Article and Section headings and the Table of
Contents used herein are for convenience of reference only, are not part of this
Agreement and shall not affect the construction of, or be taken into
consideration in interpreting, this Agreement.
Section 12.11 Confidentiality. Each of the Administrative Agent and the
Lenders agrees to maintain the confidentiality of the Information (as defined
below), except that Information may be disclosed (a) to its and its Affiliates'
directors, officers, employees and agents, including accountants, legal counsel
and other advisors (it being understood that the Persons to whom such disclosure
is made will be informed of the confidential nature of such Information and
instructed to keep such Information confidential), (b) to the extent requested
by any regulatory authority, (c) to the extent required by applicable laws or
regulations or by any subpoena or similar legal process, (d) to any other party
to
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this Agreement or any other Loan Document, (e) in connection with the exercise
of any remedies hereunder or under any other Loan Document or any suit, action
or proceeding relating to this Agreement or any other Loan Document or the
enforcement of rights hereunder or thereunder, (f) subject to an agreement
containing provisions substantially the same as those of this Section 12.11, to
(i) any assignee of or Participant in, or any prospective assignee of or
Participant in, any of its rights or obligations under this Agreement (it being
understood that the Persons to whom such disclosure is made will be informed of
the confidential nature of such Information and instructed to keep such
Information confidential) or (ii) any actual or prospective counterparty (or its
advisors) to any Swap Agreement relating to the Borrowers and their obligations
(it being understood that the Persons to whom such disclosure is made will be
informed of the confidential nature of such Information and instructed to keep
such Information confidential), (g) with the consent of the Borrowers or (h) to
the extent such Information (i) becomes publicly available other than as a
result of a breach of this Section 12.11 or (ii) becomes available to the
Administrative Agent or any Lender on a nonconfidential basis from a source
other than the Borrowers. For the purposes of this Section 12.11, "Information"
means all information received from the Borrowers or any Subsidiary relating to
the Borrowers or any Subsidiary and their businesses, other than any such
information that is available to the Administrative Agent or any Lender on a
nonconfidential basis prior to disclosure by the Borrowers or a Subsidiary. Any
Person required to maintain the confidentiality of Information as provided in
this Section 12.11 shall be considered to have complied with its obligation to
do so if such Person has exercised the same degree of care to maintain the
confidentiality of such Information as such Person would accord to its own
confidential information.
Section 12.12 Interest Rate Limitation. It is the intention of the parties
hereto that each Lender shall conform strictly to usury laws applicable to it.
Accordingly, if the transactions contemplated hereby would be usurious as to any
Lender under laws applicable to it (including the laws of the United States of
America and the State of New York or any other jurisdiction whose laws may be
mandatorily applicable to such Lender notwithstanding the other provisions of
this Agreement), then, in that event, notwithstanding anything to the contrary
in any of the Loan Documents or any agreement entered into in connection with or
as security for the Loans, it is agreed as follows: (i) the aggregate of all
consideration which constitutes interest under law applicable to any Lender that
is contracted for, taken, reserved, charged or received by such Lender under any
of the Loan Documents or agreements or otherwise in connection with the Loans,
shall under no circumstances exceed the maximum amount allowed by such
applicable law, and any excess shall be canceled automatically and if
theretofore paid shall be credited by such Lender on the principal amount of the
Indebtedness (or, to the extent that the principal amount of the Indebtedness
shall have been or would thereby be paid in full, refunded by such Lender to the
Borrowers); and (ii) in the event that the maturity of the Loans, is accelerated
by reason of an election of the holder thereof resulting from any Event of
Default under this Agreement or otherwise, or in the event of any required or
permitted prepayment, then such consideration that constitutes interest under
law applicable to any Lender may never include more than the maximum amount
allowed by such applicable law, and excess interest, if any, provided for in
this Agreement or otherwise shall be canceled automatically by such Lender as of
the date of such
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acceleration or prepayment and, if theretofore paid, shall be credited by such
Lender on the principal amount of the Indebtedness (or, to the extent that the
principal amount of the Indebtedness shall have been or would thereby be paid in
full, refunded by such Lender to the Borrowers). All sums paid or agreed to be
paid to any Lender for the use, forbearance or detention of sums due hereunder
shall, to the extent permitted by law applicable to such Lender, be amortized,
prorated, allocated and spread throughout the stated term of the Loans until
payment in full so that the rate or amount of interest on account of any Loans
hereunder does not exceed the maximum amount allowed by such applicable law. If
at any time and from time to time (i) the amount of interest payable to any
Lender on any date shall be computed at the Highest Lawful Rate applicable to
such Lender pursuant to this Section 12.12 and (ii) in respect of any subsequent
interest computation period the amount of interest otherwise payable to such
Lender would be less than the amount of interest payable to such Lender computed
at the Highest Lawful Rate applicable to such Lender, then the amount of
interest payable to such Lender in respect of such subsequent interest
computation period shall continue to be computed at the Highest Lawful Rate
applicable to such Lender until the total amount of interest payable to such
Lender shall equal the total amount of interest which would have been payable to
such Lender if the total amount of interest had been computed without giving
effect to this Section 12.12.
Section 12.13 EXCULPATION PROVISIONS. EACH OF THE PARTIES HERETO
SPECIFICALLY AGREES THAT IT HAS A DUTY TO READ THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS AND AGREES THAT IT IS CHARGED WITH NOTICE AND KNOWLEDGE OF THE TERMS
OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS; THAT IT HAS IN FACT READ THIS
AGREEMENT AND IS FULLY INFORMED AND HAS FULL NOTICE AND KNOWLEDGE OF THE TERMS,
CONDITIONS AND EFFECTS OF THIS AGREEMENT; THAT IT HAS BEEN REPRESENTED BY
INDEPENDENT LEGAL COUNSEL OF ITS CHOICE THROUGHOUT THE NEGOTIATIONS PRECEDING
ITS EXECUTION OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS; AND HAS RECEIVED
THE ADVICE OF ITS ATTORNEY IN ENTERING INTO THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS; AND THAT IT RECOGNIZES THAT CERTAIN OF THE TERMS OF THIS AGREEMENT
AND THE OTHER LOAN DOCUMENTS RESULT IN ONE PARTY ASSUMING THE LIABILITY INHERENT
IN SOME ASPECTS OF THE TRANSACTION AND RELIEVING THE OTHER PARTY OF ITS
RESPONSIBILITY FOR SUCH LIABILITY. EACH PARTY HERETO AGREES AND COVENANTS THAT
IT WILL NOT CONTEST THE VALIDITY OR ENFORCEABILITY OF ANY EXCULPATORY PROVISION
OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS ON THE BASIS THAT THE PARTY HAD
NO NOTICE OR KNOWLEDGE OF SUCH PROVISION OR THAT THE PROVISION IS NOT
"CONSPICUOUS."
Section 12.14 Collateral Matters; Swap Agreements. The benefit of the
Security Instruments and of the provisions of this Agreement relating to any
collateral securing the Indebtedness shall also extend to and be available to
those Lenders or their Affiliates and other Persons which are counterparties to
any Swap Agreement with either Borrower or any of its Subsidiaries on a pro rata
basis in respect of any obligations of the Borrowers
81
or any of their Subsidiaries which arise under any such Swap Agreement entered
into while such Person or its Affiliate is a Lender, including any Swap
Agreements between such Persons in existence prior to the date hereof. No Lender
or any Affiliate of a Lender shall have any voting rights under any Loan
Document as a result of the existence of obligations owed to it under any such
Swap Agreements.
Section 12.15 No Third Party Beneficiaries. The lenders under the Senior
Credit Agreement are express beneficiaries of Annex II of this Agreement, and
this Agreement, the other Loan Documents, and the agreement of the Lenders to
make Loans hereunder are solely for the benefit of the Borrowers, and no other
Person (including, without limitation, any Subsidiary, any obligor, contractor,
subcontractor, supplier or materialsman) shall have any rights, claims, remedies
or privileges hereunder or under any other Loan Document against the
Administrative Agent or any Lender for any reason whatsoever. There are no third
party beneficiaries.
Section 12.16 USA Patriot Act Notice. Each Lender hereby notifies the
Borrower that pursuant to the requirements of the USA Patriot Act (Title III of
Pub. L. 107-56 (signed into law October 26, 2001)) (the "Act"), it is required
to obtain, verify and record information that identifies the Borrowers, which
information includes the name and address of the Borrowers and other information
that will allow such Lender to identify the Borrowers in accordance with the
Act.
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The parties hereto have caused this Agreement to be duly executed as of the
day and year first above written.
BORROWER: QUEST RESOURCE CORPORATION
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
---------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇
Title: Chief Executive Officer
QUEST CHEROKEE, LLC
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
---------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇
Title: Chief Executive Officer
Second Lien Term Loan Agreement Signature Page
ADMINISTRATIVE AGENT: GUGGENHEIM CORPORATE FUNDING, LLC
as Administrative Agent
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title Managing Director
Second Lien Term Loan Agreement Signature Page
LENDERS: MIDLAND NATIONAL LIFE INSURANCE COMPANY
By: Midland Advisors Company as its Agent
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Managing Director
Second Lien Term Loan Agreement Signature Page
LENDERS: NORTH AMERICAN COMPANY FOR LIFE AND
HEALTH INSURANCE
By: Midland Advisors Company as its Agent
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Managing Director
Second Lien Term Loan Agreement Signature Page
LENDERS: ORPHEUS HOLDINGS LLC
By: Guggenheim Investment Management, LLC
as its Manager
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Managing Director
Second Lien Term Loan Agreement Signature Page