EXHIBIT 4.5
$175,000,000
CREDIT AGREEMENT
dated as of March 2, 2004
Among
MARINER ENERGY, INC.
as Borrower,
THE LENDERS PARTY HERETO FROM TIME TO TIME
as Lenders,
UNION BANK OF CALIFORNIA, N.A.
as Administrative Agent and as Issuing Lender
and
BNP PARIBAS, as Syndication Agent
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UNION BANK OF CALIFORNIA, N.A.
and
BNP PARIBAS,
Joint Lead Arrangers and Joint Book Running Managers
----------------------------------------------
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS AND ACCOUNTING TERMS............................. 1
Section 1.01 Certain Defined Terms.................................. 1
Section 1.02 Computation of Time Periods............................ 20
Section 1.03 Accounting Terms; Changes in GAAP...................... 20
Section 1.04 Types and Classes of Advances.......................... 20
Section 1.05 Miscellaneous.......................................... 20
ARTICLE II CREDIT FACILITIES............................................ 21
Section 2.01 Commitment for Advances................................ 21
Section 2.02 Borrowing Base......................................... 21
Section 2.03 Method of Borrowing.................................... 24
Section 2.04 Reduction of the Commitments........................... 27
Section 2.05 Prepayment of Advances................................. 27
Section 2.06 Repayment of Advances.................................. 29
Section 2.07 Letters of Credit...................................... 30
Section 2.08 Fees................................................... 33
Section 2.09 Interest............................................... 34
Section 2.10 Payments and Computations.............................. 35
Section 2.11 Sharing of Payments, Etc............................... 36
Section 2.12 Breakage Costs......................................... 37
Section 2.13 Increased Costs........................................ 37
Section 2.14 Taxes.................................................. 38
ARTICLE III CONDITIONS OF LENDING........................................ 40
Section 3.01 Conditions Precedent to Initial Advances............... 40
Section 3.02 Conditions Precedent to All Borrowings................. 45
ARTICLE IV REPRESENTATIONS AND WARRANTIES............................... 45
Section 4.01 Corporate Existence; Subsidiaries...................... 45
Section 4.02 Corporate Power........................................ 46
Section 4.03 Authorization and Approvals............................ 46
Section 4.04 Enforceable Obligations................................ 46
Section 4.05 Financial Statements................................... 46
Section 4.06 True and Complete Disclosure..................... 47
Section 4.07 Litigation; Compliance with Law.................. 47
Section 4.08 Use of Proceeds.................................. 48
Section 4.09 Investment Company Act........................... 48
Section 4.10 Public Utility Holding Company Act............... 48
Section 4.11 Taxes............................................ 48
Section 4.12 Pension Plans.................................... 49
Section 4.13 Condition of Property; Casualties................ 49
Section 4.14 No Burdensome Restrictions; No Defaults.......... 50
Section 4.15 Environmental Condition.......................... 50
Section 4.16 Permits, Licenses, Etc........................... 51
Section 4.17 Gas Contracts.................................... 51
Section 4.18 Liens; Titles, Leases, Etc....................... 51
Section 4.19 Solvency......................................... 52
Section 4.20 Hedging Agreements............................... 52
Section 4.21 Material Agreements.............................. 52
ARTICLE V AFFIRMATIVE COVENANTS..................................... 52
Section 5.01 Compliance with Laws, Etc........................ 52
Section 5.02 Maintenance of Insurance......................... 53
Section 5.03 Preservation of Corporate Existence, Etc......... 53
Section 5.04 Payment of Taxes, Etc............................ 54
Section 5.05 Visitation Rights................................ 54
Section 5.06 Reporting Requirements........................... 54
Section 5.07 Maintenance of Property.......................... 57
Section 5.08 Agreement to Pledge.............................. 58
Section 5.09 Use of Proceeds.................................. 58
Section 5.10 Title Opinions................................... 58
Section 5.11 Further Assurances; Cure of Title Defects........ 58
Section 5.12 Hedging Arrangements............................. 59
ARTICLE VI NEGATIVE COVENANTS........................................ 59
Section 6.01 Liens, Etc....................................... 59
Section 6.02 Debts, Guaranties, and Other Obligations......... 61
Section 6.03 Agreements Restricting Liens and Distributions... 61
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Section 6.04 Merger or Consolidation; Asset Sales.............. 62
Section 6.05 Restricted Payments; Bond Payments................ 62
Section 6.06 Investments....................................... 62
Section 6.07 Affiliate Transactions............................ 63
Section 6.08 Compliance with ERISA............................. 63
Section 6.09 Sale-and-Leaseback................................ 64
Section 6.10 Change of Business................................ 64
Section 6.11 Organizational Documents, Name Change............. 64
Section 6.12 Use of Proceeds; Letters of Credit................ 64
Section 6.13 Gas Imbalances, Take-or-Pay or Other Prepayments.. 65
Section 6.14 Limitation on Speculative Hedging................. 65
Section 6.15 Additional Subsidiaries........................... 65
Section 6.16 Account Payables.................................. 66
Section 6.17 Current Ratio..................................... 66
Section 6.18 Fixed Charge Coverage Ratio....................... 66
Section 6.19 Maximum Debt Ratio................................ 66
Section 6.20 Maximum Senior Debt Ratio......................... 66
Section 6.21 Project Company Loan Documents; Merger Documents.. 67
Section 6.22 Enron Corp. Obligations........................... 67
ARTICLE VII EVENTS OF DEFAULT; REMEDIES................................ 67
Section 7.01 Events of Default................................. 67
Section 7.02 Optional Acceleration of Maturity................. 69
Section 7.03 Automatic Acceleration of Maturity................ 70
Section 7.04 Right of Set-off.................................. 70
Section 7.05 Non-exclusivity of Remedies....................... 71
Section 7.06 Application of Proceeds........................... 71
ARTICLE VIII THE ADMINISTRATIVE AGENT AND THE ISSUING LENDER............ 71
Section 8.01 Authorization and Action.......................... 71
Section 8.02 Administrative Agent's Reliance, Etc.............. 72
Section 8.03 The Administrative Agent and Its Affiliates....... 72
Section 8.04 Lender Credit Decision............................ 72
Section 8.05 Indemnification................................... 73
Section 8.06 Successor Administrative Agent and Issuing
Lender............................................ 73
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Section 8.07 Syndication Agent, Joint Lead Arrangers, and Joint Book
Running Managers......................................... 74
ARTICLE IX MISCELLANEOUS..................................................... 74
Section 9.01 Amendments, Etc.......................................... 74
Section 9.02 Notices, Etc............................................. 75
Section 9.03 No Waiver; Remedies...................................... 75
Section 9.04 Costs and Expenses....................................... 75
Section 9.05 Binding Effect........................................... 76
Section 9.06 Lender Assignments and Participations.................... 76
Section 9.07 Indemnification.......................................... 78
Section 9.08 Execution in Counterparts................................ 78
Section 9.09 Survival of Representations, Etc......................... 78
Section 9.10 Severability............................................. 79
Section 9.11 Business Loans........................................... 79
Section 9.12 Governing Law; Submission to Jurisdiction................ 79
Section 9.13 Confidentiality.......................................... 79
Section 9.14 WAIVER OF JURY TRIAL..................................... 80
Section 9.15 ORAL AGREEMENTS.......................................... 80
EXHIBITS:
Exhibit A - Form of Assignment and Acceptance
Exhibit B - Form of Compliance Certificate
Exhibit C - Form of Guaranty
Exhibit D - Form of Mortgage
Exhibit E-1 - Form of Tranche A Note
Exhibit E-2 - Form of Tranche B Note
Exhibit F - Form of Notice of Borrowing
Exhibit G - Form of Notice of Conversion or Continuation
Exhibit H - Form of Pledge Agreement
Exhibit I - Form of Security Agreement
Exhibit J - Form of Transfer Letters
SCHEDULES:
Schedule I - Pricing Information
Schedule II - Borrower, Administrative Agent,and Lender
Information
Schedule 3.01(o)- Asset Associations
Schedule 4.05(a)- Undisclosed Liabilities
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Schedule 4.05(d)- Existing Debt
Schedule 4.07 - Litigation
Schedule 4.20 - Hedging Agreements
Schedule 5.06(e) - Termination Events
Schedule 6.01 - Existing Liens
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CREDIT AGREEMENT
This Credit Agreement dated as of March 2, 2004 is among Mariner Energy,
Inc., a Delaware corporation ("Borrower"), the lenders party hereto from time to
time, and Union Bank of California, N.A., as administrative agent for such
Lenders and as issuing lender for such Lenders.
The Borrower, the Lenders, the Administrative Agent, and the Issuing
Lender hereby agree to as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
Section 1.01 Certain Defined Terms. As used in this Agreement, the term
defined above shall have the meaning set forth above and the following terms
shall have the following meanings (unless otherwise indicated, such meanings to
be equally applicable to both the singular and plural forms of the terms
defined):
"Acceptable Security Interest" in any Property means a Lien which (a)
exists in favor of the Administrative Agent for the benefit of the
Administrative Agent, the Issuing Lender, the Lenders, and any Swap
Counterparty, (b) is superior to all Liens or rights of any other Person in the
Property encumbered thereby other than Permitted Prior Liens, (c) secures the
Obligations, and (d) is perfected and enforceable.
"Adjusted Reference Rate" means, for any day, the fluctuating rate per
annum of interest equal to the greater of (a) the Reference Rate in effect on
such day and (b) the Federal Funds Rate in effect on such day plus 1/2 of 1%.
"Administrative Agent" means Union Bank of California, N.A., in its
capacity as agent pursuant to Article VIII, and any successor agent pursuant to
Section 8.06.
"Advance" means a Tranche A Advance or a Tranche B Advance.
"Affiliate" means, as to any Person, any other Person that, directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such Person or any Subsidiary of such Person. The
term "control" (including the terms "controlled by" or "under common control
with") means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of a Person, whether through
ownership of a Control Percentage, by contract, or otherwise. Without limiting
the generality of the foregoing, a Person shall be deemed to be controlled by
another Person if such other Person possesses, directly or indirectly, the power
to vote 10% or more of the securities having ordinary voting power for the
election of directors, managing general partners or the equivalent.
"Agreement" means this Credit Agreement, as the same may be amended,
supplemented, and otherwise modified from time to time.
"Applicable Lending Office" means, with respect to each Lender, such
Lender's Domestic Lending Office in the case of a Reference Rate Advance and
such Lender's Eurodollar Lending Office in the case of a Eurodollar Rate
Advance.
"Applicable Margin" means, with respect to any Advance, (a) during any
time when an Event of Default exists, (i) for Tranche A Advances, 2% per annum
plus the rate per annum set forth in the Pricing Grid for the relevant Type of
such Advance based on the present Utilization Level applicable at such time, and
(ii) for Tranche B Advances, 5% per annum, and (b) at any other time, (i) for
Tranche A Advances, the rate per annum set forth in the Pricing Grid for the
relevant Type of such Advance based on the relevant Utilization Level applicable
at such time, and (ii) for Tranche B Advances, 3% per annum. The Applicable
Margin for any Tranche A Advance shall change when and as the relevant
Utilization Level changes.
"Arrangers" means Union Bank of California, N.A. and BNP Paribas.
"Assignment and Acceptance" means an assignment and acceptance entered
into by a Lender and an Eligible Assignee, and accepted by the Administrative
Agent, in substantially the form of the attached Exhibit A.
"Bond Issuance" means the issuance by the Borrower of up to $175,000,000
of Debt, which Debt shall (a) have (i) an interest rate that is no higher than
10% per annum, (ii) a maturity date that is no earlier than March 2, 2009, (iii)
covenants and restrictions that are no more restrictive than those set forth in
this Agreement and the other Loan Documents, (iv) no restriction on the ability
of the Borrower or any of its Subsidiaries to amend, modify or otherwise
supplement this Agreement or the other Loan Documents, (v) no collateral or
other security for such Debt, (vi) no restriction on the ability of the Borrower
or any of its Subsidiaries to guarantee the Obligations or pledge assets as
collateral security for the Obligations, and (vi) a bullet repayment and not
provide for amortization (other than amortization resulting from any mandatory
prepayments required in respect of such Debt in connection with the occurrence
of an event of default under such Debt, a change of control of the issuer or an
asset sale of the issuer), and (b) not otherwise cause the occurrence of a
Default or Event of Default after giving effect to the issuance of such Debt.
"Borrowing" means a Tranche A Borrowing or a Tranche B Borrowing.
"Borrowing Base" means at any particular time, the Dollar amount
determined in accordance with Section 2.02 on account of Proven Reserves
attributable to Oil and Gas Properties of the Borrower and its Subsidiaries
subject to an Acceptable Security Interest and described in the most recent
Independent Engineering Report or Internal Engineering Report, as applicable,
delivered to the Administrative Agent and the Lenders pursuant to Section 2.02.
"Business Day" means a day of the year on which banks are not required or
authorized to close in Dallas, Texas and Los Angeles, California and, if the
applicable Business Day relates to any Eurodollar Rate Advances, on which
dealings are carried on by banks in the London interbank market.
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"Capital Leases" means, as applied to any Person, any lease of any
Property by such Person as lessee which would, in accordance with GAAP, be
required to be classified and accounted for as a capital lease on the balance
sheet of such Person.
"Cash Collateral Account" means a special interest bearing cash collateral
account pledged by the Borrower to the Administrative Agent containing cash
deposited pursuant to Sections 2.05(b), 7.02(b), or 7.03(b) to be maintained
with the Administrative Agent in accordance with Section 2.07(g) and bear
interest or be invested in the Administrative Agent's reasonable discretion.
"CERCLA" means the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended, state and local analogs, and all rules and
regulations and requirements thereunder in each case as now or hereafter in
effect.
"Change in Control" shall mean the occurrence of any of the following
events:
(a) Holdings ceases to own 100% of the Equity Interest in the Borrower
(unless Holdings has been merged into the Parent);
(b) the Parent ceases to own 100% of the Equity Interest in Holdings
(unless Holdings has been merged into the Parent);
(c) the Parent ceases to own 100%, directly or indirectly, of the Equity
Interest in the Borrower;
(d) the Borrower shall cease to own 100% of the Equity Interests of its
Subsidiaries;
(e) MEI Holdings shall cease to own 100% of the Parent;
(f) ACON Investments LLC, Riverstone Holdings, LLC and their respective
Affiliates (other than portfolio companies of such institutions) fail to
collectively own at least 60% of the Equity Interests of MEI Holdings;
(g) during any period of 12 consecutive months occurring after the Closing
Date, a majority of the members of the board of directors or other equivalent
governing body of the Parent ceases to be composed of individuals (i) who were
members of that board or equivalent governing body on the first day of such
period, (ii) whose election or nomination to that board or equivalent governing
body was approved by individuals referred to in clause (i) above constituting at
the time of such election or nomination at least a majority of that board or
equivalent governing body or (iii) whose election or nomination to that board or
other equivalent governing body was approved by individuals referred to in
clauses (i) and (ii) above constituting at the time of such election or
nomination at least a majority of that board or equivalent governing body
(excluding, in the case of both clause (ii) and clause (iii), any individual
whose initial nomination for, or assumption of office as, a member of that board
or equivalent governing body occurs as a result of an actual or threatened
solicitation of proxies or consents for the election or removal of one or more
directors by any person or group other than a solicitation for the election of
one or more directors by or on behalf of the board of directors); or
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(h) ▇▇▇▇▇ ▇▇▇▇▇ ceases to be the Chief Executive Officer or President of
the Borrower or to be actively engaged in the executive management of the
Borrower and is not replaced with an individual of comparable qualifications
within six months after he ceases to be the Chief Executive Officer or President
of the Borrower or to be actively engaged in the executive management of the
Borrower (and the Borrower hereby agrees to consult with the Lenders regarding
any such potential replacement).
"Closing Date" means the date on which the initial Advances are made.
"Closing Distribution" means the distribution by the Borrower in an
aggregate amount equal to $135,000,000 to Holdings, which amount shall be
distributed by Holdings to the Parent and subsequently paid by the Parent as a
portion of the Merger Consideration (as defined in the Merger Agreement).
"COBRA" means the continuation coverage requirements for employee welfare
benefit plans under Section 4980B of the Code and Sections 601 through 608,
inclusive of ERISA.
"Code" means the Internal Revenue Code of 1986, as amended, and any
successor statute.
"Collateral" means (a) all "Collateral," "Pledged Collateral," and
"Mortgaged Properties" (as defined in each of the Mortgages, the Security
Agreements, and the Pledge Agreement, as applicable) or similar terms used in
the Security Instruments and (b) all amounts contained in the Borrower's and its
Subsidiaries' bank accounts.
"Commitment" means, for any Lender, such Lender's Tranche A Commitment or
its Tranche B Commitment, and "Commitments" shall mean all such Commitments
collectively.
"Commitment Fee Rate" means the per annum commitment fee rate set forth on
the Pricing Grid applicable from time to time. The Commitment Fee Rate shall
change when and as the relevant Utilization Level changes.
"Compliance Certificate" means a compliance certificate in the form of the
attached Exhibit B signed by a Responsible Officer of the Borrower.
"Consolidated Net Income" means, with respect to the Borrower and its
consolidated Subsidiaries, for any period, the net income for such period after
taxes, as determined in accordance with GAAP, excluding, however, (a)
extraordinary items, including (i) any net non-cash gain or loss during such
period arising from the sale, exchange, retirement or other disposition of
capital assets (such term to include all fixed assets and all securities) other
than in the ordinary course of business and (ii) any write-up or write-down of
assets and (b) the cumulative effect of any change in GAAP.
"Control Percentage" means, with respect to any Person, the percentage of
the outstanding Equity Interest (including any options, warrants or similar
rights to purchase such Equity Interest) of such Person having ordinary voting
power which gives the direct or indirect holder of such Equity Interest the
power to elect a majority of the board of directors (or other applicable
governing body) of such Person.
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"Controlled Group" means all members of a controlled group of corporations
and all businesses (whether or not incorporated) under common control during the
period that this Agreement is in effect and for the period six (6) years prior
to the Closing Date which, together with the Borrower, are treated as a single
employer under Section 414 of the Code.
"Convert," "Conversion," and "Converted" each refers to a conversion of
Tranche A Advance of one Type into a Tranche A Advance of another Type pursuant
to Section 2.03(b).
"Credit Extensions" means (a) an Advance made by any Lender and (b) the
issuance, increase, or extension of any Letter of Credit by the Issuing Lender.
"Debt," for any Person, means without duplication:
(a) indebtedness of such Person for borrowed money;
(b) obligations of such Person evidenced by bonds, debentures, notes or
other similar instruments;
(c) obligations of such Person to pay the deferred purchase price of
Property or services (including, without limitation, obligations that are
non-recourse to the credit of such Person but are secured by the assets of such
Person, but excluding trade accounts payable);
(d) obligations owing in respect of seismic data licenses (but only to the
extent such obligations are then due and owing and net of any reserves
established for such obligations);
(e) obligations of such Person as lessee under Capital Leases and
obligations of such Person in respect of synthetic leases;
(f) obligations under letters of credit and agreements relating to the
issuance of letters of credit or acceptance financing;
(g) obligations of such Person under any Hedge Contract;
(h) obligations of such Person owing in respect of redeemable preferred
stock or other preferred equity interest of such Person;
(i) any obligations of such Person owing in connection with any volumetric
production payments;
(j) obligations of such Person under direct or indirect guaranties in
respect of, and obligations (contingent or otherwise) of such Person to purchase
or otherwise acquire, or otherwise to assure a creditor against loss in respect
of, indebtedness or obligations of others of the kinds referred to in clauses
(a) through (h) above;
(k) indebtedness or obligations of others of the kinds referred to in
clauses (a) through (i) secured by any Lien on or in respect of any Property of
such Person; and
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(l) all liabilities of such Person in respect of unfunded vested benefits
under any Plan to the extent constituting liabilities under GAAP.
"Default" means (a) an Event of Default or (b) any event or condition
which with notice or lapse of time or both would become an Event of Default.
"Dollars" and "$" means lawful money of the United States of America.
"Domestic Lending Office" means, with respect to any Lender, the office of
such Lender specified as its "Domestic Lending Office" opposite its name on
Schedule II or such other office of such Lender as such Lender may from time to
time specify to the Borrower and the Administrative Agent.
"EBITDA" means for any period, without duplication (a) Consolidated Net
Income for such period, plus (b) to the extent deducted in determining
Consolidated Net Income, Interest Expense, taxes, depreciation, amortization,
and depletion for such period, plus (c) the amount of any "full cost" ceiling
test writedowns occurring during such period, plus (d) the amount of any losses
attributable to the cumulative effect of a change in GAAP during such period,
minus (e) the amount of any gains attributable to the cumulative effect of a
change in GAAP during such such period.
"Eligible Assignee" means (a) any Lender, (b) any Subsidiary or Affiliate
of a Lender, and (c) any commercial bank or other financial institution approved
by the Administrative Agent and the Issuing Lender in their sole discretion and,
when no Default has occurred and is continuing at the time any assignment is
effected pursuant to this Agreement, the Borrower, which consent by the Borrower
may not be unreasonably withheld; provided that, such Person shall have provided
evidence reasonably satisfactory to the Administrative Agent of its compliance
with Section 313 of The USA Patriot Certification Act.
"Engineering Report" means either an Independent Engineering Report or an
Internal Engineering Report.
"Environment" or "Environmental" shall have the meanings set forth in 42
U.S.C. 9601(8) (1988).
"Environmental Claim" means any third party (including governmental
agencies and employees) action, lawsuit, claim, demand, regulatory action or
proceeding, order, decree, consent agreement or notice of potential or actual
responsibility or violation (including claims or proceedings under the
Occupational Safety and Health Acts or similar laws or requirements relating to
health or safety of employees) which seeks to impose liability under any
Environmental Law.
"Environmental Law" means, as to the Borrower or its Subsidiaries, all
Legal Requirements or common law theories applicable to the Borrower or its
Subsidiaries arising from, relating to, or in connection with the Environment,
health, or safety, including without limitation CERCLA, relating to (a)
pollution, contamination, injury, destruction, loss, protection, cleanup,
reclamation or restoration of the air, surface water, groundwater, land surface
or subsurface strata, or other natural resources; (b) solid, gaseous or liquid
waste generation,
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treatment, processing, recycling, reclamation, cleanup, storage, disposal or
transportation; (c) exposure to pollutants, contaminants, hazardous, or toxic
substances, materials or wastes; (d) the safety or health of employees; or (e)
the manufacture, processing, handling, transportation, distribution in commerce,
use, storage or disposal of hazardous, or toxic substances, materials or wastes.
"Environmental Permit" means any permit, license, order, approval,
registration or other authorization under Environmental Law.
"Equity Interest" means with respect to any Person, any shares, interests,
participation, or other equivalents (however designated) of corporate stock,
membership interests, or partnership interests (or any other ownership
interests) of such Person.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"ERISA Affiliate" means each member of a controlled group of corporations
and all businesses (whether or not incorporated) under common control which,
together with the Borrower, are treated as a single employee under Section 414
of the Code.
"Eurocurrency Liabilities" has the meaning assigned to that term in
Regulation D of the Federal Reserve Board (or any successor), as in effect from
time to time.
"Eurodollar Lending Office" means, with respect to any Lender, the office
of such Lender specified as its "Eurodollar Lending Office" opposite its name on
Schedule II (or, if no such office is specified, its Domestic Lending Office),
or such other office of such Lender as such Lender may from time to time specify
to the Borrower and the Administrative Agent.
"Eurodollar Rate" means, for the Interest Period for each Eurodollar Rate
Advance comprising the same Borrowing, the interest rate per annum (rounded
upward to the nearest whole multiple of 1/100 of 1% per annum) set forth on the
applicable Telerate Page as the London Interbank Offered Rate, for deposits in
Dollars at 11:00 a.m. (London, England time) two Business Days before the first
day of such Interest Period and for a period equal to such Interest Period;
provided that, if no such quotation appears on the applicable Telerate Page, the
Eurodollar Rate shall be an interest rate per annum equal to the rate per annum
at which deposits in Dollars are offered by the principal office of Union Bank
of California, N.A. (or such other Lender as shall then be serving as the
Administrative Agent) in London, England to prime banks in the London interbank
market at 11:00 a.m. (London, England time) two Business Days before the first
day of such Interest Period in an amount substantially equal to the Eurodollar
Rate Advance to be maintained by the Lender that is the Administrative Agent in
respect of such Borrowing and for a period equal to such Interest Period.
"Eurodollar Rate Advance" means an Advance which bears interest as
provided in Section 2.09(b).
"Eurodollar Rate Reserve Percentage" of any Lender for the Interest Period
for any Eurodollar Rate Advance means the reserve percentage applicable during
such Interest Period (or if more than one such percentage shall be so
applicable, the daily average of such percentages for
7
those days in such Interest Period during which any such percentage shall be so
applicable) under regulations issued from time to time by the Federal Reserve
Board for determining the maximum reserve requirement (including, without
limitation, any emergency, supplemental, or other marginal reserve requirement)
for such Lender with respect to liabilities or assets consisting of or including
Eurocurrency Liabilities having a term equal to such Interest Period.
"Event of Default" has the meaning specified in Section 7.01.
"Expiration Date" means, with respect to any Letter of Credit, the date on
which such Letter of Credit will expire or terminate in accordance with its
terms.
"Federal Funds Rate" means, for any period, a fluctuating interest rate
per annum equal for each day during such period to the weighted average of the
rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day which is a Business Day, the average of the quotations for any such day on
such transactions received by the Administrative Agent from three Federal funds
brokers of recognized standing selected by it.
"Federal Reserve Board" means the Board of Governors of the Federal
Reserve System or any of its successors.
"Financial Statements" means the respective audited consolidated balance
sheets of the Borrower and its consolidated Subsidiaries as at December 31,
2002, and the related audited consolidated and consolidating statements of
income, cash flow, and retained earnings of the Borrower and its consolidated
Subsidiaries for the fiscal years then ended, copies of which have been
delivered to the Administrative Agent and the Lenders.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time, applied on a basis consistent with the requirements of
Section 1.03.
"Governmental Authority" means, as to any Person in connection with any
subject, any foreign, national, state or provincial governmental authority, or
any political subdivision of any state thereof, or any agency, department,
commission, board, authority or instrumentality, bureau or court, in each case
having jurisdiction over such Person or such Person's Property in connection
with such subject.
"Guarantor" means Parent, Holdings, and each other entity executing a
Guaranty as required under this Agreement.
"Guaranty" means a Guaranty in substantially the form of the attached
Exhibit C and executed by a Guarantor, and "Guaranties" shall mean all such
guaranties collectively.
"Hazardous Substance" means the substances identified as such pursuant to
CERCLA and those regulated under any other Environmental Law, including without
limitation pollutants, contaminants, petroleum, petroleum products,
radionuclides, radioactive materials, and medical and infectious waste.
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"Hazardous Waste" means the substances regulated as such pursuant to any
Environmental Law.
"Hedge Contract" means (a) any and all rate swap transactions, basis
swaps, credit derivative transactions, forward rate transactions, commodity
swaps, commodity options, forward commodity contracts, equity or equity index
swaps or options, bond or bond price or bond index swaps or options or forward
bond or forward bond price or forward bond index transactions, interest rate
options, forward foreign exchange transactions, cap transactions, floor
transactions, collar transactions, currency swap transactions, cross-currency
rate swap transactions, currency options, spot contracts, or any other similar
transactions or any combination of any of the foregoing (including any options
to enter into any of the foregoing), whether or not any such transaction is
governed by or subject to any master agreement, and (b) any and all transactions
of any kind, and the related confirmations, which are subject to the terms and
conditions of, or governed by, any form of master agreement published by the
International Swaps and Derivatives Association, Inc., any International Foreign
Exchange Master Agreement, or any other master agreement (any such master
agreement, together with any related schedules, a "Master Agreement"), including
any such obligations or liabilities under any Master Agreement; provided that, a
"Hedge Contract" shall not include any "Master Agreement" that provides solely
for the sale by the Borrower or its Subsidiaries of physical Hydrocarbons in
exchange for cash in the ordinary course of its business.
"Holdings" means Mariner Holdings, Inc., a Delaware corporation.
"Hydrocarbon Hedge Agreement" means a Hedge Contract which is intended to
reduce or eliminate the risk of fluctuations in the price of Hydrocarbons.
"Hydrocarbons" means oil, gas, coal seam gas, casinghead gas, drip
gasoline, natural gasoline, condensate, distillate, and all other liquid and
gaseous hydrocarbons produced or to be produced in conjunction therewith from a
well bore and all products, by-products, and other substances derived therefrom
or the processing thereof, and all other minerals and substances produced in
conjunction with such substances, including, but not limited to, sulfur,
geothermal steam, water, carbon dioxide, helium, and any and all minerals, ores,
or substances of value and the products and proceeds therefrom.
"Independent Engineer" means ▇▇▇▇▇ ▇▇▇▇▇ Company, ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇▇,
Netherland ▇▇▇▇▇▇ & Associates, or any other engineering firm acceptable to the
Administrative Agent.
"Independent Engineering Report" means a report, in form and substance
satisfactory to the Administrative Agent, prepared by an Independent Engineer,
addressed to the Administrative Agent and the Lenders with respect to the Oil
and Gas Properties owned by the Borrower or its Subsidiaries (or to be acquired
by the Borrower or any of its Subsidiaries, as applicable) which are or are to
be included in the Borrowing Base, which report shall (a) specify the location,
quantity, and type of the estimated Proven Reserves attributable to such Oil and
Gas Properties, (b) contain a projection of the rate of production of such Oil
and Gas Properties, (c) contain an estimate of the net operating revenues to be
derived from the production and sale of Hydrocarbons from such Proven Reserves
based on product price and cost escalation
9
assumptions specified by the Administrative Agent and the Lenders, and (d)
contain such other information as is customarily obtained from and provided in
such reports or is otherwise reasonably requested by the Administrative Agent.
"Intercreditor Agreement" means the Intercreditor Agreement dated as of
March 2, 2004 between JEDI and the Administrative Agent on behalf of the
Lenders.
"Interest Expense" means, for the Borrower and its consolidated
Subsidiaries for any period, without duplication total interest, letter of
credit fees, and other fees and expenses incurred in connection with any Debt
for such period, whether paid or accrued, including, without limitation, all
commissions, discounts and other fees and charges owed with respect to letters
of credit and bankers' acceptance financing, imputed interest under Capital
Leases, and net costs under Interest Hedge Agreements, all as determined in
conformity with GAAP.
"Interest Hedge Agreement" means between the Borrower and one or more
financial institutions providing for the exchange of nominal interest
obligations between the Borrower and such financial institution or the cap of
the interest rate on any Debt of the Borrower.
"Interest Period" means, for each Eurodollar Rate Advance comprising part
of the same Borrowing, the period commencing on the date of such Eurodollar Rate
Advance or the date of the Conversion of any Reference Rate Advance into a
Eurodollar Rate Advance and ending on the last day of the period selected by the
Borrower pursuant to the provisions below and Section 2.03 and, thereafter, each
subsequent period commencing on the last day of the immediately preceding
Interest Period and ending on the last day of the period selected by the
Borrower pursuant to the provisions below and Section 2.03. The duration of each
such Interest Period shall be one, two, three, six or, if available, nine or
twelve months, in each case as the Borrower may, upon notice received by the
Administrative Agent not later than 10:00 a.m. (Dallas, Texas time) on the third
Business Day prior to the first day of such Interest Period, select; provided,
however, that:
(a) the Borrower may not select any Interest Period which ends after the
Tranche A Commitment Termination Date;
(b) Interest Periods commencing on the same date for Advances comprising
part of the same Borrowing shall be of the same duration;
(c) whenever the last day of any Interest Period would otherwise occur on
a day other than a Business Day, the last day of such Interest Period shall be
extended to occur on the next succeeding Business Day, provided that if such
extension would cause the last day of such Interest Period to occur in the next
following calendar month, the last day of such Interest Period shall occur on
the next preceding Business Day; and
(d) any Interest Period which begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding day
in the calendar month at the end of such Interest Period) shall end on the last
Business Day of the calendar month in which it would have ended if there were a
numerically corresponding day in such calendar month.
10
"Interim Financial Statements" means the unaudited consolidated and
consolidating balance sheet of the Borrower and its consolidated Subsidiaries
dated September 30, 2003, and the related unaudited consolidated and
consolidating statements of income, cash flow, and retained earnings of the
Borrower and its consolidated Subsidiaries for the nine months then ended,
copies of which have been delivered to the Administrative Agent and the Lenders.
"Internal Engineering Report" means a report, in form and substance
satisfactory to the Administrative Agent and each Lender, prepared by the
Borrower and certified by a Responsible Officer of the Borrower, addressed to
the Administrative Agent and the Lenders with respect to the Oil and Gas
Properties owned by the Borrower or any of its Subsidiaries (or to be acquired
by the Borrower or any of its Subsidiaries, as applicable) which are or are to
be included in the Borrowing Base, which report shall (a) specify the location,
quantity, and type of the estimated Proven Reserves attributable to such Oil and
Gas Properties, (b) contain a projection of the rate of production of such Oil
and Gas Properties, (c) contain an estimate of the net operating revenues to be
derived from the production and sale of Hydrocarbons from such Proven Reserves
based on product price and cost escalation assumptions specified by the
Administrative Agent and the Lenders, and (d) contain such other information as
is customarily obtained from and provided in such reports or is otherwise
reasonably requested by the Administrative Agent or any Lender.
"Issuing Lender" means Union Bank of California, N.A., and any successor
issuing bank pursuant to Section 8.06.
"JEDI" means Joint Energy Development Investments Limited Partnership, a
Delaware limited partnership.
"JEDI Collateral" means the Borrower's property described in the Project
Company Mortgage as such instrument is in effect on the date of this Agreement.
"Leases" means all oil and gas leases, oil, gas and mineral leases, oil,
gas and casinghead gas leases or any other instruments, agreements, or
conveyances under and pursuant to which the owner thereof has or obtains the
right to enter upon lands and explore for, drill, and develop such lands for the
production of Hydrocarbons.
"Legal Requirement" means, as to any Person, any law, statute, ordinance,
decree, requirement, order, judgment, rule, regulation (or official
interpretation of any of the foregoing) of, and the terms of any license or
permit issued by, any Governmental Authority, including, but not limited to,
Regulations D, T, U, and X, which is applicable to such Person.
"Lenders" means the lenders listed on the signature pages of this
Agreement and each Eligible Assignee that shall become a party to this Agreement
pursuant to Section 9.06.
"Letter of Credit" means, individually, any standby letter of credit
issued by the Issuing Lender for the account of the Borrower in connection with
the Tranche A Commitments and which is subject to this Agreement, and "Letters
of Credit" means all such letters of credit collectively.
11
"Letter of Credit Application" means the Issuing Lender's standard form
letter of credit application for standby letters of credit that has been
executed by the Borrower and accepted by the Issuing Lender in connection with
the issuance of a Letter of Credit.
"Letter of Credit Documents" means all Letters of Credit, Letter of Credit
Applications, and agreements, documents, and instruments entered into in
connection with or relating thereto.
"Letter of Credit Exposure" means, at any time, the sum of (a) the
aggregate undrawn maximum face amount of each Letter of Credit at such time plus
(b) the aggregate unpaid amount of all Reimbursement Obligations at such time.
"Letter of Credit Obligations" means any obligations of the Borrower under
this Agreement in connection with the Letters of Credit, including the
Reimbursement Obligations.
"Lien" means any mortgage, lien, pledge, assignment, charge, deed of
trust, security interest, hypothecation, preference, deposit arrangement for a
third party's benefit or encumbrance (or other type of arrangement having the
practical effect of the foregoing) to secure or provide for the payment of any
obligation of any Person, whether arising by contract, operation of law, or
otherwise (including, without limitation, the interest of a vendor or lessor
under any conditional sale agreement, synthetic lease, Capital Lease, or other
title retention agreement).
"Liquid Investments" means:
(a) direct obligations of, or obligations the principal of and interest on
which are unconditionally guaranteed by, the United States maturing within 180
days from the date of any acquisition thereof;
(b) (i) negotiable or nonnegotiable certificates of deposit, time
deposits, or other similar banking arrangements maturing within 180 days from
the date of acquisition thereof ("bank debt securities"), issued by (A) any
Lender (or any Affiliate of any Lender) or (B) any other bank or trust company
if at the time of deposit or purchase, such bank debt securities are rated not
less than "AA" (or the then equivalent) by the rating service of Standard &
Poor's Ratings Group or of ▇▇▇▇▇'▇ Investors Service, Inc., and (ii) commercial
paper issued by (A) any Lender (or any Affiliate of any Lender) or (B) any other
Person if at the time of purchase such commercial paper is rated not less than
"A-1" (or the then equivalent) by the rating service of Standard & Poor's
Ratings Group or not less than "P-1" (or the then equivalent) by the rating
service of ▇▇▇▇▇'▇ Investors Service, Inc., or upon the discontinuance of both
of such services, such other nationally recognized rating service or services,
as the case may be, as shall be selected by the Borrower with the consent of the
Required Lenders;
(c) deposits in money market funds investing exclusively in investments
described in clauses (a) and (b) above;
(d) repurchase agreements relating to investments described in clauses (a)
and (b) above with a market value at least equal to the consideration paid in
connection therewith, with any Person who regularly engages in the business of
entering into repurchase agreements and has a combined capital surplus and
undivided profit of not less than $500,000,000.00, if at the time
12
of entering into such agreement the debt securities of such Person are rated not
less than "AA" (or the then equivalent) by the rating service of Standard &
Poor's Ratings Group or of ▇▇▇▇▇'▇ Investors Service, Inc.; and
(e) such other instruments (within the meaning of Article 9 of the Texas
Business and Commerce Code) as the Borrower may request and the Administrative
Agent may approve in writing.
"Loan Documents" means this Agreement, the Notes, the Letter of Credit
Documents, the Guaranties, the Security Instruments, and each other agreement,
instrument, certificate or document executed by the Borrower, any Guarantor, or
any of the Borrower's or a Guarantor's Subsidiaries or any of their officers at
any time in connection with this Agreement.
"Maintenance Capital Expenditures" means, without duplication for any
period, the sum of (a) all capital expenditures related to proved developed
reserves, and (b) 50% of all capital expenditures related to proved undeveloped
reserves, in each case determined in accordance with GAAP, excluding (i)
expenditures in respect of any transaction, or any series of related
transactions, consummated on or after the date of this Agreement, by which the
Borrower or any of its Subsidiaries acquires any Oil and Gas Property or any
other asset the acquisition of which is not made to maintain or improve an
existing asset and (ii) expenditures of any proceeds of any insurance,
condemnation award or other compensation paid or payable to the Borrower or any
of its Subsidiaries, in respect of any loss or damage to, or any condemnation or
taking of, any capital asset less the reasonable fees, taxes, and expenses paid
to collect such proceeds, to rebuild or repair such vessel or such other asset.
"Material Adverse Change" means (a) a material adverse change in the
business, assets (including the Oil and Gas Properties of the Borrower, or any
Guarantor or any of their respective Subsidiaries), condition (financial or
otherwise), results of operations, or prospects of the Borrower, any Guarantor
or any of their respective Subsidiaries taken as a whole since September 30,
2003 or (b) a material adverse effect on the Borrower's or any Guarantor's or
any Subsidiary's ability to perform its obligations under this Agreement, any
Note, any Guaranty, or any other Loan Document; provided that, the loss of the
Borrower's and its Subsidiaries' right to royalty relief (and their
corresponding obligation to pay accrued but unpaid royalties) with respect to
any of their respective Oil and Gas Properties in connection with the
proceedings with the Minerals Management Service described on Schedule 4.07
shall not constitute a Material Adverse Change so long as the Borrower and its
Subsidiaries shall have established adequate reserves under GAAP in respect of
such loss (and corresponding payment).
"Maximum Rate" means the maximum nonusurious interest rate under
applicable law (determined under such laws after giving effect to any items
which are required by such laws to be construed as interest in making such
determination, including without limitation if required by such laws, certain
fees and other costs).
"MEGS Obligations" means the obligations of the Borrower under (a) the
Operations and Maintenance Agreement dated December 29, 1999 between the
Borrower and MEGS LLC, and (b) the Gas Gathering Agreement dated December 29,
1999 between the Borrower and MEGS LLC relating to Mississippi Canyon Block 718.
13
"MEI Holdings" means MEI Acquisitions Holdings, LLC, a Delaware limited
liability company.
"Merger" means the merging of MEI Acquisitions, LLC with and into the
Parent under the terms of the Merger Agreement.
"Merger Agreement" means the Agreement and Plan of Merger dated as of
January 23, 2004 among MEI Acquisitions Holdings, LLC, MEI Acquisitions, LLC,
JEDI, the Parent, Holdings, and Enron Corp., as amended, modified or
supplemented from time to time.
"Mortgages" means, collectively, each of the Mortgages, Deeds of Trust,
Security Agreements, Assignment of Liens and Security Interests, Financing
Statements and Assignments of Production or any other mortgage or deed of trust
executed by any one or more of the Borrower or a Guarantor or any of their
respective Subsidiaries in favor of the Administrative Agent for the ratable
benefit of the Administrative Agent, the Issuing Lender, the Lenders, and any
Swap Counterparty in substantially the form of the attached Exhibit D or such
other form as may be requested by the Administrative Agent, in each case as the
same may be amended, modified, restated or supplemented from time-to-time and
"Mortgages" shall mean all of such Mortgages collectively.
"Multiemployer Plan" means a "multiemployer plan" as defined in Section
4001(a)(3) of ERISA.
"Note" means the Tranche A Notes and the Tranche B Notes.
"Notice of Borrowing" means a notice of borrowing in the form of the
attached Exhibit F signed by a Responsible Officer of the Borrower.
"Notice of Conversion or Continuation" means a notice of conversion or
continuation in the form of the attached Exhibit G signed by a Responsible
Officer of the Borrower.
"Obligations" means (a) all principal, interest, fees, reimbursements,
indemnifications, and other amounts payable by the Borrower or any Guarantor or
any of their respective Subsidiaries to the Administrative Agent, the Issuing
Lender, or the Lenders under the Loan Documents, including without limitation,
the Letter of Credit Obligations and (b) all obligations of the Borrower or any
Guarantor or any of their respective Subsidiaries owing to any Swap Counterparty
under any Interest Hedge Agreement or Hydrocarbon Hedge Agreement.
"Oil and Gas Properties" means fee mineral interests, term mineral
interests, Leases, subleases, farm-outs, royalties, overriding royalties, net
profit interests, carried interests, production payments and similar mineral
interests, and all unsevered and unextracted Hydrocarbons in, under, or
attributable to such oil and gas Properties and interests.
"Parent" means Mariner Energy LLC, a Delaware limited liability company.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
14
"Permit" means any approval, certificate of occupancy, consent, waiver,
exemption, variance, franchise, order, permit, authorization, right or license
of or from any Governmental Authority, including without limitation, an
Environmental Permit.
"Permitted Liens" means the Liens permitted under Section 6.01.
"Permitted Prior Liens" means the Liens permitted under paragraph (d),
(e), (f), (g), (h), (j), (k) and (l) of Section 6.01.
"Person" means an individual, partnership, corporation (including a
business trust), joint stock company, limited liability corporation or company,
limited liability partnership, trust, unincorporated association, joint venture
or other entity, or a government or any political subdivision or agency thereof
or any trustee, receiver, custodian or similar official.
"Plan" means an employee benefit plan (other than a Multiemployer Plan)
maintained for employees of the Borrower or any member of the Controlled Group
and covered by Title IV of ERISA or subject to the minimum funding standards
under Section 412 of the Code.
"Pledge Agreement" means a Pledge Agreement in substantially the form of
the attached Exhibit H, executed by the Borrower or any of its Subsidiaries or
any of the Guarantors, as the same may be amended, modified, restated or
supplemented from time to time.
"Pre-Closing Plan" means an employee benefit plan maintained for employees
of the Borrower or any member of the Borrower's Controlled Group at any time
during the six-year period preceding the Closing Date and covered by Title IV of
ERISA or subject to the minimum funding standards under Section 412 of the Code.
"Pricing Grid" means the pricing information set forth in Schedule I.
"Project Company Mortgage" means, collectively, the (a) the Mortgage,
Security Agreement, Assignment of Production, Financing Statement (Moving and
Personal Property including Hydrocarbons) and Fixture Filing dated as of March
2, 2004 by the Borrower to JEDI and (b) the Deed of Trust, Security Agreement,
Assignment of Production, Financing Statement (Moving and Personal Property
including Hydrocarbons) and Fixture Filing dated as of March 2, 2004 by the
Borrower to JEDI, copies of which have been delivered to the Administrative
Agent and which shall only encumber the JEDI Collateral.
"Project Company Note" means the $10,000,000 Promissory Note dated March
2, 2004 by the Borrower payable to JEDI, as amended, modified, or supplemented
from time to time, a copy of which has been delivered to the Administrative
Agent.
"Property" of any Person means any property or assets (whether real,
personal, or mixed, tangible or intangible) of such Person.
"Proven Reserves" means, at any particular time, the estimated quantities
of Hydrocarbons which geological and engineering data demonstrate with
reasonable certainty to be recoverable in future years from known reservoirs
attributable to Oil and Gas Properties
15
included or to be included in the Borrowing Base under then existing economic
and operating conditions (i.e., prices and costs as of the date the estimate is
made).
"Pro Rata Share" means, with respect to any Lender, (a) with respect to
amounts owing under the Tranche A Commitments, (i) if such Tranche A Commitments
have not been canceled, the ratio (expressed as a percentage) of such Bank's
uncancelled Tranche A Commitment at such time to the aggregate uncancelled
Tranche A Commitments at such time or (ii) if the aggregate Tranche A
Commitments have been terminated, the Pro Rata Share of such Bank as determined
pursuant to the preceding clause (i) immediately prior to such termination, (b)
with respect to amounts owing under the Tranche B Commitments, (i) if such
Tranche B Commitments have not been canceled, the ratio (expressed as a
percentage) of such Bank's uncancelled Tranche B Commitment at such time to the
aggregate uncancelled Tranche B Commitments at such time or (ii) if the
aggregate Tranche B Commitments have been terminated, the Pro Rata Share of such
Bank as determined pursuant to the preceding clause (i) immediately prior to
such termination, or (c) with respect to amounts owing generally under the
Credit Agreement and the other Loan Documents, the ratio (expressed as a
percentage) of aggregate Commitments of such Lender to the aggregate Commitments
of all the Lenders (or if such Commitments have been terminated, the ratio
(expressed as a percentage) of Credit Extensions owing to such Lender to the
aggregate Credit Extensions owing to all such Lenders).
"Reference Rate" means a fluctuating interest rate per annum as shall be
in effect from time to time equal to the rate of interest publicly announced by
Union Bank of California, N.A. (or such other Lender as shall then be serving as
the Administrative Agent), as its reference rate, whether or not the Borrower
has notice thereof.
"Reference Rate Advance" means an Advance which bears interest as provided
in Section 2.09(a).
"Register" has the meaning set forth in paragraph (c) of Section 9.06.
"Regulations D, T, U, and X" mean Regulations D, T, U, and X of the
Federal Reserve Board, as the same is from time to time in effect, and all
official rulings and interpretations thereunder or thereof.
"Reimbursement Obligations" means all of the obligations of the Borrower
to reimburse the Issuing Lender for amounts paid by the Issuing Lender under
Letters of Credit as established by the Letter of Credit Applications and
Section 2.07(d).
"Release" shall have the meaning set forth in CERCLA or under any other
Environmental Law.
"Reportable Event" means a "reportable event" described in Section 4043 of
ERISA and the regulations issued thereunder.
"Required Lenders" means, at any time, Lenders holding at least 67% of the
aggregate of (a) the Tranche A Commitments or, if the Tranche A Commitments have
been terminated, the outstanding principal amount of the Tranche A Advances and
Letter of Credit Exposure and (b) the outstanding principal amount of the
Tranche B Advances.
16
"Response" shall have the meaning set forth in CERCLA or under any other
Environmental Law.
"Responsible Officer" means (a) with respect to any Person that is a
corporation, such Person's Chief Executive Officer, President, Chief Financial
Officer, Vice President or Secretary, (b) with respect to any Person that is a
limited liability company, a manager or the Chief Executive Officer, President,
Chief Financial Officer, Vice President or Secretary of such Person or of such
Person's managing member or manager, and (c) with respect to any Person that is
a general partnership or a limited liability partnership, the Chief Executive
Officer, President, Chief Financial Officer, Vice President or Secretary of such
Person's general partner or partners.
"Restricted Payment" means, with respect to any Person, (a) any direct or
indirect dividend or distribution (whether in cash, securities or other
Property) or any direct or indirect payment of any kind or character (whether in
cash, securities or other Property) in consideration for or otherwise in
connection with any retirement, purchase, redemption or other acquisition of any
Equity Interest of such Person, or any options, warrants or rights to purchase
or acquire any such Equity Interest of such Person or (b) principal or interest
payments (in cash, Property or otherwise) on, or redemptions of, subordinated
debt of such Person; provided that the term "Restricted Payment" shall not
include any dividend or distribution payable solely in Equity Interests of the
Borrower or warrants, options, or other rights to purchase such Equity
Interests.
"Security Agreements" means the Security Agreements, each in substantially
the form of the attached Exhibit I, executed by the Borrower, any of its
Subsidiaries, or any of the Guarantors as the same may be amended, modified, or
supplemented from time to time.
"Security Instruments" means, collectively, (a) the Mortgages, (b) the
Transfer Letters, (c) the Pledge Agreements, (d) the Security Agreements, (e)
the Intercreditor Agreement, (f) each other agreement, instrument or document
executed at any time in connection with the Pledge Agreements, the Security
Agreements, or the Mortgages, (g) each agreement, instrument or document
executed in connection with the Cash Collateral Account, and (h) each other
agreement, instrument or document executed at any time in connection with
securing the Obligations.
"Solvent" means, with respect to any Person as of the date of any
determination, that on such date (a) the fair value of the Property of such
Person (both at fair valuation and at present fair saleable value) is greater
than the total liabilities, including contingent liabilities, of such Person,
(b) the present fair saleable value of the assets of such Person is not less
than the amount that will be required to pay the probable liability of such
Person on its debts as they become absolute and matured, (c) such Person is able
to realize upon its assets and pay its debts and other liabilities, contingent
obligations, and other commitments as they mature in the normal course of
business, (d) such Person does not intend to, and does not believe that it will,
incur debts or liabilities beyond such Person's ability to pay as such debts and
liabilities mature, and (e) such Person is not engaged in business or a
transaction, and is not about to engage in business or a transaction, for which
such Person's Property would constitute unreasonably small capital after giving
due consideration to current and anticipated future capital requirements and
current and anticipated future business conduct and the prevailing practice in
the industry in which such
17
Person is engaged. In computing the amount of contingent liabilities at any
time, such liabilities shall be computed at the amount which, in light of the
facts and circumstances existing at such time, represents the amount that can
reasonably be expected to become an actual or matured liability.
"Subsidiary" of a Person means any corporation or other entity of which
more than 50% of the outstanding Equity Interests having ordinary voting power
under ordinary circumstances to elect a majority of the board of directors or
similar governing body of such corporation or other entity (irrespective of
whether at such time Equity Interests of any other class or classes of such
corporation or other entity shall or might have voting power upon the occurrence
of any contingency) is at the time directly or indirectly owned or controlled by
such Person, by such Person and one or more Subsidiaries of such Person or by
one or more Subsidiaries of such Person. Unless otherwise indicated herein, each
reference to the term "Subsidiary" shall mean a Subsidiary of the Borrower.
"Swap Counterparty" means any Lender (or Affiliate of a Lender) that is
party to a Hydrocarbon Hedge Agreement or Interest Hedge Agreement with the
Borrower or any of its Subsidiaries.
"Termination Event" means (a) a Reportable Event with respect to a Plan
(other than a Reportable Event not subject to the provision for 30-day notice to
the PBGC under such regulations), (b) the withdrawal of the Borrower or any of
its Affiliates 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, or (e) any other event or condition which
constitutes grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Plan.
"Tranche A Advance" means an advance by a Lender to the Borrower pursuant
to Section 2.01(a) as part of a Tranche A Borrowing and refers to a Reference
Rate Advance or a Eurodollar Rate Advance.
"Tranche A Borrowing" means a borrowing consisting of Tranche A Advances
made on the same day by the Lenders pursuant to Section 2.01(a).
"Tranche A Commitment" means the amount set opposite such Lender's name on
the Schedule II hereof as its Tranche A Commitment, or if such Lender has
entered into any Assignment and Acceptance, as set forth for such Lender as its
Tranche A Commitment in the Register maintained by the Administrative Agent
pursuant to Section 9.06(c), as such amount may be reduced or terminated
pursuant to Section 2.04 or Article VII or otherwise under this Agreement.
"Tranche A Commitment Termination Date" means the earlier of (a) the
Tranche A Maturity Date and (b) the earlier termination in whole of the
Commitments pursuant to Section 2.04 or Article VII.
"Tranche A Maturity Date" means March 2, 2007.
18
"Tranche A Note" means a promissory note of the Borrower payable to the
order of any Lender, in substantially the form of the attached Exhibit E-1,
evidencing indebtedness of the Borrower to such Lender resulting from Tranche A
Advances owing to such Lender.
"Tranche B Advance" means an advance by a Lender to the Borrower pursuant
to Section 2.01(b) as part of a Tranche B Borrowing and refers to a Reference
Rate Advance. Tranche B Advances may not be comprised of Eurodollar Rate
Advances.
"Tranche B Borrowing" means a borrowing consisting of Tranche B Advances
made on the same day by the Lenders pursuant to Section 2.01(b).
"Tranche B Commitment" means the amount set opposite such Lender's name on
the Schedule II hereof as its Tranche B Commitment, or if such Lender has
entered into any Assignment and Acceptance, as set forth for such Lender as its
Tranche B Commitment in the Register maintained by the Administrative Agent
pursuant to Section 9.06(c), as such amount may be reduced or terminated
pursuant to Section 2.04 or Article VII or otherwise under this Agreement.
"Tranche B Commitment Termination Date" means the earlier of (a) ▇▇▇▇▇ ▇,
▇▇▇▇, (▇) the date the initial Tranche B Advances are made, and (c) the earlier
termination in whole of the Commitments pursuant to Section 2.04 or Article VII.
"Tranche B Initial Payment Date" means the first Business Day after the
Borrowing Base is redetermined in accordance with Section 2.02.
"Tranche B Maturity Date" means December 2, 2004
"Tranche B Note" means a promissory note of the Borrower payable to the
order of any Lender, in substantially the form of the attached Exhibit E-2,
evidencing indebtedness of the Borrower to such Lender resulting from Tranche B
Advances owing to such Lender.
"Transfer Letters" means, collectively, the letters in lieu of transfer
orders in substantially the form of the attached Exhibit J and executed by the
Borrower or any Guarantor or any of their respective Subsidiaries executing a
Mortgage, as each of the same may be amended, modified or supplemented from
time-to-time.
"Type" has the meaning set forth in Section 1.04.
"Unused Tranche A Commitment Amount" means, with respect to a Lender at
any time, (a) the lesser of (i) such Lender's Tranche A Commitment at such time
and (ii) such Lender's Pro Rata Share of the Borrowing Base then in effect at
such time minus (b) the sum of (i) the aggregate outstanding principal amount of
all Tranche A Advances owed to such Lender at such time and (ii) such Lender's
Pro Rata Share of the aggregate Letter of Credit Exposure at such time.
"Utilization Level" means the applicable category (being Level I, Level II
or Level III) of pricing criteria contained in Schedule I, which is based on at
any time of its determination on the percentage obtained by dividing (a) the
outstanding principal amount of the Tranche A Advances
19
and the Letter of Credit Exposure at such time by (b) the lesser of (i) the
Tranche A Commitments and (ii) the Borrowing Base at such time.
Section 1.02 Computation of Time Periods. In this Agreement, with respect
to the computation of periods of time from a specified date to a later specified
date, the word "from" means "from and including" and the words "to" and "until"
each means "to but excluding".
Section 1.03 Accounting Terms; Changes in GAAP. Except as otherwise
expressly provided herein, all accounting terms used herein shall be
interpreted, and all financial statements and certificates and reports as to
financial matters required to be delivered to the Lenders hereunder shall
(unless otherwise disclosed to the Lenders in writing at the time of delivery
thereof) be prepared, in accordance with GAAP applied on a basis consistent with
those used in the preparation of the latest financial statements furnished to
the Lenders hereunder (which prior to the delivery of the first financial
statements under Section 5.06 hereof, shall mean the Financial Statements and
the Interim Financial Statements). All calculations made for the purposes of
determining compliance with this Agreement shall (except as otherwise expressly
provided herein) be made by application of GAAP applied on a basis consistent
with those used in the preparation of the annual or quarterly financial
statements furnished to the Lenders pursuant to Section 5.06 hereof most
recently delivered prior to or concurrently with such calculations (or, prior to
the delivery of the first financial statements under Section 5.06 hereof, used
in the preparation of the Financial Statements and the Interim Financial
Statements); provided that, the effects of FAS 133 and the accounting rules
thereunder shall be disregarded for the purpose of calculating compliance with
Sections 6.17 through 6.20 to the extent that such effects do not otherwise
impact the cash position of the Borrower and its consolidated Subsidiaries. In
addition, all calculations and defined accounting terms used herein shall,
unless expressly provided otherwise, when referring to any Person, refer to such
Person on a consolidated basis and mean such Person and its consolidated
subsidiaries.
Section 1.04 Types and Classes of Advances. Advances are distinguished by
"Type" and "Class." The "Type" of an Advance refers to the determination whether
such Advance is a Eurodollar Rate Advance or Reference Rate Advance. The "Class"
of an Advance refers to the determination whether such Advance is a Tranche A
Advance or a Tranche B Advance.
Section 1.05 Miscellaneous. Article, Section, Schedule, and Exhibit
references are to Articles and Sections of and Schedules and Exhibits to this
Agreement, unless otherwise specified. All references to instruments, documents,
contracts, and agreements are references to such instruments, documents,
contracts, and agreements as the same may be amended, supplemented, and
otherwise modified from time to time, unless otherwise specified. The words
"hereof", "herein", and "hereunder" and words of similar import when used in
this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement. The term "including" means "including,
without limitation,". Paragraph headings have been inserted in this Agreement as
a matter of convenience for reference only and it is agreed that such paragraph
headings are not a part of this Agreement and shall not be used in the
interpretation of any provision of this Agreement.
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ARTICLE II
CREDIT FACILITIES
Section 2.01 Commitment for Advances.
(a) Tranche A Advances. Each Lender severally agrees, on the terms and
conditions set forth in this Agreement, to make Tranche A Advances to the
Borrower from time to time on any Business Day during the period from the date
of this Agreement until the Tranche A Commitment Termination Date in an amount
for each Lender not to exceed such Lender's Unused Tranche A Commitment Amount.
Each Tranche A Borrowing shall, in the case of Borrowings consisting of
Reference Rate Advances, be in an aggregate amount not less than $500,000 and in
integral multiples of $100,000 in excess thereof, and in the case of Borrowings
consisting of Eurodollar Rate Advances, be in an aggregate amount not less than
$500,000 and in integral multiples of $100,000 in excess thereof, and in each
case shall consist of Tranche A Advances of the same Type made on the same day
by the Lenders ratably according to their respective Tranche A Commitments.
Within the limits of each Lender's Tranche A Commitment, and subject to the
terms of this Agreement, the Borrower may from time to time borrow, prepay, and
reborrow Tranche A Advances.
(b) Tranche B Advances. Each Lender severally agrees, on the terms and
conditions set forth in this Agreement, to make one Tranche B Advance to the
Borrower on or before the Tranche B Commitment Termination Date in an aggregate
amount not to exceed such Lender's Tranche B Commitment. Once repaid or prepaid,
Tranche B Advances may not be reborrowed.
(c) Notes. The indebtedness of the Borrower to each Lender resulting from
the Tranche A Advances owing to such Lender shall be evidenced by a Tranche A
Note of the Borrower payable to the order of such Lender. The indebtedness of
the Borrower to each Lender resulting from the Tranche B Advances owing to such
Lender shall be evidenced by a Tranche B Note of the Borrower payable to the
order of such Lender.
Section 2.02 Borrowing Base.
(a) Borrowing Base. The initial Borrowing Base in effect as of the date of
this Agreement has been set by the Administrative Agent and the Lenders and
acknowledged by the Borrower as $110,000,000. Such initial Borrowing Base shall
remain in effect until the next redetermination made pursuant to this Section
2.02. The Borrowing Base shall be determined in accordance with the standards
set forth in Section 2.02(d) and is subject to periodic redetermination pursuant
to Sections 2.02(b), and 2.02(c).
(b) Calculation of Borrowing Base.
(i) The Borrower shall deliver to the Administrative Agent and each of the
Lenders on or before March 15, 2004 and thereafter on or before the last day of
each February, beginning February 28, 2005, an Independent Engineering Report
dated effective as of the immediately preceding January 1, and such other
information as may be reasonably requested by any Lender with respect to the Oil
and Gas Properties included or to be included in the Borrowing Base. The
Administrative Agent shall promptly, and in any event within 30 days
21
after the Administrative Agent and the Lenders' receipt of such Independent
Engineering Report and other information, deliver to each Lender the
Administrative Agent's recommendation for the redetermined Borrowing Base. The
Administrative Agent and the Lenders shall promptly, and in any event within 15
days after the Lenders' receipt of the Administrative Agent's recommendation,
redetermine the Borrowing Base in accordance with Section 2.02(d), and the
Administrative Agent shall promptly notify the Borrower in writing of the amount
of the Borrowing Base as so redetermined.
(ii) The Borrower shall deliver to the Administrative Agent and each
Lender on or before each April 30, July 31, and October 31 of each year
beginning July 31, 2004, an Internal Engineering Report dated effective as of
the immediately preceding April 1, July 1, and October 1, respectively, and such
other information as may be reasonably requested by the Administrative Agent or
any Lender with respect to the Oil and Gas Properties included or to be included
in the Borrowing Base. Notwithstanding the foregoing sentence, after the Tranche
B Advances have been repaid in full, the Borrower shall not be required to
deliver an Internal Engineering Report on or before any April 30 or October 31,
as applicable, occurring during any fiscal year so long as the Unused Tranche A
Commitment Amount as of the fiscal quarter ended March 31 (in the case of the
April 30 deadline) or September 30 (in the case of the October 31 deadline)
during such year is at least $10,000,000 and a Borrowing Base Redetermination
under this Section 2.02(b)(ii) shall not be made at such time. The
Administrative Agent shall promptly, and in any event within 30 days after the
Administrative Agent and the Lenders' receipt of such Internal Engineering
Report and other information, deliver to each Lender the Administrative Agent's
recommendation for the redetermined Borrowing Base. The Administrative Agent and
the Lenders shall promptly, and in any event within 15 days after the Lenders'
receipt of the Administrative Agent's recommendation, redetermine the Borrowing
Base in accordance with Section 2.02(d), and the Administrative Agent shall
promptly notify the Borrower in writing of the amount of the Borrowing Base as
so redetermined.
(iii) In the event that the Borrower does not furnish to the
Administrative Agent and the Lenders the Independent Engineering Report,
Internal Engineering Report or other information specified in clauses (i) and
(ii) above by the date specified therein, the Administrative Agent and the
Lenders may nonetheless redetermine the Borrowing Base and redesignate the
Borrowing Base from time-to-time thereafter in their sole discretion until the
Administrative Agent and the Lenders receive the relevant Independent
Engineering Report, Internal Engineering Report, or other information, as
applicable, whereupon the Administrative Agent and the Lenders shall redetermine
the Borrowing Base as otherwise specified in this Section 2.02.
(iv) Each delivery of an Engineering Report by the Borrower to the
Administrative Agent and the Lenders shall delivered with a certificate executed
on behalf of the Borrower by a Responsible Officer of the Borrower, which
certificate shall contain a representation and warranty by the Borrower to the
Administrative Agent and the Lenders that, except as noted in such certificate,
(A) the Borrower and its Subsidiaries, as applicable, own the Oil and Gas
Properties specified therein subject to an Acceptable Security Interest and free
and clear of any Liens (except Permitted Liens), and (B) on and as of the date
of such Engineering Report each Oil and Gas Property described as "proved
developed" therein was developed for oil and gas, and the ▇▇▇▇▇ pertaining to
such Oil and Gas Properties that are described therein as
22
producing ▇▇▇▇▇ ("▇▇▇▇▇"), were each producing oil and gas in paying quantities,
except for ▇▇▇▇▇ that were utilized as water or gas injection ▇▇▇▇▇ or as water
disposal ▇▇▇▇▇. Additionally, the Borrower shall deliver with each such
Engineering Report a list of any Proven Reserves that have been sold or acquired
by the Borrower and its Subsidiaries since the date of the last Engineering
Report delivered to the Administrative Agent.
(c) Interim Redeterminations. In addition to the Borrowing Base
redeterminations provided for in Section 2.02(b) and 2.02(e), (i) after the
Tranche B Advances have been paid in full, the Administrative Agent and the
Lenders may, either in their sole discretion or at the request of the Borrower
and based on such information as the Administrative Agent and the Lenders deem
relevant (but in accordance with Section 2.02(d)), make one additional
redetermination of the Borrowing Base during any period between scheduled
redeterminations; and (ii) the Lenders may request an additional redetermination
in connection with any sale or proposed sale of Oil and Gas Properties of the
Borrower or any of its Subsidiaries having a market value of $5,000,000 or more
to the extent any such sale is permitted by this Agreement. The party requesting
the redetermination under the foregoing clauses (i) and (ii) shall give the
other party at least 10 days' prior written notice that a redetermination of the
Borrowing Base pursuant to this paragraph (c) is to be performed. In connection
with any redetermination of the Borrowing Base under this Section 2.02(c), the
Borrower shall provide the Administrative Agent and the Lenders with such
information regarding the Borrower and its Subsidiaries' business (including,
without limitation, its Oil and Gas Properties, the Proven Reserves, and
production relating thereto) as the Administrative Agent or any Lender may
request, including, in the case of requests for an increase to the Borrowing
Base of $1,000,000 or more, an updated Independent Engineering Report. The
Administrative Agent shall promptly, and in any event within 45 days after the
Administrative Agent and the Lender's receipt of such information, and to the
extent applicable, an updated Independent Engineering Report, notify the
Borrower in writing of each redetermination of the Borrowing Base pursuant to
this Section 2.02(c) and the amount of the Borrowing Base as so redetermined.
(d) Standards for Redetermination. Each redetermination of the Borrowing
Base by the Administrative Agent and the Lenders pursuant to this Section 2.02
shall be made (i) in the sole discretion of the Administrative Agent and the
Lenders (but in accordance with the other provisions of this Section 2.02(d)),
(ii) in accordance with the Administrative Agent's and the Lenders' customary
internal standards and practices for valuing and redetermining the value of Oil
and Gas Properties in connection with reserve based oil and gas loan
transactions, (iii) in conjunction with the most recent Independent Engineering
Report or Internal Engineering Report, as applicable, or other information
received by the Administrative Agent and the Lenders relating to the Proven
Reserves of the Borrower and its Subsidiaries, and (iv) based upon the estimated
value of the Proven Reserves owned by the Borrower and its Subsidiaries as
determined by the Administrative Agent and the Lenders. In valuing and
redetermining the Borrowing Base, the Administrative Agent and the Lenders may
also consider the business, financial condition, and Debt obligations of the
Borrower and its Subsidiaries and such other factors as the Administrative Agent
and the Lenders customarily deem appropriate. In that regard, the Borrower
acknowledges that the determination of the Borrowing Base contains an equity
cushion (market value in excess of loan value), which is essential for the
adequate protection of the Administrative Agent and the Lenders. No Proven
Reserves shall be included or considered for inclusion in the Borrowing Base
unless the Administrative Agent and the
23
Lenders shall have received, at the Borrower's expense, evidence of title
satisfactory in form and substance to the Administrative Agent that the
Administrative Agent has an Acceptable Security Interest in the Oil and Gas
Properties relating thereto pursuant to the Security Instruments. If Borrower
has not, within 10 days of the Borrower's receipt from the Administrative Agent
of notification of a redetermination of the Borrowing Base under this Section
2.02 provided the Administrative Agent with written notice designating a lesser
amount as the Borrowing Base, the Borrowing Base shall, effective on the 11th
day after the Borrower's receipt of such notification regarding the Borrowing
Base redetermination if no request has been provided by the Borrower for a
lesser Borrowing Base amount, be equal to the redetermined amount in such notice
provided by the Administrative Agent, or if the Borrower has provided notice to
the Administrative Agent requesting a lesser amount for the Borrowing Base, the
Borrowing Base shall be established at such lesser amount effective on the date
the Borrower gives such request and shall, in either case, remain effective
until the Borrowing Base is subsequently redetermined in accordance with this
Section 2.02.
(e) Reduction and Redetermination for Bond Issuance. Notwithstanding the
foregoing provisions of this Section 2.02, the Borrowing Base then in effect on
the date of the closing of the Bond Issuance shall automatically reduce by an
amount equal to (a) the gross proceeds from such Bond Issuance times (b) .25.
Such reduction shall effective on the date of the closing of the Bond Issuance
and such reduced Borrowing Base shall remain in effect until the date the
Borrowing Base is otherwise redetermined pursuant to this Section 2.02.
Additionally, the Administrative Agent and the Lenders may, based on such
information as the Administrative Agent and the Lenders deem relevant (but in
accordance with Section 2.02(d)), redetermine the Borrowing Base. In connection
with any redetermination of the Borrowing Base under this Section 2.02(e), the
Borrower shall provide the Administrative Agent and the Lenders with such
information regarding the Borrower and its Subsidiaries' business (including,
without limitation, its Oil and Gas Properties, the Proven Reserves, and
production relating thereto) as the Administrative Agent or any Lender may
request. The Administrative Agent shall promptly, and in any event within 45
days after the Administrative Agent and the Lender's receipt of such information
notify the Borrower in writing of each redetermination of the Borrowing Base
pursuant to this Section 2.02(e) and the amount of the Borrowing Base as so
redetermined.
(f) Voting. Any changes in, or renewals of, the Borrowing Base (other than
increases in the Borrowing Base) must be consented to in writing by the Required
Lenders. Any increases in the Borrowing Base must be consented to in writing by
all the Lenders.
Section 2.03 Method of Borrowing.
(a) Notice. Each Borrowing shall be made pursuant to a Notice of Borrowing
(or by telephone notice promptly confirmed in writing by a Notice of Borrowing),
given not later than 10:00 a.m. (Dallas, Texas time) (i) on the third Business
Day before the date of the proposed Borrowing, in the case of a Tranche A
Borrowing comprised of Eurodollar Rate Advances or (ii) on the Business Day of
the proposed Borrowing, in the case of a Borrowing comprised of Reference Rate
Advances, by the Borrower to the Administrative Agent, which shall in turn give
to each Lender prompt notice of such proposed Borrowing by telecopier or telex.
Each Notice of a Borrowing shall be given by telecopier or telex, confirmed
immediately in writing if by telex, specifying the information required therein.
In the case of a proposed Tranche A Borrowing
24
comprised of Eurodollar Rate Advances, the Administrative Agent shall promptly
notify each Lender of the applicable interest rate under Section 2.09(b). Each
Lender shall, before 12:00 p.m. (Dallas, Texas time) on the date of such
Borrowing, make available for the account of its Applicable Lending Office to
the Administrative Agent at its address referred to in Section 9.02, or such
other location as the Administrative Agent may specify by notice to the Lenders,
in same day funds, in the case of a Borrowing, such Lender's Pro Rata Share of
such Borrowing. After the Administrative Agent's receipt of such funds and upon
fulfillment of the applicable conditions set forth in Article III, the
Administrative Agent shall make such funds available to the Borrower at its
account with the Administrative Agent.
(b) Conversions and Continuations. The Borrower may elect to Convert or
continue any Tranche A Borrowing under this Section 2.03 by delivering an
irrevocable Notice of Conversion or Continuation to the Administrative Agent at
the Administrative Agent's office no later than 10:00 a.m. (Dallas, Texas time)
(i) on the date which is at least three Business Days in advance of the proposed
Conversion or continuation date in the case of a Conversion to or a continuation
of a Tranche A Borrowing comprised of Eurodollar Rate Advances and (ii) on the
Business Day of the proposed Conversion in the case of a Conversion to a Tranche
A Borrowing comprised of Reference Rate Advances. Each such Notice of Conversion
or Continuation shall be in writing or by telex or telecopier, confirmed
immediately in writing if by telex, specifying the information required therein.
Promptly after receipt of a Notice of Conversion or Continuation under this
Section, the Administrative Agent shall provide each Lender with a copy thereof
and, in the case of a Conversion to or a continuation of a Tranche A Borrowing
comprised of Eurodollar Rate Advances, notify each Lender of the applicable
interest rate under Section 2.09(b).
(c) Certain Limitations. Notwithstanding anything to the contrary
contained in paragraphs (a) and (b) above:
(i) at no time shall there be more than eight Interest Periods
applicable to outstanding Eurodollar Rate Advances and the Borrower may not
select Eurodollar Rate Advances for any Tranche A Borrowing at any time that a
Default has occurred and is continuing;
(ii) if any Lender shall, at least one Business Day before the date
of any requested Tranche A Borrowing, Conversion, or continuation, notify the
Administrative Agent and the Borrower that the introduction of or any change in
or in the interpretation of any law or regulation makes it unlawful, or that any
central bank or other Governmental Authority asserts that it is unlawful, for
such Lender or its Eurodollar Lending Office to perform its obligations under
this Agreement to make Eurodollar Rate Advances or to fund or maintain
Eurodollar Rate Advances, the right of the Borrower to select Eurodollar Rate
Advances from such Lender shall be suspended until such Lender shall notify the
Administrative Agent that the circumstances causing such suspension no longer
exist, and the Advance made by such Lender in respect of such Borrowing,
Conversion, or continuation shall be a Reference Rate Advance;
(iii) if the Administrative Agent is unable to determine the
Eurodollar Rate for Eurodollar Rate Advances comprising any requested Tranche A
Borrowing, the right of the Borrower to select Eurodollar Rate Advances for such
Borrowing or for any subsequent Tranche
25
A Borrowing shall be suspended until the Administrative Agent shall notify the
Borrower and the Lenders that the circumstances causing such suspension no
longer exist, and each Advance comprising such Borrowing shall be a Reference
Rate Advance;
(iv) if the Required Lenders shall, at least one Business Day before
the date of any requested Tranche A Borrowing, notify the Administrative Agent
that the Eurodollar Rate for Eurodollar Rate Advances comprising such Borrowing
will not adequately reflect the cost to such Lenders of making or funding their
respective Eurodollar Rate Advances, as the case may be, for such Borrowing, the
Administrative Agent shall promptly notify the Borrower and the right of the
Borrower to select Eurodollar Rate Advances for such Borrowing or for any
subsequent Tranche A Borrowing shall be suspended until the Administrative Agent
shall notify the Borrower and the Lenders that the circumstances causing such
suspension no longer exist, and each Advance comprising such Borrowing shall be
a Reference Rate Advance; and
(v) if the Borrower shall fail to select the duration or
continuation of any Interest Period for any Eurodollar Rate Advances in
accordance with the provisions contained in the definition of "Interest Period"
in Section 1.01 and paragraph (b) above, the Administrative Agent shall
forthwith so notify the Borrower and the Lenders and such Advances shall be made
available to the Borrower on the date of the Tranche A Borrowing comprised of
such Advances as Reference Rate Advances or, if existing Eurodollar Rate
Advances, Convert into Reference Rate Advances.
(d) Notices Irrevocable. Each Notice of Borrowing and Notice of Conversion
or Continuation shall be irrevocable and binding on the Borrower. In the case of
any Tranche A Borrowing for which the related Notice of Borrowing specifies is
to be comprised of Eurodollar Rate Advances, the Borrower shall indemnify each
Lender against any loss, out-of-pocket cost, or expense incurred by such Lender
as a result of any failure by the Borrower to fulfill on or before the date
specified in such Notice of Borrowing for such Borrowing the applicable
conditions set forth in Article III including, without limitation, any loss,
cost, or expense incurred by reason of the liquidation or reemployment of
deposits or other funds acquired by such Lender to fund the Advance to be made
by such Lender as part of such Borrowing when such Advance, as a result of such
failure, is not made on such date.
(e) Administrative Agent Reliance. Unless the Administrative Agent shall
have received notice from a Lender before the date of any Borrowing that such
Lender shall not make available to the Administrative Agent such Lender's Pro
Rata Share of a Borrowing, the Administrative Agent may assume that such Lender
has made its Pro Rata Share of such Borrowing available to the Administrative
Agent on the date of such Borrowing in accordance with paragraph (a) of this
Section 2.03 and the Administrative Agent may, in reliance upon such assumption,
make available to the Borrower on such date a corresponding amount. If and to
the extent that such Lender shall not have so made its Pro Rata Share of such
Borrowing available to the Administrative Agent, such Lender and the Borrower
severally agree to immediately repay to the Administrative Agent on demand such
corresponding amount, together with interest on such amount, for each day from
the date such amount is made available to the Borrower until the date such
amount is repaid to the Administrative Agent, at (i) in the case of the
Borrower, the interest rate applicable on such day to Advances comprising such
Borrowing and (ii) in the case of such Lender, the Federal Funds Rate for such
day. If such Lender shall repay to the Administrative
26
Agent such corresponding amount and interest as provided above, such
corresponding amount so repaid shall constitute such Lender's Advance as part of
such Borrowing for purposes of this Agreement even though not made on the same
day as the other Advances comprising such Borrowing.
(f) Lender Obligations Several. The failure of any Lender to make the
Advance to be made by it as part of any Borrowing shall not relieve any other
Lender of its obligation, if any, to make its Advance on the date of such
Borrowing. No Lender shall be responsible for the failure of any other Lender to
make the Advance to be made by such other Lender on the date of any Borrowing.
Section 2.04 Reduction of the Commitments.
(a) The Borrower shall have the right, upon at least three Business Days'
irrevocable notice to the Administrative Agent, to terminate in whole or reduce
ratably in part the unused portion of the Tranche A Commitments; provided that
each partial reduction shall be in the aggregate amount of $500,000 or in
integral multiples of $100,000 in excess thereof. Additionally, the Tranche B
Commitments shall automatically reduce to zero on the date the initial Tranche B
Advances are made.
(b) Any reduction and termination of the Tranche A Commitments or Tranche
B Commitments pursuant to this Section 2.04 shall be applied ratably to each
Lender's Tranche A Commitment or Tranche B Commitment, as applicable, and shall
be permanent, with no obligation of the Lenders to reinstate such Commitments.
Section 2.05 Prepayment of Advances.
(a) Optional. The Borrower may prepay the Advances, after giving by 10:00
a.m. (Dallas, Texas time) (i) in the case of Eurodollar Rate Advances, at least
three Business Days' or (ii) in the case of Reference Rate Advances, same
Business Day's, irrevocable prior written notice to the Administrative Agent
stating the proposed date and aggregate principal amount of such prepayment. If
any such notice is given, the Borrower shall prepay the Advances in whole or
ratably in part in an aggregate principal amount equal to the amount specified
in such notice, together with accrued interest to the date of such prepayment on
the principal amount prepaid and amounts, if any, required to be paid pursuant
to Section 2.12 as a result of such prepayment being made on such date;
provided, however, that each partial prepayment with respect to: (A) any amounts
prepaid in respect of Eurodollar Rate Advances shall be applied to Eurodollar
Rate Advances comprising part of the same Borrowing; (B) any prepayments made in
respect of Reference Rate Advances shall be made in a minimum amounts of
$250,000 and in integral multiples of $50,000 in excess thereof, and (C) any
prepayments made in respect of any Borrowing comprised of Eurodollar Rate
Advances shall be made in an aggregate principal amount of at least $500,000 and
in integral multiples of $100,000 in excess thereof, and in an aggregate
principal amount such that after giving effect thereto such Borrowing shall have
a remaining principal amount outstanding with respect to such Borrowing of at
least $500,000. Full prepayments of any Borrowing are permitted without
restriction of amounts.
27
(b) Borrowing Base Deficiency. If the aggregate outstanding amount of the
Tranche A Advances plus the Letter of Credit Exposure ever exceeds the lesser of
the (i) Borrowing Base and (ii) the aggregate Tranche A Commitments, the
Borrower shall after receipt of written notice from the Administrative Agent
regarding such deficiency, deliver to the Administrative Agent within ten days
of receipt of such notice from the Administrative Agent, a written response
indicating which of the following actions it intends to take to remedy the
Borrowing Base deficiency (and the failure of the Borrower to deliver such
election notice or to perform the action chosen to remedy such Borrowing Base
deficiency shall constitute an Event of Default):
(i) prepay Tranche A Advances to the extent of the Borrowing Base
deficiency set forth in such notice or, if the Tranche A Advances have been
repaid in full, make deposits to the extent of such Borrowing Base deficiency
set forth in such notice into the Cash Collateral Account to provide cash
collateral for the Letter of Credit Exposure, such that the Borrowing Base
deficiency is cured within 10 days after the date such deficiency notice is
received by the Borrower from the Administrative Agent;
(ii) pledge as Collateral for the Obligations additional Oil and Gas
Properties acceptable to the Administrative Agent and each of Lenders such that
the Borrowing Base deficiency is cured within 30 days after the date such
deficiency notice is received by the Borrower from the Administrative Agent; or
(iii) (A) deliver written notice to the Administrative Agent
indicating the Borrower's election to repay the Tranche A Advances and make
deposits into the Cash Collateral Account to provide cash collateral for the
Letters of Credit, in each case to the extent of the Borrowing Base deficiency
set forth in such notice, each in six monthly installments equal to one-sixth of
such Borrowing Base deficiency with the first such installment due 30 days after
the date such deficiency notice is received by the Borrower from the
Administrative Agent and each following installment due 30 days after the
preceding installment, and (B) make such payments and deposits within such time
periods.
Each prepayment pursuant to this Section 2.05(b) shall be accompanied by accrued
interest on the amount prepaid to the date of such prepayment and amounts, if
any, required to be paid pursuant to Section 2.12 as a result of such prepayment
being made on such date. Each prepayment under clauses (i) and (iii) of this
Section 2.05(b) shall be applied to the Tranche A Advances as determined by the
Administrative Agent and agreed to by the Lenders in their sole discretion.
(c) Reduction of Commitments. On the date of each reduction of the
aggregate Tranche A Commitments pursuant to Section 2.04, the Borrower agrees to
make a prepayment in respect of the outstanding amount of the Tranche A Advances
to the extent, if any, that the aggregate unpaid principal amount of all Tranche
A Advances plus the Letter of Credit Exposure exceeds the lesser of (A) the
aggregate Tranche A Commitments, as so reduced and (B) the Borrowing Base. Each
prepayment pursuant to this Section 2.05(c) shall be accompanied by accrued
interest on the amount prepaid to the date of such prepayment and amounts, if
any, required to be paid pursuant to Section 2.12 as a result of such prepayment
being made on such date. Each prepayment under this Section 2.05(c) shall be
applied to the Tranche A Advances as determined by the Administrative Agent and
agreed to by the Lenders in their sole discretion.
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(d) Illegality. If any Lender shall notify the Administrative Agent and
the Borrower that, on or after the date hereof, the introduction of or any
change in or in the interpretation of any law or regulation makes it unlawful,
or that any central bank or other Governmental Authority asserts that it is
unlawful for such Lender or its Eurodollar Lending Office to perform its
obligations under this Agreement to maintain any Eurodollar Rate Advances of
such Lender then outstanding hereunder, (i) the Borrower shall, no later than
10:00 a.m. (Dallas, Texas time) (A) if not prohibited by law, on the last day of
the Interest Period for each outstanding Eurodollar Rate Advance made by such
Lender or (B) if required by such notice, on the second Business Day following
its receipt of such notice, prepay all of the Eurodollar Rate Advances made by
such Lender then outstanding, together with accrued interest on the principal
amount prepaid to the date of such prepayment and amounts, if any, required to
be paid pursuant to Section 2.12 as a result of such prepayment being made on
such date, (ii) such Lender shall simultaneously make a Reference Rate Advance
to the Borrower on such date in an amount equal to the aggregate principal
amount of the Eurodollar Rate Advances prepaid to such Lender, and (iii) the
right of the Borrower to select Eurodollar Rate Advances from such Lender for
any subsequent Tranche A Borrowing shall be suspended until such Lender gives
notice referred to above shall notify the Administrative Agent that the
circumstances causing such suspension no longer exist. If any Lender shall give
the notice to the Administrative Agent contemplated by this Section, such Lender
shall designate a different Eurodollar Lending Office if such designation will
avoid the need to continue to provide such notice and will not, in the judgment
of such Lender, be otherwise disadvantageous to such Lender.
(e) No Additional Right; Ratable Prepayment. The Borrower shall have no
right to prepay any principal amount of any Advance except as provided in this
Section 2.05, and all notices given pursuant to this Section 2.05 shall be
irrevocable and binding upon the Borrower. Each payment of any Advance pursuant
to this Section 2.05 shall be made in a manner such that all Advances comprising
part of the same Borrowing are paid in whole or ratably in part.
Section 2.06 Repayment of Advances.
(a) Tranche A. The Borrower shall repay to the Administrative Agent for
the ratable benefit of the Lenders the outstanding principal amount of each
Tranche A Advance, together with any accrued interest thereon, on the Tranche A
Maturity Date or such earlier date pursuant to Section 7.02 or Section 7.03.
(b) Tranche B. The Borrower shall repay to the Administrative Agent for
the ratable benefit of the Lenders the outstanding principal amount of all
Tranche B Advances, together with any accrued interest thereon, as follows: (i)
if the Borrowing Base is increased due to a redetermination made under Section
2.02, on the Tranche B Initial Payment Date with the proceeds of a Tranche A
Borrowing, in an amount equal to such increase; (ii) on September 2, 2004, in an
amount equal to one-half of the principal amount of all Tranche B Advances which
were outstanding on the Tranche B Initial Payment Date after giving effect to
any payment made by the Borrower on such date as required under clause (i)
above; and (iii) on the Tranche B Maturity Date or such earlier date pursuant to
Section 7.02 or Section 7.03, the outstanding principal amount of the Tranche B
Advances. Each such payment shall be made together with all accrued, unpaid
interest on the Tranche B Advances through the payment date.
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Section 2.07 Letters of Credit.
(a) Commitment. From time to time from the date of this Agreement until 30
days prior to the Tranche A Maturity Date, at the request of the Borrower, the
Issuing Lender shall, on the terms and conditions hereinafter set forth, issue,
increase, or extend the Expiration Date of, Letters of Credit for the account of
the Borrower on any Business Day. No Letter of Credit will be issued, increased,
or extended:
(i) if such issuance, increase, or extension would cause the Letter
of Credit Exposure to exceed the lesser of (A) $10,000,000 and (B) the Unused
Tranche A Commitment Amount;
(ii) if such Letter of Credit has an Expiration Date later than the
earlier of (A) one year after the date of issuance thereof and (B) 30 days prior
to the Tranche A Maturity Date;
(iii) unless such Letter of Credit Documents are in form and
substance acceptable to the Issuing Lender in its sole discretion;
(iv) unless such Letter of Credit is a standby letter of credit not
supporting the repayment of indebtedness for borrowed money of any Person;
(v) unless the Borrower has delivered to the Issuing Lender a
completed and executed Letter of Credit Application; and
(vi) unless such Letter of Credit is governed by the Uniform Customs
and Practice for Documentary Credits (1993 Revision), International Chamber of
Commerce Publication No. 500 or any successor to such publication.
If the terms of any Letter of Credit Application referred to in the foregoing
clause (v) conflicts with the terms of this Agreement, the terms of this
Agreement shall control.
(b) Participations. Upon the date of the issuance or increase of a Letter
of Credit, the Issuing Lender shall be deemed to have sold to each other Lender
having a Tranche A Commitment and each other Lender having a Tranche A
Commitment shall have been deemed to have purchased from the Issuing Lender a
participation in the related Letter of Credit Obligations equal to such Lender's
Pro Rata Share at such date and such sale and purchase shall otherwise be in
accordance with the terms of this Agreement. The Issuing Lender shall promptly
notify each such participant Lender having a Tranche A Commitment by telex,
telephone, or telecopy of each Letter of Credit issued, increased, or extended
or converted and the actual dollar amount of such Lender's participation in such
Letter of Credit.
(c) Issuing. Each Letter of Credit shall be issued, increased, or extended
pursuant to a Letter of Credit Application (or by telephone notice promptly
confirmed in writing by a Letter of Credit Application), given not later than
10:00 a.m. (Dallas, Texas time) on the fifth Business Day before the date of the
proposed issuance, increase, or extension of the Letter of Credit, and the
Issuing Lender shall give to each other Lender prompt notice thereof by telex,
telephone, or telecopy. Each Letter of Credit Application shall be delivered by
facsimile or by mail specifying
30
the information required therein; provided that if such Letter of Credit
Application is delivered by facsimile, the Borrower shall follow such facsimile
with an original by mail. After the Issuing Lender's receipt of such Letter of
Credit Application (by facsimile or by mail) and upon fulfillment of the
applicable conditions set forth in Article III, the Issuing Lender shall issue,
increase, or extend such Letter of Credit for the account of the Borrower. Each
Letter of Credit Application shall be irrevocable and binding on the Borrower.
(d) Reimbursement. The Borrower hereby agrees to pay on demand to the
Issuing Lender an amount equal to any amount paid by the Issuing Lender under
any Letter of Credit. In the event the Issuing Lender makes a payment pursuant
to a request for draw presented under a Letter of Credit and such payment is not
promptly reimbursed by the Borrower upon demand, the Issuing Lender shall give
the Administrative Agent notice of the Borrower's failure to make such
reimbursement, and the Administrative Agent shall promptly notify each Lender
having a Commitment of the amount necessary to reimburse the Issuing Lender.
Upon such notice from the Administrative Agent, each Lender shall promptly
reimburse the Issuing Lender for such Lender's Pro Rata Share of such amount,
and such reimbursement shall be deemed for all purposes of this Agreement to be
an Advance to the Borrower transferred at the Borrower's request to the Issuing
Lender. If such reimbursement is not made by any Lender to the Issuing Lender on
the same day on which the Administrative Agent notifies such Lender to make
reimbursement to the Issuing Lender hereunder, such Lender shall pay interest on
its Pro Rata Share thereof to the Issuing Lender at a rate per annum equal to
the Federal Funds Rate. The Borrower hereby unconditionally and irrevocably
authorizes, empowers, and directs the Administrative Agent and the Lenders to
record and otherwise treat such reimbursements to the Issuing Lender as
Reference Rate Advances under a Tranche A Borrowing requested by the Borrower to
reimburse the Issuing Lender which have been transferred to the Issuing Lender
at the Borrower's request.
(e) Obligations Unconditional. The obligations of the Borrower under this
Agreement in respect of each Letter of Credit shall be unconditional and
irrevocable, and shall be paid strictly in accordance with the terms of this
Agreement under all circumstances, including, without limitation, the following
circumstances:
(i) any lack of validity or enforceability of any Letter of Credit
Documents;
(ii) any amendment or waiver of, or any consent to or departure
from, any Letter of Credit Documents;
(iii) the existence of any claim, set-off, defense, or other right
which the Borrower may have at any time against any beneficiary or transferee of
such Letter of Credit (or any Persons for whom any such beneficiary or any such
transferee may be acting), the Issuing Lender, or any other person or entity,
whether in connection with this Agreement, the transactions contemplated in this
Agreement or in any Letter of Credit Documents, or any unrelated transaction;
(iv) any statement or any other document presented under such Letter
of Credit proving to be forged, fraudulent, invalid, or insufficient in any
respect or any statement therein being untrue or inaccurate in any respect;
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(v) payment by the Issuing Lender under such Letter of Credit
against presentation of a draft or certificate which does not strictly comply
with the terms of such Letter of Credit; or
(vi) any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing.
provided, however, that nothing contained in this paragraph (e) shall be deemed
to constitute a waiver of any remedies of the Borrower in connection with the
Letters of Credit or the Borrower's rights under Section 2.07(f) below.
(f) Liability of Issuing Lender. The Borrower assumes all risks of the
acts or omissions of any beneficiary or transferee of any Letter of Credit with
respect to its use of such Letter of Credit. Neither the Issuing Lender nor any
of its officers or directors shall be liable or responsible for:
(i) the use which may be made of any Letter of Credit or any acts or
omissions of any beneficiary or transferee in connection therewith;
(ii) the validity, sufficiency, or genuineness of documents, or of
any endorsement thereon, even if such documents should prove to be in any or all
respects invalid, insufficient, fraudulent, or forged;
(iii) payment by the Issuing Lender against presentation of
documents which do not strictly comply with the terms of a Letter of Credit,
including failure of any documents to bear any reference or adequate reference
to the relevant Letter of Credit; or
(iv) any other circumstances whatsoever in making or failing to make
payment under any Letter of Credit (INCLUDING THE ISSUING LENDER'S OWN
NEGLIGENCE),
except that the Borrower shall have a claim against the Issuing Lender, and the
Issuing Lender shall be liable to the Borrower, to the extent of any direct, as
opposed to consequential, damages suffered by the Borrower which the Borrower
proves were caused by the Issuing Lender's willful misconduct or gross
negligence in determining whether documents presented under a Letter of Credit
comply with the terms of such Letter of Credit. In furtherance and not in
limitation of the foregoing, the Issuing Lender may accept documents that appear
on their face to be in order, without responsibility for further investigation,
regardless of any notice or information to the contrary.
(g) Cash Collateral Account.
(i) If the Borrower is required to deposit funds in the Cash
Collateral Account pursuant to Sections 2.05(b), 7.02(b), or 7.03(b), then the
Borrower and the Issuing Lender shall establish the Cash Collateral Account and
the Borrower shall execute any documents and agreements, including the Issuing
Lender's standard form assignment of deposit accounts, that the Issuing Lender
requests in connection therewith to establish the Cash Collateral Account and
grant the Issuing Lender a first priority security interest in such account and
the funds therein.
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The Borrower hereby pledges to the Administrative Agent and grants to the
Administrative Agent for the benefit of the Administrative Agent, the Issuing
Lender and the Lenders a security interest in the Cash Collateral Account,
whenever established, all funds held in the Cash Collateral Account from time to
time, and all proceeds thereof as security for the payment of the Obligations.
(ii) So long as no Default or Event of Default Exists, (A) the
Administrative Agent may apply the funds held in the Cash Collateral Account
only to the reimbursement of any Letter of Credit Obligations, and (B) the
Administrative Agent shall release to the Borrower at the Borrower's written
request any funds held in the Cash Collateral Account in an amount up to but not
exceeding the excess, if any (immediately prior to the release of any such
funds), of the total amount of funds held in the Cash Collateral Account over
the Letter of Credit Exposure. During the existence of any Default or Event of
Default, the Administrative Agent may apply any funds held in the Cash
Collateral Account to the Obligations in accordance with Section 7.06,
regardless of any Letter of Credit Exposure that may remain outstanding.
(iii) The Administrative Agent shall exercise reasonable care in the
custody and preservation of any funds held in the Cash Collateral Account and
shall be deemed to have exercised such care if such funds are accorded treatment
substantially equivalent to that which the Administrative Agent accords its own
Property, it being understood that the Administrative Agent shall not have any
responsibility for taking any necessary steps to preserve rights against any
parties with respect to any such funds.
Section 2.08 Fees.
(a) Commitment Fees. The Borrower agrees to pay to the Administrative
Agent for the account of each Lender having a Tranche A Commitment a commitment
fee at a per annum rate equal to the Commitment Fee Rate on the average daily
Unused Tranche A Commitment Amount of such Lender, from the date of this
Agreement until the Tranche A Commitment Termination Date. The commitment fees
shall be due and payable quarterly in arrears on the last day of each March,
June, September, and December commencing on March 31, 2004 and continuing
thereafter through and including the Tranche A Commitment Termination Date.
(b) Letter of Credit Fees.
(i) The Borrower agrees to pay (A) to the Administrative Agent for
the pro rata benefit of the Lenders having a Tranche A Commitment a per annum
letter of credit fee for each Letter of Credit issued hereunder in an amount
equal to the greater of (1) the Applicable Margin then in effect for Eurodollar
Rate Advances times the daily maximum amount available to be drawn under such
Letter of Credit and (2) $1,000.00, and (B) to the Issuing Lender, a fronting
fee for each Letter of Credit equal to the greater of (1) .10% per annum times
the daily maximum amount available to be drawn under such Letter of Credit and
(2) $500.00. Each such fee shall be computed on a quarterly basis in arrears and
be due and payable on the last day of each March, June, September, and December
commencing March 31, 2004.
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(ii) The Borrower also agrees to pay to the Issuing Lender such
other usual and customary fees associated with any transfers, amendments,
drawings, negotiations or reissuances of any Letters of Credit.
(c) Administrative Fees. The Borrower agrees to pay to the Administrative
Agent the annual agency fees described in the Commitment Letter dated January
21, 2004 from the Administrative Agent to MEI Acquisitions, LLC, ACON
Investments, LLC and Riverstone Holdings LLC.
(d) Borrowing Base Increase Fees. The Borrower agrees to pay to the
Administrative Agent for the account of the Lenders having a Tranche A
Commitment in connection with any increase of the Borrowing Base, a borrowing
base increase fee on the amount of such increase; provided that, no such
increase fee shall be charged in connection the first $25,000,000 increase in
the Borrowing Base associated with the refinancing, if any, of the Tranche B
Advances. The borrowing base increase fee shall be in an amount equal to .375%
multiplied by the amount of the increase and shall be due and payable on the
Business Day following the date that the increase to the Borrowing Base becomes
effective.
Section 2.09 Interest. The Borrower shall pay interest on the unpaid
principal amount of each Advance made by each Lender from the date of such
Advance until such principal amount shall be paid in full, at the following
rates per annum:
(a) Reference Rate Advances. If such Advance is a Reference Rate Advance,
a rate per annum equal at all times to the Adjusted Reference Rate in effect
from time to time plus the Applicable Margin in effect from time to time,
payable quarterly in arrears on the last day of each quarter and on the date
such Reference Rate Advance shall be paid in full.
(b) Eurodollar Rate Advances. If such Advance is a Eurodollar Rate
Advance, a rate per annum equal at all times during the Interest Period for such
Advance to the Eurodollar Rate for such Interest Period plus the Applicable
Margin in effect from time to time, payable on the last day of such Interest
Period, or if such Interest Period is longer than three months in duration, on
each third monthly anniversary occurring from and after the first date of such
Interest Period (e.g. the three-month anniversary date, the six-month
anniversary date and the nine-month anniversary date in the case of a Interest
Period that is twelve months in duration) and on the last day of such Interest
Period.
(c) Additional Interest on Eurodollar Rate Advances. The Borrower shall
pay to each Lender, so long as any such Lender shall be required under
regulations of the Federal Reserve Board to maintain reserves with respect to
liabilities or assets consisting of or including Eurocurrency Liabilities,
additional interest on the unpaid principal amount of each Eurodollar Rate
Advance of such Lender, from the effective date of such Advance until such
principal amount is paid in full, at an interest rate per annum equal at all
times to the remainder obtained by subtracting (i) the Eurodollar Rate for the
Interest Period for such Advance from (ii) the rate obtained by dividing such
Eurodollar Rate by a percentage equal to 100% minus the Eurodollar Rate Reserve
Percentage of such Lender for such Interest Period, payable on each date on
which interest is payable on such Advance. Such additional interest payable to
any Lender shall be determined by such Lender and notified to the Borrower
through the Administrative Agent (such
34
notice to include the calculation of such additional interest, which calculation
shall be conclusive in the absence of manifest error).
(d) Usury Recapture.
(i) If, with respect to any Lender, the effective rate of interest
contracted for under the Loan Documents, including the stated rates of interest
and fees contracted for hereunder and any other amounts contracted for under the
Loan Documents which are deemed to be interest, at any time exceeds the Maximum
Rate, then the outstanding principal amount of the loans made by such Lender
hereunder shall bear interest at a rate which would make the effective rate of
interest for such Lender under the Loan Documents equal the Maximum Rate until
the difference between the amounts which would have been due at the stated rates
and the amounts which were due at the Maximum Rate (the "Lost Interest") has
been recaptured by such Lender.
(ii) If, when the loans made hereunder are repaid in full, the Lost
Interest has not been fully recaptured by such Lender pursuant to the preceding
paragraph, then, to the extent permitted by law, for the loans made hereunder by
such Lender the interest rates charged under Section 2.09 hereunder shall be
retroactively increased such that the effective rate of interest under the Loan
Documents was at the Maximum Rate since the effectiveness of this Agreement to
the extent necessary to recapture the Lost Interest not recaptured pursuant to
the preceding sentence and, to the extent allowed by law, the Borrower shall pay
to such Lender the amount of the Lost Interest remaining to be recaptured by
such Lender.
(iii) NOTWITHSTANDING THE FOREGOING OR ANY OTHER TERM IN THIS
AGREEMENT AND THE LOAN DOCUMENTS TO THE CONTRARY, IT IS THE INTENTION OF EACH
LENDER AND THE BORROWER TO CONFORM STRICTLY TO ANY APPLICABLE USURY LAWS.
ACCORDINGLY, IF ANY LENDER CONTRACTS FOR, CHARGES, OR RECEIVES ANY CONSIDERATION
WHICH CONSTITUTES INTEREST IN EXCESS OF THE MAXIMUM RATE, THEN ANY SUCH EXCESS
SHALL BE CANCELED AUTOMATICALLY AND, IF PREVIOUSLY PAID, SHALL AT SUCH LENDER'S
OPTION BE APPLIED TO THE OUTSTANDING AMOUNT OF THE LOANS MADE HEREUNDER BY SUCH
LENDER OR BE REFUNDED TO THE BORROWER.
Section 2.10 Payments and Computations.
(a) Payment Procedures. The Borrower shall make each payment under this
Agreement and under the Notes not later than 10:00 a.m. (Dallas, Texas time) on
the day when due in Dollars to the Administrative Agent at the location referred
to in the Notes (or such other location as the Administrative Agent shall
designate in writing to the Borrower) in same day funds without deduction,
setoff, or counterclaim of any kind. The Administrative Agent shall promptly
thereafter cause to be distributed like funds relating to the payment of
principal, interest or fees ratably (other than amounts payable solely to the
Administrative Agent, the Issuing Lender, or a specific Lender pursuant to
Section 2.08(c), 2.09(c), 2.12, 2.13, 2.14, 8.05, or 9.07, but after taking into
account payments effected pursuant to Section 9.04) in accordance with each
Lender's Pro Rata Share to the Lenders for the account of their respective
Applicable Lending Offices, and like funds relating to the payment of any other
amount payable to any
35
Lender or the Issuing Lender to such Lender for the account of its Applicable
Lending Office, in each case to be applied in accordance with the terms of this
Agreement.
(b) Computations. All computations of interest based on the Reference Rate
and of commitment fees shall be made by the Administrative Agent on the basis of
a year of 365 or 366 days, as the case may be, and all computations of interest
based on the Eurodollar Rate and the Federal Funds Rate and Letter of Credit
fees shall be made by the Administrative Agent, on the basis of a year of 360
days, in each case for the actual number of days (including the first day, but
excluding the last day) occurring in the period for which such interest or fees
are payable. Each determination by the Administrative Agent of an interest rate
or fee shall be conclusive and binding for all purposes, absent manifest error.
(c) Non-Business Day Payments. Whenever any payment shall be stated to be
due on a day other than a Business Day, such payment shall be made on the next
succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of interest or fees, as the case may be;
provided, however, that if such extension would cause payment of interest on or
principal of Eurodollar Rate Advances to be made in the next following calendar
month, such payment shall be made on the next preceding Business Day.
(d) Administrative Agent Reliance. Unless the Administrative Agent shall
have received written notice from the Borrower prior to the date on which any
payment is due to the Lenders that the Borrower shall not make such payment in
full, the Administrative Agent may assume that the Borrower has made such
payment in full to the Administrative Agent on such date and the Administrative
Agent may, in reliance upon such assumption, cause to be distributed to each
Lender on such date an amount equal to the amount then due such Lender. If and
to the extent the Borrower shall not have so made such payment in full to the
Administrative Agent, each Lender shall repay to the Administrative Agent
forthwith on demand such amount distributed to such Lender, together with
interest, for each day from the date such amount is distributed to such Lender
until the date such Lender repays such amount to the Administrative Agent, at
the Federal Funds Rate for such day.
Section 2.11 Sharing of Payments, Etc. If any Lender shall obtain any
payment (whether voluntary, involuntary, through the exercise of any right of
set-off, or otherwise) on account of the Advances or Letter of Credit
Obligations made by it in excess of its Pro Rata Share of payments on account of
the Advances or Letter of Credit Obligations obtained by all the Lenders, such
Lender shall notify the Administrative Agent and forthwith purchase from the
other Lenders such participations in the Advances made by them or Letter of
Credit Obligations held by them as shall be necessary to cause such purchasing
Lender to share the excess payment ratably with each of them; provided, however,
that if all or any portion of such excess payment is thereafter recovered from
such purchasing Lender, such purchase from each Lender shall be rescinded and
such Lender shall repay to the purchasing Lender the purchase price to the
extent of such Lender's ratable share (according to the proportion of (a) the
amount of the participation sold by such Lender to the purchasing Lender as a
result of such excess payment to (b) the total amount of such excess payment) of
such recovery, together with an amount equal to such Lender's ratable share
(according to the proportion of (i) the amount of such Lender's required
repayment to the purchasing Lender to (ii) the total amount of all such required
repayments to the purchasing Lender) of any interest or other amount paid or
payable by the purchasing Lender
36
in respect of the total amount so recovered. The Borrower agrees that any Lender
so purchasing a participation from another Lender pursuant to this Section 2.11
may, to the fullest extent permitted by law, exercise all its rights of payment
(including the right of set-off) with respect to such participation as fully as
if such Lender were the direct creditor of the Borrower in the amount of such
participation.
Section 2.12 Breakage Costs. If (a) any payment of principal of any
Eurodollar Rate Advance is made other than on the last day of the Interest
Period for such Advance, whether as a result of any payment pursuant to Section
2.05, the acceleration of the maturity of the Notes pursuant to Article VII, or
otherwise, or (b) the Borrower fails to make a principal or interest payment
with respect to any Eurodollar Rate Advance on the date such payment is due and
payable, the Borrower shall, within 10 days of any written demand (which written
demand shall include a calculation of the losses, costs and expenses referred to
below) sent by any Lender to the Borrower through the Administrative Agent, pay
to the Administrative Agent for the account of such Lender any amounts required
to compensate such Lender for any additional losses, out-of-pocket costs or
expenses which it may reasonably incur as a result of such payment or
nonpayment, including, without limitation, any loss (but excluding loss of
anticipated profits), cost or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by any Lender to fund or
maintain such Advance.
Section 2.13 Increased Costs.
(a) Eurodollar Rate Advances. If, due to either (i) the introduction of or
any change (other than any change by way of imposition or increase of reserve
requirements included in the Eurodollar Rate Reserve Percentage) in or in the
interpretation of any law or regulation or (ii) the compliance with any
guideline or request from any central bank or other Governmental Authority
(whether or not having the force of law), there shall be any increase in the
cost to any Lender of agreeing to make or making, funding, or maintaining
Eurodollar Rate Advances, then the Borrower shall from time to time, upon demand
by such Lender (with a copy of such demand to the Administrative Agent),
immediately pay to the Administrative Agent for the account of such Lender
additional amounts sufficient to compensate such Lender for such increased cost;
provided, however, that before making any such demand, each Lender agrees to use
reasonable efforts to designate a different lending office if the making of such
a designation would avoid the need for, or reduce the amount of, such increased
cost and would not, in the reasonable judgment of such Lender, be otherwise
disadvantageous to such Lender; provided, further, that the Borrower shall not
be obligated for the payment of any such additional amounts to the extent such
costs accrued more than 120 days prior to the date the Borrower was given such
demand. A certificate as to the amount of such increased cost and detailing the
calculation of such cost submitted to the Borrower and the Administrative Agent
by such Lender shall be conclusive and binding for all purposes, absent manifest
error.
(b) Capital Adequacy. If any Lender or the Issuing Lender determines in
good faith, on or after the date hereof, that compliance with any law or
regulation or any guideline or request from any central bank or other
Governmental Authority (whether or not having the force of law) affects or would
affect the amount of capital required or expected to be maintained by such
Lender or the Issuing Lender or any corporation controlling such Lender or the
Issuing Lender and that the amount of such capital is increased by or based upon
the existence of such Lender's
37
commitment to lend or the Issuing Lender's commitment to issue the Letters of
Credit and other commitments of this type, then, upon 30 days' prior written
notice by such Lender or the Issuing Lender (with a copy of any such demand to
the Administrative Agent), the Borrower shall immediately pay to the
Administrative Agent for the account of such Lender or to the Issuing Lender, as
the case may be, from time to time as specified by such Lender or the Issuing
Lender, additional amounts sufficient to compensate such Lender or the Issuing
Lender, in light of such circumstances, (i) with respect to such Lender, to the
extent that such Lender reasonably determines such increase in capital to be
allocable to the existence of such Lender's commitment to lend under this
Agreement and (ii) with respect to the Issuing Lender, to the extent that the
Issuing Lender reasonably determines such increase in capital to be allocable to
the issuance or maintenance of the Letters of Credit. A certificate as to such
amounts and detailing the calculation of such amounts submitted to the Borrower
by such Lender or the Issuing Lender shall be conclusive and binding for all
purposes, absent manifest error.
(c) Letters of Credit. If any change in any law or regulation or in the
interpretation thereof by any court or administrative or Governmental Authority
charged with the administration thereof shall either (i) impose, modify, or deem
applicable any reserve, special deposit, or similar requirement against letters
of credit issued by, or assets held by, or deposits in or for the account of,
the Issuing Lender or (ii) impose on the Issuing Lender any other condition
regarding the provisions of this Agreement relating to the Letters of Credit or
any Letter of Credit Obligations, and the result of any event referred to in the
preceding clause (i) or (ii) shall be to increase the cost to the Issuing Lender
of issuing or maintaining any Letter of Credit (which increase in cost shall be
determined by the Issuing Lender's reasonable allocation of the aggregate of
such cost increases resulting from such event), then, upon demand by the Issuing
Lender, the Borrower shall pay to the Issuing Lender, from time to time as
specified by the Issuing Lender, additional amounts which shall be sufficient to
compensate the Issuing Lender for such increased cost; provided, however, that
the Borrower shall not be obligated for the payment of any such additional
amounts to the extent such costs accrued more than 120 days prior to the date
the Borrower was given such demand. A certificate as to such increased cost
incurred by the Issuing Lender, as a result of any event mentioned in clause (i)
or (ii) above, and detailing the calculation of such increased costs submitted
by the Issuing Lender to the Borrower, shall be conclusive and binding for all
purposes, absent manifest error.
Section 2.14 Taxes.
(a) No Deduction for Certain Taxes. Any and all payments by the Borrower
shall be made, in accordance with Section 2.10, free and clear of and without
deduction for any and all present or future taxes, levies, imposts, deductions,
charges or withholdings, and all liabilities with respect thereto, excluding, in
the case of each Lender, the Issuing Lender, and the Administrative Agent, taxes
imposed on its income, and franchise taxes imposed on it (all such non-excluded
taxes, levies, imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to as "Taxes") and, in the case of each Lender and the
Issuing Lender, Taxes by the jurisdiction of such Lender's Applicable Lending
Office or any political subdivision of such jurisdiction. If the Borrower shall
be required by law to deduct any Taxes from or in respect of any sum payable to
any Lender, the Issuing Lender, or the Administrative Agent, (i) the sum payable
shall be increased as may be necessary so that, after making all required
deductions (including deductions applicable to additional sums payable under
this Section 2.14),
38
such Lender, the Issuing Lender, or the Administrative Agent (as the case may
be) receives an amount equal to the sum it would have received had no such
deductions been made; provided, however, that if the Borrower's obligation to
deduct or withhold Taxes is caused solely by such Lender's, the Issuing
Lender's, or the Administrative Agent's failure to provide the forms described
in paragraph (d) of this Section 2.14 and such Lender, the Issuing Lender, or
the Administrative Agent could have provided such forms, no such increase shall
be required; (ii) the Borrower shall make such deductions; and (iii) the
Borrower shall pay the full amount deducted to the relevant taxation authority
or other authority in accordance with applicable law.
(b) Other Taxes. In addition, the Borrower agrees to pay any present or
future stamp or documentary taxes or any other excise or property taxes, charges
or similar levies which arise from any payment made or from the execution,
delivery or registration of, or otherwise with respect to, this Agreement, the
Notes, or the other Loan Documents (hereinafter referred to as "Other Taxes").
(c) Indemnification. THE BORROWER INDEMNIFIES EACH LENDER, THE ISSUING
LENDER, AND THE ADMINISTRATIVE AGENT FOR THE FULL AMOUNT OF TAXES OR OTHER TAXES
(INCLUDING, WITHOUT LIMITATION, ANY TAXES OR OTHER TAXES IMPOSED BY ANY
JURISDICTION ON AMOUNTS PAYABLE UNDER THIS SECTION 2.14) PAID BY SUCH LENDER,
THE ISSUING LENDER, OR THE ADMINISTRATIVE AGENT (AS THE CASE MAY BE) AND ANY
LIABILITY (INCLUDING INTEREST AND EXPENSES) ARISING THEREFROM OR WITH RESPECT
THERETO, WHETHER OR NOT SUCH TAXES OR OTHER TAXES WERE CORRECTLY OR LEGALLY
ASSERTED. EACH PAYMENT REQUIRED TO BE MADE BY THE BORROWER IN RESPECT OF THIS
INDEMNIFICATION SHALL BE MADE TO THE ADMINISTRATIVE AGENT FOR THE BENEFIT OF ANY
PARTY CLAIMING SUCH INDEMNIFICATION WITHIN 30 DAYS FROM THE DATE THE BORROWER
RECEIVES WRITTEN DEMAND THEREFOR FROM THE ADMINISTRATIVE AGENT ON BEHALF OF
ITSELF AS ADMINISTRATIVE AGENT, THE ISSUING LENDER, OR ANY SUCH LENDER. IF ANY
LENDER, THE ADMINISTRATIVE AGENT, OR THE ISSUING LENDER RECEIVES A REFUND IN
RESPECT OF ANY TAXES PAID BY THE BORROWER UNDER THIS PARAGRAPH (C), SUCH LENDER,
THE ADMINISTRATIVE AGENT, OR THE ISSUING LENDER, AS THE CASE MAY BE, SHALL
PROMPTLY PAY TO THE BORROWER THE BORROWER'S SHARE OF SUCH REFUND.
(d) Foreign Lender Withholding Exemption. Each Lender and Issuing Lender
that is not incorporated under the laws of the United States of America or a
state thereof agrees that it shall deliver to the Borrower and the
Administrative Agent (i) if such Lender or Issuing Lender is not a United States
person, two duly completed copies of United States Internal Revenue Service Form
W8-ECI or W8-BEN or successor applicable form, as the case may be, certifying in
each case that such Lender is entitled to receive payments under this Agreement
and the Notes payable to it, without deduction or withholding of any United
States federal income taxes, (ii) if such Lender or Issuing Lender is a United
States person, an Internal Revenue Service Form W-8 or W-9 or successor
applicable form, as the case may be, to establish an exemption from United
States backup withholding tax, and (iii) any other certification,
identification, information or documentation which is necessary or required
under an applicable tax treaty or otherwise by law
39
to reduce or eliminate any withholding tax, which has been reasonably requested
by the Borrower. Each Lender which delivers to the Borrower and the
Administrative Agent a Form W8-ECI, W8-BEN or W-9 pursuant to the next preceding
sentence further undertakes to deliver to the Borrower and the Administrative
Agent two further copies of the said letter and Form ▇▇-▇▇▇, ▇▇-▇▇▇ or W-9, or
successor applicable forms, or other applicable certification, as the case may
be, on or before the date that any such form or certification expires or becomes
obsolete or after the occurrence of any event requiring a change in the most
recent form or other certification previously delivered by it to the Borrower
and the Administrative Agent, and such extensions or renewals thereof as may
reasonably be requested by the Borrower and the Administrative Agent certifying
in the case of a Form W8-ECI or W8-BEN that such Lender is entitled to receive
payments under this Agreement without deduction or withholding of any United
States federal income taxes. If an event (including without limitation any
change in treaty, law or regulation) has occurred prior to the date on which any
delivery required by the preceding sentence would otherwise be required which
renders all such forms inapplicable or which would prevent any Lender from duly
completing and delivering any such letter or form with respect to it and such
Lender advises the Borrower and the Administrative Agent that it is not capable
of receiving payments without any deduction or withholding of United States
federal income tax, and in the case of a Form W-8 or W-9, establishing an
exemption from United States backup withholding tax, such Lender shall not be
required to deliver such letter or forms. The Borrower shall withhold tax at the
rate and in the manner required by the laws of the United States with respect to
payments made to a Lender failing to timely provide the requisite Internal
Revenue Service forms.
ARTICLE III
CONDITIONS OF LENDING
Section 3.01 Conditions Precedent to Initial Advances. The obligation of
each Lender to make the initial Advances hereunder and the obligation of the
Issuing Lender to issue the initial Letters of Credit is subject to the
conditions precedent that:
(a) Documentation. The Administrative Agent shall have received the
following duly executed by all the parties thereto, in form and substance
satisfactory to the Administrative Agent, the Issuing Lender and the Lenders,
and, where applicable, in sufficient copies for each Lender:
(i) this Agreement, a Tranche A Note payable to the order of each
Lender in the amount of its Tranche A Commitment, a Tranche B Note payable to
the order of each Lender in the amount of its Tranche B Commitment, the
Guaranties, the Pledge Agreements executed by the Parent, Holdings, and the
Borrower, the Security Agreements, and Mortgages encumbering substantially all
of the Borrower's and its Subsidiaries' Proven Reserves and Oil and Gas
Properties in connection therewith, other than the JEDI Collateral, the
Intercreditor Agreement, and each of the other Loan Documents, and all attached
exhibits and schedules;
(ii) favorable opinions of the Borrower's and the Guarantors'
respective counsels and of the Administrative Agent's Alabama counsel each dated
as of the date of this
40
Agreement in form and substance satisfactory to the Administrative Agent and the
Lenders and covering such matters as the Administrative Agent may reasonably
request;
(iii) copies, certified as of the date of this Agreement by a
Responsible Officer of the Borrower of (A) the resolutions of the board of
directors of the Borrower approving the Loan Documents to which the Borrower is
a party, (B) the certificate of incorporation and the bylaws of the Borrower,
and (C) all other documents evidencing other necessary corporate action and
governmental approvals, if any, with respect to this Agreement, the Note, and
the other Loan Documents;
(iv) certificates of a Responsible Officer of the Borrower
certifying the names and true signatures of the officers of the Borrower
authorized to sign this Agreement, the Notes, Notices of Borrowing, Notices of
Conversion or Continuation, and the other Loan Documents to which the Borrower
is a party;
(v) copies, certified as of the date of this Agreement by a
Responsible Officer or the secretary or an assistant secretary of each Guarantor
of (A) the resolutions of the board of directors or managers (or other
applicable governing body) of such Guarantor approving the Loan Documents to
which it is a party, (B) the articles or certificate (as applicable) of
incorporation (or organization) and bylaws or other governing documents of such
Guarantor, and (C) all other documents evidencing other necessary corporate
action and governmental approvals, if any, with respect to the Guaranty, the
Security Instruments, and the other Loan Documents to which such Guarantor is a
party;
(vi) a certificate of the secretary or an assistant secretary of
each Guarantor certifying the names and true signatures of officers of such
Guarantor authorized to sign the Guaranty, Security Instruments, and the other
Loan Documents to which such Guarantor is a party;
(vii) a certificate dated as of the date of this Agreement from a
Responsible Officer of the Borrower on behalf of the Borrower stating that (A)
all representations and warranties of the Borrower set forth in this Agreement
are true and correct in all material respects; (B) no Default has occurred and
is continuing; and (C) the conditions in this Section 3.01 have been met;
(viii) appropriate UCC-1 and UCC-3, as applicable, Financing
Statements covering the Collateral for filing by the Administrative Agent with
the appropriate authorities and any other documents, agreements or instruments
reasonably necessary to create an Acceptable Security Interest in such
Collateral;
(ix) stock or, to the extent applicable under the Person's
organizational documents, membership or partnership interest certificates
required in connection with the Pledge Agreements and stock powers executed in
blank for each such stock certificate endorsed in blank to the Administrative
Agent;
(x) insurance certificates naming the Administrative Agent loss
payee or additional insured, as applicable, and evidencing insurance which meets
the requirements of this
41
Agreement and the Security Instruments, and which is otherwise satisfactory to
the Administrative Agent;
(xi) the initial Independent Engineer's Report dated effective as of
June 30, 2003;
(xii) copies, certified by a Responsible Officer of the Borrower, of
the Merger Agreement and all exhibits and schedules thereto, Project Company
Note, the Project Company Mortgage, and any material agreements executed in
connection with the Merger Agreement; and
(xiii) such other documents, governmental certificates, agreements
and lien searches as the Administrative Agent or any Lender may reasonably
request.
(b) Payment of Fees. On the date of this Agreement, the Borrower shall
have paid the Administrative Agent's fees required by Section 2.08(c), the
underwriting fees required under the Commitment Letter dated January 21, 2004
from the Arrangers to MEI Acquisitions, LLC, ACON Investments, LLC and
Riverstone Holdings, LLC, and all costs and expenses that have been invoiced and
are payable pursuant to Section 9.04.
(c) Delivery of Financial Statements. The Administrative Agent and the
Lenders shall have received true and correct copies of (i) the Financial
Statements, (ii) the Interim Financial Statements, (iii) the Borrower's audited
consolidated and consolidating balance sheets, income statements and statements
of cash flows for fiscal years 2000 and 2001, (iv) a capital budget for the
twelve-month period ended June 30, 2004, and (v) such other financial
information as the Lenders may reasonably request.
(d) Security Instruments. The Administrative Agent shall have received all
appropriate evidence required by the Administrative Agent and the Lenders in
their sole discretion necessary to determine that the Administrative Agent (for
its benefit and the benefit of the Lenders) shall have an Acceptable Security
Interest in the Collateral (which shall include all Proven Reserves of the
Borrower and its Subsidiaries and all Oil and Gas Properties in connection
therewith other than JEDI Collateral) and that all actions or filings necessary
to protect, preserve and validly perfect such Liens have been made, taken or
obtained, as the case may be, and are in full force and effect.
(e) Title. The Administrative Agent and the Arrangers shall be satisfied
in its sole discretion with the title to the Oil and Gas Properties included in
the Borrowing Base and shall have received mortgagee's title opinions (or other
title evidence satisfactory to the Administrative Agent) in favor of the
Administrative Agent and the Lenders in form and substance satisfactory to the
Administrative Agent and, if applicable, issued by title counsel satisfactory to
the Administrative Agent covering at least 76% of the present value of Proven
Reserves set forth on the Independent Engineering Report delivered to the
Administrative Agent prior to the effective date of this Agreement and at least
80% of the present value of such Proven Reserves which are categorized as
"proved, developed and producing" in such report.
(f) Environmental. The Administrative Agent shall have received such Phase
I environmental assessments or other reports as it may reasonably require and
shall be satisfied
42
with the condition of the Oil and Gas Properties with respect to the Borrower's
compliance with Environmental Laws.
(g) No Default. No Default shall have occurred and be continuing.
(h) Representations and Warranties. The representations and warranties
contained in Article IV hereof and in each other Loan Document shall be true and
correct in all material respects.
(i) Material Adverse Change. No event or circumstance that could
reasonably be expected to cause a Material Adverse Change shall have occurred.
(j) No Proceeding or Litigation; No Injunctive Relief. Except as set forth
on Schedule 4.07, no action, suit, investigation or other proceeding (including,
without limitation, the enactment or promulgation of a statute or rule) by or
before any arbitrator or any Governmental Authority shall be threatened or
pending and no preliminary or permanent injunction or order by a state or
federal court shall have been entered (i) in connection with this Agreement, the
Merger, or any transaction contemplated hereby or (ii) which, in any case, in
the judgment of the Administrative Agent, could reasonably be expected to result
in a Material Adverse Change.
(k) Consents, Licenses, Approvals, etc. The Administrative Agent shall
have received true copies (certified to be such by the Borrower or other
appropriate party) of all consents, licenses and approvals required in
accordance with applicable law, or in accordance with any document, agreement,
instrument or arrangement to which the Borrower, the Guarantors and their
respective Subsidiaries is a party (other than immaterial agreements the breach
of which could not reasonably be expected to result in a Material Adverse
Change), in connection with the execution, delivery, performance, validity and
enforceability of this Agreement and the other Loan Documents. In addition, the
Borrower, the Guarantors and their respective Subsidiaries shall have all such
material consents, licenses and approvals required in connection with the
continued operation of the Borrower, the Guarantors and respective Subsidiaries
and the performance of the Obligations except where the failure to have any of
such material consents, licenses and approvals could not, individually or in the
aggregate, result in a Material Adverse Change.
(l) Hedging Arrangements. The Borrower shall have entered into the
Hydrocarbon Hedge Agreements and the Interest Hedge Agreements required by
Section 5.12.
(m) Material Contracts. The Borrower shall have delivered or made
available to the Administrative Agent copies of all material contracts,
agreements or instruments listed on the attached Schedule 4.20 and on Schedules
5.12(a) and 5.13(b) of the Merger Agreement.
(n) Merger. (i) Simultaneously with or on or before the making of the
initial Advances, the Merger shall have been consummated in accordance with the
terms of the Merger Agreement and applicable law and (ii) none of the terms or
conditions to closing of any party set forth in the Merger Agreement shall have
been, without the prior written consent of the Administrative Agent (which
consent shall not be unreasonably withheld or delayed), amended or supplemented,
and all conditions stated therein shall have been satisfied without waiver,
43
unless either (A) such amendment, supplement or waiver has been consented to in
writing by the Administrative Agent and the Arrangers, or (B) such amendment,
supplement or waiver is immaterial in nature and could not reasonably be
expected to be adverse to the Administrative Agent, the Issuing Lender or the
Lenders.
(o) Ownership of Borrower. On the Closing Date, (i) more than 66% of the
Equity Interests of the Borrower shall be owned directly or indirectly by ACON
Investments, LLC and Riverstone Holdings LLC (or their respective Affiliates but
excluding any portfolio companies of such institutions), and (ii) neither the
Parent nor the Borrower shall be owned, directly or indirectly, by, nor have any
of their respective assets associated with, Enron Corp. or its Affiliates except
for the associations (but not ownership by) set forth on Schedule 3.01(o).
(p) Capitalization of Borrower. The Borrower shall have at least
$100,000,000 common equity capital as of the Closing Date minus an amount (not
to exceed $7,000,000) equal to the distribution made to Holdings (and
subsequently from Holdings to the Parent) on the Closing Date to cover certain
reasonable transactions costs and expenses associated with the Merger.
(q) Minimum Liquidity. The sum of the Borrower's unrestricted cash and
Unused Tranche A Commitment Amount after giving effect to the initial Advances
shall be at least $10,000,000 as of the Closing Date.
(r) Bankruptcy Court Order. The Parent shall have received all necessary
court approvals (which approvals shall include a bankruptcy court order
substantially similar to the form attached to the Merger Agreement filed with
the United States Bankruptcy Court for the Southern District of New York, with
no material amendments, modifications, or supplements to such form) and all
periods for the making of objections to such order or for filing appeals to such
order shall have expired without any such objection or appeal having been filed
that has not been dismissed with prejudice prior to the expiration of such
period.
(s) Liabilities to Enron Corp. and its Affiliates. The Borrower and the
Guarantors shall have no further obligations to Enron Corp. or any of its
Affiliates upon completion of the Merger (other than obligations related to the
drilling program described in the Merger Agreement, the Project Company Note,
the Project Company Mortgage, the letter agreement dated as of January 23, 2004
between the Borrower and Enron North America Corp., the MEGS Obligations,
obligations under the Sales and Purchase Contract dated November 1, 2000 between
the Borrower and Bridgeline Gas Marketing, LLC, and other obligations arising
under the Merger Agreement).
(t) Certain Termination Events. The Enron Corp. Plan shall remain in
effect and no effective date of termination shall have occurred prior to the
Closing Date with respect to such Plan.
(u) Syndication Market. There shall not have occurred since January 21,
2004 a material adverse change in the market conditions for syndicated credit
facilities that in the judgment of the Arrangers could materially impair
syndication of the Commitments.
44
(v) Notice of Borrowing. The Administrative Agent shall have received a
Notice of Borrowing from the Borrower in the form of Exhibit F, with appropriate
insertions and executed by a duly authorized Responsible Officer of the
Borrower.
Section 3.02 Conditions Precedent to All Borrowings. The obligation of
each Lender to make an Advance on the occasion of each Borrowing and of the
Issuing Lender to issue, increase, or extend any Letter of Credit shall be
subject to the further conditions precedent that on the date of such Borrowing
or the date of the issuance, increase, or extension of such Letter of Credit:
(a) the following statements shall be true (and each of the giving of the
applicable Notice of Borrowing or Letter of Credit Application and the
acceptance by the Borrower of the proceeds of such Borrowing or the issuance,
increase, or extension of such Letter of Credit shall constitute a
representation and warranty by the Borrower that on the date of such Borrowing
or on the date of such issuance, increase, or extension of such Letter of
Credit, as applicable, such statements are true):
(i) the representations and warranties contained in Article IV of
this Agreement and the representations and warranties contained in the Security
Instruments, the Guaranties, and each of the other Loan Documents are true and
correct in all material respects on and as of the date of such Borrowing or the
date of the issuance, increase, or extension of such Letter of Credit, before
and after giving effect to such Borrowing or to the issuance, increase, or
extension of such Letter of Credit and to the application of the proceeds from
such Borrowing, as though made on and as of such date, except those
representations and warranties that speak of a certain date, which
representations and warranties were true and correct as of such date; and
(ii) no Default has occurred and is continuing or would result from
such Borrowing or from the application of the proceeds therefrom, or would
result from the issuance, increase, or extension of such Letter of Credit; and
(b) the Administrative Agent shall have received such other approvals,
opinions, or documents reasonably deemed necessary or desirable by any Lender as
a result of circumstances occurring after the date of this Agreement, as any
Lender through the Administrative Agent may reasonably request.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants as follows:
Section 4.01 Corporate Existence; Subsidiaries. The Borrower is a
corporation duly organized and validly existing under the laws of Delaware and
in good standing and qualified to do business in each jurisdiction where its
ownership or lease of Property or conduct of its business requires such
qualification. Each Subsidiary of the Borrower is duly organized, validly
existing, and in good standing under the laws of its jurisdiction of
organization or formation and in good standing and qualified to do business in
each jurisdiction where its ownership or lease of Property or conduct of its
business requires such qualification except where the failure to be so
45
qualified could not reasonably be expected to cause a Material Adverse Change.
As of the date of this Agreement, the Borrower has no Subsidiaries.
Section 4.02 Corporate Power. The execution, delivery, and performance by
the Borrower of this Agreement, the Notes, and the other Loan Documents to which
it is a party and by the Guarantors of the Guaranties and the other Loan
Documents to which they are a party and the consummation of the transactions
contemplated hereby and thereby (a) are within the Borrower's and such
Guarantors' governing powers, (b) have been duly authorized by all necessary
governing action, (c) do not contravene (i) the Borrower's or any Guarantor's
certificate or articles of incorporation, bylaws, limited liability company
agreement, or other similar governance documents or (ii) any law or any
contractual restriction binding on or affecting the Borrower or any Guarantor,
and (d) will not result in or require the creation or imposition of any Lien
prohibited by this Agreement. At the time of the making of each Advance and the
issuance, extension or increase of a Letter of Credit, the receipt by the
Borrower of the proceeds of such Advance and the issuance of such Letter of
Credit for its account, and the use of the proceeds of such Advance and such
Letter of Credit, will be within the Borrower's governing ▇▇▇▇▇▇, ▇▇▇▇ have been
duly authorized by all necessary corporate action, will not contravene (i) the
Borrower's certificate of incorporation, bylaws, or other organizational
documents or (ii) any law or any contractual restriction binding on or affecting
the Borrower and will not result in or require the creation or imposition of any
Lien prohibited by this Agreement.
Section 4.03 Authorization and Approvals. Except for the filing of the
Security Instruments or as contemplated by this Agreement, no consent, order,
authorization, or approval or other action by, and no notice to or filing with,
any Governmental Authority or any other Person is required for the due
execution, delivery, and performance by the Borrower of this Agreement, the
Notes, or the other Loan Documents to which the Borrower is a party or by each
Guarantor of its Guaranty or the other Loan Documents to which it is a party or
the consummation of the transactions contemplated thereby that has not been
obtained or given. At the time of each Borrowing and each issuance, increase or
extension of a Letter of Credit, no authorization or approval or other action
by, and no notice to or filing with, any Governmental Authority will be required
for such Borrowing or such issuance, increase or extension of such Letter of
Credit or the use of the proceeds of such Borrowing or such Letter of Credit.
Section 4.04 Enforceable Obligations. This Agreement, the Notes, and the
other Loan Documents to which the Borrower is a party have been duly executed
and delivered by the Borrower, and the Guaranties and the other Loan Documents
to which each Guarantor is a party have been duly executed and delivered by the
Guarantors. Each Loan Document is the legal, valid, and binding obligation of
the Borrower and each Guarantor which is a party to it enforceable against the
Borrower and each such Guarantor in accordance with its terms, except as such
enforceability may be limited by any applicable bankruptcy, insolvency,
reorganization, moratorium, or similar law affecting creditors' rights generally
and by general principles of equity.
Section 4.05 Financial Statements.
46
(a) The Borrower has delivered to the Administrative Agent and the Lenders
copies of the Financial Statements and the Interim Financial Statements, and the
Financial Statements and the Interim Financial Statements are accurate and
complete in all material respects and present fairly the financial condition of
Borrower and its Subsidiaries as of their respective dates and for their
respective periods in accordance with GAAP. Except as set forth on Schedule
4.05(a), as of the date of the Financial Statements, there were no material
contingent obligations, liabilities for taxes, extraordinary forward or
long-term commitments, or unrealized or anticipated losses of the Borrower or
any of its Subsidiaries, except as disclosed therein and adequate reserves for
such items have been made in accordance with GAAP.
(b) All projections, estimates, and pro forma financial information
furnished by the Borrower were prepared on the basis of assumptions, data,
information, tests, or conditions believed by the Borrower to be reasonable at
the time such projections, estimates, and pro forma financial information were
furnished.
(c) Since the date of the Financial Statements, no event or circumstance
that could cause a Material Adverse Change has occurred.
(d) As of the date of this Agreement, neither the Borrower nor any of its
Subsidiaries has any Debt other than the Debt listed on the attached Schedule
4.05(d).
Section 4.06 True and Complete Disclosure. All factual information
(excluding estimates and forecasts, including those contained in any Engineering
Report) heretofore or contemporaneously furnished by or on behalf of the
Borrower or any of the Guarantors in writing to any Lender or the Administrative
Agent for purposes of or in connection with this Agreement, any other Loan
Document or any transaction contemplated hereby or thereby is, and all other
such factual information hereafter furnished by or on behalf of the Borrower and
the Guarantors in writing to the Administrative Agent or any of the Lenders
shall be, true and accurate in all material respects on the date as of which
such information is dated or certified and does not contain any untrue statement
of a material fact or omit to state any material fact necessary to make the
statements contained therein not misleading at such time.
Section 4.07 Litigation; Compliance with Law.
(a) Except as set forth on Schedule 4.07, there is no pending or, to the
best knowledge of the Borrower, threatened action or proceeding affecting the
Borrower or any of the Guarantors before any court, Governmental Authority or
arbitrator which could reasonably be expected to cause a Material Adverse Change
or which purports to affect the legality, validity, binding effect or
enforceability of this Agreement, any Note, or any other Loan Document.
Additionally, there is no pending or, to the best of the knowledge of the
Borrower, threatened action or proceeding instituted against the Borrower or any
of the Guarantors which seeks to adjudicate the Borrower or any of the
Guarantors as bankrupt or insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief, or composition of
it or its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or seeking the entry of an order for relief
or the appointment of a receiver, trustee or other similar official for it or
for any substantial part of its Property.
47
(b) The Borrower and its Subsidiaries have complied in all material
respects with all material statutes, rules, regulations, orders and restrictions
of any Governmental Authority having jurisdiction over the conduct of their
respective businesses or the ownership of their respective Property, except
where the failure to so comply could not reasonably be expected to cause a
Material Adverse Change and such non-compliance is being contested in good faith
or such reserves as may be required GAAP have been established.
Section 4.08 Use of Proceeds. The proceeds of the Advances will be used by
the Borrower for the purposes described in Section 5.09. The Borrower is not
engaged in the business of extending credit for the purpose of purchasing or
carrying margin stock (within the meaning of Regulation U). No proceeds of any
Advance will be used to purchase or carry any margin stock in violation of
Regulation T, U or X.
Section 4.09 Investment Company Act. Neither the Borrower nor any of the
Guarantors is an "investment company" or a company "controlled" by an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.
Section 4.10 Public Utility Holding Company Act. Neither the Borrower nor
any of the Guarantors 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," within the meaning of the Public Utility
Holding Company Act of 1935, as amended. Neither the Administrative Agent nor
any of the Lenders, solely by virtue of the execution, delivery and performance
of, and the consummation of the transactions contemplated by, the Loan Documents
shall be or become subject to regulation (a) as a "holding company", or an
"affiliate" of a "holding company," within the meaning of the Public Utility
Holding Company Act of 1935, as amended, (b) under the Federal Power Act, as
amended, (c) as a "public utility" or "public service corporation" or the
equivalent under the applicable law of any state, or (d) under the applicable
laws of any state relating to public utilities or public service corporations.
Section 4.11 Taxes.
(a) Reports and Payments. All Returns (as defined below in clause (c) of
this Section) required to be filed by or on behalf of the Borrower, the
Guarantors, or any member of the Controlled Group (hereafter collectively called
the "Tax Group") have been duly filed on a timely basis or appropriate
extensions have been obtained and such Returns are and will be true, complete
and correct in all material respects, except where the failure to so file would
not be reasonably expected to cause a Material Adverse Change; and all Taxes
shown to be payable on the Returns or on subsequent assessments with respect
thereto will have been paid in full on a timely basis, and no other Taxes will
be payable by the Tax Group with respect to items or periods covered by such
Returns, except in each case to the extent of (i) reserves reflected in the
Financial Statements, the Interim Financial Statement or financial statements of
the Borrower delivered to the Administrative Agent pursuant to this Agreement,
or (ii) Taxes that are being contested in good faith. The reserves for accrued
Taxes reflected in the financial statements delivered to the Lenders under this
Agreement are adequate in the aggregate for the payment of all unpaid Taxes,
whether or not disputed, for the period ended as of the date thereof and for any
period prior thereto, and for which the Tax Group may be liable in its own
right, as withholding agent or as a transferee of the assets of, or successor
to, any Person.
48
(b) Taxes Definition. "Taxes" in this Section 4.11 shall mean all taxes,
charges, fees, levies, or other assessments imposed by any federal, state,
local, or foreign taxing authority, including without limitation, income, gross
receipts, excise, real or personal property, sales, occupation, use, service,
leasing, environmental, value added, transfer, payroll, and franchise taxes (and
including any interest, penalties, or additions to tax attributable to or
imposed on with respect to any such assessment).
(c) Returns Definition. "Returns" in this Section 4.11 shall mean any
federal, state, local, or foreign report, estimate, declaration of estimated
Tax, information statement or return relating to, or required to be filed in
connection with, any Taxes, including any information return or report with
respect to backup withholding or other payments of third parties.
Section 4.12 Pension Plans. No Termination Event has occurred with respect
to any Plan that is reasonably likely to result in a Material Adverse Change,
and each Plan has complied with and been administered in all material respects
in accordance with applicable provisions of ERISA and the Code except as is not
reasonably likely to result in a Material Adverse Change. No "accumulated
funding deficiency" (as defined in Section 302 of ERISA) has occurred with
respect to any Plan and there has been no excise tax imposed under Section 4971
of the Code with respect to any Plan except, in each case, as is not reasonably
likely to result in a Material Adverse Change. No Reportable Event has occurred,
whether individually or in the aggregate, with respect to any Multiemployer
Plan, and each Multiemployer Plan has complied with and been administered in all
respects with applicable provisions of ERISA and the Code except, in each case,
as is not reasonably likely to result in a Material Adverse Change. Except with
respect to the Pre-Closing Plans, the present value of all benefits vested under
each Plan (based on the assumptions used to fund such Plan) did not, as of the
last annual valuation date applicable thereto, exceed the value of the assets of
such Plan allocable to such vested benefits by an amount that could reasonably
be expected to give rise to a Material Adverse Change. Neither the Borrower nor
any member of the Controlled Group has had a complete or partial withdrawal from
any Multiemployer Plan for which the Borrower has any material withdrawal
liability. As of the most recent valuation date applicable thereto, neither the
Borrower nor any of its ERISA Affiliates would become subject to any liability
under ERISA if the Borrower or any of its ERISA Affiliates has received notice
that any Multiemployer Plan is insolvent or in reorganization except as is not
reasonably likely to result in a Material Adverse Change. Based upon GAAP
existing as of the date of this Agreement and current factual circumstances, the
Borrower has no reason to believe that the annual cost during the term of this
Agreement to the Borrower or any of its ERISA Affiliates for post-retirement
benefits to be provided to the current and former employees of the Borrower or
any of its ERISA Affiliates under Plans that are welfare benefit plans (as
defined in Section 3(1) of ERISA) could, in the aggregate, reasonably be
expected to cause a Material Adverse Change. No event has occurred which causes
Borrower or any its ERISA Affiliates to become a "successor employer" under
COBRA and the regulations thereunder with respect to any employee welfare
benefit plan of any member of the Controlled Group other than the Borrower or
its ERISA Affiliates' employee welfare benefit plans which could reasonably be
expected to result in a Material Adverse Change.
Section 4.13 Condition of Property; Casualties. Each of the Borrower and
the Guarantors has good and marketable title to all of its Properties that
constitute Collateral as is customary in the oil and gas industry in all
material respects, free and clear of all Liens except
49
for Permitted Liens. The material personal Properties of the Borrower and its
Subsidiaries used or to be used in the continuing operations of the Borrower and
each of its Subsidiaries are in good repair, working order and condition
(ordinary wear and tear excepted). Since the date of the Financial Statements,
neither the business nor the material Properties of the Borrower and each of the
Guarantors, taken as a whole, has been materially and adversely affected as a
result of any fire, explosion, earthquake, flood, drought, windstorm, accident,
strike or other labor disturbance, embargo, requisition or taking of Property or
cancellation of contracts, Permits, or concessions by a Governmental Authority,
riot, activities of armed forces, or acts of God or of any public enemy.
Section 4.14 No Burdensome Restrictions; No Defaults.
(a) Neither the Borrower nor any Guarantor is a party to any indenture,
loan, or credit agreement or any lease or other agreement or instrument or
subject to any charter or corporate restriction or provision of applicable law
or governmental regulation that could reasonably be expected to cause a Material
Adverse Change. Neither the Borrower nor any of its Subsidiaries is in default
under or with respect to any contract, agreement, lease, or other instrument to
which the Borrower or any Subsidiary is a party and which could reasonably be
expected to cause a Material Adverse Change or under any agreement in connection
with any Debt having an aggregate outstanding principal balance of $2,000,000 or
more, unless such default is being contested in good faith and such reserves as
may be required by GAAP have been established. Neither the Borrower nor any of
its Subsidiaries has received any notice of default under any material contract,
agreement, lease, or other instrument to which the Borrower or such Subsidiary
is a party a copy of which has not been delivered to the Administrative Agent.
(b) No Default has occurred and is continuing.
Section 4.15 Environmental Condition.
(a) Permits, Etc. The Borrower and the Guarantors (i) have obtained all
Environmental Permits necessary for the ownership and operation of their
respective Properties and the conduct of their respective businesses except for
any Environmental Permit the failure of the Borrower or any Guarantor to have
could not reasonably be expected to cause a Material Adverse Change; (ii) have
at all times been and are in material compliance with all terms and conditions
of such Permits and with all other material requirements of applicable
Environmental Laws; (iii) have not received notice of any violation or alleged
violation of any Environmental Law or Permit that has not been resolved or that
could reasonably be expected to cause a Material Adverse Change; and (iv) are
not subject to any actual or contingent Environmental Claim, which could
reasonably be expected to cause a Material Adverse Change.
(b) Certain Liabilities. To the Borrower's actual knowledge, none of the
present or previously owned or operated Property of the Borrower or any
Guarantor or of any of their former Subsidiaries, wherever located, (i) has been
placed on or proposed to be placed on the National Priorities List, the
Comprehensive Environmental Response Compensation Liability Information System
list, or their state or local analogs, or have been otherwise investigated,
designated, listed, or identified by a Governmental Authority as a potential
site for removal, remediation, cleanup, closure, restoration, reclamation, or
other response activity under any
50
Environmental Laws that has not been resolved and could reasonably be expected
to result in a Material Adverse Change; (ii) is subject to a Lien, arising under
or in connection with any Environmental Laws, that attaches to any revenues or
to any Property owned or operated by the Borrower or any of the Guarantors,
wherever located, which could reasonably be expected to cause a Material Adverse
Change; or (iii) has been the site of any Release of Hazardous Substances or
Hazardous Wastes from present or past operations which has caused at the site or
at any third-party site any condition that has resulted in or could reasonably
be expected to result in the need for Response that would cause a Material
Adverse Change.
(c) Certain Actions. Without limiting the foregoing in this Section 4.14,
(i) all necessary notices have been properly filed, and no further action is
required under current Environmental Law as to each Response or other
restoration or remedial project undertaken by the Borrower or the Guarantors or
any of their former Subsidiaries on any of their presently or formerly owned or
operated Property except for any filing or other action that if not made or
taken could not reasonably be expected to cause a Material Adverse Change and
(ii) the present and, to the Borrower's best knowledge, future liability, if
any, of the Borrower and the Guarantors which could reasonably be expected to
arise in connection with requirements under Environmental Laws will not result
in a Material Adverse Change.
Section 4.16 Permits, Licenses, Etc. The Borrower and the Guarantors
possess all authorizations, Permits, licenses, patents, patent rights or
licenses, trademarks, trademark rights, trade names rights and copyrights which
are material to the conduct of their business. The Borrower and the Guarantors
manage and operate their business in accordance with all applicable Legal
Requirements and good industry practices, except to the extent the failure to do
so could not reasonably be expected to cause a Material Adverse Change.
Section 4.17 Gas Contracts. Neither the Borrower nor any of the
Guarantors, as of the date hereof, (a) is obligated in any material respect by
virtue of any prepayment made under any contract containing a "take-or-pay" or
"prepayment" provision or under any similar agreement to deliver hydrocarbons
produced from or allocated to any of the Borrower's and its Subsidiaries' Oil
and Gas Properties at some future date without receiving full payment therefor
at the time of delivery, or (b) except as has been disclosed to the
Administrative Agent, has produced gas, in any amount, subject to, and none of
the Borrower's and the Guarantors' Oil and Gas Properties is subject to, any
balancing rights of third parties or subject to balancing duties under
governmental requirements, in each case other than in the ordinary course of
business and which does not result in the Borrower or any of its Subsidiaries
having net aggregate liability in excess of $4,000,000 at any time (net of
balancing receivables or assets owing by third parties to the Borrower or such
Subsidiaries).
Section 4.18 Liens; Titles, Leases, Etc. None of the Property of the
Borrower or any of the Guarantors is subject to any Lien other than Permitted
Liens. On the date of this Agreement, all governmental actions and all other
filings, recordings, registrations, third party consents and other actions which
are necessary to create and perfect the Liens provided for in the Security
Instruments will have been made, obtained and taken in all relevant
jurisdictions (other than filings of the Mortgages and any financing statements
contemplated by the Security Instruments, which filings shall occur promptly
after the date of this Agreement). There exists no default or event of default
or circumstance which with the giving of notice or lapse of time or both would
51
give rise to a default under any of such leases or agreements which could
reasonably be expected to cause a Material Adverse Change. Neither the Borrower
nor any of the Guarantors is a party to any agreement or arrangement (other than
this Agreement, the Security Instruments and the Project Company Mortgage), or
subject to any order, judgment, writ or decree, which either restricts or
purports to restrict its ability to grant Liens to secure the Obligations
against their respective assets or Properties (other than (a) any agreement
prohibiting the granting of, or requiring consent or notice to grant, a Lien on
such agreement only, (b) the Merger Agreement and the related transaction
documents, and (c) the Project Company Note and the Project Company Mortgage).
Section 4.19 Solvency. The Borrower is Solvent.
Section 4.20 Hedging Agreements. Schedule 4.20 sets forth, as of the date
hereof, a true and complete list of all Interest Hedge Agreements, Hydrocarbon
Hedge Agreements, and any other Hedge Contract of the Borrower and each
Guarantor, the material terms thereof (including the type, term, effective date,
termination date and notional amounts or volumes), the net ▇▇▇▇ to market value
thereof, all credit support agreements relating thereto (including any margin
required or supplied), and the counterparty to each such agreement.
Section 4.21 Material Agreements. Schedules 5.12(a) and 5.13(b) of the
Merger Agreement set forth a complete and correct list of all material
agreements, leases, indentures, purchase agreements, obligations in respect of
letters of credit, guarantees, joint venture agreements, and other instruments
in effect or to be in effect as of the date hereof providing for, evidencing,
securing or otherwise relating to any Debt or other material obligations of the
Borrower or any of its Subsidiaries. The Borrower has heretofore delivered or
made available to the Administrative Agent a complete and correct copy of all
such material credit agreements, indentures, purchase agreements, contracts,
letters of credit, guarantees, joint venture agreements, or other instruments,
including any modifications or supplements thereto, as in effect on the date
hereof.
ARTICLE V
AFFIRMATIVE COVENANTS
So long as any Note or any amount under any Loan Document shall remain
unpaid, any Letter of Credit shall remain outstanding, or any Lender shall have
any Commitment hereunder, the Borrower agrees, unless the Required Lenders shall
otherwise consent in writing, to comply with the following covenants.
Section 5.01 Compliance with Laws, Etc. The Borrower shall comply, and
cause each of its Subsidiaries to comply, in all material respects with all
Legal Requirements. Without limiting the generality and coverage of the
foregoing, the Borrower shall comply, and shall cause each of its Subsidiaries
to comply, in all material respects, with all Environmental Laws and all laws,
regulations, or directives with respect to equal employment opportunity and
employee safety in all jurisdictions in which the Borrower, or any of its
Subsidiaries do business; provided, however, that this Section 5.01 shall not
prevent the Borrower or any of its Subsidiaries from, in good faith and with
reasonable diligence, contesting the validity or application of any such laws
52
or regulations by appropriate legal proceedings. Without limitation of the
foregoing, the Borrower shall, and shall cause each of its Subsidiaries to, (a)
maintain and possess all authorizations, Permits, licenses, trademarks, trade
names, rights and copyrights which are necessary to the conduct of its business
and (b) obtain, as soon as practicable, all consents or approvals required from
any states of the United States (or other Governmental Authorities) necessary to
grant the Administrative Agent an Acceptable Security Interest in the Borrower's
and its Subsidiaries' Proven Reserves and related Oil and Gas Properties.
Section 5.02 Maintenance of Insurance.
(a) The Borrower shall, and shall cause each of its Subsidiaries to,
procure and maintain or shall cause to be procured and maintained continuously
in effect policies of insurance in form and amounts and issued by companies,
associations or organizations reasonably satisfactory to the Administrative
Agent covering such casualties, risks, perils, liabilities and other hazards
reasonably required by the Administrative Agent and as is customary in the oil
and gas industry. In addition, the Borrower shall, and shall cause each of its
Subsidiaries to, comply with all requirements regarding insurance contained in
the Security Instruments.
(b) All certified copies of policies or certificates thereof, and
endorsements and renewals thereof shall be delivered to and retained by the
Administrative Agent. All policies of insurance for which the Borrower or any of
its Subsidiaries is the beneficiary shall either have attached thereto a
Lender's loss payable endorsement for the benefit of the Administrative Agent,
as loss payee in form reasonably satisfactory to the Administrative Agent or
shall name the Administrative Agent as an additional insured, as applicable. All
amounts paid under such policies in connection with such loss payable
endorsement shall be paid to the Administrative Agent for the benefit of itself,
the Issuing Lender and the Lenders; provided that, if the amount of the loss
incurred by the Borrower or its Subsidiaries (i.e. net to the interest of the
Borrower or any such Subsidiary) in respect of any event covered by such
policies is less than $10,000,000, then so long as no Default or Event of
Default shall have occurred and be continuing, the Administrative Agent shall
remit such insurance proceeds paid in respect of such event to the Borrower so
long as the Borrower agrees to use such proceeds for the repair or replacement
the damaged or destroyed Property or to reinvest in Properties used in the
Borrower's business. The Borrower shall furnish the Administrative Agent with a
certificate of insurance or a certified copy of all policies of insurance
required. All policies or certificates of insurance shall set forth the
coverage, the limits of liability, the name of the carrier, the policy number,
and the period of coverage. All such policies shall contain a provision that
notwithstanding any contrary agreements between the Borrower, its Subsidiaries,
and the applicable insurance company, such policies will not be canceled,
allowed to lapse without renewal, surrendered or amended (which provision shall
include any reduction in the scope or limits of coverage) without at least 10
days' prior written notice to the Administrative Agent. In the event that,
notwithstanding the "lender's loss payable endorsement" requirement of this
Section 5.02, the proceeds of any insurance policy described above are paid to
the Borrower or a Subsidiary, the Borrower shall deliver such proceeds to the
Administrative Agent immediately upon receipt.
Section 5.03 Preservation of Corporate Existence, Etc. The Borrower shall
preserve and maintain, and cause each of its Subsidiaries to preserve and
maintain, its corporate or limited
53
liability company, as applicable, existence, rights, franchises, and privileges
in the jurisdiction of its incorporation or organization, as applicable, and
qualify and remain qualified, and cause each such Subsidiary to qualify and
remain qualified, as a foreign corporation in each jurisdiction in which
qualification is necessary or desirable in view of its business and operations
or the ownership of its Properties, and, in each case, where failure to qualify
or preserve and maintain its rights and franchises could reasonably be expected
to cause a Material Adverse Change.
Section 5.04 Payment of Taxes, Etc. The Borrower shall pay and discharge,
and cause each of its Subsidiaries to pay and discharge, before the same shall
become delinquent, (a) all taxes, assessments, and governmental charges or
levies imposed upon it or upon its income or profits or Property that are
material in amount, prior to the date on which penalties attach thereto and (b)
all lawful claims that are material in amount which, if unpaid, might by law
become a Lien upon its Property; provided, however, that neither the Borrower
nor any such Subsidiary shall be required to pay or discharge any such tax,
assessment, charge, levy, or claim which is being contested in good faith and by
appropriate proceedings, and with respect to which reserves in conformity with
GAAP have been provided.
Section 5.05 Visitation Rights. At any reasonable time and from time to
time, upon reasonable notice and during regular business hours, the Borrower
shall, and shall cause its Subsidiaries to, permit the Administrative Agent and
any Lender or any of their respective agents or representatives thereof, to (a)
examine and make copies of and abstracts from the records and books of account
of, and visit and inspect at their reasonable discretion the Properties of, the
Borrower and any such Subsidiary operated by the Borrower or any of its
Subsidiaries during regular business hours, at the Administrative Agent's sole
risk and at the expense of the Borrower (except that, if any Lender makes more
than one such inspection during any calendar year and no Default shall exist at
the time of such inspections, then such Lender shall pay for such additional
inspections during such period), and (b) discuss the affairs, finances and
accounts of the Borrower and any such Subsidiary with any of their respective
officers or directors; provided that in no event shall the Borrower or any
Subsidiary be required to disclose any information (i) which would cause the
Borrower or such Subsidiary to be in violation of Applicable Law, (ii) which
would cause the Borrower or any of its Subsidiaries to breach a confidentiality
agreement to which any of them is bound, or (iii) if the disclosure thereof
which would jeopardize any attorney-client or attorney work product privilege
available to the Borrower or any of its Subsidiaries. In connection with the
access provided pursuant to this Section 5.05, the Administrative Agent and
Lenders shall use commercially reasonable efforts to minimize any disruption of
the business of Borrower, its Subsidiaries and its Affiliates.
Section 5.06 Reporting Requirements. The Borrower shall furnish to the
Administrative Agent and each Lender:
(a) Annual Financials. (i) As soon as available and in any event not later
than 90 days after the end of each fiscal year of the Borrower and its
consolidated Subsidiaries (or, if the Borrower is a reporting company under the
Securities Exchange Act of 1934, not later than the date that is 20 days after
the date required by the Securities and Exchange Commission for the delivery of
annual financial statements (without giving effect to any extensions granted
therefor)), (A) a copy of the annual audit report for such year for the Borrower
and its consolidated Subsidiaries, including therein the Borrower's and its
consolidated Subsidiaries'
54
balance sheets as of the end of such fiscal year and the Borrower's and its
consolidated Subsidiaries' statements of income, cash flows, and retained
earnings, in each case certified by Deloitte and Touche or other independent
certified public accountants of national standing reasonably acceptable to the
Administrative Agent and including any management letters delivered by such
accountants to the Borrower or any Subsidiary in connection with such audit, (B)
a certificate of such accounting firm to the Administrative Agent and the
Lenders stating that, in the course of the regular audit of the business of the
Borrower and its consolidated Subsidiaries, which audit was conducted by such
accounting firm in accordance with generally accepted auditing standards, such
accounting firm has obtained no knowledge that a Default has occurred and is
continuing, or if, in the opinion of such accounting firm, a Default has
occurred and is continuing, a statement as to the nature thereof, and (C) a
Compliance Certificate executed by a Responsible Officer of the Borrower and
(ii) a copy of the unaudited annual consolidating financial statements of each
of its Subsidiaries, including therein such Subsidiary's balance sheet and
statements of income, cash flows, and retained earnings for such fiscal year;
(b) Quarterly Financials. As soon as available and 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 Borrower and its consolidated Subsidiaries (or, if the
Borrower is a reporting company under the Securities Exchange Act of 1934, not
later than the date that is 10 days after the date required by the Securities
and Exchange Commission for the delivery of quarterly financial statements
(without giving effect to any extensions granted therefor)), (i) the unaudited
balance sheet and the statements of income, cash flows, and retained earnings of
each such Person for the period commencing at the end of the previous year and
ending with the end of such fiscal quarter, all in reasonable detail and duly
certified with respect to such consolidated statements (subject to year-end
audit adjustments) by a Responsible Officer of the Borrower as having been
prepared in accordance with GAAP; (ii) a Compliance Certificate executed by the
Responsible Officer of the Borrower; and (iii) an aging schedule of all
receivables and payables of Borrower and its Subsidiaries on a consolidated and
consolidating basis in summary form, certified by an authorized officer of
Borrower, which reflects aging, on an aggregate basis, of receivables which are
current or 30, 60, or 90 days past due from the date of invoice with respect
thereto and aging, on an aggregate basis, of payables which are current or 30,
60, or 90 days past due. Additionally, as soon as available and in any event not
later than 45 days after the end of the second and fourth fiscal quarters of
each fiscal year of the Borrower and its Subsidiaries, a capital budget in form
reasonably satisfactory to the Administrative Agent for the four-quarter period
beginning with the fiscal quarter in which such budget is required to be
delivered; provided that the Borrower shall also deliver such a budget within 45
days after the first fiscal quarter of 2004 for the Borrower and its
Subsidiaries.
(c) Production Reports. As soon as available and in any event within 45
days after the end of each calendar quarter, commencing with the calendar
quarter ending March 31, 2004, a report certified by a Responsible Officer of
the Borrower in form and substance satisfactory to the Administrative Agent
prepared by the Borrower covering the Proven Reserves of the Borrower and its
Subsidiaries and detailing on a monthly basis (i) the production, revenue, and
price information and associated operating expenses for each such month, (ii)
any changes to any producing reservoir, production equipment, or producing well
during each such month, which changes could cause a Material Adverse Change, and
(iii) any sales of the Borrower's or any Subsidiaries' Oil and Gas Properties
during such quarter;
55
(d) Defaults. As soon as possible and in any event within five days after
(i) the occurrence of any Default or (ii) the occurrence of any default under
any instrument or document evidencing Debt of the Borrower or any Subsidiary
exceeding $2,000,000 in principal amount, in each case known to any officer of
the Borrower or any of its Subsidiaries which is continuing on the date of such
statement, a statement of a Responsible Officer of the Borrower setting forth
the details of such Default or default, as applicable, and the actions which the
Borrower or such Subsidiary has taken and proposes to take with respect thereto;
(e) Termination Events. As soon as possible and in any event (i) within 30
days after the Borrower or any ERISA Affiliate knows or has reason to know that
any Termination Event described in clause (a) of the definition of Termination
Event with respect to any Plan has occurred, and (ii) except as set forth in
Schedule 5.06(e), within five (5) days after the Borrower or any ERISA Affiliate
knows or has reason to know that any other Termination Event with respect to any
Plan has occurred, a statement of a Responsible Officer of the Borrower
describing such Termination Event and the action, if any, which the Borrower or
such ERISA Affiliate proposes to take with respect thereto;
(f) Termination of Plans. Promptly and in any event within two Business
Days after receipt thereof by the Borrower or any ERISA Affiliate from the PBGC,
copies of each notice received by the Borrower or any such ERISA Affiliate of
the PBGC's intention to terminate any Plan or to have a trustee appointed to
administer any Plan;
(g) Other ERISA Notices. Promptly and in any event within five Business
Days after receipt thereof by the Borrower or any ERISA Affiliate from a
Multiemployer Plan sponsor, a copy of each notice received by the Borrower or
any ERISA Affiliate concerning the imposition or amount of withdrawal liability
pursuant to Section 4202 of ERISA. Promptly and in any event within five (5)
days after Borrower or any of its ERISA Affiliates knows or has reason to know
that any event has occurred that causes Borrower or any of its ERISA Affiliates
to become a "successor employer" under COBRA and the regulations thereunder with
respect to any employee welfare benefit plan of any member of the Controlled
Group other than the Borrower or its ERISA Affiliates' employee welfare benefit
plans;
(h) Environmental Notices. Promptly and in any event within five Business
Days after the receipt thereof by the Borrower or any of its Subsidiaries, a
copy of any form of request, notice, summons or citation received from the
Environmental Protection Agency, or any other Governmental Authority, concerning
(i) violations or alleged violations of Environmental Laws, which seeks to
impose liability therefor and could cause a Material Adverse Change, (ii) any
action or omission on the part of the Borrower or any Subsidiary or any of their
former Subsidiaries in connection with Hazardous Waste or Hazardous Substances
which could reasonably result in the imposition of liability therefor that could
cause a Material Adverse Change, including without limitation any information
request related to, or notice of, potential responsibility under CERCLA, or
(iii) the filing of a Lien upon, against or in connection with the Borrower or
any Subsidiary or their former Subsidiaries, or any of their leased or owned
Property, wherever located;
(i) Other Governmental Notices. Promptly and in any event within five
Business Days after receipt thereof by the Borrower or any Subsidiary, a copy of
any notice, summons,
56
citation, or proceeding seeking to modify in any material respect, revoke, or
suspend any material contract, license, permit or agreement with any
Governmental Authority;
(j) Material Changes. Promptly and in any event within five Business Days
after the knowledge thereof by the Borrower or any of its Subsidiaries, written
notice of any condition or event of which the Borrower has knowledge, which
condition or event has resulted or may reasonably be expected to result in (i) a
Material Adverse Change or (ii) a breach of or noncompliance with any material
term, condition, or covenant of any material contract to which the Borrower or
any of its Subsidiaries is a party or by which they or their Properties may be
bound which breach or noncompliance could reasonably be expected to result in a
Material Adverse Change;
(k) Disputes, Etc. Promptly and in any event within five Business Days
after the receipt thereof by the Borrower or any of its Subsidiaries, written
notice of (i) any claims, legal or arbitration proceedings, proceedings before
any Governmental Authority, or disputes, or to the knowledge of the Borrower
threatened, or affecting the Borrower, or any of its Subsidiaries which, if
adversely determined, could reasonably be expected to cause a Material Adverse
Change, or any material labor controversy of which the Borrower or any of its
Subsidiaries has knowledge resulting in or reasonably considered to be likely to
result in a strike against the Borrower or any of its Subsidiaries and (ii) any
claim, judgment, Lien or other encumbrance (other than a Permitted Lien)
affecting any Property of the Borrower or any Subsidiary if the value of the
claim, judgment, Lien, or other encumbrance affecting such Property shall exceed
$500,000;
(l) Other Accounting Reports. Promptly and in any event within five
Business Days after receipt thereof, a copy of each other report or letter
submitted to the Borrower or any Subsidiary by independent accountants in
connection with any annual, interim or special audit made by them of the books
of the Borrower and its Subsidiaries, and a copy of any response by the Borrower
or any Subsidiary of the Borrower, or the Board of Managers (or other applicable
governing body) of the Borrower or any Subsidiary of the Borrower, to such
letter or report;
(m) Notices Under Other Loan Agreements. Promptly and in any event within
five Business Days after the furnishing thereof, copies of any statement, report
or notice furnished to any Person pursuant to the terms of any 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 5.06; and
(n) Other Information. Such other information respecting the business or
Properties, or the condition or operations, financial or otherwise, of the
Borrower or any of its Subsidiaries, as any Lender through the Administrative
Agent may from time to time reasonably request. The Administrative Agent agrees
to provide the Lenders with copies of any material notices and information
delivered solely to the Administrative Agent pursuant to the terms of this
Agreement.
Section 5.07 Maintenance of Property. The Borrower shall, and shall cause
each of its Subsidiaries to, maintain their owned, leased, or operated Property
necessary to the conduct of its business in good condition and repair (ordinary
wear and tear excepted).
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Section 5.08 Agreement to Pledge. The Borrower shall, and shall cause each
Subsidiary to, grant to the Administrative Agent an Acceptable Security Interest
in all Proven Reserves and all personal Property of the Borrower or any
Subsidiary now owned or hereafter acquired promptly after receipt of a written
request from the Administrative Agent, excluding, however, while the Project
Company Note is outstanding, the Property encumbered under the Project Company
Mortgage.
Section 5.09 Use of Proceeds. The Borrower shall use the proceeds of the
Advances and Letters of Credit to make the Closing Distribution, to provide
funds to the Parent to be used to satisfy obligations with respect to the
Merger, to refinance any Debt outstanding on the Closing Date, and for general
corporate purposes.
Section 5.10 Title Opinions. The Borrower shall from time to time upon the
reasonable request of the Administrative Agent after each scheduled
redetermination of the Borrowing Base commencing with the Borrowing Base
redetermination scheduled in connection with the July 1, 2004 Engineering
Report, take such actions and execute and deliver such documents and instruments
as the Administrative Agent shall require to ensure that the Administrative
Agent shall have received satisfactory title opinions (including, if requested,
supplemental or new title opinions addressed to it) or other title evidence,
which title opinions or other title evidence shall be in form and substance
acceptable to the Administrative Agent in its sole discretion and shall include,
if title opinions are requested by the Administrative Agent, opinions regarding
the before payout and after payout ownership interests held by the Borrower and
the Borrower's Subsidiaries, for all ▇▇▇▇▇ located on the Oil and Gas Properties
covered thereby as to the ownership of Oil and Gas Properties of the Borrower
and its Subsidiaries, and reflecting that the Administrative Agent has an
Acceptable Security Interest in such Oil and Gas Properties of the Borrower and
its Subsidiaries, constituting at least 70% of the present value of the Proven
Reserves of the Borrower and its Subsidiaries and at least 80% of the present
value of the proved developed producing reserves of the Borrower and its
Subsidiaries as determined by the Administrative Agent.
Section 5.11 Further Assurances; Cure of Title Defects. Promptly upon
request, the Borrower shall, and shall cause each Subsidiary to, cure any
defects in the creation and issuance of the Notes and the execution and delivery
of the Security Instruments and this Agreement. The Borrower hereby authorizes
the Lenders or the Administrative Agent to file any financing statements without
the signature of the Borrower to the extent permitted by applicable law in order
to perfect or maintain the perfection of any security interest granted under any
of the Loan Documents. The Borrower at its expense will, and will cause each
Subsidiary to, promptly execute and deliver to the Administrative Agent upon
request all such other documents, agreements and instruments to comply with or
accomplish the covenants and agreements of the Borrower or any Subsidiary, as
the case may be, in the Security Instruments and this Agreement, or to further
evidence and more fully describe the collateral intended as security for the
Notes, or to correct any omissions in the Security Instruments, or to state more
fully the security obligations set out herein or in any of the Security
Instruments, or to perfect, protect or preserve any Liens created pursuant to
any of the Security Instruments, or to make any recordings, to file any notices
or obtain any consents, all as may be necessary or appropriate in connection
therewith or to enable the Administrative Agent to exercise and enforce its
rights and remedies with respect to any Collateral. Within 60 days after (a) a
request by the Administrative Agent or
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the Lenders to cure any title defects or exceptions which are not Permitted
Liens raised by such information or (b) a notice by the Administrative Agent
that the Borrower has failed to comply with Section 5.10 above, the Borrower
shall (i) cure such title defects or exceptions which are not Permitted Liens or
substitute acceptable Oil and Gas Properties with no title defects or exceptions
except for Permitted Liens covering Collateral of an equivalent value and (ii)
deliver to the Administrative Agent satisfactory title evidence (including, if
requested by the Administrative Agent, supplemental or new title opinions
meeting the foregoing requirements) in form and substance acceptable to the
Administrative Agent in its reasonable business judgment as to the Borrower's
and its Subsidiaries' ownership of such Oil and Gas Properties and the
Administrative Agent's Liens and security interests therein as are required to
maintain compliance with Section 5.10.
Section 5.12 Hedging Arrangements. The Borrower shall, on or before the
date of this Agreement, enter into and maintain Interest Hedge Agreements in
form and substance satisfactory to, and covering a notional amount satisfactory
to, the Administrative Agent. Additionally, the Borrower shall enter into and
maintain Hydrocarbon Hedge Agreements in form and substance satisfactory to, and
covering notional volumes and periods satisfactory to, the Administrative Agent.
ARTICLE VI
NEGATIVE COVENANTS
So long as any Note or any amount under any Loan Document shall remain
unpaid, any Letter of Credit shall remain outstanding, or any Lender shall have
any Commitment, the Borrower agrees, unless the Required Lenders otherwise
consent in writing, to comply with the following covenants.
Section 6.01 Liens, Etc. The Borrower shall not create, assume, incur, or
suffer to exist, or permit any of its Subsidiaries to create, assume, incur, or
suffer to exist, any Lien on or in respect of any of its Property whether now
owned or hereafter acquired, or assign any right to receive income, except that
the Borrower and its Subsidiaries may create, incur, assume, or suffer to exist:
(a) Liens securing the Obligations;
(b) the Liens under the Project Company Mortgage;
(c) Liens listed on the attached Schedule 6.01;
(d) purchase money Liens and Liens in connection with Capital Leases, in
each case upon or in any equipment acquired or held by the Borrower or any of
its Subsidiaries in the ordinary course of business; provided that, the Debt
secured by such Liens (i) was incurred solely for the purpose of financing the
acquisition of such equipment, and does not exceed the aggregate purchase price
of such equipment, (ii) is secured only by such equipment and not by any other
assets of the Borrower and its Subsidiaries, and (iii) is not increased in
amount;
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(e) Liens for taxes, assessments, or other governmental charges or levies
not yet due or that (provided that foreclosure, sale, or other similar
proceedings shall not have been initiated) are being contested in good faith by
appropriate proceedings, and such reserve as may be required by GAAP shall have
been made therefor;
(f) Liens in favor of vendors, carriers, warehousemen, repairmen,
mechanics, workmen, materialmen, construction, or similar Liens arising by
operation of law in the ordinary course of business in respect of obligations
that are not yet due or that are being contested in good faith by appropriate
proceedings, provided that such reserves as may be required by GAAP shall have
been made therefor;
(g) Liens to operators and non-operators under joint operating agreements
arising in the ordinary course of the business of the Borrower or the relevant
Subsidiary to secure amounts owing, which amounts are not yet due or are being
contested in good faith by appropriate proceedings, if such reserve as may be
required by GAAP shall have been made therefor;
(h) royalties, overriding royalties, net profits interests, production
payments, reversionary interests, calls on production, preferential purchase
rights and other burdens on or deductions from the proceeds of production, that
do not secure Debt for borrowed money and, with respect to the Oil and Gas
Properties covered by the Mortgages, that are taken into account in computing
the net revenue interests and working interests of the Borrower or any of its
Subsidiaries warranted in the Security Instruments;
(i) Liens arising in the ordinary course of business out of pledges or
deposits under workers' compensation laws, unemployment insurance, old age
pensions or other social security or retirement benefits, or similar legislation
or to secure public or statutory obligations of the Borrower;
(j) operating agreements, unitization and pooling agreements and orders,
production handling agreements, processing agreements, transportation
agreements, sales agreements, farmout agreements, gas balancing agreements and
other agreements, in each case that are customary in the oil, gas and mineral
exploration and production business and that are entered into in the ordinary
course of business and that are taken into account in computing the net revenue
interests and working interests of the Borrower or any of its Subsidiaries
warranted in the Security Instruments, to the extent that such Liens do not
materially impair the use of the Property covered by such Lien for the purposes
for which such Property is held by the Borrower or any Subsidiary;
(k) preferential purchase rights, consents to assignments, rights reserved
to or vested in any Governmental Authority or lessor, and rights of set-off and
banker's liens in each case that do not secure Debt;
(l) easements, rights-of-way, restrictions, and other similar
encumbrances, and minor defects in the chain of title that are customarily
accepted in the oil and gas financing industry, none of which interfere with the
ordinary conduct of the business of Borrower or any Subsidiary or materially
detract from the value or use of the Property to which they apply;
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(m) Liens in the form of cash deposits maintained with any Person to
secure obligations owing by the Borrower or any of its Subsidiaries under any
Interest Hedge Agreement or Hydrocarbon Hedge Agreement, which cash deposits
under this clause (m) may not exceed $10,000,000 in the aggregate at any time;
and
(n) other Liens securing Debt permitted under Section 6.02 not exceeding
$2,000,000 in the aggregate at any time.
Section 6.02 Debts, Guaranties, and Other Obligations. The Borrower shall
not, and shall not permit any of its Subsidiaries to, create, assume, suffer to
exist, or in any manner become or be liable in respect of, any Debt except:
(a) Debt of the Borrower and its Subsidiaries under the Loan Documents;
(b) Debt listed on the attached Schedule 4.05(d);
(c) Debt in the form of obligations for the deferred purchase price of
Property or services incurred in the ordinary course of business which are not
yet due and payable or are being contested in good faith by appropriate
proceedings and for which adequate reserves in accordance with GAAP have been
established;
(d) Debt secured by the Liens permitted under paragraph (d) of Section
6.01 in an aggregate amount not to exceed $5,000,000 at any time;
(e) Debt under Hydrocarbon Hedge Agreements or Interest Hedge Agreements
which are not prohibited by the terms of Section 6.14;
(f) Obligations under the Gas Gathering Agreement dated December 29, 1999
between MEGS LLC and the Borrower;
(g) Debt consisting of sureties or bonds provided to any Governmental
Authority or other Person and assuring payment of contingent liabilities of the
Borrower in connection with the operation of the Oil and Gas Properties,
including with respect to plugging, facility removal and abandonment of its Oil
and Gas Properties;
(h) Debt arising pursuant to the Bond Issuance; provided that, concurrent
with the issuance of such Debt, all Tranche B Advances, if any, shall be paid in
full; and
(i) other Debt not exceeding $2,000,000 in the aggregate at any time
outstanding.
Section 6.03 Agreements Restricting Liens and Distributions. The Borrower
shall not, nor shall it permit any of its Subsidiaries to, create, incur, assume
or permit to exist any contract, agreement or understanding (other than this
Agreement and the Security Instruments which in any way (a) prohibits or
restricts the granting, conveying, creation or imposition of any Lien on any of
its Property, whether now owned or hereafter acquired, to secure the Obligations
(other than any contract, agreement or understanding prohibiting or restricting
the granting, conveying, creation or imposition of any Lien solely on such
contract, agreement or understanding), or (b)
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restricts any Subsidiary from paying dividends to the Borrower, or which
requires the consent of or notice to other Persons in connection therewith.
Section 6.04 Merger or Consolidation; Asset Sales. The Borrower shall not,
nor shall it permit any of its Subsidiaries to (a) merge or consolidate with or
into any other Person without the prior consent of all of the Lenders, or (b)
sell, lease, transfer, assign, farm-out, convey, or otherwise dispose of any of
its Property (including, without limitation, any working interest, overriding
royalty interest, production payments, net profits interest, royalty interest,
or mineral fee interest) other than: (i) the sale of Hydrocarbons in the
ordinary course of business; (ii) sales of Property that is not Collateral with
a fair market value for any transaction or related series of transactions not to
exceed $2,500,000; (iii) farm-ins, farm-outs, and other sales or dispositions of
Oil and Gas Properties that do not constitute Proven Reserves, in each case
occurring in the ordinary course of business and consistent with past practices
of the Borrower established prior to the date of this Agreement, and (iv) the
sale or transfer of equipment that is (A) obsolete, worn out, depleted or
uneconomic and disposed of in the ordinary course of business, (B) no longer
necessary for the business of such Person, or (C) contemporaneously replaced by
equipment of at least comparable value and use.
Section 6.05 Restricted Payments; Bond Payments. The Borrower shall not,
nor shall it permit any of its Subsidiaries to, make any Restricted Payments
except that if no Default or Event of Default has occurred or will occur after
giving effect to the making of such Restricted Payment and no Borrowing Base
deficiency of the type described in Section 2.05(b) shall exist before or after
giving effect to the making of such Restricted Payment, (a) the Subsidiaries may
make Restricted Payments to the Borrower, (b) the Borrower may on the Closing
Date (i) make the Closing Distribution and (ii) distribute up to $7,000,000 to
Holdings (which Holdings shall distribute to the Parent) to cover certain
reasonable transaction costs and expenses associated with the Merger, (c) the
Borrower may pay monitoring fees to the Parent or any of its Affiliates during
any fiscal year in an aggregate amount not to exceed 1.5% of the EBITDA of the
Borrower and its Subsidiaries for such fiscal year, (d) the Borrower may make
Restricted Payments in an aggregate amount not to exceed $5,000,000 in any
fiscal year so long as (i) the Tranche B Advances shall have been repaid in full
in cash, and (ii) after giving effect to such Restricted Payment, the sum of the
Borrower's cash and Liquid Investments plus the Unused Tranche A Commitment
Amount equals or exceeds $20,000,000, and (e) at such other times and in such
other amounts as the Required Lenders may consent to in writing. Additionally,
the Borrower may not, and shall not permit its Subsidiaries to, make any
optional prepayments in respect of Debt arising pursuant to the Bond Issuance.
Section 6.06 Investments. The Borrower shall not, nor shall it permit any
of its Subsidiaries to, make or permit to exist any loans, advances, or capital
contributions to, or make any investment in, or purchase or commit to purchase
any stock or other securities or evidences of indebtedness of or interests in
any Person or any assets or business of any Person, including without limitation
any Oil and Gas Properties or assets related to Oil and Gas Properties, except:
(a) Liquid Investments;
62
(b) trade and customer accounts receivable which are for goods furnished
or services rendered in the ordinary course of business and are payable in
accordance with customary trade terms;
(c) expenditures made in the ordinary course of business as operator on
behalf of other working interest owners pursuant to a joint operating agreement
or similar agreement;
(d) capital expenditures made by the Borrower and its Subsidiaries in the
ordinary course of their respective businesses to explore and develop their
respective Oil and Gas Properties;
(e) acquisitions of Property (other than Oil and Gas Properties) in the
ordinary course of business not to exceed $1,000,000 in the aggregate during any
fiscal year of the Borrower;
(f) creation of any additional Subsidiaries in compliance with Section
6.15;
(g) acquisitions of Oil and Gas Properties and related Property (which may
include operations) in an aggregate amount not to exceed $25,000,000 in any
fiscal year; and
(h) other investments, loans or advances not otherwise permitted by this
Section 6.06 in an aggregate amount not to exceed $2,000,000 at any time.
Section 6.07 Affiliate Transactions. The Borrower shall not, nor shall it
permit any of its Subsidiaries to, directly or indirectly, enter into or permit
to exist any transaction or series of transactions (including, but not limited
to, the purchase, sale, lease or exchange of Property, the making of any
investment, the giving of any guaranty, the assumption of any obligation or the
rendering of any service) with any of their Affiliates unless such transaction
or series of transactions is on terms no less favorable to the Borrower or the
Subsidiary, as applicable, than those that could be obtained in a comparable
arm's length transaction with a Person that is not such an Affiliate.
Section 6.08 Compliance with ERISA. Except as could not, in each case or
in the aggregate, reasonably be expected to result in a Material Adverse Change,
the Borrower shall not, nor shall it permit any of its Subsidiaries or ERISA
Affiliates to, directly or indirectly, (a) engage in, or permit any Subsidiary
or ERISA Affiliate to engage in, any transaction in connection with which the
Borrower, any Subsidiary or any ERISA Affiliate could be subjected to either a
civil penalty assessed pursuant to section 502(c), (i) or (l) of ERISA or a tax
imposed by Chapter 43 of Subtitle D of the Code; (b) terminate, or permit any
Subsidiary or ERISA Affiliate to terminate, any Plan in a manner, or take any
other action with respect to any Plan, which could result in any liability to
the Borrower, any Subsidiary or any ERISA Affiliate to the PBGC; (c) fail to
make, or permit any Subsidiary or ERISA Affiliate to fail to make, full payment
when due of all amounts which, under the provisions of any Plan other than a
Pre-Closing Plan, agreement relating thereto or applicable law, the Borrower, a
Subsidiary or any ERISA Affiliate is required to pay as contributions thereto;
(d) permit to exist, or allow any Subsidiary or 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, other than a Pre-Closing Plan; (e) permit, or allow any Subsidiary or
ERISA Affiliate to permit, the actuarial present value of the benefit
liabilities (as "actuarial present value
63
of the benefit liabilities" shall have the meaning specified in section 4041 of
ERISA) under any Plan (other than a Pre-Closing Plan) maintained by the
Borrower, any 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; (f) contribute to or assume an obligation to
contribute to, or permit any Subsidiary or ERISA Affiliate to contribute to or
assume an obligation to contribute to, any Multiemployer Plan; (g) acquire, or
permit any Subsidiary or ERISA Affiliate to acquire, an interest in any Person
that causes such Person to become an ERISA Affiliate with respect to the
Borrower, any Subsidiary or any ERISA Affiliate 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 Subsidiary or 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 Subsidiary or 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 Subsidiary or ERISA Affiliate to
amend, a Plan resulting in an increase in current liability such that the
Borrower, any Subsidiary or any ERISA Affiliate is required to provide security
to such Plan under section 401(a)(29) of the Code; or (k) permit to exist any
occurrence of any Reportable Event or any other event or condition, which
presents a material (in the opinion of the Required Lenders) risk of a
termination by the PBGC of any Plan (other than a Pre-Closing Plan).
Section 6.09 Sale-and-Leaseback. The Borrower shall not, nor shall it
permit any of its Subsidiaries to, sell or transfer to a Person any Property,
whether now owned or hereafter acquired, if at the time or thereafter the
Borrower or a Subsidiary shall lease as lessee such Property or any part thereof
or other Property which the Borrower or a Subsidiary intends to use for
substantially the same purpose as the Property sold or transferred.
Section 6.10 Change of Business. The Borrower shall not, nor shall it
permit any of its Subsidiaries to, make any material change in the character of
its business as an independent oil and gas exploration and production company,
nor will the Borrower or any Subsidiary operate or carry on business in any
jurisdiction other than the United States, including the Gulf of Mexico.
Section 6.11 Organizational Documents, Name Change. The Borrower shall
not, nor shall it permit any of its Subsidiaries to (a) amend, supplement,
modify or restate their articles or certificate of incorporation, bylaws,
limited liability company agreements, or other equivalent organizational
documents, or amend or change its jurisdiction of incorporation, organization or
formation without prior written notice to, and prior consent of, the
Administrative Agent (which consent shall not be unreasonably withheld or
delayed), and (b) amend or change its name without giving the Administrative
Agent 30 days' prior written notice of such name change.
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Section 6.12 Use of Proceeds; Letters of Credit. The Borrower will not
permit the proceeds of any Advance or Letters of Credit to be used for any
purpose other than those permitted by Section 5.09. The Borrower will not engage
in the business of extending credit for the purpose of purchasing or carrying
margin stock (within the meaning of Regulation U). Neither the Borrower nor any
Person acting on behalf of the Borrower has taken or shall take, nor permit any
of the Borrower's Subsidiaries to take any action which might cause any of the
Loan Documents to violate Regulation T, U or X or any other regulation of the
Board of Governors of the Federal Reserve System 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, including
without limitation, the use of the proceeds of any Advance or Letters of Credit
to purchase or carry any margin stock in violation of Regulation T, U or X.
Section 6.13 Gas Imbalances, Take-or-Pay or Other Prepayments. The
Borrower shall not, nor shall it permit any of its Subsidiaries to, allow gas
imbalances, take-or-pay or other prepayments with respect to the Oil and Gas
Properties of the Borrower or any Subsidiary which would require the Borrower or
any Subsidiary to deliver any volumes of their respective Hydrocarbons produced
on a monthly basis from such Oil and Gas Properties at some future time without
then or thereafter receiving full payment therefor, except that the Borrower and
its Subsidiaries may have gas imbalances or take or pay or other similar
obligations of the type described in this Section 6.13 in a net aggregate amount
not to exceed $4,000,000 at any time (net of balancing receivables or assets
owing by third parties to the Borrower or such Subsidiaries).
Section 6.14 Limitation on Speculative Hedging. The Borrower shall not,
nor shall it permit any of its Subsidiaries to, (a) purchase, assume, or hold a
speculative position in any commodities market or futures market or enter into
any Hydrocarbon Hedge Agreement, Interest Hedge Agreement or similar hedge
arrangement for speculative purposes or (b) be party to or otherwise enter into
any Hedge Contract which (i) is entered into for reasons other than as a part of
its normal business operations as a risk management strategy and/or hedge
against changes resulting from market conditions related to the Borrower's
operations, (ii) except with respect to Proven Reserves associated with the
▇▇▇▇▇▇▇▇▇▇ Aldwell Unit located in ▇▇▇▇▇▇ County, Texas, (A) covers notional
volumes in excess of 80% of the production volumes anticipated during the period
such hedge arrangement is in effect and attributable to Proven Reserves of the
Borrower and its Subsidiaries that are categorized as "proved, developed and
producing", or (B) is longer than two years in duration (except that any such
hedge arrangement may be for three years in duration if the notional volumes
covered in the third year of such arrangement, taken together with the notional
volumes covered by other hedging arrangements during such third year, are not in
excess of 60% of such anticipated production volumes), and (iii) with respect to
the Proven Reserves associated with the ▇▇▇▇▇▇▇▇▇▇ Aldwell Unit, (A) covers
notional volumes in excess of 80% of the anticipated production volumes
attributable to Proven Reserves of the Borrower and its Subsidiaries that are
categorized as "proved, developed and producing", or (B) is longer than five
years in duration.
Section 6.15 Additional Subsidiaries. The Borrower shall not, nor shall it
permit any of its Subsidiaries to, create or acquire any additional Subsidiaries
without (a) the prior written consent of the Administrative Agent and the
Required Lenders, (b) such new Subsidiary executing and delivering to the
Administrative Agent, at its request, a Guaranty, a Pledge
65
Agreement, a Security Agreement and a Mortgage, and such other Security
Instruments as the Administrative Agent or the Required Lenders may reasonably
request, and (c) the delivery by the Borrower of any certificates, opinions of
counsel, title opinions or other documents as the Administrative Agent may
reasonably request.
Section 6.16 Account Payables. The Borrower shall not, nor shall it permit
any of its Subsidiaries to, allow any of its trade payables or other accounts
payable to be outstanding for more than 90 days past due (except in cases where
any such trade payable is being disputed in good faith and adequate reserves
under GAAP have been established).
Section 6.17 Current Ratio. The Borrower shall not permit the ratio of, as
of the last day of each fiscal quarter of the Borrower, beginning with the
fiscal quarter ending December 31, 2003, of (a) its current assets to (b) its
current liabilities, to be less (i) 0.75 to 1.00 on December 31, 2003, March 31,
2004, and June 30, 2004 and (ii) 1.00 to 1.00 on September 30, 2004 and on each
December 31, March 31, June 30 and September 30 thereafter. For purposes of this
calculation (A) "current assets" shall include, as of the date of calculation,
the Unused Tranche A Commitment Amount but shall exclude any cash deposited with
or at the request of a counterparty to any Hedge Contract and (B) "current
liabilities" shall exclude, as of the date of calculation, the current portion
of Debt existing under this Agreement.
Section 6.18 Fixed Charge Coverage Ratio. The Borrower shall not permit
the ratio, as of the last day of each fiscal quarter of the Borrower, beginning
with the fiscal quarter ending March 31, 2004, of (a) EBITDA calculated for (i)
in the case of the fiscal quarter ending March 31, 2004, the fiscal quarter then
ended, (ii) in the case of the fiscal quarter ending June 30, 2004, the two
fiscal quarters then ended, (iii) in the case of the fiscal quarter ending
September 30, 2004, the three fiscal quarters then ended, and (iv) thereafter,
the four fiscal quarters then ended to (b) the sum of (i) Interest Expense for
such period, (ii) Maintenance Capital Expenditures for such period, and (iii) an
amount equal to (A) (x) the number of quarters included pursuant to the
applicable sub-clause of clause (a) above, divided by (y) twenty, multiplied by
(B) the outstanding principal amount of the Tranche A Advances on such day, to
be less than 1.20 to 1.00.
Section 6.19 Maximum Debt Ratio. The Borrower shall not permit the ratio,
as of the last day of each fiscal quarter of the Borrower, beginning with the
fiscal quarter ending March 31, 2004, of (a) the consolidated Debt of the
Borrower as of such fiscal quarter end to (b) EBITDA for the four-fiscal quarter
period then ended, to be greater than 1.75 to 1.00; provided that (i) with
respect to the fiscal quarter period ending March 31, 2004, EBITDA shall be
measured by multiplying EBITDA for the three-month period then ended by four,
(ii) with respect to the fiscal quarter period ending June 30, 2004, EBITDA
shall be measured by multiplying EBITDA for the two quarters then ended by two,
and (iii) with respect to the fiscal quarter ending September 30, 2004, EBITDA
shall be measured by multiplying EBITDA for the three quarters then ended by
4/3; provided further that, from and after the date of the Bond Issuance, the
maximum ratio permitted for purposes of compliance with this Section 6.19 shall
be increased from 1.75 to 1.00 to 3.00 to 1.00.
Section 6.20 Maximum Senior Debt Ratio. From and after the date of the
closing of the Bond Issuance, the Borrower shall not permit the ratio, as of the
last day of each fiscal quarter of
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the Borrower, beginning with the fiscal quarter ending March 31, 2004, of (a)
the consolidated Debt of the Borrower as of such fiscal quarter end (other than
Debt incurred pursuant to the Bond Issuance) to (b) EBITDA for the four-fiscal
quarter period then ended, to be greater than 1.75 to 1.00; provided that (i)
with respect to the fiscal quarter period ending March 31, 2004, EBITDA shall be
measured by multiplying EBITDA for the three-month period then ended by four,
(ii) with respect to the fiscal quarter period ending June 30, 2004, EBITDA
shall be measured by multiplying EBITDA for the two quarters then ended by two,
and (iii) with respect to the fiscal quarter ending September 30, 2004, EBITDA
shall be measured by multiplying EBITDA for the three quarters then ended by
4/3.
Section 6.21 Project Company Loan Documents; Merger Documents. The
Borrower shall not amend, modify or supplement the Project Company Note or the
Project Company Mortgage without the consent of the Required Lenders.
Additionally, the Borrower may not amend, modify, supplement or waive any of the
terms of the Merger Agreement and the other related Merger Documents (excluding
the Project Company Note and the Project Company Mortgage which are both
governed by the preceding sentence) without the prior written consent of the
Required Lenders (which consent shall not be unreasonably withheld or delayed)
unless such amendment, modification, supplement or waiver is immaterial in
nature and could not reasonably be expected to be adverse to the Administrative
Agent, the Issuing Lender or the Lenders.
Section 6.22 Enron Corp. Obligations. Notwithstanding anything else in
this Agreement to the contrary, none of the Borrower nor any of its Subsidiaries
shall, without the prior written consent of the Required Lenders, enter into any
agreements with, or have obligations owing to or from, Enron Corp. or any of its
Affiliates other than those agreements and obligations existing on the date of
this Agreement and described on Schedule 3.01(o).
ARTICLE VII
EVENTS OF DEFAULT; REMEDIES
Section 7.01 Events of Default. The occurrence of any of the following
events shall constitute an "Event of Default" under any Loan Document:
(a) Payment. The Borrower shall fail to pay when due any principal when
due or to reimburse any Letter of Credit Obligations, or shall fail to pay any
interest, fees, reimbursements (other than reimbursement of Letter of Credit
Obligations), indemnifications, or other amounts payable hereunder, under the
Notes, or under any other Loan Document within three days of when due;
(b) Representation and Warranties. Any representation or warranty made or
deemed to be made (i) by the Borrower, any Guarantor or any of their respective
Subsidiaries (or any of their respective officers) in this Agreement or in any
other Loan Document, or (ii) by the Borrower, any Guarantor or any of their
respective Subsidiaries (or any of their respective officers) in connection with
this Agreement or any other Loan Document, shall prove to have been incorrect in
any material respect when made or deemed to be made;
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(c) Covenant Breaches. The Borrower, any Guarantor or any of their
respective Subsidiaries shall fail to (i) perform or observe any covenant
contained in Section 5.02(a), Section 5.06(e), Section 5.11 or Article VI of
this Agreement or (ii) fail to perform or observe any other term or covenant set
forth in this Agreement or in any other Loan Document which is not covered by
clause (i) above or any other provision of this Section 7.01 if such failure
shall remain unremedied for 30 days after the occurrence of such breach or
failure;
(d) Cross-Defaults. (i) The Borrower, any Guarantor or any of their
respective Subsidiaries shall fail to pay any principal of or premium or
interest on its Debt which is outstanding in a principal amount of at least
$2,000,000 individually or when aggregated with all such Debt of the Borrower,
any Guarantor or any of their respective Subsidiaries so in default (but
excluding Debt evidenced by the Notes) when the same becomes due and payable
(whether by scheduled maturity, required prepayment, acceleration, demand or
otherwise), and such failure shall continue after the applicable grace period,
if any, specified in the agreement or instrument relating to such Debt; (ii) any
other event shall occur or condition shall exist under any agreement or
instrument relating to Debt which is outstanding in a principal amount of at
least $2,000,000 individually or when aggregated with all such Debt of the
Borrower, such Subsidiary, or such Guarantor so in default, and shall continue
after the applicable grace period, if any, specified in such agreement or
instrument, if the effect of such event or condition is to accelerate, or to
permit the acceleration of, the maturity of such Debt; or (iii) any such Debt
shall be declared to be due and payable, or required to be prepaid (other than
by a regularly scheduled required prepayment), prior to the stated maturity
thereof;
(e) Insolvency. The Borrower, any Guarantor or any of their respective
Subsidiaries shall generally not pay its debts as such debts become due, or
shall admit in writing its inability to pay its debts generally, or shall make a
general assignment for the benefit of creditors; or any proceeding shall be
instituted by or against the Borrower, any of its Subsidiaries, or any Guarantor
seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation,
winding up, reorganization, arrangement, adjustment, protection, relief, or
composition of it or its debts under any law relating to bankruptcy, insolvency
or reorganization or relief of debtors, or seeking the entry of an order for
relief or the appointment of a receiver, trustee or other similar official for
it or for any substantial part of its Property and, in the case of any such
proceeding instituted against the Borrower, any such Subsidiary or any such
Guarantor either such proceeding shall remain undismissed for a period of 30
days or any of the actions sought in such proceeding shall occur; or the
Borrower, any of its Subsidiaries, or any Guarantor shall take any corporate
action to authorize any of the actions set forth above in this paragraph (e);
(f) Judgments. Any judgment or order for the payment of money shall be
rendered against the Borrower, any Guarantor or any of their respective
Subsidiaries and such judgment or order shall result in liability, when
aggregated with all such outstanding unsatisfied judgments and orders, in excess
of $2,000,000 and either (i) enforcement proceedings shall have been commenced
by any creditor upon such judgment or order or (ii) there shall be any period of
30 consecutive days during which such judgment is not paid or a stay of
enforcement of such judgment or order, by reason of a pending appeal or
otherwise, shall not be in effect;
(g) Termination Events. Any Termination Event with respect to a Plan shall
have occurred, and, 30 days after notice thereof shall have been given to the
Borrower by the
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Administrative Agent, (i) such Termination Event shall not have been corrected
and (ii) such Termination Event is reasonably likely to result (as determined by
the Required Lenders in good faith) in a liability to the Borrower, its
Subsidiaries or ERISA Affiliates of $5,000,000 or more in the aggregate.
(h) Plan Withdrawals. The Borrower or any member of the Controlled Group
as employer under a Multiemployer Plan shall have made a complete or partial
withdrawal from such Multiemployer Plan and the plan sponsor of such
Multiemployer Plan shall have notified such withdrawing employer that such
employer has incurred a withdrawal liability in an annual amount exceeding
$5,000,000 in the aggregate;
(i) COBRA Liability. An event has occurred (as determined by the Required
Lenders in good faith) that would causes Borrower or any of its ERISA Affiliates
to become a "successor employer" under COBRA and the regulations thereunder with
respect to any employee welfare benefit plan of any member of the Controlled
Group other than the Borrower or its ERISA Affiliates' employee welfare benefit
plans and the Borrower is reasonably likely to have liability in excess of
$5,000,000 in the aggregate in connection therewith.
(j) Change in Control. The Borrower shall have discontinued its usual
business or a Change in Control shall have occurred;
(k) Borrowing Base. Any failure to cure any Borrowing Base deficiency in
accordance with Section 2.05;
(l) Loan Documents. Any provision of any Loan Document shall for any
reason (except to the extent permitted by the terms thereof) cease to be valid
and binding on the Borrower or a Guarantor or any of their respective
Subsidiaries or any such Person shall so state in writing;
(m) Security Instruments. (i) The Administrative Agent shall fail to have
an Acceptable Security Interest in any portion of the Collateral or (ii) any
Security Instrument shall at any time and for any reason cease to create the
Lien on the Property purported to be subject to such agreement in accordance
with the terms of such agreement, or cease to be in full force and effect, or
shall be contested by the Borrower, any Guarantor or any of their respective
Subsidiaries; or
(n) Material Adverse Change. An event resulting in a Material Adverse
Change shall have occurred.
Section 7.02 Optional Acceleration of Maturity. If any Event of Default
(other than an Event of Default pursuant to paragraph (e) of Section 7.01) shall
have occurred and be continuing, then, and in any such event,
(a) the Administrative Agent (i) shall at the request, or may with the
consent, of the Required Lenders, by notice to the Borrower, declare the
obligation of each Lender and the Issuing Lender to make extensions of credit
hereunder, including making Advances and issuing, increasing or extending
Letters of Credit, to be terminated, whereupon the same shall forthwith
terminate, and (ii) shall at the request, or may with the consent, of the
Required Lenders, by
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notice to the Borrower, declare all principal, interest, fees, reimbursements,
indemnifications, and all other amounts payable under this Agreement, the Notes,
and the other Loan Documents to be forthwith due and payable, whereupon all such
amounts shall become and be forthwith due and payable in full, without notice of
intent to demand, demand, presentment for payment, notice of nonpayment,
protest, notice of protest, grace, notice of dishonor, notice of intent to
accelerate, notice of acceleration, and all other notices, all of which are
hereby expressly waived by the Borrower;
(b) the Borrower shall, on demand of the Administrative Agent at the
request or with the consent of the Required Lenders, deposit with the
Administrative Agent into the Cash Collateral Account an amount of cash equal to
the Letter of Credit Exposure as security for the Obligations; and
(c) the Administrative Agent shall at the request of, or may with the
consent of, the Required Lenders proceed to enforce its rights and remedies
under the Security Instruments, the Guaranties, and any other Loan Document for
the ratable benefit of itself, the Issuing Lender and the Lenders by appropriate
proceedings.
Section 7.03 Automatic Acceleration of Maturity. If any Event of Default
pursuant to paragraph (e) of Section 7.01 shall occur,
(a) (i) the obligation of each Lender and the Issuing Lender to make
extensions of credit hereunder, including making Advances and issuing,
increasing or extending Letters of Credit, shall terminate, and (ii) all
principal, interest, fees, reimbursements, indemnifications, and all other
amounts payable under this Agreement, the Notes, and the other Loan Documents
shall become and be forthwith due and payable in full, without notice of intent
to demand, demand, presentment for payment, notice of nonpayment, protest,
notice of protest, grace, notice of dishonor, notice of intent to accelerate,
notice of acceleration, and all other notices, all of which are hereby expressly
waived by the Borrower;
(b) the Borrower shall deposit with the Administrative Agent into the Cash
Collateral Account an amount of cash equal to the outstanding Letter of Credit
Exposure as security for the Obligations; and
(c) the Administrative Agent shall at the request of, or may with the
consent of, the Required Lenders proceed to enforce its rights and remedies
under the Security Instruments, the Guaranties, and any other Loan Document for
the ratable benefit of itself, the Issuing Lender and the Lenders by appropriate
proceedings.
Section 7.04 Right of Set-off. Upon the occurrence and during the
continuance of any Event of Default, the Administrative Agent, the Issuing
Lender and each Lender 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 indebtedness at any time owing by the Administrative Agent, the
Issuing Lender or such Lender to or for the credit or the account of the
Borrower against any and all of the obligations of the Borrower now or hereafter
existing under this Agreement, the Notes held by the Administrative Agent, the
Issuing Lender or such Lender, and the other Loan Documents,
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irrespective of whether or not the Administrative Agent, the Issuing Lender or
such Lender shall have made any demand under this Agreement, such Notes, or such
other Loan Documents, and although such obligations may be unmatured. The
Administrative Agent, the Issuing Lender and each Lender agrees to promptly
notify the Borrower after any such set-off and application made by the
Administrative Agent, the Issuing Lender or such Lender, provided that the
failure to give such notice shall not affect the validity of such set-off and
application. The rights of the Administrative Agent, the Issuing Lender and each
Lender under this Section 7.04 are in addition to any other rights and remedies
(including, without limitation, other rights of set-off) that the Administrative
Agent, the Issuing Lender or such Lender may have under the other Loans
Documents or under any applicable law.
Section 7.05 Non-exclusivity of Remedies. No remedy conferred upon the
Administrative Agent, the Issuing Lender and the Lenders is intended to be
exclusive of any other remedy, and each remedy shall be cumulative of all other
remedies existing by contract, at law, in equity, by statute or otherwise.
Section 7.06 Application of Proceeds. From and during the continuance of
any Event of Default, any monies or Property actually received by the
Administrative Agent pursuant to this Agreement or any other Loan Document, the
exercise of any rights or remedies under any Security Instrument or any other
agreement with the Borrower, any Guarantor or any of their respective
Subsidiaries which secures any of the Obligations, shall be applied in the
following order:
(a) First, to the payment of all amounts, including without limitation
costs and expenses incurred in connection with the collection of such proceeds
and the payment of any part of the Obligations, due to the Administrative Agent
under any of the expense reimbursement or indemnity provisions of this Agreement
or any other Loan Document, any Security Instrument or other collateral
documents;
(b) Second, ratably, according to the then unpaid amounts thereof, without
preference or priority of any kind among them, to the payment of the Obligations
then due and payable, including Obligations with respect to Letters of Credit
and including any obligations of the Borrower or its Subsidiaries owing to any
Swap Counterparty under any Interest Hedge Agreement or Hydrocarbon Hedge
Agreement; and
(c) Third, the remainder, if any, to the Borrower or its Subsidiaries, or
its respective successors or assigns, or such other Person as may be lawfully
entitled to receive the same or as a court of competent jurisdiction may direct.
ARTICLE VIII
THE ADMINISTRATIVE AGENT AND THE ISSUING LENDER
Section 8.01 Authorization and Action. Each Lender hereby appoints and
authorizes the Administrative Agent to take such action as agent on its behalf
and to exercise such powers under this Agreement as are delegated to the
Administrative Agent by the terms hereof and of the other Loan Documents,
together with such powers as are reasonably incidental thereto. As to
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any matters not expressly provided for by this Agreement or any other Loan
Document (including, without limitation, enforcement or collection of the
Notes), the Administrative Agent shall not be required to exercise any
discretion or take any action, but shall be required to act or to refrain from
acting (and shall be fully protected in so acting or refraining from acting)
upon the instructions of the Required Lenders, and such instructions shall be
binding upon all Lenders and all holders of Notes; provided, however, that the
Administrative Agent shall not be required to take any action which exposes the
Administrative Agent to personal liability or which is contrary to this
Agreement, any other Loan Document, or applicable law.
Section 8.02 Administrative Agent's Reliance, Etc. Neither the
Administrative Agent nor any of its directors, officers, agents, or employees
shall be liable for any action taken or omitted to be taken (INCLUDING THE
ADMINISTRATIVE AGENT'S OWN NEGLIGENCE) by it or them under or in connection with
this Agreement or the other Loan Documents, except for its or their own gross
negligence or willful misconduct. Without limitation of the generality of the
foregoing, the Administrative Agent: (a) may treat the payee of any Note as the
holder thereof until the Administrative Agent receives written notice of the
assignment or transfer thereof signed by such payee and in form satisfactory to
the Administrative Agent; (b) may consult with legal counsel (including counsel
for the Borrower), independent public accountants, and other experts selected by
it and shall not be liable for any action taken or omitted to be taken in good
faith by it in accordance with the advice of such counsel, accountants, or
experts; (c) makes no warranty or representation to any Lender and shall not be
responsible to any Lender for any statements, warranties, or representations
made in or in connection with this Agreement or the other Loan Documents; (d)
shall not have any duty to ascertain or to inquire as to the performance or
observance of any of the terms, covenants or conditions of this Agreement or any
other Loan Document on the part of the Borrower or its Subsidiaries or to
inspect the Property (including the books and records) of the Borrower or its
Subsidiaries; (e) shall not be responsible to any Lender for the due execution,
legality, validity, enforceability, genuineness, sufficiency, or value of this
Agreement or any other Loan Document; and (f) shall incur no liability under or
in respect of this Agreement or any other Loan Document by acting upon any
notice, consent, certificate, or other instrument or writing (which may be by
telecopier or telex) believed by it to be genuine and signed or sent by the
proper party or parties.
Section 8.03 The Administrative Agent and Its Affiliates. With respect to
its Commitment, the Advances made by it and the Notes issued to it, the
Administrative Agent shall have the same rights and powers under this Agreement
as any other Lender and may exercise the same as though it were not the
Administrative Agent. The term "Lender" or "Lenders" shall, unless otherwise
expressly indicated, include the Administrative Agent in its individual
capacity. The Administrative Agent and its Affiliates may accept deposits from,
lend money to, act as trustee under indentures of, and generally engage in any
kind of business with, the Borrower or any of its Subsidiaries, and any Person
who may do business with or own securities of the Borrower or any such
Subsidiary, all as if the Administrative Agent were not an agent hereunder and
without any duty to account therefor to the Lenders. Additionally, an Affiliate
of the Administrative Agent has made an equity investment in the MEI Holdings
and may from time to time made additional equity investments such entity or in
the Parent or their affiliates.
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Section 8.04 Lender Credit Decision. Each Lender acknowledges that it has,
independently and without reliance upon the Administrative Agent or any other
Lender and based on the Financial Statements and the Interim Financial
Statements and such other documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement. Each Lender also acknowledges that it shall, independently and
without reliance upon the Administrative Agent or any other Lender and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement.
Section 8.05 Indemnification. THE LENDERS SEVERALLY AGREE TO INDEMNIFY THE
ADMINISTRATIVE AGENT, THE ISSUING LENDER, AND BNP PARIBAS AND EACH AFFILIATE
THEREOF ACTING IN ANY CAPACITY UNDER THE LOAN DOCUMENT, INCLUDING BEING NAMED AS
"SYNDICATION AGENT," "JOINT LEAD ARRANGER," OR "JOINT BOOK RUNNING MANAGER" ON
THE COVER PAGE HEREOF AND THEIR RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES, AND
AGENTS (TO THE EXTENT NOT REIMBURSED BY THE BORROWER), ACCORDING TO THEIR
RESPECTIVE PRO RATA SHARES FROM AND AGAINST ANY AND ALL LIABILITIES,
OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS,
EXPENSES, OR DISBURSEMENTS OF ANY KIND OR NATURE WHATSOEVER WHICH MAY BE IMPOSED
ON, INCURRED BY, OR ASSERTED AGAINST THE ADMINISTRATIVE AGENT, THE ISSUING
LENDER, AND BNP PARIBAS AND EACH AFFILIATE THEREOF IN ANY WAY RELATING TO OR
ARISING OUT OF THIS AGREEMENT OR ANY ACTION TAKEN OR OMITTED BY THE
ADMINISTRATIVE AGENT, THE ISSUING LENDER, OR BNP PARIBAS OR ANY AFFILIATE
THEREOF UNDER THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT (INCLUDING THE
ADMINISTRATIVE AGENT'S, THE ISSUING LENDER'S, AND BNP PARIBAS' AND EACH
AFFILIATE'S THEREOF OWN NEGLIGENCE), AND INCLUDING, WITHOUT LIMITATION,
ENVIRONMENTAL LIABILITIES, PROVIDED THAT NO LENDER SHALL BE LIABLE FOR ANY
PORTION OF SUCH LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS,
JUDGMENTS, SUITS, COSTS, EXPENSES, OR DISBURSEMENTS RESULTING FROM THE
ADMINISTRATIVE AGENT'S, THE ISSUING LENDER'S, OR BNP PARIBAS OR EACH AFFILIATE
THEREOF GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. WITHOUT LIMITATION OF THE
FOREGOING, EACH LENDER AGREES TO REIMBURSE THE ADMINISTRATIVE AGENT, THE ISSUING
LENDER, AND BNP PARIBAS AND EACH AFFILIATE THEREOF PROMPTLY UPON DEMAND FOR ITS
RATABLE SHARE OF ANY OUT-OF-POCKET EXPENSES (INCLUDING COUNSEL FEES) INCURRED BY
THE ADMINISTRATIVE AGENT IN CONNECTION WITH THE PREPARATION, EXECUTION,
DELIVERY, ADMINISTRATION, MODIFICATION, AMENDMENT, OR ENFORCEMENT (WHETHER
THROUGH NEGOTIATIONS, LEGAL PROCEEDINGS, OR OTHERWISE) OF, OR LEGAL ADVICE IN
RESPECT OF RIGHTS OR RESPONSIBILITIES UNDER, THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT, TO THE EXTENT THAT THE ADMINISTRATIVE AGENT, THE ISSUING LENDER, OR
BNP PARIBAS OR EACH AFFILIATE THEREOF IS NOT REIMBURSED FOR SUCH BY THE
BORROWER.
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Section 8.06 Successor Administrative Agent and Issuing Lender. The
Administrative Agent or the Issuing Lender may resign at any time by giving
written notice thereof to the Lenders and the Borrower and may be removed at any
time with or without cause by the Required Lenders upon receipt of written
notice from the Required Lenders to such effect. Upon receipt of notice of any
such resignation or removal, the Required Lenders shall have the right to
appoint a successor Administrative Agent or Issuing Lender with, if any Event of
Default has not occurred and is not continuing, the consent of the Borrower,
which consent shall not be unreasonably withheld. If no successor Administrative
Agent or Issuing Lender shall have been so appointed by the Required Lenders
with the consent of the Borrower, and shall have accepted such appointment,
within 30 days after the retiring Administrative Agent's or Issuing Lender's
giving of notice of resignation or the Required Lenders' removal of the retiring
Administrative Agent or Issuing Lender, then the retiring Administrative Agent
or Issuing Lender may, on behalf of the Lenders and the Borrower, appoint a
successor Administrative Agent or Issuing Lender, which shall be, in the case of
a successor agent, a commercial bank organized under the laws of the United
States of America or of any State thereof and having a combined capital and
surplus of at least $500,000,000.00 and, in the case of the Issuing Lender, a
Lender. Upon the acceptance of any appointment as Administrative Agent or
Issuing Lender by a successor Administrative Agent or Issuing Lender, such
successor Administrative Agent or Issuing Lender shall thereupon succeed to and
become vested with all the rights, powers, privileges, and duties of the
retiring Administrative Agent or Issuing Lender, and the retiring Administrative
Agent or Issuing Lender shall be discharged from its duties and obligations
under this Agreement and the other Loan Documents, except that the retiring
Issuing Lender shall remain the Issuing Lender with respect to any Letters of
Credit outstanding on the effective date of its resignation or removal and the
provisions affecting the Issuing Lender with respect to such Letters of Credit
shall inure to the benefit of the retiring Issuing Lender until the termination
of all such Letters of Credit. After any retiring Administrative Agent's or
Issuing Lender's resignation or removal hereunder as Administrative Agent or
Issuing Lender, the provisions of this Article VIII shall inure to its benefit
as to any actions taken or omitted to be taken by it while it was Administrative
Agent or Issuing Lender under this Agreement and the other Loan Documents.
Section 8.07 Syndication Agent, Joint Lead Arrangers, and Joint Book
Running Managers. None of the Lenders identified on the facing page of this
Agreement as a "Syndication Agent," "Joint Lead Arranger," or "Joint Book
Running Manager" shall have any right, power, obligation, liability,
responsibility or duty under this Agreement other than those applicable to all
the Lenders as such. Without limiting the foregoing, none of the Lenders so
identified as a "Syndication Agent," "Joint Lead Arranger," or "Joint Book
Running Manager" shall have or be deemed to have any fiduciary relationship with
any Lender. Each Lender acknowledges that it has not relied, and will not rely,
on any of the Lenders so identified in deciding to enter into this Agreement or
in taking or not taking action hereunder.
ARTICLE IX
MISCELLANEOUS
Section 9.01 Amendments, Etc. No amendment or waiver of any provision of
this Agreement, the Notes, or any other Loan Document, nor consent to any
departure by the Borrower, any Guarantor or any Subsidiary therefrom, shall in
any event be effective unless the
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same shall be in writing and signed by the Required Lenders and the Borrower,
and then such waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given; provided, however, that no
amendment, waiver, or consent shall, unless in writing and signed by all the
Lenders, do any of the following: (a) waive any of the conditions specified in
Section 3.01, (b) increase the Borrowing Base or the Commitments of the Lenders,
(c) reduce the principal of, or rate of interest on, the Notes or any fees or
other amounts payable hereunder or under any other Loan Document, (d) postpone
any date fixed for any payment of principal of, or interest on, the Notes, the
Letter of Credit Obligations or any fees or other amounts payable hereunder or
extend the Tranche A Maturity Date, the Tranche B Maturity Date, the Tranche A
Commitment Termination Date or the Tranche B Commitment Termination Date, (e)
change the percentage of Lenders which shall be required for the Lenders or any
of them to take any action hereunder or under any other Loan Document, (f) amend
Section 2.02, Section 2.11 or this Section 9.01, (g) amend the definition of
"Required Lenders," (h) release any Guarantor from its obligations under any
Guaranty, (i) permit the Borrower or any Subsidiary to enter into any merger or
consolidation with or into any other Person or amend Section 6.04(a), or (j)
release any Collateral securing the Obligations, except for releases of
Collateral sold as permitted by this Agreement; and provided, further, that (i)
no amendment, waiver or consent shall, unless in writing and signed by the
Administrative Agent or the Issuing Lender in addition to the Lenders required
above to take such action, affect the rights or duties of the Administrative
Agent or the Issuing Lender, as the case may be, under this Agreement or any
other Loan Document, and (ii) no amendment may be made to Section 7.06 which has
the effect of subordinating the priority of the obligations owing to any Swap
Counterparty from the priority established for such obligations on the date of
this Agreement unless such amendment shall have the consent of, in addition to
the consent of the Required Lenders, the Swap Counterparty so affected.
Section 9.02 Notices, Etc. All notices and other communications shall be
in writing (including, without limitation, telecopy or telex) and mailed by
certified mail, return receipt requested, telecopied, telexed, hand delivered,
or delivered by a nationally recognized overnight courier, at the address for
the appropriate party specified in Schedule II or at such other address as shall
be designated by such party in a written notice to the other parties. All such
notices and communications shall, when so mailed, telecopied, telexed, or hand
delivered or delivered by an overnight courier, be effective when received if
mailed, when telecopy transmission is completed, when confirmed by telex
answer-back, or when delivered by such messenger or courier, respectively,
except that notices and communications to the Administrative Agent pursuant to
Article II or VIII shall not be effective until received by the Administrative
Agent.
Section 9.03 No Waiver; Remedies. No failure on the part of any Lender,
the Administrative Agent, or the Issuing Lender to exercise, and no delay in
exercising, any right hereunder or under any Note shall operate as a waiver
thereof; nor shall any single or partial exercise of any such right preclude any
other or further exercise thereof or the exercise of any other right. The
remedies herein provided are cumulative and not exclusive of any remedies
provided by law.
Section 9.04 Costs and Expenses. The Borrower agrees to pay within three
Business Days following demand, (a) all reasonable and documented out-of-pocket
costs and expenses of the Administrative Agent in connection with the
preparation, execution, delivery, administration, modification, and amendment of
this Agreement, the Notes, the Guaranties, and the other Loan
75
Documents including, without limitation, the reasonable and documented fees and
out-of-pocket expenses of counsel for the Administrative Agent with respect to
advising the Administrative Agent as to its rights and responsibilities under
this Agreement, and (b) all reasonable and documented out-of-pocket costs and
expenses, if any, of the Administrative Agent, the Issuing Lender, and each
Lender (including, without limitation, reasonable and documented counsel fees
and expenses of the Administrative Agent, the Issuing Lender, and each Lender)
in connection with the enforcement (whether through negotiations, legal
proceedings, or otherwise) of this Agreement, the Notes, the Guaranties, and the
other Loan Documents.
Section 9.05 Binding Effect. This Agreement shall become effective when it
shall have been executed by the Borrower and the Administrative Agent, and when
the Administrative Agent shall have, as to each Lender, either received a
counterpart hereof executed by such Lender or been notified by such Lender that
such Lender has executed it and thereafter shall be binding upon and inure to
the benefit of the Borrower, the Administrative Agent, the Issuing Lender, and
each Lender and their respective successors and assigns, except that the
Borrower shall not have the right to assign its rights or delegate its duties
under this Agreement or any interest in this Agreement without the prior written
consent of each Lender.
Section 9.06 Lender Assignments and Participations.
(a) Assignments. Any Lender may assign to one or more banks or other
entities all or any portion of its rights and obligations under this Agreement
(including, without limitation, all or a portion of its Commitments, the
Advances owing to it, the Notes held by it, and the participation interest in
the Letter of Credit Obligations held by it); provided, however, that (i) each
such assignment shall be of a constant, and not a varying, percentage of such
Lender's rights and obligations assigned under this Agreement and shall be an
equal percentage with respect to both its obligations owing in respect of the
Commitments and the related Advances and Letters of Credit, (ii) the amount of
the Commitments and Advances of such Lender being assigned pursuant to each such
assignment (determined as of the date of the Assignment and Acceptance with
respect to such assignment) shall be, if to an entity other than a Lender, not
less than $10,000,000.00 (or, if less, the amount of its remaining Commitments
and Advances in connection with an assignment of all such remaining Commitments
and Advances) and, with respect to amounts equal to $10,000,000.00 or greater,
shall be an integral multiple of $1,000,000.00 in excess thereof, (iii) each
such assignment shall be to an Eligible Assignee, (iv) the parties to each such
assignment shall execute and deliver to the Administrative Agent, for its
acceptance and recording in the Register, an Assignment and Acceptance, together
with the Notes subject to such assignment, and (v) each Eligible Assignee (other
than the Eligible Assignee of the Administrative Agent) shall pay to the
Administrative Agent a $3,500 administrative fee. Upon such execution, delivery,
acceptance and recording, from and after the effective date specified in each
Assignment and Acceptance, which effective date shall be at least three Business
Days after the execution thereof, (A) the assignee thereunder shall be a party
hereto for all purposes and, to the extent that rights and obligations hereunder
have been assigned to it pursuant to such Assignment and Acceptance, have the
rights and obligations of a Lender hereunder and (B) such Lender thereunder
shall, to the extent that rights and obligations hereunder have been assigned by
it pursuant to such Assignment and Acceptance, relinquish its rights and be
released from its obligations under this Agreement (and, in the case of an
76
Assignment and Acceptance covering all or the remaining portion of such Lender's
rights and obligations under this Agreement, such Lender shall cease to be a
party hereto).
(b) Term of Assignments. By executing and delivering an Assignment and
Acceptance, the Lender thereunder and the assignee thereunder confirm to and
agree with each other and the other parties hereto as follows: (i) other than as
provided in such Assignment and Acceptance, such Lender makes no representation
or warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement or
the execution, legality, validity, enforceability, genuineness, sufficiency of
value of this Agreement or any other instrument or document furnished pursuant
hereto; (ii) such Lender makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the Borrower or its
Subsidiaries or the performance or observance by the Borrower or its
Subsidiaries of any of their obligations under this Agreement or any other
instrument or document furnished pursuant hereto; (iii) such assignee confirms
that it has received a copy of this Agreement, together with copies of the
Financial Statements and Interim Financial Statements referred to in Section
4.05 and such other documents and information as it has deemed appropriate to
make its own credit analysis and decision to enter into such Assignment and
Acceptance; (iv) such assignee will, independently and without reliance upon the
Administrative Agent, such Lender or any other Lender and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under this
Agreement; (v) such assignee appoints and authorizes the Administrative Agent to
take such action as agent on its behalf and to exercise such powers under this
Agreement as are delegated to the Administrative Agent by the terms hereof,
together with such powers as are reasonably incidental thereto; and (vi) such
assignee agrees that it will perform in accordance with their terms all of the
obligations which by the terms of this Agreement are required to be performed by
it as a Lender.
(c) The Register. The Administrative Agent shall maintain at its address
referred to in Section 9.02 a copy of each Assignment and Acceptance delivered
to and accepted by it and a register for the recordation of the names and
addresses of the Lenders and the Commitments of, and principal amount of the
Advances owing to, each Lender from time to time (the "Register"). The entries
in the Register shall be conclusive and binding for all purposes, absent
manifest error, and the Borrower, the Administrative Agent, the Issuing Lender,
and the Lenders may treat each Person whose name is recorded in the Register as
a Lender hereunder for all purposes of this Agreement. The Register shall be
available for inspection by the Borrower or any Lender at any reasonable time
and from time to time upon reasonable prior notice.
(d) Procedures. Upon its receipt of an Assignment and Acceptance executed
by a Lender and an Eligible Assignee, together with the Notes subject to such
assignment, the Administrative Agent shall, if such Assignment and Acceptance
has been completed and is in substantially the form of the attached Exhibit A,
(i) accept such Assignment and Acceptance, (ii) record the information contained
therein in the Register, and (iii) give prompt notice thereof to the Borrower.
Within five Business Days after its receipt of such notice, the Borrower shall
execute and deliver to the Administrative Agent in exchange for the surrendered
Notes (A) if such Eligible Assignee has acquired a Tranche A Commitment and
outstanding Tranche B Advances, a new Tranche A Note and Tranche B Note to the
order of such Eligible Assignee in an amount equal to the Tranche A Commitment
assumed by it and the outstanding principal
77
amount of Tranche A Advances acquired, respectively, pursuant to such Assignment
and Acceptance and (B) if such Lender has retained any Tranche A Commitment and
Tranche B Advances hereunder, a new Tranche A Note and Tranche B Note to the
order of such Lender in an amount equal to the Tranche A Commitment and
outstanding principal amount of Tranche B Advances, respectively, retained by it
hereunder. Such new Notes shall be dated the effective date of such Assignment
and Acceptance and shall otherwise be in substantially the form of the attached
Exhibits E-1 and E-2.
(e) Participations. Each Lender may sell participations to one or more
banks or other entities in or to all or a portion of its rights and obligations
under this Agreement (including, without limitation, all or a portion of its
Commitments, the Advances owing to it, its participation interest in the Letter
of Credit Obligations, and the Notes held by it); provided, however, that (i)
such Lender's obligations under this Agreement (including, without limitation,
its Commitments to the Borrower hereunder) shall remain unchanged, (ii) such
Lender shall remain solely responsible to the other parties hereto for the
performance of such obligations, (iii) such Lender shall remain the holder of
any such Notes for all purposes of this Agreement, (iv) the Borrower, the
Administrative Agent, and the Issuing Lender 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, and (v) such Lender shall
not require the participant's consent to any matter under this Agreement, except
for change in the principal amount of the Notes, reductions in fees or interest,
releasing all or substantially all of any Collateral, permitting the Borrower or
any Subsidiary to enter into any merger or consolidation with or into any other,
postponement of any date fixed for any payment of principal of, or interest on,
the Notes or any fees or other amounts payable hereunder, or extensions of the
Tranche A Maturity Date, Tranche B Maturity Date, the Tranche A Commitment
Termination Date or the Tranche B Commitment Termination Date. The Borrower
hereby agrees that participants shall have the same rights under Sections 2.12,
2.13, 2.14(c), and 9.07 as a Lender to the extent of their respective
participations.
Section 9.07 Indemnification. THE BORROWER SHALL INDEMNIFY THE
ADMINISTRATIVE AGENT, THE LENDERS, THE ISSUING LENDER, AND BNP PARIBAS AND EACH
AFFILIATE THEREOF AND EACH AFFILIATE THEREOF AND THEIR RESPECTIVE DIRECTORS,
OFFICERS, EMPLOYEES, AND AGENTS FROM, AND DISCHARGE, RELEASE, AND HOLD EACH OF
THEM HARMLESS AGAINST, ANY AND ALL LOSSES, LIABILITIES, CLAIMS, OR DAMAGES WHICH
MAY BE IMPOSED ON, INCURRED BY, OR ASSERTED AGAINST THEM IN ANY WAY RELATING TO
OR ARISING OUT OF THIS AGREEMENT OR ANY ACTION TAKEN OR OMITTED BY THEM UNDER
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT (INCLUDING ANY SUCH LOSSES,
LIABILITIES, CLAIMS, DAMAGES, OR EXPENSE INCURRED BY REASON OF THE PERSON BEING
INDEMNIFIED'S OWN NEGLIGENCE OR STRICT LIABILITY) AND INCLUDING WITHOUT
LIMITATION ENVIRONMENTAL LIABILITIES, BUT EXCLUDING ANY SUCH LOSSES,
LIABILITIES, CLAIMS, DAMAGES, OR EXPENSES INCURRED BY REASON OF THE GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT OF THE PERSON TO BE INDEMNIFIED.
78
Section 9.08 Execution in Counterparts. This Agreement may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
Section 9.09 Survival of Representations, Etc. All representations and
warranties contained in this Agreement or made in writing by or on behalf of the
Borrower in connection herewith shall survive the execution and delivery of this
Agreement and the Loan Documents, the making of the Advances and any
investigation made by or on behalf of the Lenders, none of which investigations
shall diminish any Lender's right to rely on such representations and
warranties. All obligations of the Borrower provided for in Sections 2.12, 2.13,
2.14(c), 9.04, and 9.07 and all of the obligations of the Lenders in Section
8.05 shall survive any termination of this Agreement and repayment in full of
the Obligations.
Section 9.10 Severability. In case one or more provisions of this
Agreement or the other Loan Documents shall be invalid, illegal or unenforceable
in any respect under any applicable law, the validity, legality, and
enforceability of the remaining provisions contained herein or therein shall not
be affected or impaired thereby.
Section 9.11 Business Loans. The Borrower warrants and represents that the
Loans evidenced by the Notes are and shall be for business, commercial,
investment, or other similar purposes and not primarily for personal, family,
household, or agricultural use, as such terms are used in Chapter One ("Chapter
One") of the Texas Credit Code. At all such times, if any, as Chapter One shall
establish a Maximum Rate, the Maximum Rate shall be the "indicated rate ceiling"
(as such term is defined in Chapter One) from time to time in effect.
Section 9.12 Governing Law; Submission to Jurisdiction. This Agreement,
the Notes and the other Loan Documents shall be governed by, and construed and
enforced in accordance with, the laws of the State of Texas. Without limiting
the intent of the parties set forth above, (a) Chapter 346 of the Texas Finance
Code, as amended (relating to revolving loans and revolving tri-party accounts
(formerly Tex. Rev. Civ. Stat. ▇▇▇. Art. ▇▇▇▇, ▇▇. 15)), shall not apply to this
Agreement, the Notes, or the transactions contemplated hereby and (b) to the
extent that any Lender may be subject to Texas law limiting the amount of
interest payable for its account, such Lender shall utilize the indicated
(weekly) rate ceiling from time to time in effect. Each Letter of Credit shall
be governed by the Uniform Customs and Practice for Documentary Credits,
International Chamber of Commerce Publication No. 500 (1993 version). The
Borrower hereby irrevocably submits to the jurisdiction of any Texas state or
federal court sitting in Dallas, Texas in any action or proceeding arising out
of or relating to this Agreement or the other Loan Documents, and the Borrower
hereby irrevocably agrees that all claims in respect of such action or
proceeding may be heard and determined in such court. The Borrower hereby
unconditionally and irrevocably waives, to the fullest extent it may effectively
do so, any right it may have to the defense of an inconvenient forum to the
maintenance of such action or proceeding. The Borrower hereby agrees that
service of copies of the summons and complaint and any other process which may
be served in any such action or proceeding may be made by mailing or delivering
a copy of such process to such Borrower at its address set forth in this
Agreement. The Borrower agrees that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner
79
provided by law. Nothing in this Section shall affect the rights of any Lender
to serve legal process in any other manner permitted by the law or affect the
right of any Lender to bring any action or proceeding against the Borrower or
its Property in the courts of any other jurisdiction.
Section 9.13 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 (including any self-regulatory authority, such as
the National Association of Insurance Commissioners), (c) to the extent required
by applicable laws or regulations or by any subpoena or similar legal process,
(d) to any other party hereto, (e) in connection with the exercise of any
remedies hereunder or under any other Loan Document or any 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, 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 or (ii) any actual or prospective
counterparty (or its advisors) to any swap or derivative transaction relating to
the Borrower and its obligations, (g) with the consent of the Borrower or (h) to
the extent such Information (x) becomes publicly available other than as a
result of a breach of this Section or (y) becomes available to the
Administrative Agent or any Lender on a nonconfidential basis from a source
other than the Borrower. For purposes of this Section, "Information" means all
information received from the Parent, Holdings, the Borrower, or any of the
Borrower's Subsidiaries relating to any such Person or any of their respective
businesses, other than any such information that is available to the
Administrative Agent or any Lender on a nonconfidential basis prior to
disclosure by any such Person, provided that, in the case of information
received from the Parent, Holdings, the Borrower, or any of the Borrower's
Subsidiaries after the date hereof, such information is clearly identified at
the time of delivery as confidential. Any Person required to maintain the
confidentiality of Information as provided in this Section 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. Notwithstanding
anything herein to the contrary, "Information" shall not include, and the
Administrative Agent and each Lender may disclose without limitation of any
kind, any information with respect to the "tax treatment" and "tax structure"
(in each case, within the meaning of Treasury Regulation Section 1.6011-4) of
the transactions contemplated hereby and all materials of any kind (including
opinions or other tax analyses) that are provided to the Administrative Agent or
such Lender relating to such tax treatment and tax structure; provided that with
respect to any document or similar item that in either case contains information
concerning the tax treatment or tax structure of the transaction as well as
other information, this sentence shall only apply to such portions of the
document or similar item that relate to the tax treatment or tax structure of
the Loans, Letters of Credit and transactions contemplated hereby.
Section 9.14 WAIVER OF JURY TRIAL. THE BORROWER, THE LENDERS, THE ISSUING
LENDER AND THE ADMINISTRATIVE AGENT HEREBY ACKNOWLEDGE THAT THEY HAVE BEEN
REPRESENTED BY AND HAVE
80
CONSULTED WITH COUNSEL OF THEIR CHOICE, AND HEREBY KNOWINGLY, VOLUNTARILY,
INTENTIONALLY, AND IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN
RESPECT OF ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT,
ANY OTHER LOAN DOCUMENT, OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY.
Section 9.15 ORAL AGREEMENTS. THIS WRITTEN AGREEMENT AND THE LOAN
DOCUMENTS, AS DEFINED IN THIS AGREEMENT, REPRESENT THE FINAL AGREEMENT AMONG THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK. SIGNATURE PAGE FOLLOWS.]
81
EXECUTED as of the date first above written.
BORROWER:
MARINER ENERGY, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chief Executive Officer
ADMINISTRATIVE AGENT:
UNION BANK OF CALIFORNIA, N.A.,
as Administrative Agent and as Issuing Lender
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Senior Vice President
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Senior Vice President and Manager
LENDERS:
UNION BANK OF CALIFORNIA, N.A.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Senior Vice President
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Senior Vice President and Manager
BNP PARIBAS
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Managing Director
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇
Title: Vice President
BANK ONE, NA
By: /s/ Jo ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
------------------------------------
Name: Jo ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Associate Director
SOUTHWEST BANK OF TEXAS, N.A.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, III
------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, III
Title: Assistant Vice President
GUARANTY BANK
By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Senior Vice President
FORTIS CAPITAL CORP.
By: /s/ ▇▇▇▇▇▇▇▇▇▇▇ ▇. Parade
------------------------------------
Name: ▇▇▇▇▇▇▇▇▇▇▇ ▇. Parade
Title: Vice President
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Managing Director
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ FINANCING, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President
SCHEDULE I
PRICING GRID
APPLICABLE MARGINS
UTILIZATION LEVEL* BASE RATE ADVANCES EURODOLLAR RATE ADVANCES COMMITMENT FEE
------------------ ------------------ ------------------------ --------------
Level I 0.000% 2.00% 0.50%
Level II 0.250% 2.25% 0.375%
Level III 0.500% 2.75% 0.25%
* Utilization Levels are described below and are determined in accordance with
the definition of "Utilization Level."
1. LEVEL I: If the Utilization Level is less than 50%.
2. LEVEL II: If the Utilization Level is equal to or greater than 50% but less
than 75%.
3. LEVEL III: If the Utilization Level is equal to or greater than 75%.
Schedule I
Pricing Grid
SCHEDULE II
BORROWER, ADMINISTRATIVE AGENT, AND LENDER INFORMATION
Each of the commitments to lend set forth herein is governed by the terms of the
Credit Agreement which provides for, among other things, borrowing base
limitations which may restrict the Borrowers' ability to request (and the
Lenders' obligation to provide) Credit Extensions to a maximum amount which is
less than the commitments set forth in this Schedule II.
BORROWER: OFFICE:
Mariner Energy, Inc. Address for Notices:
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telecopier Number: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
ADMINISTRATIVE AGENT: APPLICABLE LENDING OFFICES:
Union Bank of California, N.A. Address for Notices:
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telecopier Number: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇▇
LENDERS: APPLICABLE LENDING OFFICES:
Union Bank of California, ▇.▇. ▇.▇. Domestic Lending Office:
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ Floor
Tranche A Commitment: $27,777,777.77 ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Tranche B Commitment: $4,629,629.63 Eurodollar Lending Office:
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Address for Notices:
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier Number: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇▇
Schedule II
Borrower, Administrative Agent, and Lender Information
BNP Paribas U.S. Domestic Lending Office:
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ A Commitment: $27,777,777.78 ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Tranche B Commitment: $4,629,629.63 Eurodollar Lending Office:
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Address for Notices:
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier Number: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇
Bank One, NA U.S. Domestic Lending Office:
1 Bank One Plaza
Tranche A Commitment: $22,222,222.22 IL1-0634
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Tranche B Commitment: $3,703,703.70
Eurodollar Lending Office:
1 Bank ▇▇▇ ▇▇▇▇▇
▇▇▇-▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Address for Notices:
▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇-▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier Number: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇
Schedule II
Borrower, Administrative Agent, and Lender Information
Southwest Bank of Texas, ▇.▇. ▇.▇. Domestic Lending Office:
▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ #▇▇▇
Tranche A Commitment: $16,666,666.67 ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Tranche B Commitment: $2,777,777.78 Eurodollar Lending Office:
▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ #▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Address for Notices:
▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ #▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telecopier Number: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Guaranty Bank U.S. Domestic Lending Office:
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ A Commitment: $22,222,222.22 ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Tranche B Commitment: $3,703,703.70 Eurodollar Lending Office:
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Address for Notices:
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telecopier Number: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇▇▇▇
Schedule II
Borrower, Administrative Agent, and Lender Information
Fortis Capital Corp. U.S. Domestic Lending Office:
▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ A Commitment: $16,666,666.67 ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Tranche B Commitment: $2,777,777.78
Eurodollar Lending Office:
▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Address for Notices:
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telecopier Number: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Financing, Inc. U.S. Domestic Lending Office:
▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇ A Commitment: $16,666,666.67 ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Tranche B Commitment: $2,777,777.78 Eurodollar Lending Office:
▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Address for Notices:
▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier Number: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Schedule II
Borrower, Administrative Agent, and Lender Information
EXHIBIT A
TO CREDIT AGREEMENT
FORM OF ASSIGNMENT AND ACCEPTANCE
Dated ________________, ______
Reference is made to the Credit Agreement dated as of March 2, 2004 (as
the same may be amended or modified from time-to-time, the "Credit Agreement")
among Mariner Energy, Inc., a Delaware corporation (the "Borrower"), the lenders
party thereto from time to time (the "Lenders"), and Union Bank of California,
N.A., as administrative agent (in such capacity, the "Administrative Agent") for
the Lenders and as issuing lender (in such capacity, the "Issuing Lender").
Capitalized terms not otherwise defined in this Assignment and Acceptance shall
have the meanings assigned to them in the Credit Agreement.
Pursuant to the terms of the Credit Agreement, ________________ wishes to
assign and delegate ___%(1) of its rights and obligations under the Credit
Agreement. Therefore, _________________ ("Assignor"), _______________
("Assignee"), and the Administrative Agent agree as follows:
1. Assignor hereby sells and assigns and delegates to the Assignee, and
the Assignee hereby purchases and assumes from the Assignor, without recourse to
the Assignor and without representation or warranty except for the
representations and warranties specifically set forth in clauses (a) and (b) of
Section 2, a ___% interest in and to all of the Assignor's rights and
obligations under the Credit Agreement as of the Effective Date (as defined
below), including, without limitation, such percentage interest in the
Assignor's Commitment, the Advances owing to the Assignor, the Assignor's
ratable participation interest in the Letters of Credit, and the Notes held by
the Assignor.(2)
2. The Assignor (a) represents and warrants that, prior to executing this
Assignment and Acceptance, (i) its Commitment is $_________, (ii) the aggregate
outstanding principal amount of Tranche A Advances owed to it by the Borrower is
$__________, (iii) the aggregate outstanding principal amount of Tranche B
Advances owed to it by Borrower is $___________, and (iv) its Pro Rata Share of
the Letter of Credit Exposure is $_______________; (b) represents and warrants
that it is the legal and beneficial owner of the interest being assigned by it
hereunder and that such interest is free and clear of any adverse claim; (c)
makes no representation or warranty and assumes no responsibility with respect
to any statements,
--------------------------
(1) Specify percentage in no more than 5 decimal points.
(2) Principal of the Commitments and Advances being assigned, if such assignment
is to an entity other than a Lender, shall equal at least $10,000,000 (or, if
less, the amount of its remaining Commitments and Advances in connection with an
assignment of all such remaining Commitments and Advances) and, with respect to
amounts greater than $10,000,000, shall be of integral multiples of $1,000,000
in excess thereof.
warranties, or representations made in, or in connection with, the Credit
Agreement or any other Loan Document or the execution, legality, validity,
enforceability, genuineness, sufficiency, or value of the Credit Agreement or
any other Loan Document or any other instrument or document furnished pursuant
thereto; (d) makes no representation or warranty and assumes no responsibility
with respect to the financial condition of the Borrower, any of the Borrower's
Subsidiaries, or any Guarantor or the performance or observance by the Borrower,
any of the Borrower's Subsidiaries, or any Guarantor of any of its respective
obligations under the Credit Agreement or any other Loan Document or any other
instrument or document furnished pursuant thereto; and (e) attaches the Notes
referred to in paragraph 1 above and requests that the Administrative Agent
exchange such Notes for a new Tranche A Note dated as of the Effective Date in
the principal amount of $____________ payable to the order of the Assignee [and]
[, a new Tranche B Note in the principal amount of $___________ payable to the
order of the Assignee,] a new Tranche A Note dated ____________, ____ in the
principal amount of $___________ payable to the order of the Assignor[, and a
new Tranche B Note dated ___________, ________ in the principal amount of
$_____________ payable to the order of the Assignor].
3. The Assignee (a) confirms that it has received a copy of the Credit
Agreement, together with copies of the financial statements referred to in
Section 4.05 thereof and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into this
Assignment and Acceptance; (b) agrees that it will, independently and without
reliance upon the Administrative Agent, the Assignor, or any other Lender and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under the Credit Agreement or any other Loan Document; (c) appoints and
authorizes the Administrative Agent to take such action as agent on its behalf
and to exercise such powers under the Credit Agreement and any other Loan
Document as are delegated to the Administrative Agent by the terms thereof,
together with such powers as are reasonably incidental thereto; (d) agrees that
it will perform in accordance with their terms all of the obligations which by
the terms of the Credit Agreement or any other Loan Document are required to be
performed by it as a Lender; (e) specifies as its Domestic Lending Office (and
address for notices) and Eurodollar Lending Office the offices set forth beneath
its name on the signature pages hereof; (f) attaches the forms prescribed by the
Internal Revenue Service of the United States certifying as to the Assignee's
status for purposes of determining exemption from United States withholding
taxes with respect to all payments to be made to the Assignee under the Credit
Agreement and the Notes or such other documents as are necessary to indicate
that all such payments are subject to such rates at a rate reduced by an
applicable tax treaty(3), and (g) represents that it is an Eligible Assignee.
4. The effective date for this Assignment and Acceptance shall be
________________ (the "Effective Date")(4) and following the execution of this
Assignment and Acceptance, the Administrative Agent will record it in the
Register.
---------------------
(3) If the Assignee is organized under the laws of a jurisdiction outside the
United States.
(4) See Section 9.06 of the Credit Agreement. Such date shall be at least three
Business Days after the execution of this Assignment and Acceptance.
Exhibit A - Page 2
5. Upon such recording, and as of the Effective Date, (a) the Assignee
shall be a party to the Credit Agreement for all purposes, and, to the extent
provided in this Assignment and Acceptance, have the rights and obligations of a
Lender thereunder and (b) the Assignor shall, to the extent provided in this
Assignment and Acceptance, relinquish its rights and be released from its
obligations under the Credit Agreement.
6. Upon such recording, from and after the Effective Date, the
Administrative Agent shall make all payments under the Credit Agreement and the
Notes in respect of the interest assigned hereby (including, without limitation,
all payments of principal, interest, letter of credit fees and commitment fees)
to the Assignee. The Assignor and Assignee shall make all appropriate
adjustments in payments under the Credit Agreement and the Notes for periods
prior to the Effective Date directly between themselves.
7. This Assignment and Acceptance shall be governed by, and construed and
enforced in accordance with, the laws of the State of Texas.
8. [By executing this Assignment and Acceptance as provided below, in
accordance with the Credit Agreement, Borrower hereby acknowledges notice of the
transaction contemplated hereby and consents to such transaction.(5)]
[Signature pages follow.]
-------------------
(5) Required if no Default has occurred and is continuing at the time the
assignment is effected.
Exhibit A - Page 3
The parties hereto have caused this Assignment and Acceptance to be duly
executed as of the date first above written.
[ASSIGNOR]
By:________________________________________________
Name:______________________________________________
Title:_____________________________________________
Address:___________________________________________
___________________________________________________
Attention:_________________________________________
Facsimile No: (XXX) XXX-XXXX
[ASSIGNEE]
By:________________________________________________
Name:______________________________________________
Title:_____________________________________________
Domestic Lending Office
Address:___________________________________________
___________________________________________________
Attention:_________________________________________
Facsimile No: (XXX) XXX-XXXX
Eurodollar Lending Office
Address:___________________________________________
___________________________________________________
Attention:_________________________________________
Facsimile No: (XXX) XXX-XXXX
Exhibit A - Page 4
Acknowledged this ____ day of _________, 200_:
UNION BANK OF CALIFORNIA, N.A.
as Administrative Agent
By:__________________________________________________
Name:________________________________________________
Title:_______________________________________________
MARINER ENERGY, INC.,
a Delaware corporation
By:__________________________________________________
Name:________________________________________________
Title:_______________________________________________
Exhibit A - Page 5
EXHIBIT B
TO CREDIT AGREEMENT
FORM OF COMPLIANCE CERTIFICATE
FOR THE PERIOD FROM _______, 200__ TO ________, 200__
This certificate dated as of ______________, _______ is prepared pursuant
to the Credit Agreement dated as of March 2, 2004 (as amended, supplemented or
otherwise modified from time to time, the "Credit Agreement") among MARINER
ENERGY, INC., a Delaware corporation ("Borrower"), the lenders party thereto
(the "Lenders"), and UNION BANK OF CALIFORNIA, N.A., as administrative agent for
such Lenders (in such capacity, the "Administrative Agent") and as issuing
lender. Unless otherwise defined in this certificate, capitalized terms that are
defined in the Credit Agreement shall have the meanings assigned to them by the
Credit Agreement.
The undersigned hereby certifies (a) that no Default or Event of Default
has occurred or is continuing, (b) that all of the representations and
warranties made by the Borrower in the Credit Agreement and the other Loan
Documents are true and correct in all material respects as if made on this date,
except with respect to those representations and warranties that speak as of a
certain date, which representations and warranties were true and correct as of
such date, and (c) that (1) as of the date hereof with respect to Section I
below, and (2) as of the last day of the previous fiscal quarter for Sections
II, III, IV, and V below, the following statements, amounts, and calculations
were true and correct:
I. ACCOUNTS PAYABLE -- SECTION 6.16. No trade payable or account payable of
Borrower or any of its Subsidiaries is now or has been outstanding for
more than ninety (90) days past due, except any such trade payables or
account payables as are being disputed in good faith and with respect to
which adequate reserves under GAAP have been established.
II. CURRENT RATIO -- SECTION 6.17.
(a) Current Assets(1) $_________________
(b) Current Liabilities(2) $_________________
Current Ratio = (a) to (b)
Minimum Current Ratio for December 31, 2003,
March 31, 2004, and June 30, 2004: 0.75 to 1.00
Minimum Current Ratio for September 30, 2004,
and each December 31, March 31, June 30, and
September 30 thereafter: 1.00 to 1.00
--------------------------
(1) As provided in Section 6.17 of the Credit Agreement, for purposes of this
calculation, "current assets" shall include, as of the date of calculation, the
Unused Tranche A Commitment Amount but shall exclude any cash deposited with or
at the request of a counterparty to any Hedge Contract.
(2) As provided in Section 6.17 of the Credit Agreement, for purposes of this
calculation, "current liabilities" shall exclude, as of the date of calculation,
the current portion of Debt existing under the Credit Agreement.
CURRENT RATIO AS OF ________________ ___ TO ___
COMPLIANCE? YES NO
III. FIXED CHARGE COVERAGE RATIO -- SECTION 6.18
(a) EBITDA $_______________
(b) Interest Expense $_______________
(c) Maintenance Capital Expenditures $_______________
(d) Outstanding Principal Amount of
Tranche A Advances $_______________
For the fiscal quarter ending March 31, 2004, the Fixed Charge Coverage
Ratio equals:
(a) to [(b) + (c) + {(0.05) times (d)}] with (a), (b), and (c)
calculated for the quarter then ended and (d) calculated as of the
last day of the quarter then ended.
For the fiscal quarter ending June 30, 2004, the Fixed Charge Coverage
Ratio equals:
(a) to [(b) + (c) + {(0.1) times (d)}] with (a), (b), and (c)
calculated for the two quarters then ended and (d) calculated as of
the last day of the quarter then ended.
For the fiscal quarter ending September 30, 2004, the Fixed Charge
Coverage Ratio equals:
(a) to [(b) + (c) + {(0.15) times (d)}] with (a), (b), and (c)
calculated for the three quarters then ended and (d) calculated as
of the last day of the quarter then ended.
For each fiscal quarter end thereafter, the Fixed Charge Coverage Ratio
equals:
(a) to [(b) + (c) + {(0.2) times (d)}] with (a), (b), and (c)
calculated for the four quarters then ended and (d) calculated as of
the last day of the quarter then ended.
Minimum Fixed Charge Coverage Ratio: 1.20 to 1.00
FIXED CHARGE COVERAGE RATIO AS OF __________ ___ TO ___
COMPLIANCE? YES NO
Exhibit B - Page 2
IV. MAXIMUM DEBT RATIO -- SECTION 6.19
(a) Consolidated Debt of Borrower $_______________
(b) EBITDA, calculated as set forth below $_______________
Maximum Debt Ratio = (a) to (b)
Maximum Debt Ratio (prior to the Bond Issuance): 1.75 to 1.00
Maximum Debt Ratio (from and after the date of the
Bond Issuance): 3.00 to 1.00
DEBT RATIO AS OF _____________ ___ TO ___
COMPLIANCE? YES NO
Calculation of EBITDA:
For the fiscal quarter ending March 31, 2004, EBITDA shall be measured by
multiplying EBITDA for the three-month period then ended by four.
For the fiscal quarter ending June 30, 2004, EBITDA shall be measured by
multiplying EBITDA for the two quarters then ended by two.
For the fiscal quarter ending September 30, 2004, EBITDA shall be measured
by multiplying EBITDA for the three quarters then ended by 4/3.
For fiscal quarters ending on each December 31, March 31, June 30, and
September 30, thereafter, EBITDA shall be EBITDA for the four-fiscal
quarter period then ended.
V. MAXIMUM SENIOR DEBT RATIO -- SECTION 6.20.
(Applicable only from and after the closing of the Bond Issuance.)
(a) Consolidated Debt of Borrower
(other than Debt incurred pursuant
to the Bond Issuance) $__________________
(b) EBITDA, calculated as set forth below $__________________
Maximum Senior Debt Ratio = (a) to (b)
Maximum Senior Debt Ratio: 1.75 to 1.00
SENIOR DEBT RATIO AS OF __________ ___ TO ___
COMPLIANCE? YES NO
Exhibit B - Page 3
Calculation of EBITDA:
For the fiscal quarter ending March 31, 2004, EBITDA shall be measured by
multiplying EBITDA for the three-month period then ended by four.
For the fiscal quarter ending June 30, 2004, EBITDA shall be measured by
multiplying EBITDA for the two quarters then ended by two.
For the fiscal quarter ending September 30, 2004, EBITDA shall be measured
by multiplying EBITDA for the three quarters then ended by 4/3.
For fiscal quarters ending on each December 31, March 31, June 30, and
September 30, thereafter, EBITDA shall be EBITDA for the four-fiscal
quarter period then ended.
[SIGNATURE PAGE FOLLOWS]
Exhibit B - Page 4
IN WITNESS THEREOF, I have hereto signed my name to this Compliance
Certificate as of _________________, 20____.
MARINER ENERGY, INC.,
a Delaware corporation
By:__________________________________________
Name:________________________________________
Title:_______________________________________
EXHIBIT C
TO CREDIT AGREEMENT
FORM OF GUARANTY
THIS GUARANTY dated as of [date] (this "Guaranty") is executed by [MARINER
ENERGY LLC] [MARINER HOLDINGS, INC.] [Subsidiary], a [_____________] [form of
organization] ("Guarantor") in favor of UNION BANK OF CALIFORNIA, N.A., as
Administrative Agent for the ratable benefit of itself, the Issuing Lender, and
the other Lenders (each as defined below).
INTRODUCTION
A. This Guaranty is given in connection with that certain Credit Agreement
dated as of [March 2, 2004] (as it has been or may be amended or otherwise
modified from time to time, the "Credit Agreement"), among Mariner Energy, Inc.,
a Delaware corporation ("Borrower"), the lenders party thereto from time to time
(the "Lenders"), and Union Bank of California, N.A. as administrative agent (the
"Administrative Agent") and as issuing lender (the "Issuing Lender").
B. Guarantor is [an Affiliate] [a Subsidiary] of Borrower and will derive
substantial direct and indirect benefit from the transactions contemplated by
the Credit Agreement, and the other Loan Documents (as defined in the Credit
Agreement).
C. Guarantor is executing and delivering this Guaranty (i) to induce the
Lenders to provide Advances under the Credit Agreement, and (ii) intending it to
be a legal, valid, binding, enforceable and continuing obligation of Guarantor,
whether or not Guarantor derives any benefit from the Credit Agreement.
NOW, THEREFORE, in consideration of the premises Guarantor hereby agrees
as follows:
Section 1. Definitions. All capitalized terms not otherwise defined in
this Guaranty that are defined in the Credit Agreement shall have the meanings
assigned to such terms by the Credit Agreement.
Section 2. Guaranty.
(a) Guarantor hereby absolutely, unconditionally and irrevocably
guarantees the punctual payment when due, whether at stated maturity, by
acceleration or otherwise, of all obligations whatsoever of Borrower now
or hereafter existing under the Loan Documents, whether absolute or
contingent and whether for principal, interest (including, without
limitation, interest that but for the existence of a bankruptcy,
reorganization or similar proceeding would accrue), fees, amounts required
to be provided as collateral, indemnities, expenses or otherwise, and all
other amounts owing in respect of the Obligations (such obligations being
the "Guaranteed Obligations"). Without limiting the ----------------------
generality of the foregoing, Guarantor's liability shall extend to all
amounts that constitute part of the Guaranteed Obligations and would be
owed by Borrower to the
Administrative Agent, the Issuing Agent, or any Lender under the Loan
Documents but for the fact that they are unenforceable or not allowable
due to insolvency or the existence of a bankruptcy, reorganization or
similar proceeding involving Borrower.
(b) It is the intention of Guarantor, and Administrative Agent, the
Issuing Lender, and each Lender that the amount of the Guaranteed
Obligations guaranteed by Guarantor shall be in, but not in excess of, the
maximum amount permitted by fraudulent conveyance, fraudulent transfer and
similar Legal Requirements applicable to Guarantor. Accordingly,
notwithstanding anything to the contrary contained in this Guaranty or in
any other agreement or instrument executed in connection with the payment
of any of the Guaranteed Obligations, the amount of the Guaranteed
Obligations guaranteed by Guarantor under this Guaranty shall be limited
to an aggregate amount equal to the largest amount that would not render
Guarantor's obligations hereunder subject to avoidance under Section 548
of the United States Bankruptcy Code or any comparable provision of any
other applicable law.
Section 3. Guaranty Absolute. Guarantor guarantees that the Guaranteed
Obligations will be paid strictly in accordance with the terms of the Loan
Documents, regardless of any law, regulation or order now or hereafter in effect
in any jurisdiction affecting any of such terms or the rights of the
Administrative Agent, the Issuing Agent, and any Lender with respect thereto but
subject to Section 2(b) above. The obligations of Guarantor under this Guaranty
are independent of the Guaranteed Obligations or any other obligations of any
other Person under the Loan Documents, and a separate action or actions may be
brought and prosecuted against Guarantor to enforce this Guaranty, irrespective
of whether any action is brought against Borrower or any other Person or whether
Borrower or any other Person is joined in any such action or actions. The
liability of Guarantor under this Guaranty shall be irrevocable, absolute and
unconditional irrespective of, and Guarantor hereby irrevocably waives any
defenses it may now or hereafter have in any way relating to, any or all of the
following:
(a) any lack of validity or enforceability of any Loan Document or
any agreement or instrument relating thereto or any part of the Guaranteed
Obligations being irrecoverable;
(b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Guaranteed Obligations or any other
obligations of any Person under the Loan Documents, or any other amendment
or waiver of or any consent to departure from any Loan Document,
including, without limitation, any increase in the Guaranteed Obligations
resulting from the extension of additional credit to Borrower or
otherwise;
(c) any taking, exchange, release or non-perfection of any
collateral, or any taking, release or amendment or waiver of or consent to
departure from any other guaranty, for all or any of the Guaranteed
Obligations;
(d) any manner of application of collateral, or proceeds thereof, to
all or any of the Guaranteed Obligations, or any manner of sale or other
disposition of any collateral for all or any of the Guaranteed Obligations
or any other obligations of any
Exhibit C
Page 2 of 10
other Person under the Loan Documents or any other assets of Borrower or
any other Person;
(e) any change, restructuring or termination of the corporate
structure or existence of Borrower or any other Person;
(f) any failure of the Administrative Agent, the Issuing Lender, or
any Lender to disclose to Borrower or Guarantor any information relating
to the business, condition (financial or otherwise), operations,
properties or prospects of any Person now or in the future known to the
Administrative Agent, the Issuing Lender, or any Lender (Guarantor hereby
irrevocably waives any duty on the part of the Administrative Agent, the
Issuing Lender, and any Lender to disclose such information);
(g) any signature of any officer of Borrower being mechanically
reproduced in facsimile or otherwise; or
(h) any other circumstance or any existence of or reliance on any
representation by the Administrative Agent, the Issuing Agent, or any
Lender that might otherwise constitute a defense available to, or a
discharge of, Borrower, Guarantor or any other guarantor, surety or other
Person.
Section 4. Continuation and Reinstatement, Etc. Guarantor agrees that, to
the extent that payments of any of the Guaranteed Obligations are made, or the
Administrative Agent, the Issuing Agent, or any Lender receives any proceeds of
collateral, and such payments or proceeds or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, or otherwise
required to be repaid, then to the extent of such repayment the Guaranteed
Obligations shall be reinstated and continued in full force and effect as of the
date such initial payment or collection of proceeds occurred. GUARANTOR SHALL
DEFEND AND INDEMNIFY THE ADMINISTRATIVE AGENT, THE ISSUING LENDER, AND EACH
LENDER FROM AND AGAINST ANY CLAIM OR LOSS UNDER THIS SECTION 4 (INCLUDING
REASONABLE ATTORNEYS' FEES AND EXPENSES) IN THE DEFENSE OF ANY SUCH ACTION OR
SUIT.
Section 5. Waivers and Acknowledgments.
(a) Guarantor hereby waives promptness, diligence, presentment,
notice of acceptance and any other notice with respect to any of the
Guaranteed Obligations and this Guaranty and any requirement that the
Administrative Agent, the Issuing Agent, and/or any Lender protect,
secure, perfect or insure any Lien or any property or exhaust any right or
take any action against Borrower or any other Person or any collateral.
(b) Guarantor hereby irrevocably waives any right to revoke this
Guaranty, and acknowledges that this Guaranty is continuing in nature and
applies to all Guaranteed Obligations, whether existing now or in the
future.
(c) Guarantor acknowledges that it will receive substantial direct
and indirect benefits from the financing arrangements involving Borrower
contemplated by the Loan
Exhibit C
Page 3 of 10
Documents and that the waivers set forth in this Guaranty are knowingly
made in contemplation of such benefits.
Section 6. Subrogation. Guarantor will not exercise any rights that it may
now have or hereafter acquire against Borrower or any other Person to the extent
that such rights arise from the existence, payment, performance or enforcement
of Guarantor's obligations under this Guaranty or any other Loan Document,
including, without limitation, any right of subrogation, reimbursement,
exoneration, contribution or indemnification and any right to participate in any
claim or remedy of the Administrative Agent, the Issuing Agent, and any Lender
against Borrower or any other Person, whether or not such claim, remedy or right
arises in equity or under contract, statute or common law, including, without
limitation, the right to take or receive from Borrower or any other Person,
directly or indirectly, in cash or other property or by set-off or in any other
manner, payment or security on account of such claim, remedy or right, unless
and until all of the Guaranteed Obligations and all other amounts payable under
this Guaranty shall have been paid in full in cash and no Letter of Credit
Exposure shall exist and all Commitments shall have expired or been terminated.
If any amount shall be paid to Guarantor in violation of the preceding sentence
at any time prior to (a) the payment in full in cash of the Guaranteed
Obligations and all other amounts payable under this Guaranty, (b) the
satisfaction of all Obligations with respect to Letters of Credit and the
termination of all obligations of the Administrative Agent and the Lenders in
respect of Letters of Credit, and (c) the termination of the Commitments, such
amount shall be held in trust for the benefit of the Lenders and shall forthwith
be paid to the Administrative Agent to be credited and applied to the Guaranteed
Obligations and all other amounts payable under this Guaranty, whether matured
or unmatured, in accordance with the terms of the Loan Documents.
Section 7. [Covenants. So long as any Obligation shall remain unpaid, any
Letter of Credit Exposure exists, or any Lender shall have any Commitment under
the Credit Agreement, Guarantor agrees to comply with the following covenants:
(a) Compliance with Laws. Guarantor shall comply in all material
respects with all Legal Requirements.
(b) Preservation of Corporate Existence. Guarantor shall preserve
and maintain its corporate or limited liability company, as applicable,
existence, rights, franchises, and privileges in the jurisdiction of its
incorporation or organization, as applicable, and qualify and remain
qualified as a foreign corporation or limited liability company in each
jurisdiction in which qualification is necessary or desirable in view of
its business and operations and the ownership of its Property, and, in
each case, where failure to qualify or preserve and maintain its rights
and franchises could reasonably be expected to cause a Material Adverse
Change.
(c) Liens. Guarantor shall not create, assume, incur, or suffer to
exist any Lien on or in respect of any of its Property whether now owned
or hereafter acquired, or assign any right to receive income other than
Liens to secure the Guaranteed Obligations.
Exhibit C
Page 4 of 10
(d) Debts. Guarantor shall not create, assume, suffer to exist, or
in any manner become or be liable in respect of, any Debt except any Debt
of Guarantor, the Borrower, or any of the Borrower's Subsidiaries under
the Loan Documents.
(e) Merger or Consolidation; Asset Sales. Guarantor shall not: (1)
merge or consolidate with or into any other Person, except that Holdings
may merge into Parent so long as, and only so long as (x) Parent is the
surviving entity of any such merger transaction, (y) Administrative Agent
continues to have an Acceptable Security Interest in the ownership
interests in Borrower and any other collateral with respect to which an
Acceptable Security Interest has been granted to Administrative Agent by
Holdings at any time prior to such merger, and (z) Parent has taken, prior
to the effectiveness of such merger, all actions deemed necessary or
desirable by Administrative Agent to ensure that Administrative Agent
shall continue to have such Acceptable Security Interest; or (2) sell,
transfer, assign, convey, or otherwise dispose of any of its Property.
(f) Investments. Guarantor shall not make or permit to exist any
loans, advances, or capital contributions to, or make any investment in
(including, without limitation, the making of any Acquisition), or
purchase or commit to purchase any stock or other securities or evidences
of indebtedness of or interests in any Person other than the Borrower.
(g) Additional Subsidiaries. Guarantor shall not, nor shall it
permit any of its Subsidiaries to, create or acquire any additional
Subsidiaries.](1)
Section 8. Representations and Warranties. Guarantor hereby represents and
warrants as follows:
(a) There are no conditions precedent to the effectiveness of this
Guaranty that have not been satisfied or waived. Guarantor benefits from
executing this Guaranty.
(b) Guarantor has, independently and without reliance upon the
Administrative Agent, the Issuing Agent, or any Lender and based on such
documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Guaranty, and Guarantor
has established adequate means of obtaining from Borrower and each other
relevant Person on a continuing basis information pertaining to, and is
now and on a continuing basis will be completely familiar with, the
business, condition (financial and otherwise), operations, properties and
prospects of Borrower and each other relevant Person.
(c) The obligations of Guarantor under this Guaranty are the valid,
binding and legally enforceable obligations of Guarantor, and the
execution and delivery of this
------------------------
(1) Insert the foregoing Section 7 in the Guaranty executed by Mariner Energy
LLC and Mariner Holdings, Inc. Replace the foregoing Section 7 with the
following words in any Guaranty executed by a Subsidiary of Borrower:
"Covenants. So long as any Note or any amount under any Loan Document shall
remain unpaid, so long as any Letter of Credit Exposure exists, or any Lender
shall have any Commitment hereunder, Guarantor agrees, unless the Required
Lenders shall otherwise consent in writing, to comply with the covenants set
forth in the Credit Agreement.
Exhibit C
Page 5 of 10
Guaranty by Guarantor has been duly and validly authorized in all respects
by Guarantor, and that the persons who are executing and delivering this
Guaranty on behalf of Guarantor have full power, authority and legal right
to so do, and to observe and perform all of the terms and conditions of
this Guaranty on Guarantor's part to be observed or performed.
(d) As of the date hereof, before and after giving effect to the
making of this Guaranty, Guarantor is Solvent. As used herein, the term
"Solvent" means, with respect to Guarantor: (a) the fair value of the
Property of Guarantor (both at fair valuation and at present fair saleable
value) is greater than the total liabilities, including contingent
liabilities, of Guarantor, (b) the present fair saleable value of the
assets of Guarantor is not less than the amount that will be required to
pay the probable liability of Guarantor on its debts as they become
absolute and matured, (c) Guarantor is able to realize upon its assets and
pay its debts and other liabilities, contingent obligations, and other
commitments as they mature in the normal course of business, (d) Guarantor
does not intend to, and does not believe that it will, incur debts or
liabilities beyond Guarantor's ability to pay as such debts and
liabilities mature, and (e) Guarantor is not engaged in business or a
transaction, and is not about to engage in business or a transaction, for
which Guarantor's Property would constitute unreasonably small capital
after giving due consideration to current and anticipated future capital
requirements and current and anticipated future business conduct and the
prevailing practice in the industry in which Guarantor is engaged. In
computing the amount of contingent liabilities at any time, such
liabilities shall be computed at the amount which, in light of the facts
and circumstances existing at such time, represents the amount that can
reasonably be expected to become an actual or matured liability.
Section 9. Right of Set-Off. Upon the occurrence and during the
continuance of any Event of Default, the Administrative Agent, the Issuing
Agent, and any Lender is hereby authorized at any time, to the fullest extent
permitted by law, to set off and apply any deposits (general or special, time or
demand, provisional or final) and other indebtedness owing by such Lender to the
account of Guarantor against any and all of the obligations of Guarantor under
this Guaranty, irrespective of whether or not such Lender shall have made any
demand under this Guaranty and although such obligations may be contingent and
unmatured. Such Lender agrees promptly to notify Guarantor after any such
set-off and application is made provided that the failure to give such notice
shall not affect the validity of such set-off and application. The rights of the
Lenders under this Section 9 are in addition to other rights and remedies
(including, without limitation, other rights of set-off) which the
Administrative Agent, the Issuing Agent, or any Lender may have.
Section 10. Amendments, Etc. Except as permitted by the Credit Agreement,
no amendment or waiver of any provision of this Guaranty and no consent to any
departure by Guarantor therefrom shall in any event be effective unless the same
shall be in writing and signed by Guarantor and the Administrative Agent and
then such waiver or consent shall be effective only in the specific instance and
for the specific purpose for which given.
Section 11. Notices, Etc. All notices and other communications provided
for hereunder shall be in writing (including, without limitation, facsimile
communication) and
Exhibit C
Page 6 of 10
mailed, faxed, or delivered, if to Guarantor, at its address specified on the
signature page hereto and if to the Administrative Agent, the Issuing Lender, or
any Lender, at its address specified in or pursuant to the Credit Agreement. All
notices and other communications shall be in writing (including, without
limitation, facsimile) and mailed by certified mail, return receipt requested,
telecopied, telexed, hand delivered, or delivered by a nationally recognized
overnight courier. All such notices and communications shall, when so mailed,
faxed, or hand delivered or delivered by a nationally recognized overnight
courier, be effective when received if mailed, when facsimile transmission is
completed and confirmed, or when delivered by such messenger or courier,
respectively, except that notices and communications to the Administrative Agent
shall not be effective until received by the Administrative Agent.
Section 12. No Waiver: Remedies. No failure on the part of the
Administrative Agent, the Issuing Agent, or any Lender to exercise, and no delay
in exercising, any right hereunder shall operate as a waiver thereof; nor shall
any single or partial exercise of any right hereunder preclude any other or
further exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
Section 13. Continuing Guaranty: Assignments under the Credit Agreement.
This Guaranty is a continuing guaranty and shall (a) remain in full force and
effect until the payment in full of all Guaranteed Obligations and all other
amounts payable under the Loan Documents, there shall exist no Letter of Credit
Exposure, and the termination of all the Commitments, (b) be binding upon each
Guarantor and its successors and assigns, and (c) inure to the benefit of and be
enforceable by the Administrative Agent, the Issuing Lender, and each Lender and
their respective successors, and, in the case of transfers and assignments made
in accordance with the Credit Agreement, transferees and assigns. Without
limiting the generality of the foregoing clause (c), subject to Section 9.06 of
the Credit Agreement, the Administrative Agent, the Issuing Agent, and any
Lender may assign or otherwise transfer all or any portion of its rights and
obligations under the Credit Agreement (including, without limitation, all or
any portion of its Commitment, the Advances owing to it and the Note or Notes
held by it) to any other Person, and such other Person shall thereupon become
vested with all the benefits in respect thereof granted to such Lender herein or
otherwise, subject, however, in all respects to the provisions of the Credit
Agreement. Guarantor acknowledges that upon any Person becoming a Lender or the
Administrative Agent in accordance with the Credit Agreement, such Person shall
be entitled to the benefits hereof.
Section 14. Governing Law. This Guaranty shall be governed by, and
construed and enforced in accordance with, the laws of the State of Texas.
Guarantor hereby irrevocably submits to the jurisdiction of any Texas state or
federal court sitting in Dallas, Texas in any action or proceeding arising out
of or relating to this Guaranty and the other Loan Documents, and Guarantor
hereby irrevocably agrees that all claims in respect of such action or
proceeding may be heard and determined in such court. Guarantor hereby
irrevocably waives, to the fullest extent it may effectively do so, any right it
may have to the defense of an inconvenient forum to the maintenance of such
action or proceeding. Guarantor hereby agrees that service of copies of the
summons and complaint and any other process which may be served in any such
action or proceeding may be made by mailing or delivering a copy of such process
to Guarantor at its address set forth in the Credit Agreement or set forth on
the signature page of this Guaranty. Guarantor agrees that a final judgment in
any such action or proceeding shall be conclusive and
Exhibit C
Page 7 of 10
may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law. Nothing in this Section shall affect the rights of the
Administrative Agent, the Issuing Agent, or any Lender to serve legal process in
any other manner permitted by the law or affect the right of the Administrative
Agent, the Issuing Agent, or any Lender to bring any action or proceeding
against Guarantor or its Property in the courts of any other jurisdiction.
Section 15. INDEMNIFICATION. GUARANTOR SHALL INDEMNIFY THE ADMINISTRATIVE
AGENT, THE LENDERS, THE ISSUING LENDER, AND BNP PARIBAS AND EACH AFFILIATE
THEREOF AND EACH AFFILIATE THEREOF AND THEIR RESPECTIVE DIRECTORS, OFFICERS,
EMPLOYEES, AND AGENTS FROM, AND DISCHARGE, RELEASE, AND HOLD EACH OF THEM
HARMLESS AGAINST, ANY AND ALL LOSSES, LIABILITIES, CLAIMS, OR DAMAGES WHICH MAY
BE IMPOSED ON, INCURRED BY, OR ASSERTED AGAINST THEM IN ANY WAY RELATING TO OR
ARISING OUT OF THIS AGREEMENT OR ANY ACTION TAKEN OR OMITTED BY THEM UNDER THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT (INCLUDING ANY SUCH LOSSES, LIABILITIES,
CLAIMS, DAMAGES, OR EXPENSE INCURRED BY REASON OF THE PERSON BEING INDEMNIFIED'S
OWN NEGLIGENCE OR STRICT LIABILITY) AND INCLUDING WITHOUT LIMITATION
ENVIRONMENTAL LIABILITIES, BUT EXCLUDING ANY SUCH LOSSES, LIABILITIES, CLAIMS,
DAMAGES, OR EXPENSES INCURRED BY REASON OF THE GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT OF THE PERSON TO BE INDEMNIFIED.
Section 16. WAIVER OF JURY TRIAL. GUARANTOR HEREBY KNOWINGLY, VOLUNTARILY,
INTENTIONALLY, IRREVOCABLY, AND UNCONDITIONALLY WAIVES ALL RIGHTS TO TRIAL BY
JURY IN ANY ACTION, SUIT, PROCEEDING, COUNTERCLAIM, OR OTHER LITIGATION THAT
RELATES TO OR ARISES OUT OF ANY OF THIS GUARANTY OR ANY OTHER LOAN DOCUMENT OR
THE ACTS OR OMISSIONS OF THE ADMINISTRATIVE AGENT, THE ISSUING AGENT, OR ANY
LENDER IN THE ENFORCEMENT OF ANY OF THE TERMS OR PROVISIONS OF THIS AGREEMENT OR
ANY OTHER LOAN DOCUMENT OR OTHERWISE WITH RESPECT THERETO. THE PROVISIONS OF
THIS SECTION ARE A MATERIAL INDUCEMENT FOR THE LENDERS PROVIDING THE CREDIT
EXTENSIONS UNDER THE LOAN DOCUMENTS.
Section 17. ORAL AGREEMENTS. PURSUANT TO SECTION 26.02 OF THE TEXAS
BUSINESS AND COMMERCE CODE, AN AGREEMENT IN WHICH THE AMOUNT INVOLVED IN
AGREEMENT EXCEEDS $50,000 IN VALUE IS NOT ENFORCEABLE UNLESS THE AGREEMENT IS IN
WRITING AND SIGNED BY THE PARTY TO BE BOUND OR THAT PARTY'S AUTHORIZED
REPRESENTATIVE.
THE RIGHTS AND OBLIGATIONS OF THE PARTIES TO AN AGREEMENT SUBJECT TO THE
PRECEDING PARAGRAPH SHALL BE DETERMINED SOLELY FROM THE WRITTEN AGREEMENT, AND
ANY PRIOR ORAL AGREEMENTS BETWEEN THE PARTIES ARE SUPERSEDED BY AND MERGED INTO
THIS GURANTY. THIS GUARANTY AND THE LOAN DOCUMENTS, AS DEFINED IN THE CREDIT
AGREEMENT REFERRED TO IN THIS GUARANTY, REPRESENT
Exhibit C
Page 8 of 10
THE FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]
Exhibit C
Page 9 of 10
Guarantor has caused this Guaranty to be duly executed as of the date
first above written.
GUARANTOR:
[NAME OF GUARANTOR]
By:____________________________________
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chief Executive Officer
Address of Guarantor:
_______________________________________
_______________________________________
_______________________________________
EXHIBIT D
TO CREDIT AGREEMENT
FORM OF MORTGAGE
NOTICE OF CONFIDENTIALITY RIGHTS: IF YOU ARE A NATURAL PERSON, YOU MAY REMOVE OR
STRIKE ANY OF THE FOLLOWING INFORMATION FROM THIS INSTRUMENT BEFORE IT IS FILED
FOR RECORD IN THE PUBLIC RECORDS: YOUR SOCIAL SECURITY NUMBER OR YOUR DRIVER'S
LICENSE NUMBER.
DEED OF TRUST, SECURITY AGREEMENT, FINANCING STATEMENT,
FIXTURE FILING AND ASSIGNMENT OF PRODUCTION
THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY AND FUTURE ADVANCE PROVISIONS.
THIS INSTRUMENT COVERS THE INTEREST OF MORTGAGOR IN MINERALS OR THE LIKE
(INCLUDING OIL AND GAS) BEFORE EXTRACTION AND THE SECURITY INTEREST CREATED BY
THIS INSTRUMENT ATTACHES TO SUCH MINERALS AS EXTRACTED AND TO THE ACCOUNTS
RESULTING FROM THE SALE THEREOF AT THE WELLHEAD. THIS INSTRUMENT COVERS THE
INTEREST OF MORTGAGOR IN FIXTURES. THIS FINANCING STATEMENT IS TO BE FILED FOR
RECORD, AMONG OTHER PLACES, IN THE REAL ESTATE RECORDS. PRODUCTS OF THE
COLLATERAL ARE ALSO COVERED.
A POWER OF SALE HAS BEEN GRANTED IN THIS DEED OF TRUST. A POWER OF SALE
MAY ALLOW THE TRUSTEE OR MORTGAGEE TO TAKE THE COLLATERAL AND SELL IT
WITHOUT GOING TO COURT IN A FORECLOSURE ACTION UPON DEFAULT BY MORTGAGOR
UNDER THIS DEED OF TRUST
FROM
MARINER ENERGY, INC.
(Mortgagor, Debtor and Grantor)
TO
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Trustee for the benefit of
UNION BANK OF CALIFORNIA, N.A., as Administrative Agent and Issuing Lender
(Mortgagee, Secured Party and Grantee)
March 2, 2004
For purposes of filing this Deed of Trust as a financing statement, the mailing
address of Mortgagor is 2101 City ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇-▇▇▇▇, the state of its organization is Delaware, and its organizational
number is 2014213; the mailing address of Mortgagee is Lincoln Plaza, ▇▇▇ ▇.
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇.
***********************************
This instrument, prepared by ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇-▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇,
L.L.P., 711 Louisiana, South Tower Pennzoil Place, Suite 2900, ▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇, (▇▇▇) ▇▇▇-▇▇▇▇, contains after-acquired property provisions and covers
future advances and proceeds to the fullest extent allowed by applicable law.
ATTENTION RECORDING OFFICER: This instrument is a mortgage of both real and
personal property and is, among other things, a Security Agreement and Financing
Statement under the Uniform Commercial Code. This instrument creates a lien on
rights in or relating to lands of Mortgagor which are described in Exhibit A
hereto or in documents described in such Exhibit A.
RECORDED DOCUMENT SHOULD BE RETURNED TO:
BRACEWELL & ▇▇▇▇▇▇▇▇▇, L.L.P.
711 Louisiana, South Tower Pennzoil Place, Suite 2900
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Exhibit D - Page 2
DEED OF TRUST, SECURITY AGREEMENT, FINANCING STATEMENT, FIXTURE
FILING AND ASSIGNMENT OF PRODUCTION
THE STATE OF TEXAS Section
Section
COUNTIES OF _________________ Section
THIS DEED OF TRUST, SECURITY AGREEMENT, FINANCING STATEMENT, FIXTURE
FILING, AND ASSIGNMENT OF PRODUCTION (the "Deed of Trust") dated effective as of
the 2nd day of March, 2004, is executed and delivered by MARINER ENERGY, INC., a
Delaware corporation ("Mortgagor"), to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ as Trustee, for the
benefit of UNION BANK OF CALIFORNIA, N.A. (the "Mortgagee") in its capacity as
the Administrative Agent and Issuing Lender under the Credit Agreement (as
hereinafter defined) and on behalf of the Credit Parties (as hereinafter
defined). The addresses of Mortgagor, Mortgagee, and the Trustee appear in
Section 7.13 of this Deed of Trust.
This Deed of Trust is executed in connection with, and pursuant to the
terms of, the Credit Agreement dated as of March 2, 2004 (as hereafter renewed,
extended, amended, supplemented and/or restated from time-to-time, the "Credit
Agreement") among Mortgagor, as borrower, the lenders party thereto from time to
time (the "Lenders"), and Mortgagee as administrative agent for the Lenders (the
"Administrative Agent") and as issuing lender under the Credit Agreement (the
"Issuing Lender").
RECITALS
Mortgagor expects to receive significant benefits from the advances of
funds pursuant to the Credit Agreement.
Mortgagor or any Guarantor may from time-to-time enter into one or more
Interest Hedge Agreements or Hydrocarbon Hedge Agreements with a Swap
Counterparty (such Swap Counterparty, the Lenders, Mortgagee, Administrative
Agent, and Issuing Lender being collectively referred to herein as the "Credit
Parties").
Mortgagor will directly or indirectly benefit from such Interest Hedge
Agreements and the Hydrocarbon Hedge Agreements entered into by it or any
Guarantor with the Swap Counterparties.
Now, therefore, in consideration of the foregoing and for other good and
valuable consideration and in order to induce Mortgagee, Administrative Agent,
Issuing Lender, and the Lenders to enter into the Credit Agreement, Mortgagor
has agreed to execute and deliver this Deed of Trust and Mortgagor (a) wishes to
make this Deed of Trust in favor of the Trustee for the benefit of Mortgagee to
secure its obligations under the Credit Agreement and any Interest Hedge
Agreements or Hydrocarbon Hedge Agreements with a Swap Counterparty and (b)
hereby agrees as follows:
Exhibit D - Page 3
ARTICLE I
DEFINITIONS
1.1 "Collateral" means the Realty Collateral, Personalty Collateral and
Fixture Collateral.
1.2 "Contracts" means all contracts, agreements, operating agreements,
farm-out or farm-in agreements, sharing agreements, mineral purchase agreements,
contracts for the purchase, exchange, transportation, processing or sale of
Hydrocarbons, rights-of-way, easements, surface leases, equipment leases,
permits, franchises, licenses, pooling or unitization agreements, and unit or
pooling designations and orders now or hereafter affecting any of the Oil and
Gas Properties, Operating Equipment, Fixture Operating Equipment, or
Hydrocarbons now or hereafter covered hereby, or which are useful or appropriate
in drilling for, producing, treating, handling, storing, transporting or
marketing oil, gas or other minerals produced from any of the Oil and Gas
Properties, and all as such contracts and agreements as they may be amended,
restated, modified, substituted or supplemented from time-to-time.
1.3 "Event of Default" shall have the meaning set forth in Article V
hereof.
1.4 "Fixture Collateral" means all of Mortgagor's interest now owned or
hereafter acquired in and to all Fixture Operating Equipment and all proceeds,
products, renewals, increases, profits, substitutions, replacements, additions,
amendments and accessions thereof, thereto or therefor.
1.5 "Fixture Operating Equipment" means any of the items described in the
first sentence of Section 1.10 which as a result of being incorporated into
realty or structures or improvements located therein or thereon, with the intent
that they remain there permanently, constitute fixtures under the laws of the
state in which such equipment is located.
1.6 "Hydrocarbons" means oil, gas, coal seam gas, casinghead gas, drip
gasoline, natural gasoline, condensate, distillate, and all other liquid and
gaseous hydrocarbons produced or to be produced in conjunction therewith from a
well bore and all products, by-products, and other substances derived therefrom
or the processing thereof, and all other minerals and substances produced in
conjunction with such substances, including sulfur, geothermal steam, water,
carbon dioxide, helium, and any and all minerals, ores, or substances of value
and the products and proceeds therefrom.
1.7 "Notes" means the "Notes" as that term is defined in the Credit
Agreement.
1.8 "Obligations" means
(a) The "Obligations", as that term is defined in the Credit
Agreement, including all indebtedness evidenced by the Notes;
(b) All other indebtedness, obligations, and liabilities of
Mortgagor or any of its Subsidiaries arising under the Credit Agreement,
this Deed of Trust, any Guaranty,
Exhibit D - Page 4
any Interest Hedge Agreement with a Swap Counterparty, any Hydrocarbon
Hedge Agreement with a Swap Counterparty, or any of the other Loan
Documents;
(c) All other indebtedness, obligations and liabilities of any kind
of Mortgagor owing to any of the Credit Parties now existing or hereafter
arising under or pursuant to any Loan Document, whether fixed or
contingent, joint or several, direct or indirect, primary or secondary,
and regardless of how created or evidenced;
(d) All sums advanced or costs or expenses incurred by Mortgagee or
any of the other Credit Parties (whether by it directly or on its behalf
by the Trustee), which are made or incurred pursuant to, or allowed by,
the terms of this Deed of Trust plus interest thereon from the date of the
advance or incurrence until reimbursement of Mortgagee or such Lender
charged at the same rate of interest as charged Tranche B Advances when an
Event of Default exists as set forth in the Credit Agreement;
(e) All future advances or other value, of whatever class or for
whatever purpose, at any time hereafter made or given by Mortgagee or any
of the other Credit Parties to Mortgagor under or pursuant to any Loan
Document or any other agreement, document, or instrument, whether or not
the advances or value are given pursuant to a commitment, whether or not
the advances or value are presently contemplated by the parties hereto,
and whether or not Mortgagor is indebted to Mortgagee, Administrative
Agent, Issuing Lender, or any Lender at the time of such events; and
(f) All renewals, extensions, modifications, amendments,
rearrangements and substitutions of all or any part of the above whether
or not Mortgagor executes any agreement or instrument.
1.9 "Oil and Gas Property" or "Oil and Gas Properties" means (a) the oil
and gas and/or oil, gas and mineral leases and leasehold interests, fee mineral
interests, term mineral interests, subleases, farmouts, royalties, overriding
royalties, net profits interests, production payments and similar interests or
estates described in Exhibit A attached hereto and made a part hereof for all
purposes including the net revenue interests warranted on such Exhibit A and any
reversionary or carried interests relating to any of the foregoing, (b) all
production units, and drilling and spacing units (and the Properties covered
thereby) which may affect all or any portion of such interests including those
units which may be described or referred to on Exhibit A and any units created
by agreement or designation or under orders, regulations, rules or other
official acts of any Federal, state or other governmental body or agency having
jurisdiction, (c) the surface leases described in Exhibit A attached hereto and
made part hereof for all purposes, (d) any and all non-consent interests owned
or held by, or otherwise benefiting, Mortgagor and arising out of, or pursuant
to, any of the Contracts, (e) any other interest in, to or relating to (i) all
or any part of the land described in Exhibit A, the land relating to, or
described in, the leases set forth in Exhibit A or in the documents described in
Exhibit A, or (ii) any of the estates, property rights or other interests
referred to above, (f) any instrument executed in amendment, correction,
modification, confirmation, renewal or extension of the same, and (g) all
tenements, hereditaments and appurtenances now existing or hereafter obtained in
connection with any of the aforesaid, including any rights arising under
unitization agreements, orders or
Exhibit D - Page 5
other arrangements, communitization agreements, orders or other arrangements or
pooling orders, agreements or other arrangements.
1.10 "Operating Equipment" means all surface or subsurface machinery,
equipment, facilities, supplies or other Property of whatsoever kind or nature
now or hereafter located on any of the Property affected by the Oil and Gas
Properties which are useful for the production, treatment, storage or
transportation of Hydrocarbons, including all oil ▇▇▇▇▇, gas ▇▇▇▇▇, water ▇▇▇▇▇,
injection ▇▇▇▇▇, casing, tubing, rods, pumping units and engines, christmas
trees, derricks, separators, gun barrels, flow lines, pipelines, tanks, gas
systems (for gathering, treating and compression), water systems (for treating,
disposal and injection), supplies, derricks, wells, power plants, poles, cables,
wires, meters, processing plants, compressors, dehydration units, lines,
transformers, starters and controllers, machine shops, tools, storage yards and
equipment stored therein, buildings and camps, telegraph, telephone and other
communication systems, roads, loading racks, shipping facilities and all
additions, substitutes and replacements for, and accessories and attachments to,
any of the foregoing. Operating Equipment shall not include any items
incorporated into realty or structures or improvements located therein or
thereon in such a manner that they no longer remain personalty under the laws of
the state in which such equipment is located.
1.11 "Personalty Collateral" means all of Mortgagor's interest now owned
or hereafter acquired in and to (a) all Operating Equipment, (b) all
Hydrocarbons severed and extracted from or attributable to the Oil and Gas
Properties, including oil in tanks, (c) all accounts (including accounts
resulting from the sale of Hydrocarbons at the wellhead), contract rights and
general intangibles attributable to the Oil and Gas Properties, including all
accounts, contract rights and general intangibles now or hereafter arising
regardless of whether any of the foregoing is in connection with the sale or
other disposition of any Hydrocarbons or otherwise, including all Liens securing
the same, (d) all accounts, contract rights and general intangibles attributable
to the Oil and Gas Properties and now existing or hereafter arising regardless
of whether any of the foregoing is in connection with or resulting from any of
the Contracts, including all Liens securing the same, (e) all proceeds and
products of the Realty Collateral and any other contracts or agreements, (f) all
information concerning the Oil and Gas Properties and all ▇▇▇▇▇ located thereon,
including abstracts of title, title opinions, geological and geophysical
information and logs, lease files, well files, and other books and records
(including computerized records and data), (g) any options to acquire any Realty
Collateral, and (h) all proceeds, products, renewals, increases, profits,
substitutions, replacements, additions, amendments and accessions of, to or for
any of the foregoing.
1.12 "Property" means any property of any kind, whether real, personal, or
mixed and whether tangible or intangible.
1.13 "Realty Collateral" means all of Mortgagor's interest now owned or
hereafter acquired in and to the Oil and Gas Properties and all unsevered and
unextracted Hydrocarbons (even though Mortgagor's interest therein be
incorrectly described in, or a description of a part or all of such interest be
omitted from, Exhibit A).
1.14 All other capitalized terms defined in the Credit Agreement which are
used in this Deed of Trust and which are not otherwise defined herein shall have
the meanings assigned to
Exhibit D - Page 6
such terms in the Credit Agreement. All meanings to defined terms, unless
otherwise indicated, are to be equally applicable to both the singular and
plural forms of the terms defined. Article, Section, Schedule, and Exhibit
references are to Articles and Sections of and Schedules and Exhibits to this
Deed of Trust, unless otherwise specified. All references to instruments,
documents, contracts, and agreements are references to such instruments,
documents, contracts, and agreements as the same may be amended, supplemented,
and otherwise modified from time to time, unless otherwise specified. The words
"hereof", "herein" and "hereunder" and words of similar import when used in this
Deed of Trust shall refer to this Deed of Trust as a whole and not to any
particular provision of this Deed of Trust. As used herein, the term "including"
means "including, without limitation".
ARTICLE II
CREATION OF SECURITY
2.1 CONVEYANCE AND GRANT OF LIEN. In consideration of the advances or
extensions by the Credit Parties to Mortgagor of the funds or credit
constituting the Obligations (including the making of the Advances and the
issuing of the Letters of Credit, and in further consideration of the mutual
covenants contained herein, Mortgagor, by this Deed of Trust hereby GRANTS,
CONVEYS, SELLS, TRANSFERS, ASSIGNS AND CONVEYS with a general warranty of title,
and WITH THE POWER OF SALE, for the uses, purposes and conditions hereinafter
set forth all of its right, title and interest in and to the Realty Collateral,
the Personalty Collateral and the Fixture Collateral unto Trustee, and to his
successor or successors or substitutes IN TRUST, WITH POWER OF SALE, in trust to
secure the payment and performance of the Obligations for the benefit of
Mortgagee and the ratable benefit of the Credit Parties.
TO HAVE AND TO HOLD the Realty Collateral, the Personalty Collateral and
Fixture Collateral unto the Trustee and his successors or substitutes in trust
and to his and their successors and assigns forever for the benefit of the
Credit Parties, together with all and singular the rights, hereditaments and
appurtenances thereto in anywise appertaining or belonging, to secure payment of
the Obligations and the performance of the covenants of Mortgagor contained in
this Deed of Trust. Mortgagor does hereby bind itself, its successors and
permitted assigns, to warrant and forever defend all and singular the Realty
Collateral, the Personalty Collateral and the Fixture Collateral unto the
Trustee and his successors or substitutes in trust, and their successors and
assigns, against every person whomsoever lawfully claiming or to claim the same,
or any part thereof.
2.2 SECURITY INTEREST. For the same consideration and to further secure
the Obligations, Mortgagor hereby grants to Mortgagee for its benefit and the
ratable benefit of the other Credit Parties a security interest in and to the
Collateral, except that for purposes of this security interest, the term
Collateral shall not include the Ineligible Property. As used in this Section
2.2, the term "Ineligible Property" means (a) any property or assets of a
Grantor to the extent that such Grantor is prohibited from granting a security
interest in, pledge of, charge, mortgage or lien upon such property or assets by
reason of (i) an existing and enforceable negative pledge provision to the
extent such provision does not cause a violation of Section 6.03 of the Credit
Agreement, or (ii) applicable law or regulation to which such Grantor is
subject, except (in the case of either of the foregoing clauses (i) and (ii)) to
the extent such prohibition is
Exhibit D - Page 7
ineffective under Sections 9.406, 9.407, 9.408 and 9.409 of the Uniform
Commercial Code, and (b) permits and licenses to the extent the grant of a
security interest therein is prohibited under applicable law or regulation or by
their express terms, except to the extent such prohibition is ineffective under
Section 9.408 of the Uniform Commercial Code.
2.3 ASSIGNMENT OF LIENS AND SECURITY INTERESTS. For the same consideration
and to further secure the Obligations, Mortgagor hereby assigns and conveys to
Mortgagee for its benefit and the benefit of the other Credit Parties the
security interests held by Mortgagor arising under Section 9.343(a) of the Texas
Business and Commerce Code and the Liens granted to Mortgagor pursuant to
Section 9.343(d) attributable to the interest of Mortgagor in the Hydrocarbons.
ARTICLE III
PROCEEDS FROM PRODUCTION
3.1 ASSIGNMENT OF PRODUCTION.
(a) In order to further secure the Obligations, Mortgagor has
assigned, transferred, conveyed and delivered and does hereby assign,
transfer, convey and deliver unto Mortgagee, effective as of the date
hereof at 7:00 a.m. Central Time, U.S.A., all Hydrocarbons produced from,
and which are attributable to, Mortgagor's interest, now owned or
hereafter acquired, in and to the Oil and Gas Properties, or are allocated
thereto pursuant to pooling or unitization orders, agreements or
designations, and all proceeds therefrom.
(b) Subject to the provisions of subsection (f) below, all parties
producing, purchasing, taking, possessing, processing or receiving any
production from the Oil and Gas Properties, or having in their possession
any such production, or the proceeds therefrom, for which they or others
are accountable to Mortgagee by virtue of the provisions of this Section
3.1, are authorized and directed by Mortgagor to treat and regard
Mortgagee as the assignee and transferee of Mortgagor and entitled in its
place and stead to receive such Hydrocarbons and the proceeds therefrom.
(c) Mortgagor directs and instructs each of such parties to pay to
Mortgagee, for its benefit and the ratable benefit of the other Credit
Parties, all of the proceeds of such Hydrocarbons until such time as such
party has been furnished evidence that all of the Obligations have been
paid and that the Lien evidenced hereby has been released; provided,
however, that until Mortgagee shall have exercised the rights as herein to
instruct such parties to deliver such Hydrocarbons and all proceeds
therefrom directly to Mortgagee, such parties shall be entitled to deliver
such Hydrocarbons and all proceeds therefrom to Mortgagor for Mortgagor's
use and enjoyment, and Mortgagor shall be entitled to execute division
orders, transfer orders and other instruments as may be required to direct
all proceeds to Mortgagor without the necessity of joinder by Mortgagee in
such division orders, transfer orders or other instruments. Mortgagor
agrees to perform all such acts, and to execute all such further
assignments, transfers and division orders, and other instruments as may
be reasonably required or desired by
Exhibit D - Page 8
Mortgagee or any party in order to have said revenues and proceeds so paid
to Mortgagee. None of such parties shall have any responsibility for the
application of any such proceeds received by Mortgagee. Subject to the
provisions of subsection (f) below, Mortgagor authorizes Mortgagee to
receive and collect all proceeds of such Hydrocarbons.
(d) Subject to the provisions of subsection (f) below, Mortgagor
will execute and deliver to Mortgagee any instruments Mortgagee may from
time to time reasonably request for the purpose of effectuating this
assignment and the payment to Mortgagee of the proceeds assigned.
(e) Neither the foregoing assignment nor the exercise by Mortgagee
of any of its rights herein shall be deemed to make Mortgagee a
"mortgagee-in-possession" or otherwise responsible or liable in any manner
with respect to the Oil and Gas Properties or the use, occupancy,
enjoyment or operation of all or any portion thereof, unless and until
Mortgagee, in person or by agent, assumes actual possession thereof, nor
shall appointment of a receiver for the Oil and Gas Properties by any
court at the request of Mortgagee or by agreement with Mortgagor or the
entering into possession of the Oil and Gas Properties or any part thereof
by such receiver be deemed to make Mortgagee a "mortgagee-in-possession"
or otherwise responsible or liable in any manner with respect to the Oil
and Gas Properties or the use, occupancy, enjoyment or operation of all or
any portion thereof.
(f) Notwithstanding anything to the contrary contained herein, so
long as no Event of Default shall have occurred and is continuing, (a)
Mortgagor shall have the right to collect all revenues and proceeds
attributable to the Hydrocarbons that accrue to the Oil and Gas Properties
or the products obtained or processed therefrom, as well as any Liens and
security interests securing any sales of said Hydrocarbons and to retain,
use and enjoy same and (b) Mortgagee shall not execute or deliver any
transfer or division orders in the name of Mortgagor or otherwise relating
to the Collateral.
(g) Subject to the provisions of Section 3.1(f), Mortgagee may
endorse and cash any and all checks and drafts payable to the order of
Mortgagor or Mortgagee for the account of Mortgagor, received from or in
connection with the proceeds of the Hydrocarbons affected hereby, and the
same may be applied as provided herein. Subject to the provisions of
Section 3.1(f), Mortgagee may execute any transfer or division orders in
the name of Mortgagor or otherwise, with warranties and indemnities
binding on Mortgagor; provided that Mortgagee shall not be held liable to
Mortgagor for, nor be required to verify the accuracy of, Mortgagor's
interests as represented therein.
(h) Subject to the provisions of Section 3.1(f), Mortgagee shall
have the right at Mortgagee's election and in the name of Mortgagor, or
otherwise, to prosecute and defend any and all actions or legal
proceedings deemed advisable by Mortgagee in order to collect such
proceeds and to protect the interests of Mortgagee or Mortgagor, with all
costs, expenses and attorneys fees incurred in connection therewith being
paid by Mortgagor. In addition, should any purchaser taking production
from the Oil and Gas Properties fail to pay promptly to Mortgagee in
accordance with this Article, Mortgagee
Exhibit D - Page 9
shall have the right to demand a change of connection and to designate
another purchaser with whom a new connection may be made without any
liability on the part of Mortgagee in making such election, so long as
ordinary care is used in the making thereof, and upon failure of Mortgagor
to consent to such change of connection, the entire amount of all the
Obligations may, at the option of Mortgagee, be immediately declared to be
due and payable and subject to foreclosure hereunder.
(i) Without in any way limiting the effectiveness of the foregoing
provisions, if Mortgagor receives any proceeds which under this Section
3.1 are payable to Mortgagee, Mortgagor shall hold the same in trust and
remit such proceeds, or cause them to be remitted, immediately, to
Mortgagee.
3.2 APPLICATION OF PROCEEDS. All payments received by Mortgagee pursuant
to this Article III attributable to the interest of Mortgagor in and to the
Hydrocarbons shall be applied in the order set forth in Section 7.06 of the
Credit Agreement.
3.3 MORTGAGOR'S PAYMENT DUTIES. Except as provided in Section 7.18 hereof,
nothing contained herein will limit Mortgagor's absolute duty to make payment of
the Obligations regardless of whether the proceeds assigned by this Article III
are sufficient to pay the same, and the receipt by Mortgagee of proceeds from
Hydrocarbons under this Deed of Trust will be in addition to all other security
now or hereafter existing to secure payment of the Obligations.
3.4 LIABILITY OF MORTGAGEE. Mortgagee is hereby absolved from all
liability for failure to enforce collection of any of such proceeds, and from
all other responsibility in connection therewith except the responsibility to
account to Mortgagor for proceeds actually received by Mortgagee.
3.5 ACTIONS TO EFFECT ASSIGNMENT. Subject to the provisions of Section
3.1(f), Mortgagor covenants to cause all operators, pipeline companies,
production purchasers and other remitters of said proceeds to pay promptly to
Mortgagee the proceeds from such Hydrocarbons in accordance with the terms of
this Deed of Trust, and to execute, acknowledge and deliver to said remitters
such division orders, transfer orders, certificates and other documents as may
be necessary, requested or proper to effect the intent of this assignment; and
Mortgagee shall not be required at any time, as a condition to its right to
obtain the proceeds of such Hydrocarbons, to warrant its title thereto or to
make any guaranty whatsoever. In addition, Mortgagor covenants to provide to
Mortgagee, upon Mortgagee's request, the name and address of every such remitter
of proceeds from such Hydrocarbons, together with a copy of the applicable
division orders, transfer orders, sales contracts and governing instruments. All
expenses incurred by the Trustee or Mortgagee in the collection of said proceeds
shall be repaid promptly by Mortgagor; and prior to such repayment, such
expenses shall be a part of the Obligations secured hereby. If under any
existing contracts for the sale of Hydrocarbons, other than division orders or
transfer orders, any proceeds of Hydrocarbons are required to be paid by the
remitter direct to Mortgagor so that under such existing agreements payment
cannot be made of such proceeds to Mortgagee in the absence of foreclosure,
Mortgagor's interest in all proceeds of Hydrocarbons under such existing
agreements shall, when received by Mortgagor, constitute trust funds in
Mortgagee's hands and shall be immediately paid over to Mortgagee.
Exhibit D - Page 10
3.6 POWER OF ATTORNEY. Without limitation upon any of the foregoing,
Mortgagor hereby designates and appoints Mortgagee as true and lawful agent and
attorney-in-fact (with full power of substitution, either generally or for such
periods or purposes as Mortgagee may from time to time prescribe), with full
power and authority, for and on behalf of and in the name of Mortgagor, to
execute, acknowledge and deliver all such division orders, transfer orders,
certificates and other documents of every nature, with such provisions as may
from time to time, in the opinion of Mortgagee, be necessary or proper to effect
the intent and purpose of the assignment contained in this Article III; and
Mortgagor shall be bound thereby as fully and effectively as if Mortgagor had
personally executed, acknowledged and delivered any of the foregoing orders,
certificates or documents. The powers and authorities herein conferred on
Mortgagee may be exercised by Mortgagee through any person who, at the time of
exercise, is the president, a senior vice president or a vice president of
Mortgagee. THE POWER OF ATTORNEY CONFERRED BY THIS SECTION 3.6 IS GRANTED FOR
VALUABLE CONSIDERATION AND COUPLED WITH AN INTEREST AND IS IRREVOCABLE SO LONG
AS THE OBLIGATIONS, OR ANY PORTION THEREOF, SHALL REMAIN UNPAID. All persons
dealing with Mortgagee, or any substitute, shall be fully protected in treating
the powers and authorities conferred by this Section 3.6 as continuing in full
force and effect until advised by Mortgagee that the Obligations are fully and
finally paid.
3.7 INDEMNIFICATION. MORTGAGOR AGREES TO INDEMNIFY MORTGAGEE, THE TRUSTEE
AND THE OTHER CREDIT PARTIES, AND EACH OF THEIR RESPECTIVE DIRECTORS, OFFICERS,
EMPLOYEES, AND AGENTS (COLLECTIVELY, THE "INDEMNIFIED PARTIES") FROM, AND
DISCHARGE, RELEASE AND HOLD EACH OF THEM HARMLESS AGAINST ALL LOSSES, DAMAGES,
CLAIMS, ACTIONS, LIABILITIES, JUDGMENTS, COSTS, ATTORNEYS FEES OR OTHER CHARGES
OF WHATSOEVER KIND OR NATURE (HEREAFTER REFERRED TO AS "CLAIMS") MADE AGAINST,
IMPOSED ON, INCURRED BY OR ASSERTED AGAINST ANY OF THEM IN ANY AS A CONSEQUENCE
OF THE ASSERTION EITHER BEFORE OR AFTER THE PAYMENT IN FULL OF THE OBLIGATIONS
THAT ANY OF THE INDEMNIFIED PARTIES RECEIVED HYDROCARBONS OR PROCEEDS PURSUANT
TO THIS DEED OF TRUST OR PURSUANT TO ANY RIGHT TO COLLECT PROCEEDS DIRECTLY FROM
ACCOUNT DEBTORS WHICH ARE CLAIMED BY THIRD PERSONS. THE INDEMNIFIED PARTIES WILL
HAVE THE RIGHT TO EMPLOY ATTORNEYS AND TO DEFEND AGAINST ANY SUCH CLAIMS AND
UNLESS FURNISHED WITH REASONABLE INDEMNITY, THE INDEMNIFIED PARTIES WILL HAVE
THE RIGHT TO PAY OR COMPROMISE AND ADJUST ALL SUCH CLAIMS. MORTGAGOR WILL
INDEMNIFY AND PAY TO THE INDEMNIFIED PARTIES ALL SUCH AMOUNTS AS MAY BE PAID IN
RESPECT THEREOF, OR AS MAY BE SUCCESSFULLY ADJUDICATED AGAINST ANY OF THE
INDEMNIFIED PARTIES. THE INDEMNITY UNDER THIS SECTION SHALL APPLY TO CLAIMS
ARISING OR INCURRED BY REASON OF THE PERSON BEING INDEMNIFIED'S OWN NEGLIGENCE
BUT SHALL NOT APPLY TO CLAIMS ARISING OR INCURRED BY REASON OF THE PERSON BEING
INDEMNIFIED'S OWN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. THE LIABILITIES OF
MORTGAGOR AS SET FORTH IN THIS SECTION 3.7 SHALL SURVIVE THE TERMINATION OF THIS
DEED OF TRUST.
ARTICLE IV
MORTGAGOR'S WARRANTIES AND COVENANTS
4.1 PAYMENT OF OBLIGATIONS. Mortgagor covenants that Mortgagor shall
timely pay and perform the Obligations secured by this Deed of Trust.
Exhibit D - Page 11
4.2 REPRESENTATIONS AND WARRANTIES. Mortgagor represents and warrants as
follows:
(a) Incorporation of Representations and Warranties from Credit
Agreement. The representations and warranties applicable to Mortgagor and
to its Properties contained in Article IV of the Credit Agreement are
hereby confirmed and restated, each such representation and warranty,
together with all related definitions and ancillary provisions, being
hereby incorporated into this Deed of Trust by reference as though
specifically set forth in this Section.
(b) Title to Collateral. Mortgagor has good and marketable title to
the Collateral as is customary in the oil and gas industry in all material
respects free from all Liens, claims, security interests or other
encumbrances except as permitted by the provisions of Section 4.4(i)
below. The descriptions set forth in Exhibit A of the quantum and nature
of the record title interests of Mortgagor in and to the Oil and Gas
Properties include the entire record title interests of Mortgagor in the
Oil and Gas Properties and are complete and accurate in all respects.
There are no "back-in" or "reversionary" interests held by third parties
which could reduce the interests of Mortgagor in the Oil and Gas
Properties except as set forth on Exhibit A and except to the extent, and
only to the extent, that the effect on the interests owned by Mortgagor,
including, but not limited to the record title interests, in the Oil and
Gas Properties of each of the agreements and instruments described as
"Permitted Liens" on such Exhibit A has been taken into account. No
operating or other agreement to which Mortgagor is a party or by which
Mortgagor is bound affecting any part of the Collateral requires Mortgagor
to bear any of the costs relating to the Collateral greater than the
record title interest of Mortgagor in such portion of the Collateral,
except in the event Mortgagor is obligated under an operating agreement to
assume a portion of a defaulting party's share of costs.
(c) Status of Leases, Term Mineral Interests and Contracts. All of
the leases and term mineral interests in the Oil and Gas Properties are
valid, subsisting and in full force and effect, and Mortgagor has no
knowledge that a default exists under any of the terms or provisions,
express or implied, of any of such leases or interests or under any
agreement to which the same are subject, the effect of which could
reasonably be expected to result in a reduction in the present
value, using a ten percent (10%) discount rate, of Mortgagor's proved
reserves in an amount equal to or greater than $2,000,000. Neither
Mortgagor nor, to the knowledge of Mortgagor, any other party to any
leases or term mineral interests in the Oil and Gas Properties or any
Contract (i) is in breach of or default, or with the lapse of time or the
giving of notice, or both, would be in breach or default, with respect to
any obligations thereunder, whether express or implied, the effect of
which could reasonably be expected to result in a reduction in the present
value, using a ten percent (10%) discount rate, of Mortgagor's proved
reserves in an amount equal to or greater than $2,000,000, or (ii) has
given or threatened to give notice of any default under or inquiry into
any possible default under, or action to alter, terminate, rescind or
procure a judicial reformation of, any lease in the Oil and Gas Properties
or any Contract, the effect of which could reasonably be expected to
result in a reduction in the present
Exhibit D - Page 12
value, using a ten percent (10%) discount rate, of Mortgagor's proved
reserves in an amount equal to or greater than $2,000,000.
(d) Production Burdens, Taxes, Expenses and Revenues. All rentals,
royalties, overriding royalties, shut-in royalties and other payments due
under or with respect to the Oil and Gas Properties have been properly and
timely paid. All taxes have been properly and timely paid. All expenses
payable under the terms of the Contracts have been properly and timely
paid except for such expenses being contested in good faith by appropriate
proceedings, and for which reserves shall have been made therefore and
except for such expenses as are being currently paid prior to delinquency
in the ordinary course of business. Except for Mortgagor's interests in
certain Oil and Gas Properties, which Mortgagor represents do not
constitute a material portion (with 2% being deemed material) of the value
of the Collateral and all other Properties of Mortgagor securing the
Obligations, all of the proceeds from the sale of Hydrocarbons produced
from the Realty Collateral are being properly and timely paid to Mortgagor
by the purchasers or other remitters of production proceeds without
suspense. Mortgagor's ownership of the Hydrocarbons and the undivided
interests therein as specified on attached Exhibit A (i) will, after
giving full effect to all Liens permitted hereby and after giving full
effect to the agreements or instruments set forth on Exhibit A and any
other instruments or agreements affecting Mortgagor's ownership of the
Hydrocarbons, afford Mortgagor not less than those net interests
(expressed as a fraction, percentage or decimal) in the production from or
which is allocated to such Hydrocarbons specified as net revenue interest
on Exhibit A hereto and (ii) will cause Mortgagor to bear not more than
that portion (expressed as a fraction, percentage or decimal), specified
as working interest on Exhibit A hereto, of the costs of drilling,
developing and operating the ▇▇▇▇▇ identified on Exhibit A.
(e) Pricing. The prices being received for the production of
Hydrocarbons do not violate any Contract or any law or regulation. Where
applicable, all of the ▇▇▇▇▇ located on the Oil and Gas Properties and
production of Hydrocarbons therefrom have been properly classified under
appropriate governmental regulations.
(f) Gas Regulatory Matters. Mortgagor has filed with the appropriate
state and federal agencies all necessary rate and collection filings and
all necessary applications for well determinations under the Natural Gas
Act of 1938, as amended, the Natural Gas Policy Act of 1978, as amended,
and the rules and regulations of the Federal Energy Regulatory Commission
(the "FERC") thereunder, and each such application has been approved by or
is pending before the appropriate state or federal agency.
(g) Production Balances. As of the date hereof, Mortgagor (i) is not
obligated in any material respect by virtue of any prepayment made under
any contract containing a "take-or-pay" or "prepayment" provision or under
any similar agreement to deliver hydrocarbons produced from or allocated
to Mortgagor's Oil and Gas Properties at some future date without
receiving full payment therefor at the time of delivery, or (ii) has not,
except as has been disclosed to the Administrative Agent, produced gas, in
any amount, subject to, and none of Mortgagor's Oil and Gas Properties is
subject to, any balancing rights of third parties or subject to balancing
duties under governmental requirements, in
Exhibit D - Page 13
each case other than in the ordinary course of business and which does not
result in Mortgagor having liability in excess of $4,000,000 at any time
(net of balancing receivables or assets owing by third parties to
Mortgagor).
(h) Drilling Obligations. There are no obligations under any Oil
and Gas Property or Contract which require the drilling of additional
▇▇▇▇▇ or operations to earn or to continue to hold any of the Oil and Gas
Properties in force and effect.
(i) Compliance With Laws. All ▇▇▇▇▇ on or attributable to the Oil
and Gas Properties have been drilled, completed and operated, and all
production therefrom has been accounted for and paid to the persons
entitled thereto, in compliance with all applicable federal, state and
local laws and applicable rules and regulations of the federal, state and
local regulatory authorities having jurisdiction thereof.
(j) Regulatory Filings. All necessary regulatory filings have been
properly made in connection with the drilling, completion and operation of
the ▇▇▇▇▇ on or attributable to the Oil and Gas Properties and all other
operations related thereto.
(k) Allowables. All production and sales of Hydrocarbons produced
or sold from the Oil and Gas Properties have been made in accordance with
any applicable allowables (plus permitted tolerances) imposed by any
Governmental Authorities.
(l) Refund Obligations. Mortgagor has not collected any proceeds
from the sale of Hydrocarbons produced from the Oil and Gas Properties
which are subject to any refund obligation.
(m) Mortgagor's Address. The address of Mortgagor's place of
business, residence, chief executive office and office where Mortgagor
keeps its records concerning accounts, contract rights and general
intangibles is as set forth in Section 7.13, and there has been no change
in the location of Mortgagor's place of business, residence, chief
executive office and office where it keeps such records and no change of
Mortgagor's name during the four months immediately preceding the date of
this Deed of Trust. Mortgagor hereby represents and warrants that its
organizational number is 2014213, the state of its formation is Delaware,
and the correct spelling of its name is as set forth in its signature
block below.
4.3 FURTHER ASSURANCES.
(a) Mortgagor covenants that Mortgagor shall execute and deliver
such other and further instruments, and shall do such other and further
acts as in the opinion of Mortgagee may be necessary or desirable to carry
out more effectively the purposes of this Deed of Trust, including without
limiting the generality of the foregoing, (i) prompt correction of any
defect in the execution or acknowledgment of this Deed of Trust, any
written instrument comprising part or all of the Obligations, or any other
document used in connection herewith; (ii) correction of any defect which
may hereafter be discovered in the title to the Collateral, such
corrections to be effected in the manner and subject to the time
limitations set forth in Section 5.11 of the Credit Agreement; (iii)
subject to the provisions of Section 3.1(f) of this Mortgage, prompt
execution and delivery of all
Exhibit D - Page 14
division or transfer orders or other instruments which in Mortgagee's
opinion are required to transfer to Mortgagee, for its benefit and the
ratable benefit of the other Credit Parties, the assigned proceeds from
the sale of Hydrocarbons from the Oil and Gas Properties; and (iv) prompt
payment when due and owing of all taxes, assessments and governmental
charges imposed on this Deed of Trust or upon the interest of Mortgagee or
the Trustee.
(b) Mortgagor covenants that Mortgagor shall maintain and preserve
the Lien and security interest herein created as an Acceptable Security
Interest so long as any of the Obligations remain unpaid.
(c) Mortgagor shall immediately notify Mortgagee of any
discontinuance of or change in the address of Mortgagor's place of
business, residence, chief executive office or office where it keeps
records concerning accounts, contract rights and general intangibles.
(d) Mortgagor shall not amend, supplement, modify or restate its
articles or certificate of incorporation, bylaws, limited liability
company agreements, or other equivalent organizational documents, or amend
its name or change its jurisdiction of incorporation, organization or
formation without prior written notice to, and prior consent of, the
Mortgagee.
4.4 OPERATION OF OIL AND GAS PROPERTIES. As long as any of the
Obligations remain unpaid or unsatisfied, and whether or not Mortgagor is the
operator of the Oil and Gas Properties, Mortgagor shall (at Mortgagor's own
expense):
(a) not enter into any operating agreement, contract or agreement
which materially adversely affects the Collateral;
(b) do all things necessary and within the reasonable control of
Mortgagor to keep, or cause to be kept, in full force and effect the Oil
and Gas Properties and Mortgagor's interests therein;
(c) neither abandon, forfeit, surrender, release, sell, assign,
sublease, farmout or convey, nor agree to sell, assign, sublease, farmout
or convey, nor mortgage or grant security interests in, nor otherwise
dispose of or encumber any of the Collateral or any interest therein,
except as permitted by the Credit Agreement;
(d) cause the Collateral to be maintained, developed and protected
against drainage and continuously operated for the production and
marketing of Hydrocarbons in a good and workmanlike manner as a prudent
operator would in accordance with (i) generally accepted practices, (ii)
applicable oil and gas leases and Contracts, and (iii) all applicable
Federal, state and local laws, rules and regulations;
(e) promptly pay or cause to be paid when due and owing (i) all
rentals and royalties payable in respect of the Collateral; (ii) all
expenses incurred in or arising from the operation or development of the
Collateral; (iii) all taxes, assessments and governmental charges imposed
upon Mortgagee because of its interest in the Collateral; and (iv) all
taxes, assessments, and governmental charges imposed upon Mortgagor
Exhibit D - Page 15
and/or the Collateral as provided in Section 5.04 of the Credit Agreement
(and indemnify Mortgagee and Trustee from all liability in connection with
any of the foregoing);
(f) promptly take all action necessary to enforce or secure the
observance or performance of any term, covenant, agreement or condition to
be observed or performed by third parties under any Contract, or any part
thereof, or to exercise any of its rights, remedies, powers and privileges
under any Contract, all in accordance with the respective terms thereof;
(g) cause the Operating Equipment and the Fixture Operating
Equipment to be kept in good condition and repair (ordinary wear and tear
excepted);
(h) permit and do all things necessary or proper to enable the
Trustee and Mortgagee (through any of their respective agents and
employees) to enter upon the Oil and Gas Properties for the purpose of
investigating and inspecting the condition and operations of the
Collateral in accordance with the terms of the Credit Agreement;
(i) cause the Collateral to be kept free and clear of Liens,
charges, security interests and encumbrances of every character other than
(i) the Liens and security interests created and assigned by this Deed of
Trust and (ii) the Permitted Liens;
(j) carry and maintain the insurance required by the Credit
Agreement;
(k) furnish to Mortgagee, upon request, copies of any Contracts;
and
(l) timely and adequately perform all covenants express or implied
in any Contract necessary to keep in full force and effect the Oil and Gas
Properties and to maintain Mortgagor's interests therein.
4.5 RECORDING. Mortgagor shall promptly (at Mortgagor's own expense)
record, register, deposit and file this Deed of Trust and every other instrument
in addition or supplement hereto, including applicable financing statements, in
such offices and places within the state where the Collateral is located and in
the state where the Mortgagor is registered as a corporation and at such times
and as often as may be necessary to preserve, protect and renew the Lien and
security interest herein created as an Acceptable Security Interest on real or
personal property as the case may be, and otherwise shall do and perform all
matters or things necessary or expedient to be done or observed by reason of any
Legal Requirement for the purpose of effectively creating, perfecting,
maintaining and preserving the Lien and security interest created hereby in and
on the Collateral.
4.6 RECORDS, STATEMENTS AND REPORTS. Mortgagor shall keep proper books
of record and account in which complete and correct entries shall be made of
Mortgagor's transactions in accordance with the method of accounting required in
the Credit Agreement and shall furnish or cause to be furnished to Mortgagee the
reports required to be delivered pursuant to the terms of the Credit Agreement.
4.7 INSURANCE. To the extent that insurance is carried by a third-party
operator on behalf of Mortgagor, upon request by Mortgagee, Mortgagor shall
obtain and provide Mortgagee
Exhibit D - Page 16
with copies of certificates of insurance showing Mortgagor as a named insured.
Subject to the provisions of the Credit Agreement to the contrary, Mortgagor
hereby assigns to Mortgagee for its benefit and the benefit of the other Credit
Parties any and all monies that may become payable under any such policies of
insurance by reason of damage, loss or destruction of any of the Collateral and
Mortgagee may receive such monies and apply all or any part of the sums so
collected, at its election, toward payment of the Obligations, whether or not
such Obligations are then due and payable, in such manner as Mortgagee may
elect; provided, however, that if the amount of the loss incurred by Mortgagor
in respect of any event covered by such policies is less than $10,000,000, then
so long as no Default or Event of Default shall have occurred and be continuing,
Mortgagee shall remit such insurance proceeds paid to Mortgagee in respect of
such event to Mortgagor. Any insurance proceeds received by Mortgagor and due to
Mortgagee shall be held in trust for the benefit of Mortgagee, shall be
segregated from other funds of Mortgagor and shall be forthwith paid over to
Mortgagee.
ARTICLE V
DEFAULT
5.1 EVENTS OF DEFAULT. An Event of Default under the terms of the Credit
Agreement shall constitute an "Event of Default" under this Deed of Trust.
5.2 ACCELERATION UPON DEFAULT. Upon the occurrence and during the
continuance of any Event of Default, Mortgagee may, or shall at the request of
the Required Lenders, declare the entire unpaid principal of, and the interest
accrued on, and all other amounts owed in connection with, the Obligations to be
forthwith due and payable, whereupon the same shall become immediately due and
payable without any protest, presentment, demand, notice of intent to
accelerate, notice of acceleration or further notice of any kind, all of which
are hereby expressly waived by Mortgagor. Whether or not Mortgagee or the
Required Lenders elect to accelerate as herein provided, Mortgagee may
simultaneously, or thereafter, without any further notice to Mortgagor, exercise
any other right or remedy provided in this Deed of Trust or otherwise existing
under the Credit Agreement or any other Loan Documents or any other agreement,
document, or instrument evidencing obligations owing from the Mortgagor to any
of the Credit Parties
ARTICLE VI
MORTGAGEE'S RIGHTS
6.1 RIGHTS TO REALTY COLLATERAL UPON DEFAULT.
(a) Operation of Property by Mortgagee. Upon the occurrence and
during the continuance of any Event of Default, and in addition to all
other rights of Mortgagee, Mortgagee shall have the following rights and
powers (but no obligation):
(i) To enter upon and take possession of any of the Realty
Collateral and exclude Mortgagor therefrom;
Exhibit D - Page 17
(ii) To hold, use, administer, manage and operate the Realty
Collateral to the extent that Mortgagor could do so, and without any
liability to Mortgagor in connection with such operations; and
(iii) To the extent that Mortgagor could do so, to collect,
receive and receipt for all Hydrocarbons produced and sold from the
Realty Collateral, to make repairs, to purchase machinery and
equipment, to conduct workover operations, to drill additional
▇▇▇▇▇, and to exercise every power, right and privilege of Mortgagor
with respect to the Realty Collateral.
Mortgagee may designate any person, firm, corporation or other entity to act on
its behalf in exercising the foregoing rights and powers. When and if the
expenses of such operation and development (including costs of unsuccessful
workover operations or additional ▇▇▇▇▇) have been paid, and the Obligations
have been paid, the Realty Collateral shall be returned to Mortgagor (providing
there has been no foreclosure sale).
(b) Judicial Proceedings. Upon the occurrence and during the
continuance of any Event of Default, the Trustee and/or Mortgagee, in lieu
of or in addition to exercising the power of sale hereafter given, may
proceed by a suit or suits, in equity or at law (i) for the specific
performance of any covenant or agreement herein contained or in aid of the
execution of any power herein granted, (ii) for the appointment of a
receiver whether there is then pending any foreclosure hereunder or the
sale of the Realty Collateral, or (iii) for the enforcement of any other
appropriate legal or equitable remedy; and further, in lieu of the
non-judicial power of sale hereafter given for Collateral located in the
State of Texas, the Trustee may proceed by suit for a sale of the Realty
Collateral.
(c) Foreclosure by Private Power of Sale of Collateral. Upon the
occurrence and during the continuance of any Event of Default, the Trustee
shall have the right and power to sell, as the Trustee may elect, all or a
portion of the Collateral at one or more sales as an entirety or in
parcels, in accordance with Section 51.002 of the Texas Property Code, as
amended from time to time (or any successor provisions of Texas governing
real property foreclosure sales) or with any applicable state law.
Mortgagor hereby designates as Mortgagor's address for the purpose of
notice the address set out in Section 7.13; provided that Mortgagor may by
written notice to Mortgagee designate a different address for notice
purposes. Any purchaser or purchasers will be provided with a general
warranty conveyance binding Mortgagor and Mortgagor's successors and
assigns. Sale of a part of the Realty Collateral will not exhaust the
power of sale, and sales may be made from time to time until all of the
Realty Collateral is sold or all of the Obligations are paid in full.
(d) Certain Aspects of Sale. Mortgagee will have the right to
become the purchaser at any foreclosure sale and to credit the then
outstanding balance of the Obligations against the amount payable by
Mortgagee as purchaser at such sale. Statements of fact or other recitals
contained in any conveyance to any purchaser or purchasers at any sale
made hereunder will conclusively establish the occurrence of any Event of
Default, any acceleration of the maturity of the Obligations, the
advertisement and conduct of such sale in the manner provided herein, the
appointment of any
Exhibit D - Page 18
successor-Trustee hereunder and the truth and accuracy of all other
matters stated therein. Mortgagor does hereby ratify and confirm all legal
acts that the Trustee may do in carrying out the Trustee's duties and
obligations under this Deed of Trust, and Mortgagor hereby irrevocably
appoints Mortgagee to be the attorney-in-fact of Mortgagor and in the name
and on behalf of Mortgagor to execute and deliver any deeds, transfers,
conveyances, assignments, assurances and notices which Mortgagor ought to
execute and deliver and do and perform any and all such acts and things
which Mortgagor ought to do and perform under the covenants herein
contained and generally to use the name of Mortgagor in the exercise of
all or any of the powers hereby conferred on Trustee. Upon any sale,
whether under the power of sale hereby given or by virtue of judicial
proceedings, it shall not be necessary for Trustee or any public officer
acting under execution or by order of court, to have physically present or
constructively in his possession any of the Collateral, and Mortgagor
hereby agrees to deliver to the purchaser or purchasers at such sale on
the date of sale the Collateral purchased by such purchasers at such sale
and if it should be impossible or impracticable to make actual delivery of
such Collateral, then the title and right of possession to such Collateral
shall pass to the purchaser or purchasers at such sale as completely as if
the same had been actually present and delivered.
(e) Receipt to Purchaser. Upon any sale made under the power of
sale herein granted, the receipt of the Trustee will be sufficient
discharge to the purchaser or purchasers at any sale for its purchase
money, and such purchaser or purchasers, will not, after paying such
purchase money and receiving such receipt of the Trustee, be obligated to
see to the application of such purchase money or be responsible for any
loss, misapplication or non-application thereof.
(f) Effect of Sale. Any sale or sales of the Realty Collateral
will operate to divest all right, title, interest, claim and demand
whatsoever, either at law or in equity, of Mortgagor in and to the
premises and the Realty Collateral sold, and will be a perpetual bar, both
at law and in equity, against Mortgagor, Mortgagor's successors or
assigns, and against any and all persons claiming or who shall thereafter
claim all or any of the Realty Collateral sold by, through or under
Mortgagor, or Mortgagor's successors or assigns. Nevertheless, if
requested by the Trustee so to do, Mortgagor shall join in the execution
and delivery of all proper conveyances, assignments and transfers of the
Property so sold. The purchaser or purchasers at the foreclosure sale will
receive as incident to his, her, its or their own ownership, immediate
possession of the Realty Collateral purchased and Mortgagor agrees that if
Mortgagor retains possession of the Realty Collateral or any part thereof
subsequent to such sale, Mortgagor will be considered a tenant at
sufferance of the purchaser or purchasers and will be subject to eviction
and removal by any lawful means, with or without judicial intervention,
and all damages by reason thereof are hereby expressly waived by
Mortgagor.
(g) Application of Proceeds. The proceeds of any sale of the
Realty Collateral or any part thereof, whether under the power of sale
herein granted and conferred or by virtue of judicial proceedings, shall
either be, at the option of Mortgagee, applied at the time of receipt, or
held by Mortgagee in a cash collateral account as additional Collateral,
and in either case, applied in the order set forth in Section 7.06 of the
Credit Agreement.
Exhibit D - Page 19
(h) Mortgagor's Waiver of Appraisement and Marshalling. Mortgagor
agrees, to the full extent that Mortgagor may lawfully so agree, that
Mortgagor will not at any time insist upon or plead or in any manner
whatever claim the benefit of any appraisement, valuation, stay, extension
or redemption law, now or hereafter in force, in order to prevent or
hinder the enforcement or foreclosure of this Deed of Trust, the absolute
sale of the Collateral, including the Realty Collateral, or the possession
thereof by any purchaser at any sale made pursuant to this Deed of Trust
or pursuant to the decree of any court of competent jurisdiction; and
Mortgagor, for Mortgagor and all who may claim through or under Mortgagor,
hereby waives the benefit of all such laws and, to the extent that
Mortgagor may lawfully do so under any applicable law, any and all rights
to have the Collateral, including the Realty Collateral, marshaled upon
any foreclosure of the Lien hereof or sold in inverse order of alienation.
Mortgagor agrees that the Trustee may sell the Collateral, including the
Realty Collateral, in part, in parcels or as an entirety as directed by
Mortgagee.
6.2 RIGHTS TO PERSONALTY COLLATERAL UPON DEFAULT. Upon the occurrence
and during the continuance of any Event of Default, Mortgagee or the Trustee may
proceed against the Personalty Collateral in accordance with the rights and
remedies granted herein with respect to the Realty Collateral, or will have all
rights and remedies granted by the Uniform Commercial Code as in effect in Texas
and this Deed of Trust. Mortgagee shall have the right to take possession of the
Personalty Collateral, and for this purpose Mortgagee may enter upon any
premises on which any or all of the Personalty Collateral is situated and, to
the extent that Mortgagor could do so, take possession of and operate the
Personalty Collateral or remove it therefrom. Mortgagee may require Mortgagor to
assemble the Personalty Collateral and make it available to Mortgagee at a place
to be designated by Mortgagee which is reasonably convenient to both parties.
Unless the Personalty Collateral is perishable or threatens to decline speedily
in value or is of a type customarily sold on a recognized market, Mortgagee will
send Mortgagor reasonable notice of the time and place of any public sale or of
the time after which any private sale or other disposition of the Personalty
Collateral is to be made. This requirement of sending reasonable notice will be
met if such notice is mailed, postage prepaid, to Mortgagor at the address
designated in Section 7.13 hereof (or such other address as has been designated
as provided herein) at least ten days before the time of the sale or
disposition. In addition to the expenses of retaking, holding, preparing for
sale, selling and the like, Mortgagee will be entitled to recover attorney's
fees and legal expenses as provided for in this Deed of Trust and in the
writings evidencing the Obligations before applying the balance of the proceeds
from the sale or other disposition toward satisfaction of the Obligations.
Mortgagor will remain liable for any deficiency remaining after the sale or
other disposition. Mortgagor hereby consents and agrees that any disposition of
all or a part of the Collateral may be made without warranty of any kind whether
expressed or implied.
6.3 RIGHTS TO FIXTURE COLLATERAL UPON DEFAULT. Upon the occurrence and
during the continuance of any Event of Default, Mortgagee may elect to treat the
Fixture Collateral as either Realty Collateral or as Personalty Collateral (but
not both) and proceed to exercise such rights as apply to the type of Collateral
selected.
6.4 ACCOUNT DEBTORS. Mortgagee may, in its discretion, after the
occurrence and during the continuance of any Event of Default, notify any
account debtor to make payments
Exhibit D - Page 20
directly to Mortgagee and contact account debtors directly to verify information
furnished by Mortgagor. Mortgagee shall not have any obligation to preserve any
rights against prior parties.
6.5 COSTS AND EXPENSES. All sums advanced or costs or expenses incurred
by Mortgagee (either by it directly or on its behalf by the Trustee or any
receiver appointed hereunder) in protecting and enforcing its rights hereunder
shall constitute a demand obligation owing by Mortgagor to Mortgagee as part of
the Obligations. Mortgagor hereby agrees to repay such sums on demand plus
interest thereon from the date of the advance or incurrence until reimbursement
of Mortgagee at the same rate of interest as charged Tranche B Advances when an
Event of Default exists as set forth in the Credit Agreement.
6.6 SET-OFF. Upon the occurrence and during the continuance of any Event
of Default, Mortgagee shall have the right to set-off any funds of Mortgagor in
the possession of Mortgagee against any amounts then due by Mortgagor to
Mortgagee pursuant to this Deed of Trust.
ARTICLE VII
MISCELLANEOUS
7.1 SUCCESSOR TRUSTEES. The Trustee may resign in writing addressed to
Mortgagee or be removed at any time with or without cause by an instrument in
writing duly executed by Mortgagee. In case of the death, resignation or removal
of the Trustee, a successor Trustee may be appointed by Mortgagee by instrument
of substitution complying with any applicable requirements of law, and in the
absence of any requirement, without other formality other than an appointment
and designation in writing. The appointment and designation will vest in the
named successor Trustee all the estate and title of the Trustee in all of the
Collateral and all of the rights, powers, privileges, immunities and duties
hereby conferred upon the Trustee. All references herein to the Trustee will be
deemed to refer to any successor Trustee from time to time acting hereunder.
7.2 ADVANCES BY MORTGAGEE OR THE TRUSTEE. Each and every covenant of
Mortgagor herein contained shall be performed and kept by Mortgagor solely at
Mortgagor's expense. If Mortgagor fails to perform or keep any of the covenants
of whatsoever kind or nature contained in this Deed of Trust, Mortgagee (either
by it directly or on its behalf by the Trustee or any receiver appointed
hereunder) may, but will not be obligated to, make advances to perform the same
on Mortgagor's behalf, and Mortgagor hereby agrees to repay such sums and any
reasonable attorneys' fees incurred in connection therewith on demand plus
interest thereon from the date of the advance until reimbursement of Mortgagee
at the same rate of interest as charged Tranche B Advances when an Event of
Default exists as set forth in the Credit Agreement. In addition, Mortgagor
hereby agrees to repay on demand any costs, expenses and reasonable attorney's
fees incurred by Mortgagee or the Trustee which are to be obligations of
Mortgagor pursuant to, or allowed by, the terms of this Deed of trust, including
such costs, expenses and reasonable attorney's fees incurred pursuant to Section
3.1(h), Section 6.5 or Section 7.3 hereof, plus interest thereon from the date
of the advance by Mortgagee or the Trustee until reimbursement of Mortgagee or
the Trustee, respectively, at the same rate of interest as charged Tranche B
Advances when an Event of Default exists as set forth in the
Exhibit D - Page 21
Credit Agreement. Such amounts will be in addition to any sum of money which
may, pursuant to the terms and conditions of the written instruments comprising
part of the Obligations, be due and owing. No such advance will be deemed to
relieve Mortgagor from any default hereunder.
7.3 DEFENSE OF CLAIMS. Mortgagor shall promptly notify Mortgagee in
writing of the commencement of any legal proceedings affecting Mortgagor's title
to the Collateral or Mortgagee's Lien or security interest in the Collateral, or
any part thereof, and shall take such action, employing attorneys agreeable to
Mortgagee, as may be necessary to preserve Mortgagor's, the Trustee's and
Mortgagee's rights affected thereby. If Mortgagor fails or refuses to adequately
or vigorously, in the sole judgment of Mortgagee, defend Mortgagor's, the
Trustee's or Mortgagee's rights to the Collateral, the Trustee or Mortgagee may
take such action on behalf of and in the name of Mortgagor and at Mortgagor's
expense. Moreover, Mortgagee or the Trustee on behalf of Mortgagee, may take
such independent action in connection therewith as they may in their discretion
deem proper, including the right to employ independent counsel and to intervene
in any suit affecting the Collateral. All costs, expenses and attorneys' fees
incurred by Mortgagee or the Trustee pursuant to this Section 7.3 or in
connection with the defense by Mortgagee of any claims, demands or litigation
relating to Mortgagor, the Collateral or the transactions contemplated in this
Deed of Trust shall be paid by Mortgagor as provided in Section 7.2 above.
7.4 TERMINATION. If all the Obligations are paid in full, the
Commitments are terminated, and the covenants herein contained are well and
fully performed then all of the Collateral will revert to Mortgagor and the
entire estate, right, title and interest of the Trustee and Mortgagee will
thereupon cease; and Mortgagee in such case shall, upon the request of Mortgagor
and the payment by Mortgagor of all reasonable attorneys' fees and other
expenses, deliver to Mortgagor proper instruments acknowledging satisfaction of
this Deed of Trust.
7.5 RENEWALS, AMENDMENTS AND OTHER SECURITY. Without notice or consent
of Mortgagor, renewals and extensions of the written instruments constituting
part or all of the Obligations may be given at any time and amendments may be
made to agreements relating to any part of such written instruments or the
Collateral. Mortgagee may take or hold other security for the Obligations
without notice to or consent of Mortgagor. The acceptance of this Deed of Trust
by Mortgagee shall not waive or impair any other security Mortgagee may have or
hereafter acquire to secure the payment of the Obligations nor shall the taking
of any such additional security waive or impair the Lien and security interests
herein granted. The Trustee or Mortgagee may resort first to such other security
or any part thereof, or first to the security herein given or any part thereof,
or from time to time to either or both, even to the partial or complete
abandonment of either security, and such action will not be a waiver of any
rights conferred by this Deed of Trust. This Deed of Trust may not be amended,
waived or modified except in a written instrument executed by both Mortgagor and
Mortgagee.
7.6 SECURITY AGREEMENT, FINANCING STATEMENT AND FIXTURE FILING. This
Deed of Trust will be deemed to be and may be enforced from time to time as an
assignment, chattel mortgage, contract, deed of trust, financing statement, real
estate mortgage, or security agreement, and from time to time as any one or more
thereof if appropriate under applicable state law. AS A FINANCING STATEMENT,
THIS DEED OF TRUST IS INTENDED TO COVER ALL PERSONALTY COLLATERAL INCLUDING
MORTGAGOR'S
Exhibit D - Page 22
INTEREST IN ALL HYDROCARBONS AS AND AFTER THEY ARE EXTRACTED AND ALL ACCOUNTS
ARISING FROM THE SALE THEREOF AT THE WELLHEAD. THIS DEED OF TRUST SHALL BE
EFFECTIVE AS A FINANCING STATEMENT FILED AS A FIXTURE FILING WITH RESPECT TO
FIXTURE COLLATERAL INCLUDED WITHIN THE COLLATERAL. This Deed of Trust shall be
filed in the real estate records or other appropriate records of the county or
counties in the state in which any part of the Realty Collateral and Fixture
Collateral is located as well as the Uniform Commercial Code records or other
appropriate office of the state in which any Collateral is located. At
Mortgagee's request, Mortgagor shall execute financing statements covering the
Personalty Collateral, including all Hydrocarbons sold at the wellhead, and
Fixture Collateral, which financing statements may be filed in the Uniform
Commercial Code records or other appropriate office of the county or state in
which any of the Collateral is located or in any other location permitted or
required to perfect Mortgagee's security interest under the Uniform Commercial
Code. In addition, Mortgagor hereby irrevocably authorizes Mortgagee and any
affiliate, employee or agent thereof, at any time and from time to time, to file
in any Uniform Commercial Code jurisdiction any financing statement or document
and amendments thereto, without the signature of Mortgagor where permitted by
law, in order to perfect or maintain the perfection of any security interest
granted under this Deed of Trust. A photographic or other reproduction of this
Deed of Trust shall be sufficient as a financing statement.
7.7 UNENFORCEABLE OR INAPPLICABLE PROVISIONS. If any term, covenant,
condition or provision hereof is invalid, illegal or unenforceable in any
respect, the other provisions hereof will remain in full force and effect and
will be liberally construed in favor of the Trustee and Mortgagee in order to
carry out the provisions hereof.
7.8 RIGHTS CUMULATIVE. Each and every right, power and remedy herein
given to the Trustee or Mortgagee will be cumulative and not exclusive, and each
and every right, power and remedy whether specifically herein given or otherwise
existing may be exercised from time to time and as often and in such order as
may be deemed expedient by the Trustee, or Mortgagee, as the case may be, and
the exercise, or the beginning of the exercise, of any such right, power or
remedy will not be deemed a waiver of the right to exercise, at the same time or
thereafter, any other right, power or remedy. No delay or omission by the
Trustee or by Mortgagee in the exercise of any right, power or remedy will
impair any such right, power or remedy or operate as a waiver thereof or of any
other right, power or remedy then or thereafter existing.
7.9 WAIVER BY MORTGAGEE. Any and all covenants in this Deed of Trust may
from time to time by instrument in writing by Mortgagee and the Required
Lenders, be waived to such extent and in such manner as the Trustee or Mortgagee
may desire, but no such waiver will ever affect or impair either the Trustee's
or Mortgagee's rights hereunder, except to the extent specifically stated in
such written instrument.
7.10 TERMS. The term "Mortgagor" as used in this Deed of Trust will be
construed as singular or plural to correspond with the number of persons
executing this Deed of Trust as Mortgagor. If more than one person executes this
Deed of Trust as Mortgagor, his, her, its, or their duties and liabilities under
this Deed of Trust will be joint and several. The terms "Mortgagee",
"Mortgagor", and "Trustee" as used in this Deed of Trust include the heirs,
executors or administrators, successors, representatives, receiver, trustees and
assigns of those
Exhibit D - Page 23
parties. Unless the context otherwise requires, terms used in this Deed of Trust
which are defined in the Uniform Commercial Code of Texas are used with the
meanings therein defined.
7.11 COUNTERPARTS. This Deed of Trust may be executed in any number of
counterparts, each of which will for all purposes be deemed to be an original,
and all of which are identical except that, to facilitate recordation, in any
particular counties counterpart portions of Exhibit A hereto which describe
Properties situated in counties other than the counties in which such
counterpart is to be recorded may have been omitted.
7.12 GOVERNING LAW. This Deed of Trust shall be governed by and construed
in accordance with the laws of the State of Texas.
7.13 NOTICE. All notices required or permitted to be given by Mortgagor,
Mortgagee or the Trustee shall be made in the manner set forth in the Credit
Agreement and shall be addressed as follows:
Mortgagor: Mariner Energy, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: Chief Financial Officer
Telephone: ▇▇▇.▇▇▇.▇▇▇▇
Facsimile: 713.954.5555
Mortgagee: Union Bank of California, N.A.
Lincoln Plaza
▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Facsimile: 214.922.4209
Trustee: Any notices to be given to the
Trustee shall also be delivered to Mortgagee.
7.14 DUTIES OF TRUSTEE. It shall be no part of the duty of the Trustee to
see to any recording, filing or registration of this Deed of Trust or any other
instrument in addition or supplemental hereto, or to see to the payment of or be
under any duty with respect to any tax or assessment or other governmental
charge which may be levied or assessed on the Collateral, any part thereof, or
against Mortgagor, or to see to the performance or observance by Mortgagor of
any of the covenants and agreements contained herein. Trustee shall not be
responsible for the execution, acknowledgment or validity of this Deed of Trust
or of any instrument in addition or supplemental hereto or for the sufficiency
of the security purported to be created hereby, and makes no representation in
respect thereof or in respect of the rights of Mortgagee. Trustee shall have the
right to seek the advice of counsel upon any matters arising hereunder and shall
be fully protected in relying as to legal matters on the advice of counsel.
Trustee shall not incur any personal liability hereunder except for his own
willful misconduct; and the Trustee shall have the right to rely on any
instrument, document or signature authorizing or supporting any action taken or
proposed to be taken by him hereunder, believed by him in good faith to be
genuine.
Exhibit D - Page 24
7.15 CONDEMNATION. All awards and payments heretofore and hereafter made
for the taking of or injury to the Collateral or any portion thereof whether
such taking or injury be done under the power of eminent domain or otherwise,
are hereby assigned, and shall be paid to Mortgagee. Mortgagee is hereby
authorized to collect and receive the proceeds of such awards and payments and
to give proper receipts and acquittances therefor. Mortgagor hereby agrees to
make, execute and deliver, upon request, any and all assignments and other
instruments sufficient for the purpose of confirming this assignment of the
awards and payments to Mortgagee free and clear of any encumbrances of any kind
or nature whatsoever. Any such award or payment may, at the option of Mortgagee,
be retained and applied by Mortgagee after payment of attorneys' fees, costs and
expenses incurred in connection with the collection of such award or payment
toward payment of all or a portion of the Obligations, whether or not the
Obligations are then due and payable, or be paid over wholly or in part to
Mortgagor for the purpose of altering, restoring or rebuilding any part of the
Collateral which may have been altered, damaged or destroyed as a result of any
such taking, or other injury to the Collateral.
7.16 SUCCESSORS AND ASSIGNS. This Deed of Trust is binding upon
Mortgagor, Mortgagor's successors and assigns, and shall inure to the benefit of
the Trustee, the Mortgagee, Administrative Agent, Issuing Lender, and each of
the Lenders, and each of their respective successors and assigns, and to the
benefit of the Swap Counterparties, and each of their respective successors and
assigns with the prior consent of the Mortgagee, and the provisions hereof shall
likewise be covenants running with the land.
7.17 ARTICLE AND SECTION HEADINGS. The article and section headings in
this Deed of Trust are inserted for convenience of reference and shall not be
considered a part of this Deed of Trust or used in its interpretation.
7.18 USURY NOT INTENDED. It is the intent of Mortgagor and Mortgagee in
the execution and performance of this Deed of Trust, the Credit Agreement and
the other Loan Documents to contract in strict compliance with applicable usury
laws governing the Obligations including such applicable usury laws of the State
of Texas and the United States of America as are from time-to-time in effect. In
furtherance thereof, Mortgagee and Mortgagor stipulate and agree that none of
the terms and provisions contained in this Deed of Trust, the Credit Agreement
or the other Loan Documents shall ever be construed to create a contract to pay,
as consideration for the use, forbearance or detention of money, interest at a
rate in excess of the maximum non-usurious rate permitted by applicable law and
that for purposes hereof "interest" shall include the aggregate of all charges
which constitute interest under such laws that are contracted for, charged or
received under this Deed of Trust, the Credit Agreement and the other Loan
Documents; and in the event that, notwithstanding the foregoing, under any
circumstances the aggregate amounts taken, reserved, charged, received or paid
on the Obligations, include amounts which by applicable law are deemed interest
which would exceed the maximum non-usurious rate permitted by applicable law,
then such excess shall be deemed to be a mistake and Mortgagee shall credit the
same on the principal of the Obligations (or if the Obligations shall have been
paid in full, refund said excess to Mortgagor). In the event that the maturity
of the Obligations is accelerated by reason of any election of Mortgagee
resulting from any Event of Default, or in the event of any required or
permitted prepayment, then such consideration that constitutes interest may
never include more than the maximum non-usurious rate permitted by applicable
law and excess interest, if any, provided for in this Deed of Trust, the Credit
Exhibit D - Page 25
Agreement or other Loan Documents shall be canceled automatically as of the date
of such acceleration and prepayment and, if theretofore paid, shall be credited
on the Obligations or, if the Obligations shall have been paid in full, refunded
to Mortgagor. In determining whether or not the interest paid or payable under
any specific contingencies exceeds the maximum non-usurious rate permitted by
applicable law, Mortgagor and Mortgagee shall to the maximum extent permitted
under applicable law amortize, prorate, allocate and spread in equal part during
the period of the full stated term of the Obligations, all amounts considered to
be interest under applicable law of any kind contracted for, charged, received
or reserved in connection with the Obligation.
7.19 CREDIT AGREEMENT. To the fullest extent possible, the terms and
provisions of the Credit Agreement shall be read together with the terms and
provisions of this Deed of Trust so that the terms and provisions of this Deed
of Trust do not conflict with the terms and provisions of the Credit Agreement;
provided, however, notwithstanding the foregoing, in the event that any of the
terms or provisions of this Deed of Trust conflict with any terms or provisions
of the Credit Agreement, the terms or provisions of the Credit Agreement shall
govern and control for all purposes; provided that the inclusion in this Deed of
Trust of terms and provisions, supplemental rights or remedies in favor of the
Secured Party not addressed in the Credit Agreement shall not be deemed to be a
conflict with the Credit Agreement and all such additional terms, provisions,
supplemental rights or remedies contained herein shall be given full force and
effect.
7.20 DUE AUTHORIZATION. Mortgagor hereby represents, warrants and
covenants to Mortgagee and the Trustee that the obligations of Mortgagor under
this Deed of Trust are the valid, binding and legally enforceable obligations of
Mortgagor, that the execution, ensealing and delivery of this Deed of Trust by
Mortgagor has been duly and validly authorized in all respects by Mortgagor, and
that the persons who are executing and delivering this Deed of Trust on behalf
of Mortgagor have full power, authority and legal right to so do, and to observe
and perform all of the terms and conditions of this Deed of Trust on Mortgagor's
part to be observed or performed.
7.21 NO OFFSETS, ETC. Mortgagor hereby represents, warrants and covenants
to Mortgagee and the Trustee that there are no offsets, counterclaims or
defenses at law or in equity against this Deed of Trust or the indebtedness
secured thereby.
7.22 BANKRUPTCY LIMITATION. Notwithstanding anything contained herein to
the contrary, it is the intention of the Mortgagor, the Mortgagee and the other
Credit Parties that the amount of the Obligation secured by the Mortgagor's
interests in any of its Property shall be in, but not in excess of, the maximum
amount permitted by fraudulent conveyance, fraudulent transfer and other similar
law, rule or regulation of any Governmental Authority applicable to the
Mortgagor. Accordingly, notwithstanding anything to the contrary contained in
this Deed of Trust in any other agreement or instrument executed in connection
with the payment of any of the Obligations, the amount of the Obligations
secured by the Mortgagor's interests in any of its Property pursuant to this
Deed of Trust shall be limited to an aggregate amount equal to the largest
amount that would not render the Mortgagor's obligations hereunder or the Liens
and security interest granted to the Mortgagee hereunder subject to avoidance
under Section 548 of the United States Bankruptcy Code or any comparable
provision of any other applicable law.
Exhibit D - Page 26
7.23 EMPLOYEE OVERRIDES.
(a) Except as otherwise provided in Section 7.23(b) below, as to
those Oil and Gas Properties (x) that are described on Exhibit A attached
hereto, (y) with respect to which such Exhibit A shows that the "record
title interest" (as signified by the "(R)" appearing next to certain
applicable statements of ownership interest in various places on such
Exhibit A) that is represented and warranted to Mortgagee as owned by
Mortgagor to Mortgagee as owned by Mortgagor exceeds the "beneficial
interest" (as signified by the "(B)" appearing next to certain applicable
statements of ownership interest in various places on such Exhibit A) that
is represented and warranted to Mortgagee as owned by Mortgagor, and (z)
with respect to which Mortgagee has a valid and binding contractual
obligation to deliver an assignment of an interest in such Oil and Gas
Property to another Person, upon Mortgagor's written request delivered to
Mortgagee, Mortgagee will be obligated to execute and deliver an
instrument reasonably satisfactory to the assignee of such interest
providing for the partial release of the liens and security interests
created by this Mortgage which encumber such interest, subject, however,
to the extent, and only to the extent that each condition described in
subsections (a)(i) and (a)(ii) of this Section 7.23 are satisfied in full:
(i) Mortgagor's written request delivered to Mortgagee
pursuant to Section 7.23(a) shall include a copy of the proposed
assignment of interest, including a statement of the quantum of
interest to be assigned thereby; and
(ii) Mortgagor shall deliver to Mortgagee a certificate
executed on behalf of Mortgagor by a Responsible Officer of
Mortgagor, which certificate shall contain a representation and
warranty by Mortgagor to Mortgagee that: (A) Mortgagor is
contractually obligated to deliver the assignment to the Person
described as assignee in the copy of the proposed assignment of
interest delivered to Mortgagee pursuant to subsection (a)(i) of
this Section 7.23 and (B) the assignment from Mortgagor to such
Person does not and will not, upon its execution, delivery, and
recordation, increase Mortgagor's working interest, on the one hand,
or reduce, on the other hand, Mortgagor's net revenue interest in
the Oil and Gas Properties affected thereby below the net revenue
interest represented and warranted to Mortgagee on Exhibit A as
constituting Mortgagor's "beneficial interest" in such Oil and Gas
Properties.
(b) As to the Oil and Gas Properties designated on Exhibit A
attached hereto as "Pluto" and "Black Widow," and solely with respect to
those Oil and Gas Properties, to the extent and only to the extent that
Mortgagee has a valid and binding contractual obligation to deliver an
assignment of an interest in either of such Oil and Gas Properties to
another Person, upon Mortgagor's written request delivered to Mortgagee,
Mortgagee will be obligated to execute and deliver an instrument
reasonably satisfactory to the assignee of such interest providing for the
partial release of the liens and security interests created by this
Mortgage which encumber such interest, subject, however, to the extent,
and only to the extent that each condition described in subsections (b)(i)
and (b)(ii) of this Section 7.23 are satisfied in full:
Exhibit D - Page 27
(i) Mortgagor's written request delivered to Mortgagee
pursuant to Section 7.23(b) shall include a copy of the proposed
assignment of interest, including a statement of the quantum of
interest to be assigned thereby; and
(ii) Mortgagor shall deliver to Mortgagee a certificate
executed on behalf of Mortgagor by a Responsible Officer of
Mortgagor, which certificate shall contain a representation and
warranty by Mortgagor to Mortgagee that: (A) Mortgagor is
contractually obligated to deliver the assignment to the Person
described as assignee in the copy of the proposed assignment of
interest delivered to Mortgagee pursuant to subsection (b)(i) of
this Section 7.23 and (B) the assignment from Mortgagor to such
Person does not and will not, upon its execution, delivery, and
recordation, increase Mortgagor's working interest, on the one hand,
or reduce, on the other hand, Mortgagor's net revenue interest in
the Oil and Gas Properties affected thereby below the net revenue
interest represented and warranted to Mortgagee on Exhibit A as
constituting Mortgagor's "beneficial interest" in such Oil and Gas
Properties.
All costs, expenses, and reasonable attorneys' fees incurred by Mortgagee or the
Trustee pursuant to this Section 7.23 shall be paid by Mortgagor as provided in
Section 7.2 above.
[SIGNATURE PAGES FOLLOW]
Exhibit D - Page 28
EXECUTED AND DELIVERED effective as of the date first written above.
MORTGAGOR:
MARINER ENERGY, INC.,
a Delaware corporation
By:_____________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇
Chief Executive Officer
Signature page to Deed of Trust
MORTGAGEE:
UNION BANK OF CALIFORNIA, N.A.
as Mortgagee for the ratable benefit of
the Credit Parties
By:_____________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Senior Vice President
Acknowledgment page to Deed of Trust
THE STATE OF TEXAS Section
Section
COUNTY OF ▇▇▇▇▇▇ Section
This instrument was acknowledged before me on this ____ day of March,
2004, by ▇▇▇▇▇ ▇. ▇▇▇▇▇, Chief Executive Officer of MARINER ENERGY INC., a
Delaware corporation, on behalf of said corporation.
________________________________________
Notary Public in and for the State of
Texas
THE STATE OF TEXAS Section
Section
COUNTY OF DALLAS Section
This instrument was acknowledged before me on this ____ day of March,
2004, by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, as Senior Vice President of UNION BANK OF CALIFORNIA,
N.A., a national association, on behalf of said association.
________________________________________
Notary Public in and for the State of
Texas
Acknowledgment page to Deed of Trust
EXHIBIT "A"
Any reference in this Exhibit to ▇▇▇▇▇ or units is for warranty of interest,
administrative convenience, and identification and shall not limit or restrict
the right, title, interest, or properties covered by this Deed of Trust. All
right, title, and interest of Mortgagor in the properties described herein are
and shall be subject to this Deed of Trust, regardless of the presence of any
units or ▇▇▇▇▇ not described herein.
Unless otherwise expressly provided, all recording references in this Exhibit
are references to the official public records of real property in the county or
counties (or parish or parishes) in which the Mortgaged Property is located and
in which record documents relating to the Mortgaged Property are recorded,
whether Conveyance Records, Deed Records, Mortgage Records, Oil and Gas Records
("OGR"), Oil and Gas Lease Records, or other records. All references to "Volume"
shall mean "Book" and all references herein to "Book" shall mean "Volume" for
the purposes of identifying the proper place of recording in the office in which
record documents are recorded. Any references to "Lease no." or to any
particular "County" or "Parish" are merely for internal reference purposes and
shall not limit the effectiveness of this Mortgage and this Exhibit whether for
recording purposes or otherwise. The abbreviation "GWI" denotes Mortgagor's
working interest or operating interest, which terms as used synonymously here,
and which are intended to have the meaning commonly attributed to such terms in
the oil and gas industry. The abbreviation "NRI" denotes Mortgagor's net revenue
interest, which term is intended to have the meaning commonly attributed to such
term in the oil and gas industry. The abbreviation "APO" means "after payout,"
and is intended to have the meaning commonly attributed to such term in the oil
and gas industry. The abbreviation "BPO" means "before payout," and is intended
to have the meaning commonly attributed to such term in the oil and gas
industry. The abbreviation "ORRI" means "overriding royalty interest" and is
intended to have the meaning commonly attributed to such term in the oil and gas
industry.
EXHIBIT E-1
TO CREDIT AGREEMENT
FORM OF TRANCHE A NOTE
$_____________ ____________, 2004
For value received, the undersigned Mariner Energy, Inc., a Delaware
corporation ("Borrower"), hereby promises to pay to the order of
_______________________ ("Bank"), the principal amount of ______________________
_______________________ Dollars ($______________) or, if less, the aggregate
outstanding principal amount of the Tranche A Advances (as defined in the Credit
Agreement referred to below) made by the Bank to the Borrower, together with
interest on the unpaid principal amount of the Tranche A Advances from the date
of such Tranche A Advances until such principal amount is paid in full, at such
interest rates, and at such times, as are specified in the Credit Agreement.
This Tranche A Note is one of the Tranche A Notes referred to in, and is
entitled to the benefits of, and is subject to the terms of, the Credit
Agreement dated as of March 2, 2004 (as the same may be amended or modified from
time to time, the "Credit Agreement"), among the Borrower, the lenders party
thereto (the "Lenders"), and Union Bank of California, N.A., as administrative
agent for the Lenders (the "Administrative Agent") and as issuing lender
("Issuing Lender"). Capitalized terms used in this Tranche A Note that are
defined in the Credit Agreement and not otherwise defined in this Tranche A Note
have the meanings assigned to such terms in the Credit Agreement. The Credit
Agreement, among other things, (a) provides for the making of the Tranche A
Advances by the Bank to the Borrower in an aggregate amount not to exceed at any
time outstanding the Dollar amount first above mentioned, the indebtedness of
the Borrower resulting from each such Tranche A Advance being evidenced by this
Tranche A Note and (b) contains provisions for acceleration of the maturity of
this Tranche A Note upon the happening of certain events stated in the Credit
Agreement and for optional and mandatory prepayments of principal prior to the
maturity of this Tranche A Note upon the terms and conditions specified in the
Credit Agreement.
Both principal and interest are payable in lawful money of the United
States of America to the Administrative Agent at the place and in the manner
specified in the Credit Agreement. The Bank shall record payments of principal
made under this Tranche A Note, but no failure of the Bank to make such
recordings shall affect the Borrower's repayment obligations under this Tranche
A Note.
Without being limited thereto or thereby, this Tranche A Note is secured
by the Security Instruments and guaranteed under the Guaranties.
Except as specifically provided in the Credit Agreement, the Borrower
hereby waives presentment, demand, protest, notice of intent to accelerate,
notice of acceleration,
and any other notice of any kind. No failure to exercise, and no delay in
exercising, any rights hereunder on the part of the holder of this Tranche A
Note shall operate as a waiver of such rights.
This Tranche A Note shall be governed by, and construed and enforced in
accordance with, the laws of the state of Texas (except that Chapter 346 of the
Texas Finance Code Chapter, which regulates certain revolving credit loan
accounts shall not apply to this Tranche A Note).
THIS NOTE AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT AMONG
THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS,
OR SUBSEQUENT AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
MARINER ENERGY, INC.,
a Delaware corporation
By: ___________________________
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chief Executive Officer
Exhibit E-1 - Page 2
EXHIBIT E-2
TO CREDIT AGREEMENT
FORM OF TRANCHE B NOTE
$______________ ____________, 2004
For value received, the undersigned MARINER ENERGY, INC., a Delaware
corporation ("Borrower"), hereby promises to pay to the order of
________________________________ ("Bank"), the principal amount of______________
___________________________ Dollars ($____________) or, if less, the aggregate
outstanding principal amount of the Tranche B Advances (as defined in the Credit
Agreement referred to below) made by the Bank to the Borrower, together with
interest on the unpaid principal amount of the Tranche B Advances from the date
of such Tranche B Advances until such principal amount is paid in full, at such
interest rates, and at such times, as are specified in the Credit Agreements.
This Tranche B Note is one of the Tranche B Notes referred to in, and is
entitled to the benefits of, and is subject to the terms of, the Credit
Agreement dated as of March 2, 2004 (as the same has been and may be further
amended or modified from time to time, the "Credit Agreement"), among the
Borrower, the lenders party thereto (the "Lenders"), and Union Bank of
California, N.A., as administrative agent for the Lenders (the "Administrative
Agent") and as issuing lender ("Issuing Lender"). Capitalized terms used in this
Tranche B Note that are defined in the Credit Agreement and not otherwise
defined in this Tranche B Note have the meanings assigned to such terms in the
Credit Agreement. The Credit Agreement, among other things, (a) provides for the
making of the Tranche B Advances by the Bank to the Borrower in an aggregate
amount not to exceed at any time outstanding the Dollar amount first above
mentioned, the indebtedness of the Borrower resulting from each such Tranche B
Advance being evidenced by this Tranche B Note and (b) contains provisions for
acceleration of the maturity of this Tranche B Note upon the happening of
certain events stated in the Credit Agreement and for optional and mandatory
prepayments of principal prior to the maturity of this Tranche B Note upon the
terms and conditions specified in the Credit Agreement.
Both principal and interest are payable in lawful money of the United
States of America to the Administrative Agent at the place and in the manner
specified in the Credit Agreement. The Bank shall record payments of principal
made under this Tranche B Note, but no failure of the Bank to make such
recordings shall affect the Borrower's repayment obligations under this Tranche
B Note.
Without being limited thereto or thereby, this Tranche B Note is secured
by the Security Instruments and guaranteed under the Guaranties.
Except as specifically provided in the Credit Agreement, the Borrower
hereby waives presentment, demand, protest, notice of intent to accelerate,
notice of acceleration, and any other
notice of any kind. No failure to exercise, and no delay in exercising, any
rights hereunder on the part of the holder of this Tranche B Note shall operate
as a waiver of such rights.
This Tranche B Note shall be governed by, and construed and enforced in
accordance with, the laws of the state of Texas (except that Chapter 346 of the
Texas Finance Code Chapter, which regulates certain revolving credit loan
accounts shall not apply to this Tranche B Note).
THIS NOTE AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT AMONG
THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS,
OR SUBSEQUENT AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
MARINER ENERGY, INC.,
a Delaware corporation
By: ___________________________
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chief Executive Officer
Exhibit E-2 - Page 2
EXHIBIT F
TO CREDIT AGREEMENT
FORM OF NOTICE OF BORROWING
[Date]
Union Bank of California, N.A., as Administrative Agent
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Ladies and Gentlemen:
The undersigned, Mariner Energy, Inc., a Delaware corporation (the "Borrower"),
refers to the Credit Agreement dated as of March 2, 2004 (as the same may be
amended or modified from time-to-time, the "Credit Agreement," the defined terms
of which are used in this Notice of Borrowing unless otherwise defined in this
Notice of Borrowing) among the Borrower, the lenders party thereto (the
"Lenders"), and Union Bank of California, N.A., as administrative agent for the
Lenders (the "Administrative Agent") and as issuing lender for the Lenders (the
"Issuing Lender"), and hereby gives you irrevocable notice pursuant to Section
2.03(a) of the Credit Agreement that the undersigned hereby requests a
Borrowing, and in connection with that request sets forth below the information
relating to such Borrowing (the "Proposed Borrowing") as required by Section
2.03(a) of the Credit Agreement:
(a) The Business Day of the Proposed Borrowing is _____________, _____.
(b) The Proposed Borrowing will be composed of [Tranche A Advances]
[Tranche B Advances].
(c) The Proposed Borrowing will be composed of [Reference Rate Advances]
[Eurodollar Rate Advances].(1)
(d) The aggregate amount of the Proposed Borrowing is $____________.
(e) [The Interest Period for each Eurodollar Rate Advance made as part
of the Proposed Borrowing is [_____ month[s]].]
The Borrower hereby certifies that the following statements are true on the date
hereof, and will be true on the date of the Proposed Borrowing:
(1) except those representations and warranties that speak of a certain
date, which representations and warranties were true and correct as
of such date, the representations and warranties contained in
Article IV of the Credit Agreement and the representations and
warranties contained in the Security Instruments, the Guaranties,
and each of the other Loan Documents are true and correct in all
-------------------
(1) Tranche A Advances can be either Reference Rate Advances or Eurodollar
Advances. Tranche B Advances can be Reference Rate Advances but not Eurodollar
Advances.
material respects on and as of the date of such Borrowing, before
and after giving effect to such Borrowing and to the application of
the proceeds from such Borrowing; and
(2) no Default has occurred and is continuing or would result from such
Borrowing or from the application of the proceeds therefrom.
Very truly yours,
MARINER ENERGY, INC.,
a Delaware corporation
By:____________________________
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chief Executive Officer
Exhibit F - Page 2
EXHIBIT G
TO CREDIT AGREEMENT
FORM OF NOTICE OF CONVERSION OR CONTINUATION
[Date]
Union Bank of California, as Administrative Agent
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Ladies and Gentlemen:
The undersigned, Mariner Energy, Inc., a Delaware corporation (the "Borrower"),
refers to the Credit Agreement dated as of March 2, 2004 (as the same may be
amended or modified from time-to-time, the "Credit Agreement," the defined terms
of which are used in this Notice of Conversion or Continuation unless otherwise
defined in this Notice of Conversion or Continuation) among the Borrower, the
lenders party thereto (the "Lenders"), and Union Bank of California, N.A., as
administrative agent for the Lenders (the "Administrative Agent") and as issuing
lender for the Lenders (the "Issuing Lender"), and hereby gives you irrevocable
notice pursuant to Section 2.03(b) of the Credit Agreement that the undersigned
hereby requests a Conversion or continuation of an outstanding Tranche A
Borrowing, and in connection with that request sets forth below the information
relating to such Conversion or continuation (the "Proposed Borrowing") as
required by Section 2.03(b) of the Credit Agreement:
(a) The Business Day of the Proposed Borrowing is _______________, 20__.
(b) The Proposed Borrowing consists of [a Conversion to [Reference Rate
Advances] [Eurodollar Rate Advances]] [a continuation of Eurodollar
Rate Advances].
(c) The aggregate amount of the Borrowing to be [Converted] [continued]
is $______ and consists of [Reference Rate Advances] [Eurodollar
Rate Advances].
(d) [The Interest Period for each Eurodollar Rate Advance made as part
of the Proposed Borrowing is [____ month[s]].]
Very truly yours,
MARINER ENERGY, INC.,
a Delaware corporation
By:____________________________
Name:__________________________
Title:_________________________
Exhibit G - Page 2
EXHIBIT H
TO CREDIT AGREEMENT
FORM OF PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT dated as of March 2, 2004 ("Pledge Agreement") is by
and among MARINER ENERGY, INC., a Delaware corporation ("Borrower"), MARINER
ENERGY LLC, a Delaware limited liability company ("Company"), MARINER HOLDINGS,
INC., a Delaware corporation ("Holdings"), and each affiliate of the Borrower
signatory hereto (together with the Borrower, the Company, and Holdings,
collectively referred to herein as the "Pledgors" and individually, a "Pledgor")
and UNION BANK OF CALIFORNIA, N.A., as Administrative Agent (the "Secured
Party") for the ratable benefit of itself, the Issuing Lender (as defined
below), the Lenders (as defined below), and the Swap Counterparties (as defined
in the Credit Agreement referred to below and together with the Administrative
Agent, the Issuing Lender, and the Lenders, individually a "Credit Party", and
collectively, the "Credit Parties").
INTRODUCTION
(A) The Borrower, the lenders party thereto from time to time (the
"Lenders"), and Union Bank of California, N.A., as administrative agent (the
"Administrative Agent") and as issuing lender ("Issuing Lender") have entered
into the Credit Agreement dated as of March 2, 2004 (as amended, restated or
otherwise modified from time-to-time, the "Credit Agreement").
(B) It is a requirement under the Credit Agreement that the Pledgors
shall secure the due payment and performance of all Obligations (as defined in
the Credit Agreement) by entering into this Pledge Agreement.
Now, therefore, the Pledgors and the Secured Party for its benefit and the
ratable benefit of the Credit Parties, do hereby agree as follows:
Section 1.________Definitions. All capitalized terms not otherwise defined
in this Pledge Agreement that are defined in the Credit Agreement shall have the
meanings assigned to such terms by the Credit Agreement. Any terms used in this
Pledge Agreement that are defined in the Uniform Commercial Code as adopted in
the State of Texas ("UCC") shall have the meanings assigned to those terms by
the UCC as the UCC may be amended from time to time, whether specified elsewhere
in this Pledge Agreement or not. All meanings to defined terms, unless otherwise
indicated, are to be equally applicable to both the singular and plural forms of
the terms defined. Article, Section, Schedule, and Exhibit references are to
Articles and Sections of and Schedules and Exhibits to this Pledge Agreement,
unless otherwise specified. All references to instruments, documents, contracts,
and agreements are references to such instruments, documents, contracts, and
agreements as the same may be amended, supplemented, and otherwise modified from
time to time, unless otherwise specified. The words "hereof", "herein" and
"hereunder" and words of similar import when used in this Pledge Agreement shall
refer to this Pledge Agreement as a whole and not to any particular provision of
this Pledge Agreement.
As used herein, the term "including" means "including, without limitation,".
Paragraph headings have been inserted in this Pledge Agreement as a matter of
convenience for reference only and it is agreed that such paragraph headings are
not a part of this Pledge Agreement and shall not be used in the interpretation
of any provision of this Pledge Agreement.
Section 2. Pledge.
2.01. Grant of Pledge.
(a) Each Pledgor hereby pledges to the Secured Party, and grants
to the Secured Party, for the benefit of the Credit Parties, a continuing
security interest in, the Pledged Collateral, as defined in Section 2.02
below. This Pledge Agreement shall secure (i) all Obligations now or
hereafter existing, including any extensions, modification, substitutions,
amendments, and renewals thereof, whether for principal, interest, fees,
expenses, indemnifications or otherwise, and (ii) all other indebtedness,
obligations and liabilities of any of the Pledgors owing to any of the
Credit Parties, now or hereafter existing, in each case, with respect to
any letter of credit issued by the Issuing Lender or another Lender in
connection with Hydrocarbon Hedge Agreements or Interest Hedge Agreements
which are not prohibited by the terms of Section 6.14 of the Credit
Agreement. All such obligations shall be referred to in this Pledge
Agreement as the "Secured Obligations".
(b) Notwithstanding anything contained herein to the contrary, it
is the intention of each Pledgor, the Secured Party and the other Credit
Parties that the amount of the Secured Obligation secured by each
Pledgor's interests in any of its Property shall be in, but not in excess
of, the maximum amount permitted by fraudulent conveyance, fraudulent
transfer and other similar law, rule or regulation of any Governmental
Authority applicable to such Pledgor. Accordingly, notwithstanding
anything to the contrary contained in this Pledge Agreement in any other
agreement or instrument executed in connection with the payment of any of
the Secured Obligations, the amount of the Secured Obligations secured by
each Pledgor's interests in any of its Property pursuant to this Pledge
Agreement shall be limited to an aggregate amount equal to the largest
amount that would not render such Pledgor's obligations hereunder or the
liens and security interest granted to the Secured Party hereunder subject
to avoidance under Section 548 of the United States Bankruptcy Code or any
comparable provision of any other applicable law.
2.02. Pledged Collateral. "Pledged Collateral" shall mean all of each
Pledgor's right, title, and interest in the following, whether now owned or
hereafter acquired:
(a) (i) all of the membership interests listed in the attached
Schedule 2.02(a) issued to such Pledgor (the "Membership Interests"), (ii)
all such additional membership interests of any issuer of such interests
hereafter acquired by such Pledgor, (iii) the certificates representing
the Membership Interests, if any, and all such additional membership
interests, and (iv) all rights to money or Property which such Pledgor now
has or hereafter acquires in respect of the Membership Interests,
including, without
Exhibit H - Page 2
limitation, (A) any proceeds from a sale by or on behalf of such Pledgor
of any of the Membership Interests, and (B) any distributions, dividends,
cash, instruments and other property from time-to-time received or
otherwise distributed in respect of the Membership Interests, whether
regular, special or made in connection with the partial or total
liquidation of the issuer and whether attributable to profits, the return
of any contribution or investment or otherwise attributable to the
Membership Interests or the ownership thereof other than distributions
received by such Pledgor in compliance with the Loan Documents
(collectively, the "Membership Interests Distributions");
(b) (i) all of the general and limited partnership interests
listed in the attached Schedule 2.02(b) issued to such Pledgor (the
"Partnership Interests"), (ii) all such additional limited or general
partnership interests of any issuer of such interests hereafter acquired
by such Pledgor and (iii) all rights to money or Property which such
Pledgor now has or hereafter acquires in respect of the Partnership
Interests, including, without limitation, (A) any proceeds from a sale by
or on behalf of such Pledgor of any of the Partnership Interests, and (B)
any distributions, dividends, cash, instruments and other property from
time-to-time received or otherwise distributed in respect of the
Partnership Interests, whether regular, special or made in connection with
the partial or total liquidation of the issuer and whether attributable to
profits, the return of any contribution or investment or otherwise
attributable to the Partnership Interests or the ownership thereof other
than distributions received by such Pledgor in compliance with the Loan
Documents (collectively, the "Partnership Interests Distributions");
(c) (i) all of the shares of stock listed in the attached Schedule
2.02(c) issued to such Pledgor (the "Pledged Shares"), (ii) all such
additional shares of stock of any issuer of such shares of stock hereafter
issued to such Pledgor, (iii) the certificates representing the Pledged
Shares and all such additional shares, and (iv) all rights to money or
Property which such Pledgor now has or hereafter acquires in respect of
the Pledged Shares, including, without limitation, (A) any proceeds from a
sale by or on behalf of such Pledgor of any of the Pledged Shares, and (B)
any distributions, dividends, cash, instruments and other property from
time-to-time received or otherwise distributed in respect of the Pledged
Shares, whether regular, special or made in connection with the partial or
total liquidation of the issuer and whether attributable to profits, the
return of any contribution or investment or otherwise attributable to the
Pledged Shares or the ownership thereof other than distributions received
by such Pledgor in compliance with the Loan Documents (collectively, the
"Pledged Shares Distributions"; together with the Membership Interests
Distributions and the Partnership Interest Distributions, the
"Distributions");
(d) any and all promissory notes made by any Pledgor or any
Subsidiary of any Pledgor and payable to the order of any Pledgor (each,
an "Intercompany Note"), whether such Intercompany Note is in existence as
of the date of this Pledge Agreement or is made hereafter, and the
indebtedness thereunder, together with all other documents and agreements
securing and supporting such Intercompany Note, including all security
agreements, mortgages, deeds of trust, guaranties, and other assurances of
payment, plus
Exhibit H - Page 3
all interests, cash, instruments received, receivables, or other property
distributed in respect or of in exchange for any of the foregoing; and
(e) all proceeds from the Pledged Collateral described in paragraphs
(a), (b), (c), and (d) of this Section 2.02.
2.03. Delivery of Pledged Collateral. All certificates or instruments, if
any, representing the Pledged Collateral shall be delivered to the Secured Party
and shall be in suitable form for transfer by delivery, or shall be accompanied
by duly executed instruments of transfer or assignment in blank, all in form and
substance reasonably satisfactory to the Secured Party. After the occurrence and
during the continuance of an Event of Default, the Secured Party shall have the
right, upon prior written notice to the applicable Pledgor, to transfer to or to
register in the name of the Secured Party or any of its nominees any of the
Pledged Collateral, subject to the rights specified in Section 2.04. In
addition, after the occurrence and during the continuance of an Event of
Default, the Secured Party shall have the right at any time to exchange the
certificates or instruments representing the Pledged Collateral for certificates
or instruments of smaller or larger denominations.
2.04. Rights Retained by Pledgor. Notwithstanding the pledge in Section
2.01, so long as no Event of Default shall have occurred and remain uncured:
(a) and, if an Event of Default shall have occurred and remain
uncured, until such time thereafter as such voting and other consensual
rights have been terminated pursuant to Section 5 hereof, each Pledgor
shall be entitled to exercise any voting and other consensual rights
pertaining to its Pledged Collateral for any purpose not inconsistent with
the terms of this Pledge Agreement or the Credit Agreement; provided,
however, that (i) no Pledgor shall exercise nor shall it refrain from
exercising any such right if such action would have a material adverse
effect on the value of the Pledged Collateral and (ii) no Pledgor shall
amend, modify, compromise, settle, or otherwise alter any Intercompany
Note without the prior written consent of the Secured Party;
(b) except as otherwise provided in the Credit Agreement, each
Pledgor shall be entitled to receive and retain any dividends and other
distributions paid on or in respect of the Pledged Collateral and the
proceeds of any sale of the Pledged Collateral; and
(c) at and after such time as voting and other consensual rights
have been terminated pursuant to Section 5 hereof, each Pledgor shall
execute and deliver (or cause to be executed and delivered) to the Secured
Party all proxies and other instruments as the Secured Party may
reasonably request to (i) enable the Secured Party to exercise the voting
and other rights which such Pledgor is entitled to exercise pursuant to
paragraph (a) of this Section 2.04, and (ii) receive the dividends or
other distributions and proceeds of sale of the Pledged Collateral which
such Pledgor is authorized to receive and retain pursuant to paragraph (b)
of this Section 2.04.
Exhibit H - Page 4
Section 3. Pledgor's Representations and Warranties. Each Pledgor
represents and warrants to the Secured Party and the other Credit Parties as
follows:
(a) The Membership Interests, Partnership Interests, and Pledged
Shares applicable to such Pledgor listed on the attached Schedule 2.02(a),
Schedule 2.02(b) and Schedule 2.02(c) have been duly authorized and
validly issued to such Pledgor and are fully paid and nonassessable.
(b) Such Pledgor is the legal and beneficial owner of the Pledged
Collateral free and clear of any Lien or option, except for (i) the
security interest created by this Pledge Agreement and (ii) other
Permitted Liens.
(c) No authorization, authentication, approval, or other action by,
and no notice to or filing with, any Governmental Authority or regulatory
body is required either (a) for the pledge by such Pledgor of the Pledged
Collateral pursuant to this Pledge Agreement or for the execution,
delivery, or performance of this Pledge Agreement by such Pledgor or (b)
for the exercise by the Secured Party or any Credit Party of the voting or
other rights provided for in this Pledge Agreement or the remedies in
respect of the Pledged Collateral pursuant to this Pledge Agreement
(except for the filing of a financing statement with respect to the
Pledged Collateral and except as may be required in connection with such
disposition by laws affecting the offering and sale of securities
generally).
(d) Such Pledgor has the full right, power and authority to deliver,
pledge, assign and transfer the Pledged Collateral to the Secured Party.
(e) The Membership Interests listed on the attached Schedule 2.02(a)
constitute the (i) percentage of the issued and outstanding membership
interests of the respective issuer thereof set forth on Schedule 2.02(a)
and (ii) all of the membership interests of such issuer in which such
Pledgor has any ownership interest.
(f) The Partnership Interests listed on the attached Schedule
2.02(b) constitute (i) the percentage of the issued and outstanding
general and limited partnership interests of the respective issuer thereof
set forth on Schedule 2.02(b) and (ii) all partnership interests of such
issuer in which such Pledgor has any ownership interest.
(g) The Pledged Shares list on the attached Schedule 2.02(c)
constitute (i) the percentage of the issued and outstanding shares of
capital stock of the respective issuer thereof set forth on Schedule
2.02(c) and (ii) all of the shares of stock of such issuer in which such
Pledgor has any ownership interests.
(h) Schedule 3 sets forth its sole jurisdiction of formation, type
of organization, federal tax identification number, organizational number,
and all names used by it during the last five years prior to the date of
this Pledge Agreement.
(i) With respect to any Intercompany Note, the applicable Pledgor
is, and will be at the time such Intercompany Note is delivered to Secured
Party hereunder, the
Exhibit H - Page 5
record and beneficial owner of such Intercompany Note free and clear of
any Liens, other than the liens created by this Pledge Agreement.
Section 4. Pledgor's Covenants. During the term of this Pledge Agreement
and until all of the Secured Obligations have been fully and finally paid and
discharged in full, the Commitments under the Credit Agreement have been
terminated or expired, each Pledgor covenants and agrees with the Secured Party
that:
4.01. Protect Collateral; Further Assurances. Each Pledgor will warrant
and defend the rights and title herein granted unto the Secured Party in and to
the Pledged Collateral (and all right, title, and interest represented by the
Pledged Collateral) against the claims and demands of all Persons whomsoever,
other than with respect to Permitted Liens. Each Pledgor agrees that, at the
expense of such Pledgor, such Pledgor will promptly execute and deliver all
further instruments and documents, and take all further action, that may be
reasonably necessary and that the Secured Party or any Credit Party may
reasonably request, in order to perfect and protect any security interest
granted or purported to be granted hereby or to enable the Secured Party or any
Credit Party to exercise and enforce its rights and remedies hereunder with
respect to any Pledged Collateral. Each Pledgor hereby authorizes the Secured
Party to file any financing statements, amendments or continuations without the
signature of such Pledgor to the extent permitted by applicable law in order to
perfect or maintain the perfection of any security interest granted under this
Pledge Agreement.
4.02. Transfer, Other Liens, and Additional Shares. Each Pledgor agrees
that it will not (a) except as otherwise permitted by the Credit Agreement, sell
or otherwise dispose of, or grant any option with respect to, any of the Pledged
Collateral or (b) create or permit to exist any Lien upon or with respect to any
of the Pledged Collateral, except for Permitted Liens. Each Pledgor agrees that
it will (a) cause each issuer of the Pledged Collateral that is a Subsidiary of
such Pledgor not to issue any other Equity Interests in addition to or in
substitution for the Pledged Collateral issued by such issuer, except to such
Pledgor or any other Pledgor and (b) pledge hereunder, immediately upon its
acquisition (directly or indirectly) thereof, any additional Equity Interests of
an issuer of the Pledged Collateral. Each Pledgor shall not approve any
amendment or modification of any of the Pledged Collateral without the Secured
Party's prior written consent.
4.03. Jurisdiction of Formation; Name Change. No Pledgor shall (a) amend,
supplement, modify or restate its articles or certificate of incorporation,
bylaws, limited liability company agreements, or other equivalent organizational
documents, nor amend or change its jurisdiction of incorporation, organization,
or formation without the prior written consent of the Administrative Agent
(which consent shall not be unreasonably withheld or delayed), nor (b) amend or
change its name without giving the Administrative Agent thirty (30) days' prior
written notice.
4.04. Intercompany Note(s). Concurrent with its execution of this Pledge
Agreement, with respect to any Intercompany Note is in existence at such time,
or promptly after any Pledgor's receipt of any Intercompany Note, with respect
to any Intercompany Note that is made after the date of this Pledge Agreement,
Pledgor shall endorse, assign, and deliver such
Exhibit H - Page 6
Intercompany Note to the Secured Party together with such instrument of transfer
as the Secured Party may request.
Section 5. Remedies upon Default. If any Event of Default shall have
occurred and be continuing:
5.01. UCC Remedies. To the extent permitted by law, the Secured Party may
exercise in respect of the Pledged Collateral, in addition to other rights and
remedies provided for in this Pledge Agreement or otherwise available to it, all
the rights and remedies of a secured party under the UCC (whether or not the UCC
applies to the affected Pledged Collateral).
5.02. Dividends and Other Rights.
(a) All rights of the Pledgors to exercise the voting and other
consensual rights which it would otherwise be entitled to exercise
pursuant to Section 2.04(a) of this Pledge Agreement may be exercised by
the Secured Party if the Secured Party so elects and gives written notice
of such election to the affected Pledgor and all rights of the Pledgors to
receive the dividends and other distributions on or in respect of the
Pledged Collateral and the proceeds of sale of the Pledged Collateral
which it would otherwise be authorized to receive and retain pursuant to
Section 2.04(b) of this Pledge Agreement shall cease.
(b) All dividends and other distributions on or in respect of the
Pledged Collateral and the proceeds of sale of the Pledged Collateral
which are received by any Pledgor shall be received in trust for the
benefit of the Secured Party, shall be segregated from other funds of such
Pledgor, and shall be promptly paid over to the Secured Party as Pledged
Collateral in the same form as so received (with any necessary
indorsement).
5.03. Sale of Pledged Collateral. The Secured Party may sell all or part
of the Pledged Collateral at public or private sale, at any of the Secured
Party's offices or elsewhere, for cash, on credit, or for future delivery, and
upon such other terms as the Secured Party may deem commercially reasonable in
accordance with applicable laws. Each Pledgor agrees that to the extent
permitted by law such sales may be made without notice. If notice is required by
law, each Pledgor hereby deems ten (10) days' advance notice of the time and
place of any public sale or the time after which any private sale is to be made
reasonable notification, recognizing that if the Pledged Collateral threatens to
decline speedily in value or is of a type customarily sold on a recognized
market shorter notice may be reasonable. The Secured Party shall not be
obligated to make any sale of the Pledged Collateral regardless of notice of
sale having been given. The Secured Party may adjourn any public or private sale
from time-to-time by announcement at the time and place fixed therefor, and such
sale may, without further notice, be made at the time and place to which it was
so adjourned. Upon the request of the Secured Party, each Pledgor shall fully
cooperate with Secured Party in selling or realizing upon all or any part of the
Pledged Collateral. In addition, each Pledgor shall fully comply with the
securities laws of the United States, the State of Texas, and other states and
take such actions as may be necessary to permit Secured Party to sell or
otherwise dispose of any securities representing the Pledged Collateral in
compliance with such laws.
Exhibit H - Page 7
5.04. Exempt Sale. If, in the opinion of the Secured Party, there is any
question that a public or semipublic sale or distribution of any Pledged
Collateral will violate any state or federal securities law, the Secured Party
in its reasonable discretion (a) may offer and sell securities privately to
purchasers who will agree to take them for investment purposes and not with a
view to distribution and who will agree to imposition of restrictive legends on
the certificates representing the security, or (b) may sell such securities in
an intrastate offering under Section 3(a)(11) of the Securities Act of 1933, as
amended, and no sale so made in good faith by the Secured Party shall be deemed
to be not "commercially reasonable" solely because so made.
5.05. Application of Collateral. The proceeds of any sale, or other
realization (other than that received from a sale or other realization permitted
by the Credit Agreement) upon all or any part of the Pledged Collateral pledged
by the Pledgors shall be applied by the Secured Party as set forth in Section
7.06 of the Credit Agreement.
5.06. Cumulative Remedies. Each right, power and remedy herein
specifically granted to the Secured Party or otherwise available to it shall be
cumulative, and shall be in addition to every other right, power and remedy
herein specifically given or now or hereafter existing at law, in equity, or
otherwise, and each such right, power and remedy, whether specifically granted
herein or otherwise existing, may be exercised at any time and from time-to-time
as often and in such order as may be deemed expedient by the Secured Party in
its sole discretion. No failure on the part of the Secured Party to exercise,
and no delay in exercising, and no course of dealing with respect to, any such
right, power or remedy, shall operate as a waiver thereof, nor shall any single
or partial exercise of any such rights, power or remedy preclude any other or
further exercise thereof or the exercise of any other right.
Section 6. Secured Party as Attorney-in-Fact for Pledgor.
6.01. Secured Party Appointed Attorney-in-Fact. Each Pledgor hereby
irrevocably appoints the Secured Party as such Pledgor's attorney-in-fact, with
full authority after the occurrence and during the continuance of an Event of
Default to act for such Pledgor and in the name of such Pledgor, and, in the
Secured Party's discretion, to take any action and to execute any instrument
which the Secured Party may deem reasonably necessary or advisable to accomplish
the purposes of this Pledge Agreement, including, without limitation, to
receive, indorse, and collect all instruments made payable to such Pledgor
representing any dividend, or the proceeds of the sale of the Pledged
Collateral, or other distribution in respect of the Pledged Collateral and to
give full discharge for the same. EACH PLEDGOR HEREBY ACKNOWLEDGES, CONSENTS AND
AGREES THAT THE POWER OF ATTORNEY GRANTED PURSUANT TO THIS SECTION IS
IRREVOCABLE AND COUPLED WITH AN INTEREST.
6.02. Secured Party May Perform. The Secured Party may from time-to-time,
at its option but at the Pledgors' expense, perform any act which any Pledgor
agrees hereunder to perform and which such Pledgor shall fail to perform after
being requested in writing so to perform (it being understood that no such
request need be given after the occurrence and during the continuance of any
Event of Default and after notice thereof by the Secured Party to the affected
Pledgor) and the Secured Party may from time-to-time take any other action which
the
Exhibit H - Page 8
Secured Party reasonably deems necessary for the maintenance, preservation
or protection of any of the Pledged Collateral or of its security interest
therein. The Secured Party shall provide notice to the affected Pledgor of any
action taken hereunder; provided however, the failure to provide such notice
shall not be construed as a waiver of any rights of the Secured Party provided
under this Pledge Agreement or under applicable law.
6.03. Secured Party Has No Duty. The powers conferred on the Secured Party
hereunder are solely to protect its interest in the Pledged Collateral and shall
not impose any duty on it to exercise any such powers. Except for reasonable
care of any Pledged Collateral in its possession and the accounting for moneys
actually received by it hereunder, the Secured Party shall have no duty as to
any Pledged Collateral or responsibility for taking any necessary steps to
preserve rights against prior parties or any other rights pertaining to any
Pledged Collateral.
6.04. Reasonable Care. The Secured Party shall be deemed to have exercised
reasonable care in the custody and preservation of the Pledged Collateral in its
possession if the Pledged Collateral is accorded treatment substantially equal
to that which the Secured Party accords its own property, it being understood
that the Secured Party shall have no responsibility for (a) ascertaining or
taking action with respect to calls, conversions, exchanges, maturities,
tenders, or other matters relative to any Pledged Collateral, whether or not the
Secured Party has or is deemed to have knowledge of such matters, or (b) taking
any necessary steps to preserve rights against any parties with respect to any
Pledged Collateral.
Section 7. Miscellaneous.
7.01. Expenses. The Pledgors will upon demand pay to the Secured Party for
its benefit and the benefit of the other Credit Parties the amount of any
reasonable out-of-pocket expenses, including the reasonable fees and
disbursements of its counsel and of any experts, which the Secured Party and the
other Credit Parties may incur in connection with (a) the custody, preservation,
use, or operation of, or the sale, collection, or other realization of, any of
the Pledged Collateral, (b) the exercise or enforcement of any of the rights of
the Secured Party, Administrative Agent, Issuing Lender, or any Lender or any
other Credit Party hereunder, and (c) the failure by any Pledgor to perform or
observe any of the provisions hereof.
7.02. Amendments, Etc. No amendment or waiver of any provision of this
Pledge Agreement nor consent to any departure by any Pledgor herefrom shall be
effective unless made in writing and authenticated by the affected Pledgor and
the Secured Party and, as required by the Credit Agreement, either all of the
Administrative Agent, the Issuing Lenders, the Lenders or the Required Lenders,
and such waiver or consent shall be effective only in the specific instance and
for the specific purpose for which given.
7.03. Addresses for Notices. All notices and other communications provided
for hereunder shall be in the manner and to the addresses set forth in the
Credit Agreement or on the signature page hereof.
7.04. Continuing Security Interest; Transfer of Interest.
Exhibit H - Page 9
(a) This Pledge Agreement shall create a continuing security interest in
the Pledged Collateral and, unless expressly released by the Secured Party,
shall (i) remain in full force and effect until the indefeasible payment in full
in cash of, and termination of, the Secured Obligations, the reduction of the
Letter of Credit Exposure to zero, and the termination of the Commitments, (ii)
be binding upon the Pledgors, the Secured Party, the other Credit Parties and
their successors, and assigns, and (iii) inure, together with the rights and
remedies of the Secured Party hereunder, to the benefit of and be binding upon,
the Secured Party, the Administrative Agent, the Issuing Lenders, and the
Lenders and their respective successors, transferees, and assigns, and to the
benefit of and be binding upon, the Swap Counterparties, and each of their
respective successors and assigns only to the extent such successors,
transferees, and assigns of a Swap Counterparty is the Administrative Agent, the
Issuing Lender, a Lender or an Affiliate of a Lender. Without limiting the
generality of the foregoing clause, when any Lender assigns or otherwise
transfers any interest held by it under the Credit Agreement or other Loan
Document (other than an Interest Hedge Agreement or a Hydrocarbon Hedge
Agreement) to any other Person pursuant to the terms of the Credit Agreement or
such other Loan Document, that other Person shall thereupon become vested with
all the benefits held by such Lender under this Security Agreement. Furthermore,
when any Swap Counterparty assigns or otherwise transfers any interest held by
it under an Interest Hedge Agreement or a Hydrocarbon Hedge Agreement to any
other Person pursuant to the terms of such agreement, that other Person shall
thereupon become vested with all the benefits held by such Lender under this
Pledge Agreement only if such Person is also then a Lender or an Affiliate of a
Lender.
(b) Upon the indefeasible payment in full and termination of the Secured
Obligations, the reduction of the Letter of Credit Exposure to zero, and the
termination of all Commitments, the security interest granted hereby shall
terminate and all rights to the Pledged Collateral shall revert to the
applicable Pledgor to the extent such Pledged Collateral shall not have been
sold or otherwise applied pursuant to the terms hereof. Upon any such
termination, the Secured Party will, at the Pledgors' expense, deliver all
Pledged Collateral to the applicable Pledgor, execute and deliver to the
applicable Pledgor such documents as such Pledgor shall reasonably request and
take any other actions reasonably requested to evidence or effect such
termination.
7.05. Waivers. Each Pledgor hereby waives:
(a) promptness, diligence, notice of acceptance, and any other notice with
respect to any of the Secured Obligations and this Pledge Agreement;
(b) any requirement that the Secured Party or any Credit Party protect,
secure, perfect, or insure any Lien or any Property subject thereto or exhaust
any right or take any action against any Pledgor, any Guarantor, or any other
Person or any collateral; and
(c) any duty on the part of the Secured Party to disclose to any Pledgor
any matter, fact, or thing relating to the business, operation, or condition of
any Pledgor, any
Exhibit H - Page 10
other Guarantor, or any other Person and their respective assets now known
or hereafter known by such Person.
7.06. Severability. Wherever possible each provision of this Pledge
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Pledge Agreement shall be
prohibited by or invalid under such law, such provision shall be ineffective to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this Pledge Agreement.
7.07. Choice of Law. This Pledge Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Texas, except
to the extent that the validity or perfection of the security interests
hereunder, or remedies hereunder, in respect of any particular Pledged
Collateral are governed by the laws of a jurisdiction other than the State of
Texas.
7.08. Counterparts. For the convenience of the parties, this Pledge
Agreement may be executed in multiple counterparts, each of which for all
purposes shall be deemed to be an original, and all such counterparts shall
together constitute but one and the same Pledge Agreement.
7.09. Headings. Paragraph headings have been inserted in this Pledge
Agreement as a matter of convenience for reference only and it is agreed that
such paragraph headings are not a part of this Pledge Agreement and shall not be
used in the interpretation of any provision of this Pledge Agreement.
7.10. Reinstatement. If, at any time after payment in full of all Secured
Obligations and termination of the Secured Party's security interest, any
payments on the Secured Obligations previously made must be disgorged by the
Secured Party for any reason whatsoever, including, without limitation, the
insolvency, bankruptcy or reorganization of any Pledgor or any other Person,
this Pledge Agreement and the Secured Party's security interests herein shall be
reinstated as to all disgorged payments as though such payments had not been
made, and each Pledgor shall sign and deliver to the Secured Party all
documents, and shall do such other acts and things, as may be reasonably
necessary to reinstate and perfect the Secured Party's security interest. EACH
PLEDGOR SHALL DEFEND AND INDEMNIFY EACH CREDIT PARTY FROM AND AGAINST ANY CLAIM,
DAMAGE, LOSS, LIABILITY, COST, OR EXPENSE UNDER THIS SECTION 7.10 (INCLUDING
REASONABLE ATTORNEYS' FEES AND EXPENSES) IN THE DEFENSE OF ANY SUCH ACTION OR
SUIT, INCLUDING SUCH CLAIM, DAMAGE, LOSS, LIABILITY, COST, OR EXPENSE ARISING AS
A RESULT OF THE INDEMNIFIED CREDIT PARTY'S OWN NEGLIGENCE BUT EXCLUDING SUCH
CLAIM, DAMAGE, LOSS, LIABILITY, COST, OR EXPENSE THAT IS FOUND IN A FINAL,
NON-APPEALABLE JUDGMENT BY A COURT OF COMPETENT JURISDICTION TO HAVE RESULTED
FROM SUCH INDEMNIFIED CREDIT PARTY'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
Exhibit H - Page 11
7.11. Conflicts. In the event of any explicit or implicit conflict between
any provisions of this Pledge Agreement and any provision of the Credit
Agreement, the terms of the Credit Agreement shall be controlling.
7.12. Additional Pledgors. Pursuant to Section 5.08 of the Credit
Agreement, certain subsidiaries of the Borrower that were not in existence on
the date of the Credit Agreement are required to enter into this Pledge
Agreement as Pledgors. Upon execution and delivery after the date hereof by the
Secured Party and such Subsidiary of an instrument in the form of Annex 1
attached to this Pledge Agreement, such Subsidiary shall become a Pledgor
hereunder with the same force and effect as if originally named as a Pledgor
herein. The execution and delivery of any instrument adding an additional
Pledgor as a party to this Pledge Agreement shall not require the consent of any
other Pledgor hereunder. The rights and obligations of each Pledgor hereunder
shall remain in full force and effect notwithstanding the addition of any new
Pledgor as a party to this Pledge Agreement.
7.13. Entire Agreement. THIS PLEDGE AGREEMENT AND THE OTHER LOAN
DOCUMENTS, AS DEFINED IN THE CREDIT AGREEMENT REFERRED TO IN THIS PLEDGE
AGREEMENT, REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES HERETO.
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]
Exhibit H - Page 12
The parties hereto have caused this Pledge Agreement to be duly executed
as of the date first above written.
BORROWER:
MARINER ENERGY, INC.,
a Delaware corporation
By:____________________________________________
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chief Executive Officer
MARINER ENERGY LLC,
a Delaware limited liability company
By:____________________________________________
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chief Executive Officer
MARINER HOLDINGS INC.,
a Delaware corporation
By:____________________________________________
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chief Executive Officer
UNION BANK OF CALIFORNIA, N.A.,
as Secured Party for the ratable benefit of the
Credit Parties
By:____________________________________________
Name:__________________________________________
Title:_________________________________________
By:____________________________________________
Name:__________________________________________
Title:_________________________________________
Exhibit H - Page 13
SCHEDULE 2.02(a)
Attached to and forming a part of that certain Pledge Agreement dated
March 2, 2004 by [Pledgor], as Pledgor, to the Secured Party.
Type of Membership % of Membership Interest
Issuer Interest Owned
------ ------------------ ------------------------
SCHEDULE 2.02(b)
Attached to and forming a part of that certain Pledge Agreement dated
March 2, 2004 by [Pledgor], as Pledgor, to the Secured Party.
% of Partnership Interest
Issuer Type of Partnership Interest Owned
------ ---------------------------- -------------------------
SCHEDULE 2.02(c)
Attached to and forming a part of that certain Pledge Agreement dated
March 2, 2004 by [Pledgor], as Pledgor, to the Secured Party.
Number of % of Shares
Issuer Type of Shares Shares Owned Certificate No.
------ -------------- --------- ----------- ---------------
SCHEDULE 3
Pledgor: [PLEDGOR]
Sole Jurisdiction of Formation / Filing: [STATE]
Type of Organization: [ENTITY TYPE]
Organizational Number: ______________________________
Federal Tax Identification Number: ______________________________
Prior Names: ______________________________
Exhibit H - Page 14
Annex 1 to the
Pledge Agreement
SUPPLEMENT NO. [ ] dated as of [ ] (the "Supplement"), to the Pledge
Agreement dated as of March 2, 2004 (as amended, supplemented or otherwise
modified from time to time, the "Pledge Agreement"), among MARINER ENERGY, INC.,
a Delaware corporation ("Borrower"), MARINER ENERGY LLC, a Delaware limited
liability company ("Company"), MARINER HOLDINGS, INC., a Delaware corporation
("Holdings"), and each affiliate of the Borrower signatory hereto (together with
the Borrower, the Company, and Holdings, collectively referred to herein as the
"Pledgors" and individually, a "Pledgor") and UNION BANK OF CALIFORNIA, N.A., as
Administrative Agent (the "Secured Party") for the ratable benefit of itself,
the Issuing Lender (as defined below), the Lenders (as defined below), and the
Swap Counterparties (as defined in the Credit Agreement referred to below and
together with the Administrative Agent, the Issuing Lender, and the Lenders,
individually a "Credit Party", and collectively, the "Credit Parties").
A. Reference is made to the Credit Agreement dated as of March 2, 2004 (as
amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among the Borrower, the lenders from time to time party thereto
(the "Lenders"), and Union Bank of California, N.A , as Administrative Agent and
as Issuing Lender.
B. Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Pledge Agreement and the Credit
Agreement.
C. The Pledgors have entered into the Pledge Agreement in order to induce
the Lenders to make Advances. Pursuant to Section 5.08 of the Credit Agreement,
certain Subsidiaries of the Borrower that were not in existence on the date of
the Credit Agreement are required to enter into the Pledge Agreement as a
Pledgor upon becoming a Subsidiary. Section 7.12 of the Pledge Agreement
provides that additional Subsidiaries of the Borrower may become Pledgors under
the Pledge Agreement by execution and delivery of an instrument in the form of
this Supplement. The undersigned Subsidiary of the Borrower (the "New Pledgor")
is executing this Supplement in accordance with the requirements of the Credit
Agreement to become a Pledgor under the Pledge Agreement in order to induce the
Administrative Agent, the Issuing Lender, or any of the Lenders to make
additional Advances and as consideration for Advances previously made.
SECTION 1. Accordingly, the Secured Party and the New Pledgor agree as
follows: In accordance with Section 7.12 of the Pledge Agreement, the New
Pledgor by its signature below becomes a Pledgor under the Pledge Agreement with
the same force and effect as if originally named therein as a Pledgor and the
New Pledgor hereby agrees (a) to all the terms and provisions of the Pledge
Agreement applicable to it as a Pledgor thereunder and (b) represents and
warrants that the representations and warranties made by it as a Pledgor
thereunder are true and correct on and as of the date hereof in all material
respects. In furtherance of the foregoing, the New Pledgor, as security for the
payment and performance in full of the Secured Obligations (as defined in the
Pledge Agreement), does hereby create and grant to the Secured Party, its
successors and assigns, for the benefit of the Credit Parties, their successors
and assigns, a continuing security interest in and lien on all of the New
Pledgor's right, title and interest in and
Exhibit H - Page 15
to the Pledged Collateral (as defined in the Pledge Agreement) of the New
Pledgor. Each reference to a "Pledgor" in the Pledge Agreement shall be deemed
to include the New Pledgor. The Pledge Agreement is hereby incorporated herein
by reference.
SECTION 2. The New Pledgor represents and warrants to the Secured Party
and the other Credit Parties that this Supplement has been duly authorized,
executed and delivered by it and constitutes its legal, valid and binding
obligation, enforceable against it in accordance with its terms (subject to
applicable bankruptcy, reorganization, insolvency, moratorium or similar laws
affecting creditors' rights generally and subject, as to enforceability, to
equitable principles of general application (regardless of whether enforcement
is sought in a proceeding in equity or at law)).
SECTION 3. This Supplement may be executed in counterparts, each of which
shall constitute an original, but all of which when taken together shall
constitute a single contract. This Supplement shall become effective when the
Secured Party shall have received counterparts of this Supplement that, when
taken together, bear the signatures of the New Pledgor and the Secured Party.
Delivery of an executed signature page to this Supplement by facsimile
transmission shall be as effective as delivery of a manually signed counterpart
of this Supplement.
SECTION 4. The New Pledgor hereby represents and warrants that (a) set
forth on Schedules 2.02(a), 2.02(b), and 2.02(c) attached hereto are true and
correct schedules of all its Membership Interests, Partnership Interests and
Pledged Shares, as each term is defined in the Pledge Agreement, and (b) set
forth on Schedule 3 attached hereto are its sole jurisdiction of formation, type
of organization, its federal tax identification number, its organizational
number, and all names used by it during the last five years prior to the date of
this Supplement.
SECTION 5. Except as expressly supplemented hereby, the Pledge Agreement
shall remain in full force and effect.
SECTION 6. THIS SUPPLEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, EXCEPT TO THE EXTENT THAT THE
VALIDITY OR PERFECTION OF THE SECURITY INTERESTS HEREUNDER, OR REMEDIES
HEREUNDER, IN RESPECT OF ANY PARTICULAR PLEDGED COLLATERAL ARE GOVERNED BY THE
LAWS OF A JURISDICTION OTHER THAN THE STATE OF TEXAS.
SECTION 7. In case any one or more of the provisions contained in this
Supplement should be held invalid, illegal or unenforceable in any respect,
neither party hereto shall be required to comply with such provision for so long
as such provision is held to be invalid, illegal or unenforceable, but the
validity, legality and enforceability of the remaining provisions contained
herein and in the Pledge Agreement shall not in any way be affected or impaired.
The parties hereto shall endeavor in good-faith negotiations to replace the
invalid, illegal or unenforceable provisions with valid provisions the economic
effect of which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.
Exhibit H - Page 16
SECTION 8. All communications and notices hereunder shall be in writing
and given as provided in the Pledge Agreement. All communications and notices
hereunder to the New Pledgor shall be given to it at the address set forth under
its signature hereto.
SECTION 9. The New Pledgor agrees to reimburse the Secured Party for its
reasonable out-of-pocket expenses in connection with this Supplement, including
the reasonable fees, other charges and disbursements of counsel for the Secured
Party.
Exhibit H - Page 17
IN WITNESS WHEREOF, the New Pledgor and the Secured Party have duly
executed this Supplement to the Pledge Agreement as of the day and year first
above written.
[Name of New Pledgor],
By:______________________________________________
Name:____________________________________________
Title:___________________________________________
Address:_________________________________________
_________________________________________________
_________________________________________________
_________________________________________________
UNION BANK OF CALIFORNIA, N.A.,
as Secured Party for the ratable benefit of the
Credit Parties
By:______________________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Senior Vice President
By:______________________________________________
Name:____________________________________________
Title:___________________________________________
Schedules
Supplement No. ____
to the Pledge Agreement
Pledged Collateral of the New Pledgor
SCHEDULE 2.02(a)
Type of Membership % of Membership Interest
Issuer Interest Owned
------ ------------------ ------------------------
SCHEDULE 2.02(b)
% of Partnership Interest
Issuer Type of Partnership Interest Owned
------ ---------------------------- -------------------------
SCHEDULE 2.02(c)
Number of % of Shares
Issuer Type of Shares Shares Owned Certificate No.
------ -------------- --------- ----------- ---------------
SCHEDULE 3
New Pledgor: [PLEDGOR]
Sole Jurisdiction of Formation / Filing: [STATE]
Type of Organization: [ENTITY TYPE]
Organizational Number: _____________________________
Federal Tax Identification Number: _____________________________
Prior Names: _____________________________
Exhibit H - Page 20
EXHIBIT I
TO CREDIT AGREEMENT
FORM OF SECURITY AGREEMENT
THIS SECURITY AGREEMENT dated as of March 2, 2004 ("Security Agreement")
is by and among MARINER ENERGY, INC., a Delaware corporation ("Borrower"),
MARINER ENERGY LLC, a Delaware limited liability company ("Company"), Mariner
Holdings, Inc., a Delaware corporation ("Holdings"), and each affiliate of the
Borrower signatory hereto (together with the Borrower, the Company and Holdings,
collectively the "Grantors" and individually, a "Grantor") and UNION BANK OF
CALIFORNIA, N.A., as Administrative Agent (the "Secured Party") for the ratable
benefit of itself, the Issuing Lender (as defined below), the Lenders (as
defined below) and the Swap Counterparties (as defined in the Credit Agreement
referred to below and together with the Administrative Agent, the Issuing
Lender, and the Lenders, individually a "Credit Party", and collectively, the
"Credit Parties").
INTRODUCTION
A. The Borrower, the lenders party thereto from time to time (the
"Lenders"), and Union Bank of California, N.A., as administrative agent (the
"Administrative Agent") and as issuing lender (the "Issuing Lender") have
entered into the Credit Agreement dated as of March 2, 2004 (as amended,
restated or otherwise modified from time-to-time, the "Credit Agreement").
B. It is a requirement under the Credit Agreement that the Grantors shall
secure the due payment and performance of all Obligations (as defined in the
Credit Agreement) by entering into this Security Agreement.
Now, therefore, the Grantors and the Secured Party for its benefit and the
ratable benefit of the Credit Parties, do hereby agree as follows:
Section 1. Definitions; Interpretation.
(a) All capitalized terms not otherwise defined in this Security
Agreement that are defined in the Credit Agreement shall have the meanings
assigned to such terms by the Credit Agreement. Any terms used in this
Security Agreement that are defined in the UCC (as defined below) and not
otherwise defined herein shall have the meanings assigned to those terms
by the UCC. All meanings to defined terms, unless otherwise indicated, are
to be equally applicable to both the singular and plural forms of the
terms defined. The following terms shall have the meanings specified
below:
"Chattel Paper" means a writing or writings which evidence both a monetary
obligation and a security interest in or a lease of specific goods.
"Collateral" has the meaning set forth in Section 2 of this Security
Agreement.
"Contracts" means all contracts to which any of the Grantors now is, or
hereafter will be, bound, or a party, beneficiary or assignee (other than rights
evidenced by Chattel Paper, Documents or Instruments), all Insurance Contracts,
and all exhibits, schedules and other attachments to such contracts, as the same
may be amended, supplemented or otherwise modified or replaced from time to
time.
"Contract Documents" means all Instruments, Chattel Paper, letters of
credit, bonds, guarantees or similar documents evidencing, representing, arising
from or existing in respect of, relating to, securing or otherwise supporting
the payment of, the Contract Rights.
"Contract Rights" means (a) all (i) of any Grantor's rights to payment
under any Contract or Contract Document and (ii) payments due and to become due
to the Grantor under any Contract or Contract Document, in each case whether as
contractual obligations, damages or otherwise; (b) all of any Grantor's claims,
rights, powers, or privileges and remedies under any Contract or Contract
Document; and (c) all of any Grantor's rights under any Contract or Contract
Document to make determinations, to exercise any election (including, but not
limited to, election of remedies) or option or to give or receive any notice,
consent, waiver or approval together with full power and authority with respect
to any Contract or Contract Document to demand, receive, enforce or collect any
of the foregoing rights or any property which is the subject of any Contract or
Contract Document, to enforce or execute any checks, or other instruments or
orders, to file any claims and to take any action which, in the opinion of the
Secured Party, may be necessary or advisable in connection with any of the
foregoing.
"Document" means a ▇▇▇▇ of lading, dock warrant, dock receipt, warehouse
receipt or order for the delivery of goods, and also any other document which in
the regular course of business or financing is treated as adequately evidencing
that the person in possession of it is entitled to receive, hold and dispose of
the document and the goods it covers.
"Equipment" means any equipment now or hereafter owned or leased by any
Grantor, or in which any Grantor holds or acquires any other right, title or
interest, constituting "equipment" under the UCC, including without limitation
all field lines and drilling equipment, purification equipment, liquefaction
equipment, vaporizing equipment, and all other machinery, tools, office
equipment, furniture, furnishings, fixtures, vehicles, motor vehicles, and any
manuals, instructions, blueprints, computer software (including software that is
imbedded in and part of the equipment) and similar items which relate to the
above, and any and all additions, substitutions and replacements of any of the
foregoing, wherever located together with all improvements thereon and all
attachments, components, parts, equipment and accessories installed thereon or
affixed thereto.
"Fixtures" means any fixtures now or hereafter owned or leased by any
Grantor, or in which any Grantor holds or acquires any other right, title or
interest, constituting "fixtures" under the UCC, including without limitation
any and all additions, substitutions and replacements of any of the foregoing,
wherever located together with all improvements thereon and all attachments,
components, parts, equipment and accessories installed thereon or affixed
thereto.
"General Intangibles" means all general intangibles now or hereafter owned
by any Grantor, or in which any Grantor holds or acquires any other right, title
or interest, constituting
Exhibit I - Page 2
"general intangibles" or "payment intangibles" under the UCC, including, but not
limited to, all trademarks, trademark applications, trademark registrations,
tradenames, fictitious business names, business names, company names, business
identifiers, prints, labels, trade styles and service marks (whether or not
registered), trade dress, including logos and/or designs, copyrights, patents,
patent applications, goodwill of any Grantor's business symbolized by any of the
foregoing, trade secrets, license rights, license agreements, permits,
franchises, and any rights to tax refunds to which any Grantor is now or
hereafter may be entitled.
"Ineligible Property" means (a) any property or assets of a Grantor to the
extent that such Grantor is prohibited from granting a security interest in,
pledge of, charge, mortgage or lien upon such property or assets by reason of
(i) an existing and enforceable negative pledge provision to the extent such
provision does not cause a violation of Section 6.03 of the Credit Agreement, or
(ii) applicable law or regulation to which such Grantor is subject, except (in
the case of either of the foregoing clauses (i) and (ii)) to the extent such
prohibition is ineffective under Sections 9.406, 9.407, 9.408 and 9.409 of the
UCC, and (b) permits and licenses to the extent the grant of a security interest
therein is prohibited under applicable law or regulation or by their express
terms, except to the extent such prohibition is ineffective under Section 9.408
of the UCC.
"Instrument" means an "instrument" as defined in the UCC, including,
without limitation, any Negotiable Instrument, or any other writing which
evidences a right to the payment of money and is not itself a security agreement
or lease and is of a type which is in the ordinary course of business
transferred by delivery with any necessary endorsement or assignment (other than
Instruments constituting Chattel Paper).
"Insurance Contracts" means all contracts and policies of insurance and
re-insurance maintained or required to be maintained by or on behalf of any
Grantor under the Loan Documents.
"Inventory" means all of the inventory of any Grantor, or in which any
Grantor holds or acquires any right, title or interest, of every type or
description, now owned or hereafter acquired and wherever located, whether raw,
in process or finished, and all materials usable in processing the same and all
documents of title covering any inventory, including, without limitation, work
in process, materials used or consumed in any Grantor's business, now owned or
hereafter acquired or manufactured by any Grantor and held for sale in the
ordinary course of its business, all present and future substitutions therefor,
parts and accessories thereof and all additions thereto, all Proceeds thereof
and products of such inventory in any form whatsoever, and any other item
constituting "inventory" under the UCC.
"Investment Property" means "investment property" as defined in the UCC,
including, without limitation, all securities (whether certificated or
uncertificated), security entitlements, securities accounts, commodity
contracts, and commodity accounts.
"Negotiable Instrument" means a "negotiable instrument" as defined in the
UCC.
"Proceeds" means all proceeds of any or all of the Collateral, including
without limitation (a) any and all proceeds of, all claims for, and all rights
of each respective Grantor to receive the
Exhibit I - Page 3
return of any premiums for, any insurance, indemnity, warranty or guaranty
payable from time to time with respect to any of the Collateral, (b) any and all
payments (in any form whatsoever) made or due and payable from time to time in
connection with any requisition, confiscation, condemnation, seizure or
forfeiture of all or any part of the Collateral by any Governmental Authority
(or any Person acting under color of Governmental Authority), (c) all proceeds
received or receivable when any or all of the Collateral is sold, exchanged or
otherwise disposed, whether voluntarily, involuntarily, in foreclosure or
otherwise, (d) all claims of any Grantor for damages arising out of, or for
breach of or default under any Collateral, (e) all rights of any Grantor to
terminate, amend, supplement, modify or waive performance under any Contracts,
to perform thereunder and to compel performance and otherwise exercise all
remedies thereunder, and (f) any and all other amounts from time to time paid or
payable under or in connection with any of the Collateral.
"Receivables" means all of any Grantor's rights to payment for goods sold
or leased, services performed, or otherwise, whether now in existence or arising
from time to time hereafter, including, without limitation, rights arising under
any of the Contracts or evidenced by an account, note, contract, security
agreement, Chattel Paper (including, without limitation, tangible Chattel Paper
and electronic Chattel Paper), or other evidence of indebtedness or security,
together with all of the right, title and interest of any Grantor in and to (a)
all security pledged, assigned, hypothecated or granted to or held by any
Grantor to secure the foregoing, (b) all of any Grantor's right, title and
interest in and to any goods or services, the sale of which gave rise thereto,
(c) all guarantees, endorsements and indemnifications on, or of, any of the
foregoing, (d) all powers of attorney granted to any Grantor for the execution
of any evidence of indebtedness or security or other writing in connection
therewith, (e) all books, correspondence, credit files, records, ledger cards,
invoices, and other papers relating thereto, including without limitation all
similar information stored on a magnetic medium or other similar storage device
and other papers and documents in the possession or under the control of any
Grantor or any computer bureau from time to time acting for any Grantor, (f) all
evidences of the filing of financing statements and other statements granted to
any Grantor and the registration of other instruments in connection therewith
and amendments thereto, notices to other creditors or secured parties, and
certificates from filing or other registration officers, (g) all credit
information, reports and memoranda relating thereto, and (h) all other writings
related in any way to the foregoing.
"Secured Obligations" means, collectively, (a) all Obligations of any of
the Grantors now or hereafter existing under the Credit Agreement, the Notes and
the other Loan Documents, including any extensions, modifications,
substitutions, amendments and renewals thereof, whether for principal, interest,
fees, expenses, indemnification, or otherwise, and (b) all other indebtedness,
obligations and liabilities of any of the Grantors owing to any of the Credit
Parties, now or hereafter existing, in each case, with respect to any letter of
credit issued by Issuing Lender or any other Lender in connection with
Hydrocarbon Hedge Agreements or Interest Hedge Agreements which are not
prohibited by the terms of Section 6.14 of the Credit Agreement.
"Security Agreement" means this Security Agreement, as the same may be
modified, supplemented or amended from time to time in accordance with its
terms.
Exhibit I - Page 4
"UCC" shall mean the Uniform Commercial Code as the same may, from time to
time, be in effect in the State of Texas; provided, however, in the event that,
by reason of mandatory provisions of law, any or all of the attachment,
perfection or priority of the security interest in any Collateral is governed by
the Uniform Commercial Code as in effect in a jurisdiction other than the State
of Texas, the term "UCC" shall mean the Uniform Commercial Code as in effect in
such other jurisdiction for purposes of the provisions hereof relating to such
attachment, perfection or priority and for purposes of definitions related to
such provisions.
(b) All meanings to defined terms, unless otherwise indicated, are
to be equally applicable to both the singular and plural forms of the
terms defined. Article, Section, Schedule, and Exhibit references are to
Articles and Sections of and Schedules and Exhibits to this Security
Agreement, unless otherwise specified. All references to instruments,
documents, contracts, and agreements are references to such instruments,
documents, contracts, and agreements as the same may be amended,
supplemented, and otherwise modified from time to time, unless otherwise
specified. The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Security Agreement shall refer to this
Security Agreement as a whole and not to any particular provision of this
Security Agreement. As used herein, the term "including" means "including,
without limitation". Paragraph headings have been inserted in this
Security Agreement as a matter of convenience for reference only and it is
agreed that such paragraph headings are not a part of this Security
Agreement and shall not be used in the interpretation of any provision of
this Security Agreement.
Section 2. Assignment, Pledge and Grant of Security Interest.
(a) As collateral security for the prompt and complete payment and
performance when due of all Secured Obligations, each of the Grantors
hereby assigns, pledges, and grants to the Secured Party for the benefit
of the Credit Parties a lien on and continuing security interest in all of
such Grantor's right, title and interest in, to and under, the following,
whether now owned, hereafter acquired by any Grantor, or hereafter
existing or arising, and wherever located (collectively, the
"Collateral"):
(i) each and every Contract, all Contract Rights, Contract Documents
and Receivables associated with such Contracts and each and every
agreement granting security to any Grantor under any such Contract;
(ii) each and every Receivable;
(iii) all Inventory;
(iv) all Equipment;
(v) all General Intangibles;
(vi) all Investment Property;
(vii) all Fixtures;
Exhibit I - Page 5
(viii) all amounts from time to time held in any checking, savings,
deposit or other account of any Grantor, all monies, proceeds or sums due
or to become due therefrom or thereon and all documents (including, but
not limited to, passbooks, certificates and receipts) evidencing all funds
and investments held in such accounts;
(ix) any Legal Requirements now or hereafter held by any Grantor;
(x) any right to receive a payment under any hedging agreement
(including any Interest Hedge Agreement and any Hydrocarbon Hedge
Agreement) in connection with a termination thereof;
(xi) (A) all policies of insurance and Insurance Contracts, now or
hereafter held by or on behalf of any Grantor, including casualty and
liability, business interruption, and any title insurance, (B) all
Proceeds of insurance, and (C) all rights, now or hereafter held by any
Grantor to any warranties of any manufacturer or contractor of any other
Person;
(xii) any and all liens and security interests (together with the
documents evidencing such security interests) granted to a Grantor by an
obligor to secure such obligor's obligations owing under any Instrument,
Chattel Paper or Contract, which are pledged hereunder;
(xiii) any and all guaranties given by any Person to the benefit of
such Grantor which guarantees the obligations of an obligor under any
Instrument, Chattel Paper or Contract, which are pledged hereunder;
(xiv) without limiting the generality of the foregoing, all other
personal property, goods, Instruments, Chattel Paper, Documents, Fixtures,
credits, claims, demands and assets of any Grantor whether now existing or
hereafter acquired from time to time; and
(xv) any and all additions, accessions and improvements to, all
substitutions and replacements for and all products and Proceeds of or
derived from all of the foregoing items described above in this Section 2;
provided that, "Collateral" shall not include (a) any Ineligible Property, and
(b) so long as any amounts shall be owed under the Project Company Note, the
JEDI Collateral.
(b) Notwithstanding anything contained herein to the contrary, it is
the intention of each Grantor, the Secured Party and the other Credit
Parties that the amount of the Secured Obligation secured by each
Grantor's interests in any of its Property shall be in, but not in excess
of, the maximum amount permitted by fraudulent conveyance, fraudulent
transfer and other similar law, rule or regulation of any Governmental
Authority applicable to such Grantor. Accordingly, notwithstanding
anything to the contrary contained in this Security Agreement in any other
agreement or instrument executed in connection with the payment of any of
the Secured Obligations, the amount of the Secured Obligations secured by
each Grantor's interests in any of its Property pursuant to this Security
Agreement shall be limited to an aggregate amount equal to the
Exhibit I - Page 6
largest amount that would not render such Grantor's obligations hereunder
or the liens and security interest granted to the Secured Party hereunder
subject to avoidance under Section 548 of the United States Bankruptcy
Code or any comparable provision of any other applicable law.
Section 3. Representations and Warranties. Each of the Grantors hereby
represents and warrants the following to the Secured Party and the other Credit
Parties:
(a) Records. Each Grantor's sole jurisdiction of formation and type
of organization are as set forth in Schedule 1 attached hereto. All of the
Equipment and Inventory, and all records concerning the Receivables,
General Intangibles, Interest Hedge Agreements, and Hydrocarbon Hedge
Agreements, or any other Collateral, are located at the respective
addresses for such Grantors on such Schedule 1. None of the Receivables is
evidenced by a promissory note or other instrument.
(b) Other Liens. Each of the Grantors is, and will be, the record,
legal and beneficial owner of all of the Collateral pledged by such
Grantor free and clear of any Lien, except for Liens created hereby or
other Permitted Liens. No effective financing statement or other
instrument similar in effect covering all or any part of the Collateral
is, or will be, on file in any recording office, except such as may be
filed in connection with this Security Agreement or in connection with
other Permitted Liens or for which satisfactory releases have been
received by the Secured Party.
(c) Lien Priority and Perfection.
(i) Subject only to Permitted Liens, this Security Agreement creates
valid and continuing security interests in the Collateral, securing the
payment and performance of all the Secured Obligations. Upon the filing of
financing statements with the jurisdictions listed in Schedule 1, the
security interests granted to the Secured Party hereunder will constitute
valid first-priority perfected security interests in all Collateral with
respect to which a security interest can be perfected by the filing of a
financing statement, subject only to Permitted Prior Liens.
(ii) Except for the filings and actions described in Section
3(c)(i), no consent of any other Person and no authorization, approval, or
other action by, and no notice to or filing with any Governmental
Authority is required (A) for the grant by the Grantor of the pledge,
assignment, and security interest granted hereby or for the execution,
delivery, or performance of this Security Agreement by any of the
Grantors, (B) for the validity, perfection, or maintenance of the pledge,
assignment, lien, and security interest created hereby (including the
first-priority nature thereof (subject to Permitted Prior Liens)), except
for security interests that cannot be perfected by filing under the UCC,
or (C) for the exercise by the Secured Party of the rights provided for in
this Security Agreement or the remedies in respect of the Collateral
pursuant to this Security Agreement, except for those which have been duly
obtained or made and, in the case of the maintenance of perfection, for
the filing of continuation statements under the UCC.
Exhibit I - Page 7
(d) Tax Identification Number and Organizational Number. The
respective federal tax identification numbers of the Grantors and the
respective organizational numbers of the Grantors are as set forth in
Schedule 1.
(e) Tradenames; Prior Names. Except as set forth on Schedule 1, the
Grantors have not conducted business under any name other than their
respective current names during the last five years prior to the date of
this Security Agreement.
(f) Exclusive Control. Except with respect to Oil and Gas Properties
for which such Grantor is not designated the operator, each of the
Grantors has exclusive possession and control of its respective Equipment
and its respective Inventory.
Section 4. Covenants.
(a) Further Assurances.
(i) Each of the Grantors agrees that from time to time, at its
expense, such Grantor shall promptly execute and deliver all instruments
and documents, and take all action, that may be reasonably necessary or
desirable, or that the Secured Party may reasonably request, in order to
perfect and protect any pledge, assignment, or security interest granted
or intended to be granted hereby or to enable the Secured Party to
exercise and enforce its rights and remedies hereunder with respect to any
Collateral. Without limiting the generality of the foregoing, each of the
Grantors (A) shall at the request of the Secured Party, execute and file,
with a copy to the Secured Party, such financing or continuation
statements, or amendments thereto, and such other instruments,
endorsements or notices, as may be reasonably necessary or desirable, in
order to perfect and preserve the assignments and security interests
granted or purported to be granted hereby, (B) shall at the reasonable
request of the Secured Party, ▇▇▇▇ conspicuously each Document included in
the Collateral, each Chattel Paper included in the Receivables, and each
of its records pertaining to the Collateral with a legend, in form and
substance satisfactory to the Secured Party, including that such Document,
Chattel Paper, or record is subject to the pledge, assignment, and
security interest granted hereby, (C) if any Collateral shall be evidenced
by a promissory note or other Instrument or Chattel Paper, shall deliver
and pledge to the Secured Party hereunder such note or Instrument or
Chattel Paper duly endorsed and accompanied by duly executed instruments
of transfer or assignment, all in form and substance satisfactory to the
Secured Party, and (D) hereby authorizes the Secured Party to file any
financing statements, amendments or continuations without the signature of
such Grantor to the extent permitted by applicable law in order to perfect
or maintain the perfection of any security interest granted under this
Security Agreement.
(ii) The Grantors shall pay all filing, registration and recording
fees and all refiling, re-registration and re-recording fees, and all
reasonable expenses incident to the execution and acknowledgment of this
Security Agreement, any assurance, and all federal, state, county and
municipal stamp taxes and other taxes, duties, imports, assessments and
charges arising out of or in connection with the execution and delivery
Exhibit I - Page 8
of this Security Agreement, any agreement supplemental hereto, any
financing statements, and any instruments of further assurance.
(iii) The Grantors shall promptly provide to the Secured Party all
information and evidence the Secured Party may reasonably request
concerning the Collateral to enable the Secured Party to enforce the
provisions of this Security Agreement.
(b) Change of Name; State of Formation. Each of the Grantors shall
give the Secured Party at least thirty (30) days' prior written notice
before it (i) changes the location of its principal place of business and
chief executive office, (ii) changes the location of its jurisdiction of
formation or organization, (iii) changes the location of the Equipment,
Inventory, or original copies of any Chattel Paper evidencing Receivables,
or (iv) changes its name or uses a trade name other than its current name
used on the date hereof. Promptly upon the request of the Secured Party,
each Grantor shall take all such action as the Secured Party shall
reasonably request to maintain the security interest of the Secured Party
in the Collateral granted hereby at all times fully perfected and in full
force and effect.
(c) Right of Inspection. Each of the Grantors will hold and
preserve, at its own cost and expense satisfactory, accurate and complete
records of the respective Collateral, including, but not limited to,
Instruments, Chattel Paper, Contracts, and Records with respect to the
Receivables and will permit representatives of the Secured Party to
inspect and copy them in accordance with the terms of the Credit
Agreement. Upon the occurrence and during the continuation of any Event of
Default, at the Secured Party's request, the Grantors shall promptly
deliver copies of any and all such records to the Secured Party.
(d) Liability Under Contracts and Receivables. Notwithstanding
anything in this Security Agreement to the contrary, (i) the execution of
this Security Agreement shall not release any of the Grantors from its
respective obligations and duties under the any Contract Documents, or any
other Contract or Instrument, including Interest Hedge Agreements and
Hydrocarbon Hedge Agreements, which are part of the Collateral and
Receivables included in the Collateral to the extent set forth therein,
(ii) the exercise by the Secured Party of any of its rights hereunder
shall not release any of the Grantors from their respective duties or
obligations under any Contract Documents, or any other contract or
instrument, including Interest Hedge Agreements and Hydrocarbon Hedge
Agreements, which are part of the Collateral and Receivables included in
the Collateral, and (iii) the Secured Party shall not have any obligation
or liability under any Contract Documents, or any other contract or
instrument, including Interest Hedge Agreements and Hydrocarbon Hedge
Agreements, which are part of the Collateral and Receivables included in
the Collateral by reason of the execution and delivery of this Security
Agreement, nor shall the Secured Party be obligated to perform any of the
obligations or duties of any of the Grantors thereunder or to take any
action to collect or enforce any claim for payment assigned hereunder.
(e) Transfer of Certain Collateral; Release of Certain Security
Interest. Each of the Grantors agrees that it shall not sell, assign, or
otherwise dispose of any Collateral
Exhibit I - Page 9
except as otherwise permitted under the Credit Agreement. The Secured
Party shall promptly, at the Grantors' expense, execute and deliver all
further instruments and documents, and take all further action that a
Grantor may reasonably request in order to release its security interest
in any Collateral which is disposed of in accordance with the terms of the
Credit Agreement.
(f) Receivables. Each of the Grantors agrees that it will use
commercially reasonable efforts to ensure that each Receivable (i) is and
will be, in all material respects, the genuine, legal, valid, and binding
obligations of the account debtor in respect thereof, representing an
unsatisfied obligation of such account debtor, (ii) is and will be, in all
material respects, enforceable in accordance with its terms, (iii) is not
and will not be subject to any setoffs, defenses, taxes, counterclaims,
except in the ordinary course of business, (iv) is and will be, in all
material respects, in compliance with all applicable laws, whether
federal, state, local or foreign, and (v) which if evidenced by Chattel
Paper, will not require the consent of the account debtor in respect
thereof in connection with its assignment hereunder.
(g) Negotiable Instrument. If any Grantor shall at any time hold or
acquire any Negotiable Instruments, including promissory notes, such
Grantor shall, upon the request of the Secured Party, forthwith endorse,
assign and deliver the same to the Secured Party, accompanied by such
instruments of transfer or assignment duly executed in blank as the
Secured Party may from time to time reasonably request.
(h) Other Covenants of Grantor. (i) Each of the Grantors agrees that
any action or proceeding to enforce this Security Agreement may be taken
by the Secured Party either in such Grantor's name or in the Secured
Party's name, as the Secured Party may deem necessary. (ii) Each of the
Grantors will, so long as any Secured Obligation shall be outstanding,
warrant and defend its title to the Collateral and the interest of the
Secured Party in the Collateral against any claim or demand of any Persons
(other than Permitted Liens) which could reasonably be expected to
materially and adversely affect any Grantor's title to, or the Secured
Party's right or interest in, such Collateral.
Section 5. Termination of Security Interest. Upon the indefeasible payment
in full of the Secured Obligations in cash, the termination of the Commitments,
the reduction of the Letter of Credit Exposure to zero, and the termination of
the obligations under the Interest Hedge Agreements and the Hydrocarbon Hedge
Agreements with a Swap Counterparty, the security interest granted hereby shall
terminate and all rights to the Collateral shall revert to the applicable
Grantor to the extent such Collateral shall not have been sold or otherwise
applied pursuant to the terms hereof. Upon any such termination, the Secured
Party will, at the Grantors' expense, execute and deliver to the applicable
Grantor such documents (including, without limitation, UCC-3 termination
statements) as the applicable Grantor shall reasonably request to evidence such
termination.
Section 6. Reinstatement. If, at any time after payment in full of all
Secured Obligations and termination of the Secured Party's security interest,
any payments on the Secured Obligations previously made by any of the Grantors
or a Guarantor or any other Person must be disgorged by the Secured Party for
any reason whatsoever, including, without limitation,
Exhibit I - Page 10
the insolvency, bankruptcy or reorganization of any of the Grantors or any other
Person, this Security Agreement and the Secured Party's security interests
herein shall be reinstated as to all disgorged payments as though such payments
had not been made, and the Grantors shall sign and deliver to the Secured Party
all documents, and shall do such other acts and things, as may be necessary to
reinstate and perfect the Secured Party's security interest. EACH GRANTOR SHALL
DEFEND AND INDEMNIFY EACH CREDIT PARTY FROM AND AGAINST ANY CLAIM, DAMAGE, LOSS,
LIABILITY, COST, OR EXPENSE UNDER THIS SECTION 6 (INCLUDING REASONABLE
ATTORNEYS' FEES AND EXPENSES) IN THE DEFENSE OF ANY SUCH ACTION OR SUIT,
INCLUDING SUCH CLAIM, DAMAGE, LOSS, LIABILITY, COST, OR EXPENSE ARISING AS A
RESULT OF THE INDEMNIFIED CREDIT PARTY'S OWN NEGLIGENCE BUT EXCLUDING SUCH
CLAIM, DAMAGE, LOSS, LIABILITY, COST, OR EXPENSE THAT IS FOUND IN A FINAL,
NON-APPEALABLE JUDGMENT BY A COURT OF COMPETENT JURISDICTION TO HAVE RESULTED
FROM SUCH INDEMNIFIED CREDIT PARTY'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
Section 7. Remedies upon Event of Default.
(a) If any Event of Default has occurred and is continuing, the
Secured Party may (and shall at the written request of the Required
Lenders), (i) proceed to protect and enforce the rights vested in it by
this Security Agreement or otherwise available to it, including but not
limited to, the right to cause all revenues pledged hereby as security and
all other moneys pledged hereunder to be paid directly to it, and to
enforce its rights hereunder to such payments and all other rights
hereunder by such appropriate judicial proceedings as it shall deem most
effective to protect and enforce any of such rights, either at law or in
equity or otherwise, whether for specific enforcement of any covenant or
agreement contained in any of the Contract Documents, or in aid of the
exercise of any power therein or herein granted, or for any foreclosure
hereunder and sale under a judgment or decree in any judicial proceeding,
or to enforce any other legal or equitable right vested in it by this
Security Agreement or by law; (ii) cause any action at law or suit in
equity or other proceeding to be instituted and prosecuted and enforce any
rights hereunder or included in the Collateral, subject to the provisions
and requirements thereof; (iii) sell or otherwise dispose of any or all of
the Collateral or cause the Collateral to be sold or otherwise disposed of
in one or more sales or transactions, at such prices and in such manner as
may be commercially reasonable, and for cash or on credit or for future
delivery, without assumption of any credit risk, at public or private
sale, without demand of performance or notice of intention to sell or of
time or place of sale (except such notice as is required by applicable
statute and cannot be waived), it being agreed that the Secured Party may
be a purchaser on behalf of the Credit Parties or on its own behalf at any
such sale and that the Secured Party, any other Credit Party, or any other
Person who may be a bona fide purchaser for value and without notice of
any claims of any or all of the Collateral so sold shall thereafter hold
the same absolutely free from any claim or right of whatsoever kind,
including any equity of redemption of the Grantor, any such demand, notice
or right and equity being hereby expressly waived and released to the
extent permitted by law; (iv) incur reasonable expenses, including
reasonable attorneys' fees, reasonable consultants' fees, and other costs
appropriate to the exercise of any right or power under this Security
Agreement; (v) perform any obligation
Exhibit I - Page 11
of any of the Grantors hereunder and make payments, purchase, contest or
compromise any encumbrance, charge or lien, and pay taxes and expenses,
without, however, any obligation to do so; (vi) in connection with any
acceleration and foreclosure, take possession of the Collateral and render
it usable and repair and renovate the same, without, however, any
obligation to do so, and enter upon any location where the Collateral may
be located for that purpose, control, manage, operate, rent and lease the
Collateral, collect all rents and income from the Collateral and apply the
same to reimburse the Credit Parties for any cost or expenses incurred
hereunder or under any of the Loan Documents and to the payment or
performance of the Grantor's obligations hereunder or under any of the
Loan Documents, and apply the balance to the other Secured Obligations and
any remaining excess balance to whomsoever is legally entitled thereto;
(vii) secure the appointment of a receiver for the Collateral or any part
thereof; (viii) require any of the Grantors to, and each of the Grantors
hereby agrees that it will at its expense and upon request of the Secured
Party forthwith, assemble all or part of the Collateral as directed by the
Secured Party and make it available to the Secured Party at a place to be
designated by the Secured Party which is reasonably convenient to both
parties; (ix) exercise any other or additional rights or remedies granted
to a secured party under the UCC; or (x) occupy any premises owned or
leased by any of the Grantors where the Collateral or any part thereof is
assembled for a reasonable period in order to effectuate its rights and
remedies hereunder or under law, without obligation to any of the Grantors
in respect of such occupation. If, pursuant to applicable law, prior
notice of sale of the Collateral under this Section is required to be
given to any of the Grantors, then such Grantor hereby acknowledges that
the minimum time required by such applicable law, or if no minimum time is
specified, ten (10) Business Days, shall be deemed a reasonable notice
period. The Secured Party shall not be obligated to make any sale of
Collateral regardless of notice of sale having been given. The Secured
Party may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was so
adjourned.
(b) All reasonable costs and expenses (including reasonable
attorneys' fees and expenses) incurred by the Secured Party in connection
with any suit or proceeding in connection with the performance by the
Secured Party of any of the agreements contained in any of the Contract
Documents, or in connection with any exercise of its rights or remedies
hereunder, pursuant to the terms of this Security Agreement, shall
constitute additional indebtedness secured by this Security Agreement and
shall be paid on demand by the Grantors to the Secured Party on behalf of
the Credit Parties.
Section 8. Remedies Cumulative; Delay Not Waiver.
(a) No right, power or remedy herein conferred upon or reserved to
the Secured Party is intended to be exclusive of any other right, power or
remedy and every such right, power and remedy shall, to the extent
permitted by law, be cumulative and in addition to every other right,
power and remedy given hereunder or now or hereafter existing at law or in
equity or otherwise. The assertion or employment of any right or remedy
hereunder or otherwise shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy. Resort to any or all
security now or hereafter
Exhibit I - Page 12
held by the Secured Party may be taken concurrently or successively and in
one or several consolidated or independent judicial actions or lawfully
taken nonjudicial proceedings, or both.
(b) No delay or omission of the Secured Party to exercise any right
or power accruing upon the occurrence and during the continuance of any
Event of Default as aforesaid shall impair any such right or power or
shall be construed to be a waiver of any such Event of Default or an
acquiescence therein; and every power and remedy given by this Security
Agreement may be exercised from time to time, and as often as shall be
deemed expedient, by the Secured Party.
Section 9. Contract Rights. If an Event of Default has occurred and is
continuing the Secured Party may exercise any of the Contract Rights and
remedies of a Grantor under or in connection with the Instruments, Chattel
Paper, or Contracts which represent Receivables, the General Intangibles,
Interest Hedge Agreements, Hydrocarbon Hedge Agreements or otherwise relate to
the Collateral, including, without limitation, any rights of any of a Grantor to
demand or otherwise require payment of any amount under, or performance of any
provisions of, the Instruments, Chattel Paper, or Contracts which represent
Receivables, the General Intangibles, Interest Hedge Agreements or Hydrocarbon
Hedge Agreements.
Section 10. Receivables. If an Event of Default has occurred and is
continuing:
(a) The Secured Party may, or may direct the Grantors to, take any
action the Secured Party deems necessary or advisable to enforce
collection of the Receivables including, without limitation, notifying the
account debtors or obligors under any Receivables of the assignment of
such Receivables to the Secured Party and directing such account debtors
or obligors to make payment of all amounts due or to become due directly
to the Secured Party. Upon such notification and direction, and at the
expense of the Grantors, the Secured Party may enforce collection of any
such Receivables, and adjust, settle, or compromise the amount or payment
thereof in the same manner and to the same extent as the Grantors might
have done.
(b) After receipt by any of the Grantors of the notice referred to
in Section 10(a) above, all amounts and Proceeds (including Instruments,
other contracts and agreements) received by such Grantor in respect of the
Accounts shall be received in trust for the benefit of the Secured Party
hereunder, shall be segregated from other funds of such Grantor, and shall
promptly be paid over to the Secured Party in the same form as so received
(with any necessary indorsement) to be held as Collateral. The Grantors
shall not adjust, settle, or compromise the amount or payment of any
receivable, or release wholly or partly any account debtor or obligor
thereof, or allow any credit or discount thereon other than in the
ordinary course of business and consistent with past practices.
Section 11. Application of Collateral. The proceeds of any sale, or other
realization upon all or any part of the Collateral shall be applied by the
Secured Party in the order set forth in, and subject to the terms of, Section
7.06 of the Credit Agreement.
Exhibit I - Page 13
Section 12. Secured Party as Attorney-in-Fact for Grantor. Each of the
Grantors hereby constitutes and irrevocably appoints the Secured Party, acting
for and on behalf of itself and the Credit Parties and each successor or assign
of the Secured Party and the Credit Parties, the true and lawful
attorney-in-fact of such Grantor, with full power and authority in the place and
stead of such Grantor and in the name of such Grantor, the Secured Party or
otherwise to take any action and execute any instrument at the written direction
of the Credit Parties and enforce all rights, interests and remedies of such
Grantor with respect to the Collateral, including the right:
(a) to ask, require, demand, receive and give acquittance for any
and all moneys and claims for moneys due and to become due under or
arising out of the any of the other Collateral, including without
limitation, any Insurance Contracts
(b) to elect remedies thereunder and to endorse any checks or other
instruments or orders in connection therewith;
(c) to file any claims or take any action or institute any
proceedings in connection therewith which the Secured Party may reasonably
deem to be necessary or advisable;
(d) to pay, settle or compromise all bills and claims which may be
or become liens or security interests against any or all of the
Collateral, or any part thereof, unless a bond or other security
satisfactory to the Secured Party has been provided; and
(e) upon foreclosure, to do any and every act which such Grantor may
do on its behalf with respect to the Collateral or any part thereof and to
exercise any or all of such Grantor's rights and remedies under any or all
of the Collateral;
provided, however, that the Secured Party shall not exercise any such rights
except upon the occurrence and continuation of an Event of Default. THIS POWER
OF ATTORNEY IS A POWER COUPLED WITH AN INTEREST AND SHALL BE IRREVOCABLE.
Section 13. Secured Party May Perform. The Secured Party may from
time-to-time perform any act which a Grantor has agreed hereunder to perform and
which such Grantor shall fail to perform after being requested in writing so to
perform (it being understood that no such request need be given after the
occurrence and during the continuance of any Event of Default and after notice
thereof by the Secured Party to such Grantor) and the Secured Party may from
time-to-time take any other action which the Secured Party reasonably deems
necessary for the maintenance, preservation or protection of any of the
Collateral or of its security interest therein, and the reasonable expenses of
the Secured Party incurred in connection therewith shall be part of the Secured
Obligations and shall be secured hereby.
Section 14. Secured Party Has No Duty. The powers conferred on the Secured
Party hereunder are solely to protect its interest in the Collateral and shall
not impose any duty on it to exercise any such powers. Except for reasonable
care of any Collateral in its possession and the accounting for moneys actually
received by it hereunder, the Secured Party shall have no duty as to any
Collateral or responsibility for taking any necessary steps to preserve rights
against prior parties or any other rights pertaining to any Collateral.
Exhibit I - Page 14
Section 15. Reasonable Care. The Secured Party shall be deemed to have
exercised reasonable care in the custody and preservation of the Collateral in
its possession if the Collateral is accorded treatment substantially equal to
that which the Secured Party accords its own Property.
Section 16. Payments Held in Trust. During the continuance of an Event of
Default, all payments received by a Grantor under or in connection with any
Collateral shall be received in trust for the benefit of the Secured Party,
shall be segregated from other funds of such Grantor and shall be forthwith paid
over to the Secured Party in the same form as received (with any necessary
endorsement).
Section 17. Miscellaneous.
(a) Expenses. The Grantors will upon demand pay to the Secured Party
for its benefit and the benefit of the Credit Parties the amount of any
reasonable out-of-pocket expenses, including the reasonable fees and
disbursements of its counsel and of any experts, which the Secured Party
and the Credit Parties may incur in connection with (i) the custody,
preservation, use, or operation of, or the sale, collection, or other
realization of, any of the Collateral, (ii) the exercise or enforcement of
any of the rights of the Secured Party or any Credit Party hereunder, and
(iii) the failure by a Grantor to perform or observe any of the provisions
hereof.
(b) Amendments; Etc. No amendment or waiver of any provision of this
Security Agreement nor consent to any departure by a Grantor herefrom
shall be effective unless the same shall be in writing and authenticated
by the Grantors, the Secured Party and either, as required by the Credit
Agreement, the Required Lenders or all of the Lenders, and then such
waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given.
(c) Addresses for Notices. All notices and other communications
provided for hereunder shall be made in the manner and to the addresses
set forth in the Credit Agreement.
(d) Continuing Security Interest; Transfer of Interest. This
Security Agreement shall create a continuing security interest in the
Collateral and, unless expressly released by the Secured Party, shall (i)
remain in full force and effect until the indefeasible payment in full in
cash of, and termination of, the Secured Obligations and the termination
of the Commitments, (ii) be binding upon the Grantors, the Secured Party,
the other Credit Parties and their successors, and assigns, and (iii)
inure, together with the rights and remedies of the Secured Party
hereunder, to the benefit of and be binding upon, the Secured Party,
Administrative Agent, the Issuing Lender, and the Lenders and their
respective successors, transferees, and assigns, and to the benefit of and
be binding upon, the Swap Counterparties, and each of their respective
successors and assigns only to the extent such successors, transferees,
and assigns of a Swap Counterparty is Administrative Agent, the Issuing
Lender, a Lender or an Affiliate of a Lender. Without limiting the
generality of the foregoing clause, when any Lender assigns or otherwise
transfers any interest held by it under the Credit Agreement or other
Exhibit I - Page 15
Loan Document (other than an Interest Hedge Agreement or a Hydrocarbon
Hedge Agreement) to any other Person pursuant to the terms of the Credit
Agreement or such other Loan Document, that other Person shall thereupon
become vested with all the benefits held by such Lender under this
Security Agreement. Furthermore, when any Swap Counterparty assigns or
otherwise transfers any interest held by it under an Interest Hedge
Agreement or a Hydrocarbon Hedge Agreement to any other Person pursuant to
the terms of such agreement, that other Person shall thereupon become
vested with all the benefits held by such Lender under this Security
Agreement only if such Person is also then a Lender or an Affiliate of a
Lender.
(e) Severability. Wherever possible each provision of this Security
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Security Agreement
shall be prohibited by or invalid under such law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions
of this Security Agreement.
(f) Choice of Law. This Security Agreement shall be governed by and
construed and enforced in accordance with the laws of the state of Texas,
except to the extent that the validity or perfection of the security
interests hereunder, or remedies hereunder, in respect of any particular
Collateral are governed by the laws of a jurisdiction other than the state
of Texas.
(g) Counterparts. For the convenience of the parties, this Security
Agreement may be executed in multiple counterparts, each of which for all
purposes shall be deemed to be an original, and all such counterparts
shall together constitute but one and the same Security Agreement.
(h) Headings. Paragraph headings have been inserted in this Security
Agreement as a matter of convenience for reference only and it is agreed
that such paragraph headings are not a part of this Security Agreement and
shall not be used in the interpretation of any provision of this Security
Agreement.
(i) Additional Grantors. Pursuant to Section 5.08 of the Credit
Agreement, certain subsidiaries of the Borrower that were not in existence
on the date of the Credit Agreement are required to enter into this
Security Agreement as Grantors. Upon execution and delivery after the date
hereof by the Secured Party and such Subsidiary of an instrument in the
form of Annex 1, such Subsidiary shall become a Grantor hereunder with the
same force and effect as if originally named as a Grantor herein. The
execution and delivery of any instrument adding an additional Grantor as a
party to this Security Agreement shall not require the consent of any
other Grantor hereunder. The rights and obligations of each Grantor
hereunder shall remain in full force and effect notwithstanding the
addition of any new Grantor as a party to this Security Agreement.
(j) Entire Agreement. THIS SECURITY AGREEMENT AND THE OTHER LOAN
DOCUMENTS, AS DEFINED IN THE CREDIT AGREEMENT REFERRED TO IN THIS SECURITY
AGREEMENT, REPRESENT THE FINAL
Exhibit I - Page 16
AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES HERETO.
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK.]
Exhibit I - Page 17
The parties hereto have caused this Security Agreement to be duly executed
as of the date first above written.
MARINER ENERGY, INC.,
a Delaware corporation
By:__________________________________
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chief Executive Officer
Address: ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
MARINER ENERGY LLC,
a Delaware limited liability company
By:__________________________________
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chief Executive Officer
Address: ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
MARINER HOLDINGS, INC.,
a Delaware corporation
By:__________________________________
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chief Executive Officer
Address: ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Exhibit I - Page ▇▇
▇▇▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇▇, N.A., as
Secured Party for the ratable benefit of the
Credit Parties
By:_________________________________________
Name:_______________________________________
Title:______________________________________
By:_________________________________________
Name:_______________________________________
Title:______________________________________
Exhibit I - Page 19
SCHEDULE 1
TO SECURITY AGREEMENT
Grantor: MARINER ENERGY, INC.
Jurisdiction of Formation / Filing: DELAWARE
Type of Organization: CORPORATION
Address where records for
Collateral are kept: ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Organizational Number: 34121152F
Federal Tax Identification Number: ▇▇-▇▇▇▇▇▇▇
Prior Names: NONE
Grantor: MARINER ENERGY LLC
Jurisdiction of Formation / Filing: DELAWARE
Type of Organization: LIMITED LIABILITY COMPANY
Address where records for
Collateral are kept: ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Organizational Number: __________
Federal Tax Identification Number: __________
Prior Names: NONE
Grantor: MARINER HOLDINGS, INC.
Jurisdiction of Formation / Filing: DELAWARE
Type of Organization: CORPORATION
Address where records for
Collateral are kept: ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Exhibit I - Page 20
Organizational Number: __________
Federal Tax Identification Number: __________
Prior Names: NONE
Exhibit I - Page 21
Annex 1 to the
Security Agreement
SUPPLEMENT NO. [ ] dated as of [ ] (the "Supplement"), to the Security
Agreement dated as of March 2, 2004 (as amended, supplemented or otherwise
modified from time to time, the "Security Agreement"), among MARINER ENERGY,
INC., a Delaware corporation ("Borrower"), MARINER ENERGY LLC, a Delaware
limited liability company ("Company"), Mariner Holdings, Inc., a Delaware
corporation ("Holdings"), and each affiliate of the Borrower signatory hereto
(together with the Borrower, the Company and Holdings, collectively the
"Grantors" and individually, a "Grantor") and UNION BANK OF CALIFORNIA, N.A., as
Administrative Agent (the "Secured Party") for the ratable benefit of itself,
the Issuing Lender (as defined below), the Lenders (as defined below) and the
Swap Counterparties (as defined in the Credit Agreement referred to below and
together with the Administrative Agent, the Issuing Lender, and the Lenders,
individually a "Credit Party", and collectively, the "Credit Parties").
A. Reference is made to the Credit Agreement dated as of March 2, 2004 (as
amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among the Borrower, the lenders from time to time party thereto
(the "Lenders"), and Union Bank of California, N.A., as Administrative Agent
("Administrative Agent") and as issuing lender ("Issuing Lender").
B. Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Security Agreement and the
Credit Agreement.
C. The Grantors have entered into the Security Agreement in order to
induce the Administrative Agent to enter into the Credit Agreement and to induce
Issuing Lender to issue Letters of Credit and the other Lenders to make Advances
and participate in such Letters of Credit. Pursuant to Section 5.08 of the
Credit Agreement, certain Subsidiaries of the Borrower that were not in
existence on the date of the Credit Agreement are required to enter into the
Security Agreement as a Grantor upon becoming a Subsidiary. Section 17(i) of the
Security Agreement provides that additional Subsidiaries of the Borrower may
become Grantors under the Security Agreement by execution and delivery of an
instrument in the form of this Supplement. The undersigned Subsidiary of the
Borrower (the "New Grantor") is executing this Supplement in accordance with the
requirements of the Credit Agreement to become a Grantor under the Security
Agreement in order to induce the Issuing Lender to issue Letters of Credit or
the other Lenders to make additional Advances and participate in Letters of
Credit and as consideration for Advances previously made and Letters of Credit
previously issued.
Accordingly, the Secured Party and the New Grantor agree as follows:
SECTION 1. In accordance with Section 17(i) of the Security Agreement, the
New Grantor by its signature below becomes a Grantor under the Security
Agreement with the same force and effect as if originally named therein as a
Grantor and the New Grantor hereby agrees (a) to all the terms and provisions of
the Security Agreement applicable to it as a Grantor thereunder and (b)
represents and warrants that the representations and warranties made by it as a
Grantor thereunder are true and correct on and as of the date hereof in all
material respects. In
Exhibit I - Page 22
furtherance of the foregoing, the New Grantor, as security for the payment and
performance in full of the Secured Obligations (as defined in the Security
Agreement), does hereby create and grant to the Secured Party, its successors
and assigns, for the benefit of the Credit Parties, their successors and assigns
(to the extent provided in the Security Agreement), a continuing security
interest in and lien on all of the New Grantor's right, title and interest in
and to the Collateral (as defined in the Security Agreement) of the New Grantor.
Each reference to a "Grantor" in the Security Agreement shall be deemed to
include the New Grantor. The Security Agreement is hereby incorporated herein by
reference.
SECTION 2. The New Grantor represents and warrants to the Secured Party
and the other Credit Parties that this Supplement has been duly authorized,
executed and delivered by it and constitutes its legal, valid and binding
obligation, enforceable against it in accordance with its terms (subject to
applicable bankruptcy, reorganization, insolvency, moratorium or similar laws
affecting creditors' rights generally and subject, as to enforceability, to
equitable principles of general application (regardless of whether enforcement
is sought in a proceeding in equity or at law)).
SECTION 3. This Supplement may be executed in counterparts, each of which
shall constitute an original, but all of which when taken together shall
constitute a single contract. This Supplement shall become effective when the
Secured Party shall have received counterparts of this Supplement that, when
taken together, bear the signatures of the New Grantor and the Secured Party.
Delivery of an executed signature page to this Supplement by facsimile
transmission shall be as effective as delivery of a manually signed counterpart
of this Supplement.
SECTION 4. The New Grantor hereby represents and warrants that set forth
on Schedule 1 attached hereto are (a) its sole jurisdiction of formation and
type of organization, (ii) the location of all records concerning its
Receivables, General Intangibles, or any other Collateral, (iii) its federal tax
identification number and the organizational number, and (iv) all names used by
it during the last five years prior to the date of this Supplement.
SECTION 5. Except as expressly supplemented hereby, the Security Agreement
shall remain in full force and effect.
SECTION 6. THIS SUPPLEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, EXCEPT TO THE EXTENT THAT THE
VALIDITY OR PERFECTION OF THE SECURITY INTERESTS HEREUNDER, OR REMEDIES
HEREUNDER, IN RESPECT OF ANY PARTICULAR PLEDGED COLLATERAL ARE GOVERNED BY THE
LAWS OF A JURISDICTION OTHER THAN THE STATE OF TEXAS.
SECTION 7. In case any one or more of the provisions contained in this
Supplement should be held invalid, illegal or unenforceable in any respect,
neither party hereto shall be required to comply with such provision for so long
as such provision is held to be invalid, illegal or unenforceable, but the
validity, legality and enforceability of the remaining provisions contained
herein and in the Security Agreement shall not in any way be affected or
impaired. The parties hereto shall endeavor in good-faith negotiations to
replace the invalid, illegal or
Exhibit I - Page 23
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
SECTION 8. All communications and notices hereunder shall be in writing
and given as provided in the Security Agreement. All communications and notices
hereunder to the New Grantor shall be given to it at the address set forth under
its signature hereto.
SECTION 9. The New Grantor agrees to reimburse the Secured Party for its
reasonable out-of-pocket expenses in connection with this Supplement, including
the reasonable fees, other charges and disbursements of counsel for the Secured
Party.
Exhibit I - Page 24
IN WITNESS WHEREOF, the New Grantor and the Secured Party have duly
executed this Supplement to the Security Agreement as of the day and year first
above written.
[Name of New Grantor],
By: _________________________________________________
Name: _______________________________________________
Title: ______________________________________________
Address: ____________________________________________
_____________________________________________________
_____________________________________________________
_____________________________________________________
UNION BANK OF CALIFORNIA, N.A.,
as Secured Party for the ratable benefit of the
Credit Parties
By: _________________________________________________
Name: _______________________________________________
Title: ______________________________________________
By: ________________________________________________
Name: _______________________________________________
Title: ______________________________________________
Schedule 1
to the Security Agreement
Grantor: [GRANTOR]
Jurisdiction of Formation / Filing: [STATE]
Type of Organization: [ENTITY TYPE]
Address where records for
Collateral are kept: [ADDRESS]
[ADDRESS]
Organizational Number: _______________________________
Federal Tax Identification Number: _______________________________
Prior Names: _______________________________
Exhibit I - Page 27
EXHIBIT J
TO CREDIT AGREEMENT
FORM OF TRANSFER LETTERS
______________, 20__
_____________________________
_____________________________
_____________________________
Re: Agreement dated _______________, by and between__________________,
as Seller, and ___________________________, as Buyer (the
"Contract").
Ladies and Gentlemen:
Mariner Energy, Inc., a Delaware corporation ("Mortgagor"), has executed a
mortgage or deed of trust dated effective as of March 2, 2004] ("Deed of Trust")
for the benefit of Union Bank of California, N.A., as Administrative Agent for
the ratable benefit of itself, the Lenders (as defined in the Deed of Trust) and
certain other credit parties as described in the Deed of Trust, which Deed of
Trust has been recorded in the Real Property Records of the Counties or
Parishes, as applicable, listed on the attached Exhibit A. A copy of the Deed of
Trust is enclosed. The properties covered by the Deed of Trust include all of
the oil, gas and other hydrocarbons and/or other minerals attributable to the
above-referenced Contract to which we understand you are currently a party and
includes the well or ▇▇▇▇▇ listed on the attached Exhibit A with respect to
which you are remitting proceeds of production to the Mortgagor. Your division
order or lease numbers for such well or ▇▇▇▇▇ are set forth on the attached
Exhibit A.
Pursuant to Article III of the Deed of Trust, the Administrative Agent is
entitled to receive all of Mortgagor's interest in all Hydrocarbons (as defined
in the Deed of Trust), which are covered by the above-referenced Contract, all
products obtained or processed therefrom, and the revenues and proceeds
attributable thereto. The assignment of the Hydrocarbons, products and proceeds
was effective as of 7:00 A.M., Central Daylight Savings Time, on March 2, 2004
("Effective Date"). The Lenders, however, as provided in Article III, have
permitted Mortgagor to collect the Hydrocarbons and the revenues and proceeds
attributable thereto until the Administrative Agent or the Mortgagor shall have
instructed the seller or purchaser of production to deliver such Hydrocarbons
and all proceeds therefrom directly to the Administrative Agent. The purpose of
this letter is to notify you that, commencing immediately upon the receipt
hereof, and in accordance with the terms and conditions of the Deed of Trust,
you are to deliver all proceeds attributable to the sale of such Hydrocarbons
pursuant to the above-referenced Contract directly to the Administrative Agent
at its office at Lincoln Plaza, ▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇, Telephone: (▇▇▇) ▇▇▇-▇▇▇▇, Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇, Attention: ▇▇.
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, or to such other address of which we may subsequently notify
you in writing. If you require the execution of transfer or division orders,
please forward the transfer or division orders to the Administrative Agent at
its address at indicated above, Attention: ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇.
Should you have any questions in connection with any of the foregoing, please do
not hesitate to contact us.
Very truly yours,
Union Bank of California, N.A., as
Administrative Agent
By: ___________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Senior Vice President
By: ___________________________________
Name: _________________________________
Title: ________________________________
MARINER ENERGY, INC.,
a Delaware corporation
By: ___________________________________
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chief Executive Officer
Exhibit J - Page 2
EXHIBIT A
Name and Location of Well Division Order or Lease No.
Exhibit J - Page 3
SCHEDULE 3.01(o)
ASSET ASSOCIATIONS
Gas Gathering Agreement, dated December 29, 1999, between MEGS LLC and Mariner
Energy, Inc., et al, relating to Mississippi Canyon Block 718 (Pluto Prospect).
Operations and Maintenance Agreement, dated December 29, 1999, between Mariner
Energy, Inc. and MEGS LLC.
Sales and Purchase Contract, dated November 1, 2000, between Mariner and
Bridgeline Gas Marketing, LLC.
Project Company Note
Project Company Mortgage
Drilling program described in the Merger Agreement
Indemnity obligations of Enron Corp and JEDI under the Merger Agreement
SCHEDULE 4.05(a)
UNDISCLOSED LIABILITIES
Liability of Mariner Energy, Inc. to MEGS LLC under the Gas Gathering Agreement
dated December 29, 1999 between Mariner Energy, Inc. and MEGS LLC
Liability of Mariner Energy, Inc. under the Mariner-Noble Drilling Program
Agreement, dated as of February 28, 2000 between Mariner Energy, Inc. and Noble
Drilling Exploration Company, as amended by First Amendment to Mariner-Noble
Drilling Program Agreement, dated as of January 29, 2004, and related Domestic
Daywork Drilling Contract--Offshore Semisubmersible, dated as of January 29,
2004 by and between Mariner Energy, Inc. and Noble Drilling (US) Inc.
Liability of Mariner Energy, Inc. to pay transfer fee related to Master License
Agreement for Multiclient Seismic Data, dated September 25, 2001, between
WesternGeco L.L.C. and Mariner Energy, Inc., in connection with consummation of
the transactions contemplated by this Agreement. By letter agreement dated
November 20, 2003, WesternGeco LLC and Mariner Energy, Inc. agreed upon a $2.45
million fee payable within 90 days of the Merger and other terms and conditions
related thereto.
Liabilities of Mariner Energy, Inc. for license fees, risk/reward payments,
success fees, bonuses, overriding royalty interests or other consideration for
the licensing of data in accordance with the following agreements:
a. Master License Agreement for Geophysical Data, dated July
12, 1996, by and between TGS-CALIBRE Geophysical Company, as Licensor,
and Mariner Energy, Inc., as Licensee, and Supplements #▇, #▇, #▇, #▇,
#▇, #▇ and #7.
b. Master License Agreement for Multiclient Seismic Data,
dated September 25, 2001, between WesternGeco L.L.C., as Licensor, and
Mariner Energy, Inc., as Licensee as amended by Addendum dated December
11, 2001 and supplemented by Letter Agreement dated October 1, 1997
between Mariner Energy, Inc. and Western Geophysical and Letter
Agreement dated April 23, 2001 between Mariner Energy, Inc. and
WesternGeco L.L.C., as amended by letter dated December 18, 2001.
c. Agreement Concerning Seismic and Geophysical Services,
dated February 25, 2002, by and between Mariner Energy LLC and
Riverbend Energy Partners, L.P., as amended by First Amendment to that
Certain Agreement Concerning Seismic and Geophysical Services entered
into effective as of July 31, 2002, and by Second Amendment to that
Certain Agreement Concerning Seismic and Geophysical Services entered
into effective as of November 18, 2003.
d. Geophysical Data Master Sublicense Agreement, dated March
5, 2002, between Riverbend Energy Partners, L.P. and Mariner Energy,
L.L.C., as supplemented, and as amended by First Amendment to that
Certain Geophysical Data Master Sublicense Agreement.
Prior to the closing of the Merger, Mariner Energy, Inc. may have been an Enron
Corp. Controlled Group Member as defined under ERISA regulations due to Enron's
indirect control over Mariner Energy LLC. In the event Mariner Energy, Inc. was
a Controlled Group Member, it may have potential liability for certain employee
benefit plan obligations of Enron, as discussed in Mariner Energy, Inc.'s Form
10-Q for the quarter ended March 31, 2003.
SCHEDULE 4.05(d)
EXISTING DEBT
Project Company Note
Hedge Contracts listed on Schedule 4.20
SCHEDULE 4.07
LITIGATION
APPEAL OF MARINER ENERGY, INC., MMS-01-0033-OCS (SEPT. 20, 2002) (DEEPWATER
ROYALTY RELIEF PROCEEDING).
Certain of the properties that Mariner Energy, Inc. ("Mariner") operates in the
Gulf of Mexico qualify for automatic royalty relief under the Deepwater Royalty
Relief Act (the "DWRRA"). However, the leases with the MMS that govern these
properties contain provisions limiting royalty relief if commodity prices exceed
certain price thresholds specified in the leases. In April 2001, the Minerals
Management Service ("MMS") issued an order directing Mariner to pay royalties on
gas produced from two of these leases during 2000 when commodity prices exceeded
the price levels specified in the leases. Mariner filed an appeal of this order,
arguing that the MMS did not have the authority to include price triggers in
deepwater leases entitled to mandatory, automatic relief under the DWRRA, and
therefore those provisions of the leases were unenforceable. On September 20,
2002, the Acting Associate Director for Policy Management and Improvement for
the MMS issued a decision adverse to Mariner, holding that the MMS did have the
authority to include price triggers in deepwater leases entitled to automatic
royalty relief. Mariner filed an appeal of this decision on October 31, 2002. On
December 19, 2002, counsel for the MMS filed a motion to dismiss arguing that
Mariner's appeal was not timely filed. Mariner responded with an opposition on
January 21, 2003, and a decision on the MMS's motion to dismiss is pending.
Pursuant to federal regulation, the Department of Interior ("Interior") must
render a final decision on Mariner's appeal by March 15, 2004. Mariner has been
advised by counsel that if Interior does not render a final decision by that
date, then Interior will be deemed to have issued a decision adverse to Mariner,
which Mariner may challenge in federal court. Mariner's obligation to pay the
royalties in question has been suspended pending the outcome of the appeal.
Mariner has established reserves for 100% of the potential liability for these
royalties.
TGS-NOPEC GEOPHYSICAL COMPANY, CLAIMANT, V. MARINER ENERGY, INC., RESPONDENT AND
COUNTERCLAIMANT (ARBITRATION PROCEEDING).
Mariner is a party in an arbitration proceeding initiated by TGS-NOPEC
Geophysical Company ("TGS") that concerns a 1999 supplement to a 1996 master
license agreement for geophysical data. TGS initiated the arbitration proceeding
after sending invoices to Mariner for certain bonus payments that TGS contends
are payable under the supplement. Mariner disputes the invoices and contends
that the bonus payments that TGS requested in its invoices are not proper.
Because the parties disagree with respect to the interpretation of the bonus
provisions in the supplement, Mariner has asserted a comprehensive counterclaim
that requests declaratory relief to clarify the terms of the supplement. TGS
requests bonus payments totaling $1.5 million. Mariner seeks a refund of
$300,000 for overpayment
of prior alleged bonus payments under the supplement, as well as declaratory
relief and a determination that it does not owe the amounts sought by TGS. The
arbitration hearing was held on January 12 and 13, with post-hearing briefing
due on February 15, 2004. The resolution from the panel of three arbitrators is
expected by March 2004.
SCHEDULE 4.20
HEDGING AGREEMENTS
1. ISDA Master Agreement dated October 9, 2003 between BP Energy Company
("BP") and Mariner Energy, Inc., as amended by Amendment Agreement
dated as of January 12, 2004, including Credit Support Annex thereto
dated October 9, 2003 and the confirmations of transactions entered
into pursuant thereto listed on Attachment I hereto (collectively, the
"BP Agreement"). Under the terms of the BP Agreement, Mariner Energy,
Inc. may be required to post collateral in the form of cash or letters
of credit in an amount equal to the excess of BP's Exposure (as defined
in the Credit Annex) over a Threshold of $8 million. Net unrealized
▇▇▇▇ to market valuation of the BP Agreement as of March 1, 2004:
($16,455,060.60).
2. Financial Transaction Confirmation Agreement, dated January 28, 2004,
between Mariner Energy, Inc. and Shell Trading (US) Company ("STUSCO"):
Crude oil Swap for the period February 1 through December 31, 2004 and
a notional quantity of 197, 250 BBL (the "STUSCO Agreement"). Under the
terms of the STUSCO Agreement, Mariner Energy, Inc. may be required to
post collateral in the form of cash or letters of credit in an amount
equal to the excess of BP's Contract Exposure (as defined in therein)
over the Security Threshold (as defined therein). Net unrealized ▇▇▇▇
to market valuation of the STUSCO Agreement as of March 1, 2004:
($617,777.50).
ATTACHMENT I TO SCHEDULE 4.20
NATURAL GAS SWAPS
BP TRADE ID TRADE DATE EFFECTIVE DATE TERMINATION DATE NOTIONAL QUANTITY
--------------------------------------------------------------------------------
227688 11/24/2003 01/01/2004 01/31/2004 15,000 MMBTUs/day
227689 11/24/2003 02/01/2004 02/29/2004 15,000 MMBTUs/day
227690 11/24/2003 03/31/2004 03/31/2004 15,000 MMBTUs/day
227691 11/24/2003 04/01/2004 04/30/2004 15,000 MMBTUs/day
227693 11/24/2003 05/01/2004 05/31/2004 15,000 MMBTUs/day
227694 11/24/2003 06/01/2004 06/30/2004 15,000 MMBTUs/day
227698 11/24/2003 07/01/2004 07/31/2004 15,000 MMBTUs/day
227699 11/24/2003 08/01/2004 08/31/2004 15,000 MMBTUs/day
227700 11/24/2003 09/01/2004 09/30/2004 15,000 MMBTUs/day
227701 11/24/2003 10/01/2004 10/31/2004 15,000 MMBTUs/day
227704 11/24/2003 11/01/2004 11/30/2004 15,000 MMBTUs/day
227706 11/24/2003 12/01/2004 12/31/2004 15,000 MMBTUs/day
231283 12/09/2003 01/01/2004 03/31/2004 20,000 MMBTUs/day
231501 12/09/2003 04/01/2004 06/30/2004 15,000 MMBTUs/day
231496 12/09/2003 07/01/2004 09/30/2004 10,000 MMBTUs/day
231504 12/09/2003 10/01/2004 12/31/2004 5,000 MMBTUs/day
247877 01/28/2004 04/01/2004 06/30/2004 10,000 MMBTUs/day
247878 01/28/2004 07/01/2004 09/30/2004 10,000 MMBTUs/day
247879 01/28/2004 10/01/2004 12/31/2004 7,500 MMBTUs/day
247934 01/28/2004 03/01/2004 03/31/2004 12,500 MMBTUs/day
OIL SWAPS
BP TRADE ID TRADE DATE EFFECTIVE DATE TERMINATION DATE NOTIONAL QUANTITY
--------------------------------------------------------------------------------
3127 11/24/2003 01/01/2004 12/31/2005 1,462,500 BBL
SCHEDULE 5.06(e)
TERMINATION EVENTS
Enron Corp. pension plan termination.
SCHEDULE 6.01
EXISTING LIENS
NONE