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EXHIBIT 10.1
EXECUTION COPY
AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of February 17, 2000
Among
▇▇▇▇▇▇▇ OIL & GAS, L.P.
as Borrower,
BANK OF MONTREAL,
as Agent,
and
THE LENDERS SIGNATORY HERETO
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TABLE OF CONTENTS
PAGE
Article 1 Definitions and Accounting Matters.............................................................2
Section 1.01 Terms Defined Above.................................................................2
Section 1.02 Certain Defined Terms...............................................................2
Section 1.03 Accounting Terms and Determinations................................................19
Article 2 Commitments...................................................................................19
Section 2.01 Loans..............................................................................19
Section 2.02 Borrowings, Continuations and Conversions..........................................20
Section 2.03 Changes of Commitments.............................................................21
Section 2.04 Fees...............................................................................22
Section 2.05 Several Obligations................................................................22
Section 2.06 Notes..............................................................................22
Section 2.07 Prepayments........................................................................23
Section 2.08 Borrowing Base.....................................................................24
Section 2.09 Lending Offices....................................................................25
Article 3 Payments of Principal and Interest............................................................26
Section 3.01 Repayment of Loans.................................................................26
Section 3.02 Interest...........................................................................26
Article 4 Payments; Pro Rata Treatment; Computations; Etc...............................................27
Section 4.01 Payments...........................................................................27
Section 4.02 Pro Rata Treatment.................................................................27
Section 4.03 Computations.......................................................................27
Section 4.04 Non-receipt of Funds by the Agent..................................................28
Section 4.05 Set-off, Sharing of Payments, Etc..................................................28
Section 4.06 Taxes..............................................................................29
Article 5 Capital Adequacy..............................................................................32
Section 5.01 Additional Costs...................................................................32
Section 5.02 Limitation on Eurodollar Loans.....................................................34
Section 5.03 Illegality.........................................................................34
Section 5.04 Base Rate Loans Pursuant to Sections 5.01, 5.02 and 5.03...........................35
Section 5.05 Compensation.......................................................................35
Section 5.06 Replacement Lenders................................................................36
Article 6 Conditions Precedent..........................................................................37
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TABLE OF CONTENTS
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Section 6.01 Initial Funding....................................................................37
Section 6.02 Initial, Subsequent Loans..........................................................39
Section 6.03 Conditions Precedent for the Benefit of Lenders....................................39
Section 6.04 No Waiver..........................................................................39
Article 7 Representations and Warranties................................................................39
Section 7.01 Corporate Existence................................................................39
Section 7.02 Financial Condition................................................................40
Section 7.03 Litigation.........................................................................40
Section 7.04 No Breach..........................................................................40
Section 7.05 Authority..........................................................................40
Section 7.06 Approvals..........................................................................41
Section 7.07 Use of Loans.......................................................................41
Section 7.08 ERISA..............................................................................41
Section 7.09 Taxes..............................................................................42
Section 7.10 Titles, etc........................................................................42
Section 7.11 No Material Misstatements..........................................................43
Section 7.12 Investment Company Act.............................................................44
Section 7.13 Public Utility Holding Company Act.................................................44
Section 7.14 Subsidiaries.......................................................................44
Section 7.15 Location of Business and Offices...................................................44
Section 7.16 Defaults...........................................................................44
Section 7.17 Environmental Matters..............................................................44
Section 7.18 Compliance with the Law............................................................45
Section 7.19 Insurance..........................................................................46
Section 7.20 Hedging Agreements.................................................................46
Section 7.21 Restriction on Liens...............................................................47
Section 7.22 Material Agreements................................................................47
Section 7.23 Gas Imbalances.....................................................................47
Section 7.24 Partnership Agreement..............................................................47
Section 7.25 Prior Notes and Related Documents..................................................47
Article 8 Affirmative Covenants.........................................................................48
Section 8.01 Financial Statements and Other Reports.............................................48
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TABLE OF CONTENTS
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Section 8.02 Litigation.........................................................................51
Section 8.03 Maintenance, Etc...................................................................51
Section 8.04 Environmental Matters..............................................................52
Section 8.05 Further Assurances.................................................................53
Section 8.06 Performance of Obligations.........................................................53
Section 8.07 Engineering Reports................................................................53
Section 8.08 Reserved...........................................................................55
Section 8.09 Additional Collateral..............................................................55
Section 8.10 ERISA Information and Compliance...................................................56
Section 8.11 Subsidiary Security................................................................56
Section 8.12 Payment of Trade Payables..........................................................57
Section 8.13 Target Asset Value.................................................................57
Article 9 Negative Covenants............................................................................57
Section 9.01 Debt...............................................................................58
Section 9.02 Liens..............................................................................59
Section 9.03 Investments, Loans and Advances....................................................59
Section 9.04 Dividends, Distributions and Redemptions...........................................60
Section 9.05 Sales and Leasebacks...............................................................60
Section 9.06 Nature of Business.................................................................61
Section 9.07 Limitation on Leases...............................................................61
Section 9.08 Mergers, Etc.......................................................................61
Section 9.09 Proceeds of Notes..................................................................61
Section 9.10 ERISA Compliance...................................................................61
Section 9.11 Sale or Discount of Receivables....................................................63
Section 9.12 [Intentionally Omitted]............................................................63
Section 9.13 Sale of Oil and Gas Properties.....................................................63
Section 9.14 Environmental Matters..............................................................63
Section 9.15 Transactions with Affiliates.......................................................63
Section 9.16 Subsidiaries.......................................................................63
Section 9.17 Negative Pledge Agreements.........................................................63
Section 9.18 Gas Imbalances, Take-or-Pay or Other Prepayments...................................64
Section 9.19 Borrower as Operator...............................................................64
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TABLE OF CONTENTS
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Section 9.20 Quest Resources LLC................................................................64
Section 9.21 Subordinated Debt..................................................................64
Section 9.22 Restrictions While Outstanding Indebtedness Exceeds the Borrowing Base.............64
Article 10 Events of Default; Remedies...................................................................65
Section 10.01 Events of Default..................................................................65
Section 10.02 Remedies...........................................................................67
Section 10.03 Production and Proceeds............................................................68
Article 11 The Agent.....................................................................................68
Section 11.01 Appointment, Powers and Immunities.................................................68
Section 11.02 Reliance by Agent..................................................................69
Section 11.03 Defaults...........................................................................69
Section 11.04 Rights as a Lender.................................................................69
Section 11.05 INDEMNIFICATION....................................................................69
Section 11.06 Non-Reliance on Agent and other Lenders............................................70
Section 11.07 Action by Agent....................................................................70
Section 11.08 Resignation or Removal of Agent....................................................71
Article 12 Miscellaneous.................................................................................71
Section 12.01 Waiver.............................................................................71
Section 12.02 Notices............................................................................71
Section 12.03 Payment of Expenses, Indemnities, etc..............................................72
Section 12.04 Amendments, Etc....................................................................74
Section 12.05 Successors and Assigns.............................................................75
Section 12.06 Assignments and Participations.....................................................75
Section 12.07 Invalidity.........................................................................77
Section 12.08 Counterparts.......................................................................77
Section 12.09 References.........................................................................77
Section 12.10 Survival...........................................................................77
Section 12.11 Captions...........................................................................77
Section 12.12 NO ORAL AGREEMENTS.................................................................77
Section 12.13 GOVERNING LAW; SUBMISSION TO JURISDICTION..........................................77
Section 12.14 Interest...........................................................................79
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TABLE OF CONTENTS
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Section 12.15 Confidentiality....................................................................79
Section 12.16 Prior Credit Agreement.............................................................80
Section 12.17 Release Regarding the Prior Notes and Related Documents............................80
Section 12.18 Effectiveness......................................................................80
Section 12.19 EXCULPATION PROVISIONS.............................................................81
Section 12.20 RELEASE............................................................................81
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THIS AMENDED AND RESTATED CREDIT AGREEMENT dated as of February 17, 2000
is among: ▇▇▇▇▇▇▇ OIL & GAS, L.P., a limited partnership formed under the laws
of the State of Delaware (the "Borrower"); BANK OF MONTREAL, a Canadian bank, in
its individual capacity (in its individual capacity, "BMO"), SHELL CAPITAL INC.
("SCI"), Societe Generale, Southwest Agency ("Soc-Gen") and any other lender
which becomes a signatory hereto as provided in Section 12.06 (individually,
together with its successors and assigns, a "Lender" and, collectively, the
"Lenders"); and BMO, in its capacity as agent for the Lenders (in such capacity,
together with its successors in such capacity, the "Agent").
R E C I T A L S
A. Pursuant to that certain Credit Agreement (the "Original Credit
Agreement") dated as of January 26, 1998 among the Borrower and BMO, as amended
by that certain First Amendment to Credit Agreement dated as of August 20, 1998
among the Borrower, BMO and Soc-Gen (the "First Amendment"), that certain Second
Amendment to Credit Agreement dated as of March 26, 1999 among the Borrower, BMO
and Soc-Gen (the "Second Amendment"), that certain Third Amendment to Credit
Agreement dated as of July 19, 1999 among the Borrower, BMO and Soc-Gen (the
"Third Amendment") and that certain Fourth Amendment to Credit Agreement dated
as of October 7, 1999 among the Borrower, BMO and Soc-Gen (the "Fourth
Amendment") (the Original Credit Agreement as amended by the First Amendment,
the Second Amendment, the Third Amendment and the Fourth Amendment being
hereafter called the "Prior Credit Agreement"),BMO and Soc-Gen provided to the
Borrower loans and extensions of credit, which loans and extensions of credit
are evidenced by those certain promissory notes from the Borrower in the
aggregate principal amount of $75,000,000 (the "Prior Notes").
B. By Partial Assignment of Notes of even date herewith (the "SCI
Assignment") SCI has acquired a 53.3% interest in the Prior Notes and a like
interest in all security for the payment of the Prior Notes and the performance
of the Borrower's obligations under the Prior Credit Agreement.
C. The Lenders have agreed to provide senior secured debt in the amount
of up to $75,000,000 consisting of a rearrangement of the Prior Notes and
advances to the Borrower for general corporate purposes, and the Borrower, the
Agent and the Lenders now desire to set forth their agreements with respect to
such credit facility and to amend and restate in their entirety the Prior Credit
Agreement, by means of this Agreement, and the Prior Notes, by means of the
Notes.
D. Pursuant to that certain Intercreditor and Subordination Agreement
dated as of August 20, 1998, as from time to time amended (including that
certain Second Amendment to Intercreditor and Subordination Agreement dated as
of the date hereof), among Enron North America Corp., fka Enron Capital & Trade
Resources Corp., a Delaware corporation, Joint Energy Development Investments II
Limited Partnership, a Delaware limited partnership and Agent, for the benefit
of the Lenders, the Subordinated Debt (as hereinafter defined) is expressly
subordinated to the Indebtedness (as hereinafter defined).
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E. In consideration of the mutual covenants and agreements herein
contained and of the loans, extensions of credit and commitments hereinafter
referred to, the parties hereto agree as follows:
ARTICLE 1
Definitions and Accounting Matters
Section 1.01 Terms Defined Above. As used in this Agreement, the
terms "Agent," "BMO," "Borrower," "Lender," "Lenders," "Prior Credit Agreement,"
"Prior Notes", "SCI", "SCI Assignment" and "Soc-Gen" shall have the meanings
indicated above.
Section 1.02 Certain Defined Terms. As used herein, the following
terms shall have the following meanings (all terms defined in this Article I or
in other provisions of this Agreement in the singular to have the same meanings
when used in the plural and vice versa):
"Additional Costs" shall have the meaning assigned such term in
Section 5.01(a).
"Affected Loans" shall have the meaning assigned such term in
Section 5.04.
"Affiliate" of any Person shall mean (i) any Person directly or
indirectly controlled by, controlling or under common control with such first
Person, (ii) any director or officer of such first Person or of any Person
referred to in clause (i) above and (iii) if any Person in clause (i) above is
an individual, any member of the immediate family (including parents, spouse and
children) of such individual and any trust whose principal beneficiary is such
individual or one or more members of such immediate family and any Person who is
controlled by any such member or trust. For purposes of this definition, any
Person which owns directly or indirectly 20% or more of the securities having
ordinary voting power for the election of directors or other governing body of a
corporation or 20% or more of the partnership or other ownership interests of
any other Person (other than as a limited partner of such other Person) will be
deemed to "control" (including, with its correlative meanings, "controlled by"
and "under common control with") such corporation or other Person.
"Agent's Fee Letter" shall mean that certain letter agreement from
the Agent to the Borrower dated of even date with this Agreement concerning
certain fees in connection with this Agreement and any agreements or instruments
executed in connection therewith, as the same may be amended or replaced from
time to time.
"Agreement" shall mean this Amended and Restated Credit Agreement,
as the same may from time to time be amended or supplemented.
"Aggregate Commitments" at any time shall equal the amount
calculated in accordance with Section 2.03 hereof.
"Aggregate Maximum Credit Amounts" shall mean the amount of
$70,000,000 (minus any portion of the outstanding Loans converted pursuant to an
Equity Conversion), as the same may be reduced pursuant to Section 2.03(b) and
Section 2.07(d); provided, however, that at such time as there has occurred an
Increase Event, the Aggregate Maximum Credit Amounts
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shall be $75,000,000, less any prior or contemporaneous reductions pursuant to
Section 2.03(b) and Section 2.07(d) and the portion of any outstanding Loans
converted pursuant to an Equity Conversion.
"Applicable Lending Office" shall mean, for each Lender and for
each Type of Loan, the lending office of such Lender (or an Affiliate of such
Lender) designated for such Type of Loan on the signature pages hereof or such
other offices of such Lender (or of an Affiliate of such Lender) as such Lender
may from time to time specify to the Agent and the Borrower as the office by
which its Loans of such Type are to be made and maintained.
"Applicable Margin" shall mean 2% per annum with respect to Base
Rate Loans and 3% per annum with respect to Eurodollar Loans.
"Assignment" shall have the meaning assigned such term in Section
12.06(b).
"Base Rate" shall mean, with respect to any Base Rate Loan, for
any day, the higher of (i) the Federal Funds Rate for any such day plus 1/2 of
1% or (ii) the Prime Rate for such day. Each change in any interest rate
provided for herein based upon the Base Rate resulting from a change in the Base
Rate shall take effect at the time of such change in the Base Rate.
"Base Rate Loans" shall mean Loans that bear interest at rates
based upon the Base Rate.
"BMO/Soc-Gen Lenders" means BMO and Soc-Gen and their respective
successors and assigns.
"BMO/Soc-Gen Majority Lenders" shall mean, at any time while no
Loans are outstanding, BMO/Soc-Gen Lenders having at least sixty-six and
two-thirds percent (66-2/3%) of the Aggregate Commitments of the BMO/Soc-Gen
Lenders and, at any time while Loans are outstanding, BMO/Soc-Gen Lenders
holding at least sixty-six and two-thirds percent (66-2/3%) of the outstanding
aggregate principal amount of the portion of the Loans allocable to the
BMO/Soc-Gen Lenders (without regard to any sale by a BMO/Soc-Gen Lender of a
participation in any Loan under Section 12.06(c)).
"Borrowing Base" shall mean at any time in amount equal to the
amount determined in accordance with Section 2.08.
"Borrowing Base Redetermination Date" shall have the meaning
assigned such term in Section 2.08(a).
"▇▇▇▇▇▇▇ Exploration" shall mean ▇▇▇▇▇▇▇ Exploration Company, a
Delaware corporation and owner of 100% of the capital stock of the General
Partner.
"Business Day" shall mean any day other than a day on which
commercial banks are authorized or required to close in Houston, Texas and,
where such term is used in the definition of "Quarterly Date" or if such day
relates to a borrowing or continuation of, a payment or prepayment of principal
of or interest on, or a conversion of or into, or the Interest Period for,
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a Eurodollar Loan or a notice by the Borrower with respect to any such borrowing
or continuation, payment, prepayment, conversion or Interest Period, any day
which is also a day on which dealings in Dollar deposits are carried out in the
London interbank market.
"CAPEX Plan" shall mean each Capital Expenditures Plan detailing
the projected capital expenditures of the Borrower for the twelve month period
from and after the month in which such plan is delivered, the first of which is
to be submitted on the Closing Date with similar plans for each succeeding
twelve month period to be submitted in accordance with Section 8.01(l).
"Closing Date" shall mean February 17, 2000.
"Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time and any successor statute.
"Commitment" shall mean, for any Lender, its obligation to make
Loans up to the lesser of such Lender's Maximum Credit Amount or, when the
Borrowing Base becomes effective, the Lender's Percentage Share of the amount
equal to the then effective Borrowing Base.
"Consolidated Net Income" shall mean with respect to ▇▇▇▇▇▇▇
Exploration and its Consolidated Subsidiaries, for any period, the aggregate of
the net income (or loss) of ▇▇▇▇▇▇▇ Exploration and its Consolidated
Subsidiaries after allowances for taxes for such period, determined on a
consolidated basis in accordance with GAAP; provided that there shall be
excluded from the calculation of such net income (to the extent otherwise
included therein) the following: (i) the net income of any Person in which
▇▇▇▇▇▇▇ Exploration or any Consolidated Subsidiary has an interest (which
interest does not cause the net income of such other Person to be consolidated
with the net income of ▇▇▇▇▇▇▇ Exploration and its Consolidated Subsidiaries in
accordance with GAAP), except to the extent of the amount of dividends or
distributions actually paid in such period by such other Person to ▇▇▇▇▇▇▇
Exploration or to a Consolidated Subsidiary, as the case may be; (ii) the net
income (but not loss) of any Consolidated Subsidiary to the extent that the
declaration or payment of dividends or similar distributions or transfers or
loans by that Consolidated Subsidiary is not at the time permitted by operation
of the terms of its charter or any agreement, instrument or Governmental
Requirement applicable to such Consolidated Subsidiary, or is otherwise
restricted or prohibited in each case determined in accordance with GAAP; (iii)
the net income (or loss) of any Person acquired in a pooling-of-interests
transaction for any period prior to the date of such transaction; (iv) any
extraordinary gains or losses, including gains or losses attributable to
Property sales not in the ordinary course of business; and (v) the cumulative
effect of a change in accounting principles and any gains or losses attributable
to writeups or writedowns of assets. Consolidated Net Income shall include all
amounts paid on account of the Term ORRI, regardless of the accounting treatment
given such Term ORRI.
"Consolidated Subsidiaries" shall mean each Subsidiary of ▇▇▇▇▇▇▇
Exploration (whether now existing or hereafter created or acquired) the
financial statements of which shall be (or should have been) consolidated with
the financial statements of ▇▇▇▇▇▇▇ Exploration in accordance with GAAP,
including, without limitation, the Borrower.
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"Covenant Release Date" means the first Borrowing Base
Redetermination Date on which the outstanding Indebtedness is less than or equal
to the Borrowing Base.
"Debt" shall mean, for any Person the sum of the following
(without duplication): (i) all obligations of such Person for borrowed money or
evidenced by bonds, debentures, notes or other similar instruments (including
principal, interest, fees and charges); (ii) all obligations of such Person
(whether contingent or otherwise) in respect of bankers' acceptances, letters of
credit, surety or other bonds and similar instruments; (iii) all obligations of
such Person to pay the deferred purchase price of Property or services (other
than for borrowed money) excluding Trade Payables; (iv) all obligations under
leases which shall have been, or should have been, in accordance with GAAP,
recorded as capital leases in respect of which such Person is liable (whether
contingent or otherwise); (v) all obligations under leases (other than capital
leases and oil and gas leases) which require such Person or its Affiliate to
make payments exceeding $100,000 over the term of such lease, including payments
at termination, which are substantially equal to at least eighty percent (80%)
of the purchase price of the Property subject to such lease plus interest at an
imputed market rate of interest; (vi) all Debt (as described in the other
clauses of this definition) of others secured by a Lien on any asset of such
Person, whether or not such Debt is assumed by such Person; (vii) all Debt (as
described in the other clauses of this definition) of others guaranteed by such
Person or in which such Person otherwise assures a creditor against loss of the
Debt of others; (viii) all obligations or undertakings of such Person to
maintain or cause to be maintained the financial position or covenants of others
including without limitation agreements expressed as an agreement to purchase
the Debt or Property of others or otherwise; (ix) obligations to deliver
Hydrocarbons in consideration of advance payments; (x) obligations to pay for
goods or services whether or not such goods or services are actually received or
utilized by such Person; (xi) any capital stock of such Person in which such
Person has a mandatory obligation to redeem such stock; (xii) any Debt of a
Special Entity for which such Person is liable either by agreement or because of
a Governmental Requirement; (xiii) the undischarged balance of any production
payment created by such Person or for the creation of which such Person directly
or indirectly received payment; and (xiv) all obligations of such Person under
Hedging Agreements.
"Default" shall mean an Event of Default or an event which with
notice or lapse of time or both would become an Event of Default.
"Dollars" and "$" shall mean lawful money of the United States of
America. "EBITDA" shall mean, for any period, the sum of Consolidated Net Income
for such period PLUS the following expenses or charges to the extent deducted
from Consolidated Net Income in such period: interest, taxes, depreciation,
depletion and amortization, and other noncash charges, MINUS (i) all non cash
income added to Consolidated Net Income in such period and (ii) capitalized
general and administrative charges for such period.
"ECT Merchant" shall mean ECT Merchant Investments Corp., a
Delaware corporation.
"Effective Date" shall have the meaning assigned such term in
Section 12.16.
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"Engineering Reports" shall have the meaning assigned such term in
Section 2.08.
"Environmental Laws" shall mean any and all Governmental
Requirements pertaining to the environment in effect in any and all
jurisdictions in which the Borrower or any Subsidiary is conducting or at any
time has conducted business, or where any Property of the Borrower or any
Subsidiary is located, including without limitation, the Oil Pollution Act of
1990 ("OPA"), the Clean Air Act, as amended, the Comprehensive Environmental,
Response, Compensation, and Liability Act of 1980 ("CERCLA"), as amended, the
Federal Water Pollution Control Act, as amended, the Occupational Safety and
Health Act of 1970, as amended, the Resource Conservation and Recovery Act of
1976 ("RCRA"), as amended, the Safe Drinking Water Act, as amended, the Toxic
Substances Control Act, as amended, the Superfund Amendments and Reauthorization
Act of 1986, as amended, the Hazardous Materials Transportation Act, as amended,
and other environmental conservation or protection laws. As used in the
provisions hereof relating to Environmental Laws, the term "oil" shall have the
meaning specified in OPA, the terms "hazardous substance" and "release" (or
"threatened release") have the meanings specified in CERCLA, and the terms
"solid waste" and "disposal" (or "disposed") have the meanings specified in
RCRA; provided, however, that (i) in the event either OPA, CERCLA or RCRA is
amended so as to broaden the meaning of any term defined thereby, such broader
meaning shall apply subsequent to the effective date of such amendment and (ii)
to the extent the laws of the state in which any Property of the Borrower or any
Subsidiary is located establish a meaning for "oil," "hazardous substance,"
"release," "solid waste" or "disposal" which is broader than that specified in
either OPA, CERCLA or RCRA, such broader meaning shall apply.
"Equity Conversion" shall mean the conversion of a portion of the
Loans of the SCI Lenders into capital stock of ▇▇▇▇▇▇▇ Exploration pursuant to
the terms of the Equity Conversion Agreement.
"Equity Conversion Agreement" shall mean that certain Equity
Conversion Agreement of even date herewith among the Borrower, ▇▇▇▇▇▇▇
Exploration and Shell Capital, which sets forth the terms for one or more of the
Equity Conversions.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time and any successor statute.
"ERISA Affiliate" shall mean each trade or business (whether or
not incorporated) which together with the Borrower or any Subsidiary of the
Borrower would be deemed to be a "single employer" within the meaning of section
4001(b)(1) of ERISA or subsections (b), (c), (m) or (o) of section 414 of the
Code.
"ERISA Event" shall mean (i) a "Reportable Event" described in
Section 4043 of ERISA and the regulations issued thereunder (other than such an
event with respect to which the requirement to give notice has been waived),
(ii) the withdrawal of the Borrower or any ERISA Affiliate from a Plan during a
plan year in which it was a "substantial employer" as defined in Section
4001(a)(2) of ERISA, (iii) the filing of a notice of intent to terminate a Plan
(other than a defined contribution Plan) or the treatment of an amendment to
such a Plan as a termination under Section 4041 of ERISA, (iv) the institution
of proceedings to terminate a Plan by the
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PBGC or (v) any other event or condition which might constitute grounds under
Section 4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Plan.
"Eurodollar Loans" shall mean Loans the interest rates on which
are determined on the basis of rates referred to in the definition of
"Eurodollar Rate".
"Eurodollar Rate" shall mean, with respect to any Eurodollar Loan,
the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%)
reported, on the date two Business Days prior to the first day of the Interest
Period for such Loan, on Telerate Access Service Page 3750 (British Bankers
Association Settlement Rate) as the London Interbank Offered Rate for U.S.
dollar deposits having a term comparable to such Interest Period and in an
amount of $1,000,000 or more (provided that, if such Page shall cease to be
publicly available or if the information contained on such Page shall cease to
be publicly available or if the information contained on such Page, in the
Agent's reasonable judgment, shall cease to accurately reflect such London
Interbank Offered Rate or if such page does not report information for the term
of the Interest Period selected by Borrower, such rate shall be that reported by
any publicly available source of similar market data selected by the Agent, or
that interpolated by Agent from such market data, which, in the Agent's
reasonable judgment, accurately reflects such London Interbank Offered Rate).
"Event of Default" shall have the meaning assigned such term in
Section 10.01.
"Excepted Liens" shall mean: (i) Liens for taxes, assessments or
other governmental charges or levies not yet due or which are being contested in
good faith by appropriate action and for which adequate reserves have been
maintained in accordance with GAAP; (ii) Liens in connection with workmen's
compensation, unemployment insurance or other social security, old age pension
or public liability obligations not yet due or which are being contested in good
faith by appropriate action and for which adequate reserves have been maintained
in accordance with GAAP; (iii) operators', vendors', carriers', warehousemen's,
repairmen's, mechanics', workmen's, materialmen's, construction or other like
Liens arising by operation of law in the ordinary course of business or incident
to the exploration, development, operation and maintenance of Oil and Gas
Properties or customary landlord's liens, each of which is in respect of
obligations that have not been outstanding more than 90 days or which are being
contested in good faith by appropriate proceedings and for which adequate
reserves have been maintained in accordance with GAAP; (iv) any Liens reserved
in leases or farmout agreements for rent or royalties and for compliance with
the terms of the farmout agreements or leases in the case of leasehold estates,
to the extent that any such Lien referred to in this clause does not materially
impair the use of the Property covered by such Lien for the purposes for which
such Property is held or materially impair the value of such Property subject
thereto; (v) encumbrances (other than to secure the payment of borrowed money or
the deferred purchase price of Property or services), easements, restrictions,
servitudes, permits, conditions, covenants, exceptions or reservations in any
rights of way or other Property for the purpose of roads, pipelines,
transmission lines, transportation lines, distribution lines for the removal of
gas, oil, coal or other minerals or timber, and other like purposes, or for the
joint or common use of real estate, rights of way, facilities and equipment, and
defects, irregularities, zoning restrictions and deficiencies in title of any
rights of way or other Property which in the aggregate do not materially impair
the use of such rights of way or other Property for the purposes of which such
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rights of way and other Property are held or materially impair the value of such
Property subject thereto; (vi) deposits of cash or securities to secure the
performance of bids, trade contracts, leases, statutory obligations and other
obligations of a like nature incurred in the ordinary course of business; (vii)
Liens permitted by the Loan Documents; and (viii) liens securing any Debt
described in Section 9.01(f) hereof that is owing to a Lender or an Affiliate of
a Lender at the time such Debt is incurred.
"Federal Funds Rate" shall mean, for any day, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to the
weighted average of the rates on overnight federal funds transactions with a
member of the Federal Reserve System arranged by federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Business Day
next succeeding such day, provided that (i) if the date for which such rate is
to be determined is not a Business Day, the Federal Funds Rate for such day
shall be such rate on such transactions on the next preceding Business Day as so
published on the next succeeding Business Day, and (ii) if such rate is not so
published for any day, the Federal Funds Rate for such day shall be the average
rate charged to the Agent on such day on such transactions as determined by the
Agent.
"Financial Statements" shall mean the financial statement or
statements described or referred to in Section 7.02.
"First Asset Valuation Date" means September 30, 2000.
"First Borrowing Base Determination Date" shall mean March 30,
2002, or such later date upon which the Borrower receives written notice of the
Borrowing Base from Agent; provided that the First Borrowing Base Determination
Date may occur prior to March 30, 2002, in the event Borrower calls for an
earlier determination of the Borrowing Base pursuant to Section 2.08(d).
"GAAP" shall mean generally accepted accounting principles in the
United States of America in effect from time to time.
"General Partner" shall mean ▇▇▇▇▇▇▇, Inc., a Nevada corporation,
general partner of the Borrower.
"Governmental Authority" shall include the country, the state,
county, city and political subdivisions in which any Person or such Person's
Property is located or which exercises valid jurisdiction over any such Person
or such Person's Property, and any court, agency, department, commission, board,
bureau or instrumentality of any of them including monetary authorities which
exercises valid jurisdiction over any such Person or such Person's Property.
Unless otherwise specified, all references to Governmental Authority herein
shall mean a Governmental Authority having jurisdiction over, where applicable,
the Borrower, the Subsidiaries or any of their Property or the Agent, any Lender
or any Applicable Lending Office.
"Governmental Requirement" shall mean any law, statute, code,
ordinance, order, determination, rule, regulation, judgment, decree, injunction,
franchise, permit, certificate, license, authorization or other directive or
requirement (in the case of banking regulatory authorities whether or not having
the force of law), including, without limitation, Environmental
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Laws, energy regulations and occupational, safety and health standards or
controls, of any Governmental Authority.
"Guarantors" shall mean ▇▇▇▇▇▇▇ Exploration, the General Partner,
▇▇▇▇▇▇▇ Holdings I, LLC and ▇▇▇▇▇▇▇ Holdings II, LLC and any other Person who
becomes party to a Guaranty Agreement pursuant to the terms of Section 8.11.
"Guaranty Agreements" shall mean the agreements executed by the
Guarantors in form and substance satisfactory to the Agent guarantying,
unconditionally, payment of the Indebtedness, as the same may be amended,
modified or supplemented from time to time.
"Hedging Agreements" shall mean any commodity, interest rate or
currency swap, cap, floor, collar, forward agreement or other exchange or
protection agreements or any option with respect to any such transaction.
"Highest Lawful Rate" shall mean, with respect to each Lender, the
maximum nonusurious interest rate, if any, that at any time or from time to time
may be contracted for, taken, reserved, charged or received on the Notes or on
other Indebtedness under laws applicable to such Lender which are presently in
effect or, to the extent allowed by law, under such applicable laws which may
hereafter be in effect and which allow a higher maximum nonusurious interest
rate than applicable laws now allow.
"Hydrocarbon Interests" shall mean all rights, titles, interests
and estates now or hereafter acquired in and to oil and gas leases, oil, gas and
mineral leases, or other liquid or gaseous hydrocarbon leases, mineral fee
interests, overriding royalty and royalty interests, net profit interests and
production payment interests, including any reserved or residual interests of
whatever nature.
"Hydrocarbons" shall mean oil, gas, casinghead gas, drip gasoline,
natural gasoline, condensate, distillate, liquid hydrocarbons, gaseous
hydrocarbons and all products refined or separated therefrom.
"Increase Event" means the satisfaction of any one of the
following conditions:
(a) if as of July 31, 2000, the RAPRV is $50,000,000 or
greater and the Interest Coverage Ratio of ▇▇▇▇▇▇▇ Exploration is
0.75 to 1.0 or greater, or
(b) if as of September 30, 2000, the RAPRV is $55,000,000
or greater and the Interest Coverage Ratio of ▇▇▇▇▇▇▇ Exploration
is 0.90 to 1.0 or greater, or
(c) if (i) ▇▇▇▇▇▇▇ Exploration sells common stock and/or
preferred stock with cashless dividends of ▇▇▇▇▇▇▇ Exploration for
at least $10,000,000 or (ii) Borrower and/or ▇▇▇▇▇▇▇ Exploration
are able to acquire in exchange for ▇▇▇▇▇▇▇ Exploration common
stock and/or preferred stock with cashless dividends, producing
properties with PDP Reserves having a value (to be reasonably
determined by the SCI Lenders and a discount rate of 10%) of at
least $10,000,000, or (iii) Borrower and/or ▇▇▇▇▇▇▇ Exploration
are able to effect some combination of (i) and (ii) above, that
results in cash consideration received for
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the issuance of ▇▇▇▇▇▇▇ Exploration common stock and/or preferred
stock with cashless dividends plus a value (to be reasonably
determined by the SCI Lenders and a discount rate of 10%) of any
PDP Reserves acquired in exchange for ▇▇▇▇▇▇▇ Exploration common
stock and/or preferred stock with cashless dividends, that
collectively equals or exceeds $10,000,000.
"Indebtedness" shall mean any and all amounts owing or to be owing
by the Borrower to the Agent and/or Lenders in connection with the Loan
Documents and any Hedging Agreements now or hereafter existing between (i)
Borrower and BMO and its successors or assigns (a "BMO Hedge Party") and Soc-Gen
and its successors or assigns (a "Soc-Gen Hedge Party") entered into while such
BMO Hedge Party or such Soc-Gen Hedge Party is a Lender; and (ii) Borrower and
SCI and its successors or assigns (with Loans or Commitments of $20 million or
more) or any Affiliate of SCI (SCI and any Affiliate of SCI a "SCI Hedge Party")
entered into while such SCI Hedge Party or Fathom Energy Capital I, L.L.C, is a
Lender and permitted by the terms of this Agreement and all renewals, extensions
and/or rearrangements of any of the above.
"Indemnified Parties" shall have the meaning assigned such term in
Section 12.03(b).
"Indemnity Matters" shall mean any and all actions, suits,
proceedings (including any investigations, litigation or inquiries), claims,
demands and causes of action made or threatened against a Person and, in
connection therewith, all losses, liabilities, damages (including, without
limitation, consequential damages) or reasonable costs and expenses of any kind
or nature whatsoever incurred by such Person whether caused by the sole or
concurrent negligence of such Person seeking indemnification.
"Indenture" shall mean that certain Indenture dated as of August
20, 1998 between ▇▇▇▇▇▇▇ Exploration, as the issuer of the Subordinated Debt,
and Chase Bank of Texas, National Association, as the trustee as amended by that
First Amendment to Indenture dated March 26, 1999 and that Second Amendment to
Indenture of even date herewith.
"Initial Funding" shall mean the funding of the initial Loans
pursuant to Section 6.01 hereof.
"Initial Reserve Report" shall mean the report of ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇ & Associates with respect to the Oil and Gas Properties of the
Borrower as of December 31, 1999, a copy of which has been delivered to the
Agent.
"Interest Coverage Ratio" shall have the meaning assigned such
term in the Amended and Restated Guaranty Agreement dated as of the date hereof,
as from time to time amended, executed by ▇▇▇▇▇▇▇ Exploration.
"Interest Period" shall mean, with respect to (i) any Eurodollar
Loan made prior to the First Borrowing Base Determination Date, the period
commencing on the date such Eurodollar Loan is made and ending on the
numerically corresponding day in the first month thereafter and (ii) any
Eurodollar Loan made after the First Borrowing Base Determination Date, the
period commencing on the date such Eurodollar Loan is made and ending on the
numerically corresponding day in the first or third calendar month thereafter,
as the Borrower may select as
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provided in Section 2.02, except that each Interest Period which commences on
the last Business Day of a calendar month (or on any day for which there is no
numerically corresponding day in the appropriate subsequent calendar month)
shall end on the last Business Day of the appropriate subsequent calendar month.
Notwithstanding the foregoing: (i) no Interest Period may end
after the Revolving Credit Termination Date; (ii) no Interest Period for any
Eurodollar Loan may end after the due date of any installment, if any, provided
for in Section 3.01 hereof to the extent that such Eurodollar Loan would need to
be prepaid prior to the end of such Interest Period in order for such
installment to be paid when due; (iii) each Interest Period which would
otherwise end on a day which is not a Business Day shall end on the next
succeeding Business Day (or, if such next succeeding Business Day falls in the
next succeeding calendar month, on the next preceding Business Day); and (iv) no
Interest Period shall have a duration of less than one month and, if the
Interest Period for any Eurodollar Loans would otherwise be for a shorter
period, such Loans shall not be available hereunder.
"JEDI-II" shall mean Joint Energy Development Investments II
Limited Partnership, a Delaware limited partnership.
"Lending Relationship" shall refer to this Agreement and the other
Loan Documents, together with any and all negotiations, discussions, acts,
omissions, renewals, extensions, and other agreements or events related to this
Agreement and such other Loan Documents, the parties' obligations thereunder and
the transactions contemplated thereby, including, without limitation, any such
negotiations, discussions, acts, omissions, renewals, extensions, other
agreements or events that may occur on the date hereof and the instruments and
documents executed and delivered in connection herewith or relating hereto.
"Lien" shall mean any interest in Property securing an obligation
owed to, or a claim by, a Person other than the owner of the Property, whether
such interest is based on the common law, statute or contract, and whether such
obligation or claim is fixed or contingent, and including but not limited to (i)
the lien or security interest arising from a mortgage, encumbrance, pledge,
security agreement, conditional sale or trust receipt or a lease, consignment or
bailment for security purposes or (ii) production payments and the like payable
out of Oil and Gas Properties. The term "Lien" shall include reservations,
exceptions, encroachments, easements, rights of way, covenants, conditions,
restrictions, leases and other title exceptions and encumbrances affecting
Property. For the purposes of this Agreement, a Person shall be deemed to be the
owner of any Property which it has acquired or holds subject to a conditional
sale agreement, or leases under a financing lease or other arrangement pursuant
to which title to the Property has been retained by or vested in some other
Person in a transaction intended to create a financing.
"Loan Documents" shall mean this Agreement, the Notes, the Agent's
Fee Letter, the SCI Fee Letter, the Soc-Gen Fee Letter, the Equity Conversion
Agreement (and any warrants issued pursuant thereto), the agreements or
instruments described or referred to in Exhibit D, and any and all other
agreements or instruments now or hereafter executed and delivered by the
Borrower or any Subsidiary or Affiliate of the Borrower including, without
limitation, ▇▇▇▇▇▇▇ Exploration (other than assignments, participation or
similar agreements between any Lender and
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any other lender or creditor with respect to any Indebtedness pursuant to this
Agreement) in connection with, or as security for the payment or performance of
the Notes, or this Agreement, as such agreements may be amended, supplemented or
restated from time to time.
"Loans" shall mean the loans as provided for by Section 2.01(a).
"Majority Lenders" means the BMO/Soc-Gen Majority Lenders and the
SCI Majority Lenders, together.
"Material Adverse Effect" shall mean any material and adverse
effect on (i) the assets, liabilities, financial condition, business, operations
or affairs of ▇▇▇▇▇▇▇ Exploration and its Subsidiaries taken as a whole or the
Borrower and its Subsidiaries taken as a whole, from those reflected in the
Financial Statements or from the facts represented or warranted in any Loan
Document, or (ii) the ability of ▇▇▇▇▇▇▇ Exploration or the Borrower or ▇▇▇▇▇▇▇
Exploration or the Borrower and their respective Subsidiaries taken as a whole
to carry out their business as at the Closing Date or as proposed as of the
Closing Date to be conducted or meet their obligations under the Loan Documents
on a timely basis.
"Maximum Credit Amount" shall mean, as to each Lender, the amount
set forth opposite such Lender's name on Annex I under the caption "Maximum
Credit Amounts" (as the same may be reduced pursuant to Section 2.03(b) hereof
as modified from time to time to reflect any assignments permitted by Sections
12.06(b) and (c) and any reallocation of the respective Maximum Credit Amounts
of the Lenders effected pursuant to Section 8.13.
"Mortgage" shall mean, collectively, the mortgages referred to in
items [2, 12 and 13] of Exhibit D and any other Standard Mortgages executed
pursuant to Section 8.09(b) hereof and New Mortgages executed pursuant to
Section 8.09 (a) hereof.
"Mortgaged Property" shall mean the Property owned by the Borrower
and which is subject to the Liens existing and to exist under the terms of the
Loan Documents.
"Multiemployer Plan" shall mean a Plan defined as such in Section
3(37) or 4001(a)(3) of ERISA.
"Net Seismic and Land Expenditures" shall mean those costs
incurred after the Closing Date for seismic services, seismic data, and
acquisition of undeveloped Hydrocarbon Interests, less the net proceeds, if any,
received after the Closing Date through the sale or licensing of interests in
undeveloped Hydrocarbon Interests and/or seismic data.
"NSLE Limit" shall have the meaning set forth in Section 9.22(a).
"New Mortgage" shall mean, collectively, the "New Mortgage"
referred to in item 13 of Exhibit D and any other mortgages and supplements
executed pursuant to Section 8.09 (a) hereof.
"Notes" shall mean the Notes provided for by Section 2.06,
together with any and all renewals, extensions for any period, increases,
rearrangements, substitutions or modifications thereof.
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"Oil and Gas Properties" shall mean Hydrocarbon Interests; the
Properties now or hereafter pooled or unitized with Hydrocarbon Interests; all
presently existing or future unitization, pooling agreements and declarations of
pooled units and the units created thereby (including without limitation all
units created under orders, regulations and rules of any Governmental Authority)
which may affect all or any portion of the Hydrocarbon Interests; all operating
agreements, contracts and other agreements which relate to any of the
Hydrocarbon Interests or the production, sale, purchase, exchange or processing
of Hydrocarbons from or attributable to such Hydrocarbon Interests; all
Hydrocarbons in and under and which may be produced and saved or attributable to
the Hydrocarbon Interests, including all oil in tanks, the lands covered thereby
and all rents, issues, profits, proceeds, products, revenues and other incomes
from or attributable to the Hydrocarbon Interests; all tenements, hereditaments,
appurtenances and Properties in any manner appertaining, belonging, affixed or
incidental to the Hydrocarbon Interests; and all Properties, rights, titles,
interests and estates described or referred to above, including any and all
Property, real or personal, now owned or hereinafter acquired and situated upon,
used, held for use or useful in connection with the operating, working or
development of any of such Hydrocarbon Interests or Property (excluding drilling
rigs, automotive equipment or other personal property which may be on such
premises for the purpose of drilling a well or for other similar temporary uses)
and including any and all oil ▇▇▇▇▇, gas ▇▇▇▇▇, injection ▇▇▇▇▇ or other ▇▇▇▇▇,
buildings, structures, fuel separators, liquid extraction plants, plant
compressors, pumps, pumping units, field gathering systems, tanks and tank
batteries, fixtures, valves, fittings, machinery and parts, engines, boilers,
meters, apparatus, appliances, tools, implements, cables, wires, towers, casing,
tubing and rods, similar equipment, surface leases, rights-of-way, easements and
servitudes together with all additions, substitutions, replacements, accessions
and attachments to any and all of the foregoing.
"Other Taxes" shall have the meaning assigned such term in Section
4.06(b).
"Partners" shall mean the General Partner, ▇▇▇▇▇▇▇ Holdings I, LLC
and ▇▇▇▇▇▇▇ Holdings II, LLC.
"Partnership Agreement" shall mean the written partnership
agreement of the Borrower among the Partners dated December 30, 1997, as amended
from time to time.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions.
"PDNP Reserves" shall mean proved, developed, non-producing
Hydrocarbon reserves, as determined in conformity with the guidelines in effect
from time to time as promulgated by the Society of Petroleum Engineers or its
successor association.
"PDP Reserves" shall mean proved, developed, producing Hydrocarbon
reserves, as determined in conformity with the guidelines in effect from time to
time as promulgated by the Society of Petroleum Engineers or its successor
association.
"Percentage Share" shall mean the percentage of the Aggregate
Commitments to be provided by a Lender under this Agreement as indicated on
Annex I hereto, as modified from
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time to time to reflect any assignments permitted by Section 12.06(b) or (c) and
any reallocation effected pursuant to Section 8.13 hereof.
"Person" shall mean any individual, corporation, company,
voluntary association, partnership, joint venture, trust, limited liability
company, unincorporated organization or government or any agency,
instrumentality or political subdivision thereof, or any other form of entity.
"Plan" shall mean any employee pension benefit plan, as defined in
Section 3(2) of ERISA, which (i) is currently or hereafter sponsored, maintained
or contributed to by the Borrower, any Subsidiary or an ERISA Affiliate or (ii)
was at any time during the preceding six calendar years sponsored, maintained or
contributed to, by the Borrower, any Subsidiary or an ERISA Affiliate.
"Post-Default Rate" shall mean, in respect of any principal of any
Loan or any other amount payable by the Borrower under this Agreement or any
Note, a rate per annum during the period commencing on the date of an Event of
Default until such amount is paid in full or all Events of Default are cured or
waived equal to 2% per annum above the Base Rate as in effect from time to time
plus the Applicable Margin (if any), but in no event to exceed the Highest
Lawful Rate provided that, for a Eurodollar Loan, the "Post-Default Rate" for
such principal shall be, for the period commencing on the date of an Event of
Default and ending on the earlier to occur of the last day of the Interest
Period therefor or the date all Events of Default are cured or waived, 2% per
annum above the interest rate for such Loan as provided in Section 3.02(ii), but
in no event to exceed the Highest Lawful Rate.
"Prime Rate" shall mean the rate of interest from time to time
announced publicly by the Agent at the Principal Office as its prime commercial
lending rate. Such rate is set by the Agent as a general reference rate of
interest, taking into account such factors as the Agent may deem appropriate, it
being understood that many of the Agent's commercial or other loans are priced
in relation to such rate, that it is not necessarily the lowest or best rate
actually charged to any customer and that the Agent may make various commercial
or other loans at rates of interest having no relationship to such rate.
"Principal Office" shall mean the principal office of the Agent,
presently located at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
"Prior Mortgage" shall have the meaning assigned to such term in
the Mortgage.
"Property" shall mean any interest in any kind of property or
asset, whether real, personal or mixed, or tangible or intangible.
"Proved Reserves" means PDP, PDNP and PUD Reserves.
"PUD Reserves" shall mean proved, undeveloped Hydrocarbon
reserves, as determined in conformity with the guidelines in effect from time to
time as promulgated by the Society of Petroleum Engineers or its successor
association.
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"PV7%" shall mean the present value, determined utilizing the SCI
Lenders' price forecast and applying the SCI Lenders reasonable adjustments
(positive or negative) to the engineering analysis prepared by ▇▇▇▇▇▇▇
Exploration's independent reserve engineers or in-house reserve engineers,
whichever the case may be, of the forecasted future cash flow attributable to
the subject Hydrocarbon reserves, discounted at an annual rate of 7%.
"Quarterly Dates" shall mean the last day of each March, June,
September, and December, in each year, the first of which shall be March 31,
2000; provided, however, that if any such day is not a Business Day, such
Quarterly Date shall be the next succeeding Business Day.
"Regulation D" shall mean Regulation D of the Board of Governors
of the Federal Reserve System (or any successor), as the same may be amended or
supplemented from time to time.
"Regulatory Change" shall mean, with respect to any Lender, any
change after the Closing Date in any Governmental Requirement (including
Regulation D) or the adoption or making after such date of any interpretations,
directives or requests applying to a class of lenders (including such Lender or
its Applicable Lending Office) of or under any Governmental Requirement (whether
or not having the force of law) by any Governmental Authority charged with the
interpretation or administration thereof.
"Released Claims" shall mean any and all claims (including without
limitation any liabilities, damages, demands and causes of action arising
therefrom), whether (a) at law or in equity, (b) on the alleged commission of a
tort, (c) on the alleged breach (or anticipatory breach or repudiation) of any
contract, duty, or warranty (whether oral or written, express or implied), (d)
on the alleged violation of any statute, tariff, or regulation (whether
promulgated by the United States, any state thereof, any foreign state or
country, or any other governmental agency or entity, wherever located), or (e)
on any other factual, legal or equitable theory, including, without limitation,
any claim for damages of any type or nature, for injunctive or other relief, for
attorneys' fees, interest or any other liability whatsoever on any theory,
including without limitation any loss, cost or damage in connection with or
based upon "lender liability", unfair dealing, duress, coercion, control or
undue influence, extortion or commercial bribery, breach of an implied covenant
or duty of good faith and fair dealing, material misrepresentation or omission,
overreaching, unconscionability, conflict of interest, bad faith, malpractice,
disparate bargaining position, detrimental reliance, promissory estoppel,
estoppel by deed, waiver, laches, or any other equitable theory, equitable
subordination, breach of fiduciary duty or any other duty, or tortious
inducement to commit such breach, tortious interference with contract or
prospective business relations, negligent performance of contractual
obligations, or other theories of negligence, negligent or intentional
infliction of emotional distress, slander, libel, other defamation, fraudulent
transfer, conversion, trespass to (or clouding the title of) property, usury,
violations of the Racketeer Influenced and Corrupt Organizations Act, deceptive
trade practices, conspiracy, or any theory of liability as partners or joint
venturers, that any Releasing Party may have as of the date hereof against any
Released Party with respect to the Lending Relationship.
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"Released Party" shall mean each of the Agent, the Lenders and
their respective predecessors, successors, assigns, directors, officers,
partners, employees, agents, attorneys, principals and Affiliates and all other
Persons liable or who might be claimed to be liable on their behalf
(collectively, the "Released Parties").
"Releasing Party" shall mean each of the Borrower and the
Guarantors and their respective predecessors, successors, assigns, directors,
officers, partners, employees, agents, attorneys, principals, Affiliates and all
other Persons who might have a claim against any Released Party (collectively,
the "Releasing Parties").
"Required Payment" shall have the meaning assigned such term in
Section 4.04.
"Reserve Report" shall mean a report, in form satisfactory to the
Agent, setting forth, as of the dates set forth in Section 8.07(a) and (b) (or
such other date in the event of an unscheduled redetermination); (i) the proved
oil and gas reserves attributable to the Borrower's and its Subsidiaries'
Hydrocarbon Interests together with a projection of the rate of production and
future net income, taxes, operating expenses and capital expenditures with
respect thereto as of such date, based upon the pricing assumptions consistent
with SEC reporting requirements at the time (or other pricing provided by the
Agent) and (ii) such other information as the Agent may reasonably request. The
term "Reserve Report" shall also include the Initial Reserve Report, the
supplemental Reserve Reports described in Section 8.07(a), and the information
to be provided by the Borrower of each year pursuant to Section 8.07(c).
"Responsible Officer" shall mean, as to any Person, the Chief
Executive Officer, the President or any Vice President of such Person and the
Chief Financial Officer of such Person. Unless otherwise specified, all
references to a Responsible Officer herein shall mean a Responsible Officer of
the Borrower.
"Revolving Credit Termination Date" shall mean, unless the
Commitments are sooner terminated pursuant to Sections 2.03(b) or 10.02 hereof,
December 31, 2002.
"Risk Adjusted Proved Reserve Value" or "RAPRV" means the lesser
of (i) 100% of the PV7% of the Borrower's and any Guarantor's PDP Reserves, and
(ii) the sum of 65% of the PV7% of the Borrower's and any Guarantor's PDP
Reserves, plus 43% of the PV7% of the Borrower's and any Guarantor's PDNP
Reserves, plus 33% of the PV7% of the Borrower's and any Guarantor's PUD
Reserves. For purposes of this definition only Proved Reserves subject to a
Standard Mortgage shall be included.
"Scheduled Asset Valuation Date" means each March 30th and
September 30th following the First Asset Valuation Date.
"Scheduled Borrowing Base Redetermination Date" shall have the
meaning assigned such term in Section 2.08(d).
"SCI Assignment" shall mean that certain Partial Assignment of
Notes between BMO, Soc-Gen and SCI of even date herewith.
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"SCI Fee Letter" shall mean that certain letter agreement from SCI
to the Borrower dated of even date with this Agreement concerning certain fees
in connection with this Agreement and any agreements or instruments executed in
connection therewith, as the same may be amended or replaced from time to time.
"SCI Lenders" means SCI and its successors and assigns.
"SCI Majority Lenders" shall mean, at any time while no Loans are
outstanding, SCI Lenders having at least sixty-six and two-thirds percent
(66-2/3%) of the Aggregate Commitments of the SCI Lenders and, at any time while
Loans are outstanding, SCI Lenders holding at least sixty-six and two-thirds
percent (66-2/3%) of the outstanding aggregate principal amount of the portion
of the Loans allocable to the SCI Lenders (without regard to any sale by a SCI
Lender of a participation in any Loan under Section 12.06(c)).
"SEC" shall mean the Securities and Exchange Commission or any
successor Governmental Authority.
"Securities Purchase Agreement" shall mean that certain Securities
Purchase Agreement dated August 20, 1998 among ▇▇▇▇▇▇▇ Exploration, ECT Merchant
and JEDI-II, as agent for such purchasers regarding the Subordinated Debt.
"Soc-Gen Fee Letter" shall mean that certain letter agreement from
Soc-Gen to the Borrower dated of even date with this Agreement concerning
certain fees in connection with this Agreement and any agreements or instruments
executed in connection therewith, as the same may be amended or replaced from
time to time.
"Special Entity" shall mean any joint venture, limited liability
company or partnership, general or limited partnership or any other type of
partnership or company other than a corporation in which a Person or one or more
of its other Subsidiaries is a member, owner, partner or joint venturer and
owns, directly or indirectly, at least a majority of the equity of such entity
or controls such entity, but excluding any tax partnerships that are not
classified as partnerships under state law. For purposes of this definition, any
Person which owns directly or indirectly an equity investment in another Person
which allows the first Person to manage or elect managers who manage the normal
activities of such second Person will be deemed to "control" such second Person
(e.g. a sole general partner controls a limited partnership).
"Standard Mortgage" shall mean, collectively, the "Standard
Mortgage" referred to in item 12 of Exhibit D hereto and any other mortgages and
supplements executed pursuant to Section 8.09 (b) hereof.
"Subordinated Debt" shall mean the Debt in the principal amount
not to exceed $40,000,000 (plus interest paid in kind through December 31, 2000
pursuant to Section 9.02 of the Indenture or otherwise satisfied through payment
of the Term ORRI) of ▇▇▇▇▇▇▇ Exploration incurred under the Indenture and
expressly subordinated to the Indebtedness pursuant to the Subordination
Agreement.
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"Subordination Agreement" shall mean that certain Intercreditor
and Subordination Agreement dated as of August 20, 1998, and from time to time
amended, among ENA, JEDI-II and Agent, for the benefit of the Lenders.
"Subsidiary" shall mean (i) any corporation of which at least a
majority of the outstanding shares of stock having by the terms thereof ordinary
voting power to elect a majority of the board of directors of such corporation
(irrespective of whether or not at the time stock of any other class or classes
of such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time directly or indirectly owned or
controlled by a Person or one or more of its Subsidiaries or by a Person and one
or more of its Subsidiaries and (ii) any Special Entity. Unless otherwise
indicated herein, each reference to the term "Subsidiary" shall mean a
Subsidiary of the Borrower. Quest Resources L.L.C. and Venture Acquisitions L.P.
shall not be considered Subsidiaries of Borrower or ▇▇▇▇▇▇▇ Exploration.
"Tangible Net Worth" shall mean, as at any date, the sum of the
following for ▇▇▇▇▇▇▇ Exploration and its Consolidated Subsidiaries determined
(without duplication) in accordance with GAAP (determined without regard to any
write up or write down resulting from any changes in GAAP subsequent to
September 30, 1999):
(i) the amount of preferred stock and common stock at
par plus the amount of surplus of ▇▇▇▇▇▇▇
Exploration, plus
(ii) the retained earnings (or, in the case of retained
earnings deficit, minus the amount of such deficit),
minus
(iii) the sum of the following: cost of treasury shares
and the book value of all assets of ▇▇▇▇▇▇▇
Exploration and its Consolidated Subsidiaries which
should be classified as intangibles (without
duplication of deductions in respect of items
already deducted in arriving at surplus and retained
earnings) but in any event including as such
intangibles the following: goodwill, research and
development costs, trademarks, trade names,
copyrights, patents and franchises, unamortized debt
discount and expense, all reserves and any writeup
in the book value of assets resulting from a
revaluation thereof.
"Target Asset Value" has the meaning assigned to it in Section
8.13.
"Taxes" shall have the meaning assigned such term in Section
4.06(a).
"Term ORRI" means the term overriding royalty interest created in
favor of the holders of the Subordinated Debt pursuant to a Conveyance of
Adjustable Term Overriding Royalty Interest between Borrower, ECT Merchant and
JEDI-II.
"Trade Payables" shall mean customary trade payables incurred in
the ordinary course of business.
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"Type" shall mean, with respect to any Loan, a Base Rate Loan or a
Eurodollar Loan.
"Wholly-Owned Subsidiary" shall mean, as to a Person, any
Subsidiary of which all of the outstanding shares of stock (or other ownership
interests) having by the terms thereof ordinary voting power to elect the board
of directors (or other managing persons) of such entity, other than directors'
qualifying shares, are owned or controlled by such Person or one or more of the
Wholly-Owned Subsidiaries or by such Person and one or more of the Wholly-Owned
Subsidiaries.
Section 1.03 Accounting Terms and Determinations. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
determinations with respect to accounting matters hereunder shall be made, and
all financial statements and certificates and reports as to financial matters
required to be furnished to the Agent or the Lenders hereunder shall be
prepared, in accordance with GAAP, applied on a basis consistent with the
audited financial statements of the Borrower referred to in Section 7.02 (except
for changes concurred with by the Borrower's independent public accountants).
ARTICLE 2
COMMITMENTS
Section 2.01 Loans.
(a) Loans. Subject to the SCI Assignment, each Lender
severally agrees, on the terms of this Agreement, to make Loans to
the Borrower during the period from and including (i) the Closing
Date or (ii) such later date that such Lender becomes a party to
this Agreement as provided in Section 12.06(b), to but excluding,
the Revolving Credit Termination Date in an aggregate principal
amount at any one time outstanding up to but not exceeding the
amount of such Lender's Commitment as then in effect; provided,
however, that the aggregate principal amount of all such Loans by
all Lenders hereunder at any one time outstanding shall not exceed
the Aggregate Commitments; and provided further, that the
BMO/Soc-Gen Lenders shall not be obligated to make any such Loans
other than the initial Loans. Subject to the terms of this
Agreement, during the period from the Closing Date to (i) the
later to occur of the First Borrowing Base Determination Date and
the date on which the outstanding Loans are less than or equal to
the Borrowing Base, no principal amount of the Loans which are
paid by Borrower may be reborrowed, and (ii) at any time
thereafter to but excluding, the Revolving Credit Termination
Date, the Borrower may borrow, repay and reborrow the amount
described in this Section 2.01(a). The initial Loans hereunder
shall be a rearrangement of the principal balance outstanding on
the Prior Notes (as adjusted pursuant to the SCI Assignment) which
shall be concurrently therewith rearranged as an advance under the
Notes. Each of the SCI Lenders and ▇▇▇▇▇▇▇ Exploration may, at its
option, call for an Equity Conversion, pursuant and subject to the
terms and provisions set forth in the Equity Conversion Agreement
without the consent of the BMO/Soc-Gen Lenders.
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(b) Intentionally Left Blank
(c) Limitation on Types of Loans. Subject to the other
terms and provisions of this Agreement, at the option of the
Borrower, the Loans may be Base Rate Loans or Eurodollar Loans;
provided that, without the prior written consent of the Majority
Lenders, no more than six (6) Eurodollar Loans may be outstanding
at any time from any Lender.
Section 2.02 Borrowings, Continuations and Conversions.
(a) Borrowings. The Borrower shall give the Agent (which
shall promptly notify the Lenders) advance notice as hereinafter
provided of each borrowing hereunder, which shall specify the
aggregate amount of such borrowing, the Type and the date (which
shall be a Business Day) of the Loans to be borrowed and (in the
case of Eurodollar Loans) the duration of the Interest Period
therefor.
(b) Minimum Amounts. If the initial borrowing consists in
whole or in part of Eurodollar Loans, such Eurodollar Loans shall
be in amounts of at least $1,000,000 or any whole multiple of
$1,000,000 in excess thereof. Eurodollar Loans, at Borrower's
election, shall have a maturity date of 30, 60 or 90 days.
(c) Notices. All borrowings, continuations and conversions
shall require advance written notice to the Agent (which shall
promptly notify the Lenders) in the form of Exhibit B hereto (or
telephonic notice promptly confirmed by such a written notice),
which in each case shall be irrevocable, from the Borrower to be
received by the Agent not later than 11:00 a.m. Houston, Texas
time at least one Business Day prior to the date of each Base Rate
Loan borrowing and three Business Days prior to the date of each
Eurodollar Loan borrowing, continuation or conversion; provided,
however, for Base Rate Loans, Borrower may request a same day
advance of up to $5,000,000 if the request is received by the
Agent not later than 11:00 a.m. on such day. Without in any way
limiting the Borrower's obligation to confirm in writing any
telephonic notice, the Agent may act without liability upon the
basis of telephonic notice believed by the Agent in good faith to
be from the Borrower prior to receipt of written confirmation. In
each such case, the Borrower hereby waives the right to dispute
the Agent's record of the terms of such telephonic notice except
in the case of gross negligence or willful misconduct by the
Agent.
(d) Continuation Options. Subject to the provisions made in
this Section 2.02(d), the Borrower may elect to continue all or
any part of any Eurodollar Loan beyond the expiration of the then
current Interest Period relating thereto by giving advance notice
as provided in Section 2.02(c) to the Agent (which shall promptly
notify the Lenders) of such election, specifying the amount of
such Loan to be continued and the Interest Period therefor. In the
absence of such a timely and proper election, the Borrower shall
be deemed to have elected to convert such Eurodollar Loan to a
Base Rate Loan pursuant to Section 2.02(e). Unless the Borrowing
Base is not equal to or greater than the outstanding
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principal amount of the Loans, all or any part of any Eurodollar
Loan may be continued as provided herein, provided that (i) any
continuation of any such Loan shall be (as to each Loan as
continued for an applicable Interest Period) in amounts of at
least $1,000,000 or any whole multiple of $1,000,000 in excess
thereof and (ii) no Default shall have occurred and be continuing.
If a Default shall have occurred and be continuing, each
Eurodollar Loan shall be converted to a Base Rate Loan on the last
day of the Interest Period applicable thereto.
(e) Conversion Options. The Borrower may elect to convert
all or any part of any Eurodollar Loan on the last day of the then
current Interest Period relating thereto to a Base Rate Loan by
giving advance notice to the Agent (which shall promptly notify
the Lenders) of such election. Subject to the provisions made in
this Section 2.02(e), the Borrower may elect to convert all or any
part of any Base Rate Loan at any time and from time to time to a
Eurodollar Loan by giving advance notice as provided in Section
2.02(c) to the Agent (which shall promptly notify the Lenders) of
such election. Unless the Borrowing Base is not equal to or
greater than the outstanding principal amount of the Loans, all or
any part of any outstanding Loan may be converted as provided
herein, provided that (i) any conversion of any Base Rate Loan
into a Eurodollar Loan shall be (as to each such Loan into which
there is a conversion for an applicable Interest Period) in
amounts of at least $1,000,000 or any whole multiple of $1,000,000
in excess thereof and (ii) no Default shall have occurred and be
continuing. If a Default shall have occurred and be continuing, no
Base Rate Loan may be converted into a Eurodollar Loan.
(f) Advances. Not later than 11:00 a.m. Houston, Texas time
on the date specified for each borrowing hereunder, each Lender
shall make available the amount of the Loan to be made by it on
such date to the Agent, to an account which the Agent shall
specify, in immediately available funds for the account of the
Borrower. The amounts so received by the Agent shall, subject to
the terms and conditions of this Agreement, be made available to
the Borrower by depositing the same, in immediately available
funds, in an account of the Borrower, designated by the Borrower
and maintained at the Principal Office.
Section 2.03 Changes of Commitments.
(a) Prior to the Covenant Release Date, the Aggregate
Commitments shall at all times be equal to the Aggregate Maximum
Credit Amounts, after which date the Aggregate Commitments shall
be equal to the lesser of (i) the Aggregate Maximum Credit Amounts
or (ii) the Borrowing Base as determined from time to time.
(b) The Borrower shall have the right to terminate or to
reduce the amount of the Aggregate Maximum Credit Amounts at any
time or from time to time upon not less than three (3) Business
Days' prior notice to the Agent (which shall promptly notify the
Lenders) of each such termination or reduction, which notice shall
specify the effective date thereof and the amount of any such
reduction
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(which shall not be less than $5,000,000 or any whole multiple of
$1,000,000 in excess thereof) and shall be irrevocable and
effective only upon receipt by the Agent. Any such reduction in
the Aggregate Maximum Credit Amounts shall first reduce the
Maximum Credit Amounts of the BMO/Soc-Gen Lenders pro rata until
the Maximum Credit Amounts of the BMO/Soc-Gen Lenders have been
reduced to zero, and then to reduce the Maximum Credit Amounts of
the SCI Lenders.
(c) The Aggregate Maximum Credit Amounts once terminated or
reduced may not be reinstated.
Section 2.04 Fees.
(a) Commitment Fee. The Borrower shall pay to the Agent (to
be allocated to the SCI Lenders) a commitment fee on the daily
average unused amount of the Aggregate Commitments for the period
from and including the Closing Date up to but excluding the
earlier of the date the Aggregate Commitments are terminated or
the Revolving Credit Termination Date at a rate per annum equal to
5/8 of 1%. Accrued commitment fees shall be payable quarterly in
arrears on each Quarterly Date and on the earlier of the date the
Aggregate Commitments are terminated or the Revolving Credit
Termination Date.
(b) The Borrower shall pay to the SCI Lenders for their
account such other fees as are set forth in the SCI Fee Letter on
the dates specified therein to the extent not paid prior to the
Closing Date.
(c) The Borrower shall pay to the Agent for its account
such other fees as are set forth in the Agent's Fee Letter on the
dates specified therein to the extent not paid prior to the
Closing Date.
Section 2.05 Several Obligations. The failure of any Lender to
make any Loan to be made by it on the date specified therefor shall not relieve
any other Lender of its obligation to make its Loan or provide funds on such
date, but no Lender shall be responsible for the failure of any other Lender to
make a Loan to be made by such other Lender or to provide funds to be provided
by such other Lender.
Section 2.06 Notes. The Loans made by each Lender shall be
evidenced by a single promissory note of the Borrower in substantially the form
of Exhibit A hereto, dated (i) the Closing Date or (ii) the effective date of an
Assignment pursuant to Sections 12.06(b) and (c), payable to the order of such
Lender in a principal amount equal to its Maximum Credit Amount as in effect and
otherwise duly completed and such substitute Notes as required by Section
12.06(d). The initial advance under the Notes shall be the amount of the
principal balance on each Lender's Prior Note (as adjusted pursuant to the SCI
Assignment) plus $2,000,000.00 advanced by SCI. The date, amount, Type, interest
rate and Interest Period of each Loan made by each Lender, and all payments made
on account of the principal thereof, shall be recorded by such Lender on its
books for its Note, and, prior to any transfer, may be
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endorsed by such Lender on a schedule attached to such Note or any continuation
thereof or on any separate record maintained by such Lender. Failure to make any
such notation or to attach a schedule shall not affect any Lender's or the
Borrower's rights or obligations in respect of such Loans or affect the validity
of such transfer by any Lender of its Note.
Section 2.07 Prepayments.
(a) The Borrower may prepay the Base Rate Loans upon not
less than one (1) Business Day's prior notice to the Agent (which
shall promptly notify the Lenders), which notice shall specify the
prepayment date (which shall be a Business Day) and the amount of
the prepayment (which shall be at least $1,000,000 or the
remaining aggregate principal balance outstanding on the Notes)
and shall be irrevocable and effective only upon receipt by the
Agent, provided that interest on the principal prepaid, accrued to
the prepayment date, shall be paid on the prepayment date. The
Borrower may prepay Eurodollar Loans on the same condition as for
Base Rate Loans and in addition such prepayments of Eurodollar
Loans shall be subject to the terms of Section 5.05.
(b) If, after giving effect to any termination or reduction
of the Aggregate Maximum Credit Amounts pursuant to Section
2.03(a) or (b), the outstanding aggregate principal amount of the
Loans exceeds the Aggregate Maximum Credit Amounts, the Borrower
shall prepay the Loans on the date of such termination or
reduction in an aggregate principal amount equal to the excess,
together with interest on the principal amount paid accrued to the
date of such prepayment.
(c) Upon any redetermination of the amount of the Borrowing
Base in accordance with Section 2.08, if the redetermined
Borrowing Base is less than the aggregate outstanding principal
amount of the Loans, then within ninety (90) days (or such shorter
period as hereinafter provided) of receipt of written notice of
the redetermined Borrowing Base, the Borrower shall prepay the
Loans in an aggregate principal amount equal to such excess,
together with interest on the principal amount paid accrued to the
date of such prepayment, provided however, that if the Borrowing
Base is less than the outstanding principal amount of the Loans
following the first Borrowing Base determination, such required
prepayment shall be made on or before thirty 30 days after such
first Borrowing Base determination, as applicable, if the amount
of the required payment equals or exceeds an amount equal to 10%
of the redetermined Borrowing Base.
(d) Prepayments permitted or required under this Section
2.07 shall be without premium or penalty, except as required under
Section 5.05 for prepayment of Eurodollar Loans. Prior to the
First Borrowing Base Determination Date, all prepayments on the
Loans shall reduce the Aggregate Maximum Credit Amounts. Any
payments on the Loans made hereunder shall first be applied to
reduce the outstanding Loans of the BMO/Soc-Gen Lenders until the
outstanding Loans of the BMO/Soc-Gen Lenders have been reduced to
zero, and then to reduce the outstanding Loans of the SCI Lenders.
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(e) Except as otherwise provided in Section 2.01(a), any
prepayments on the Loans may, subject to the Equity Conversion
Agreement, be reborrowed subject to the then effective Aggregate
Commitments.
(f) Convertible Amounts (as defined in the Equity
Conversion Agreement) can only be prepaid or repaid in cash upon
approval of the BMO/Soc-Gen Lenders.
(g) Unless otherwise specified in this Section 2.07, all
prepayments under this Section 2.07 shall be allocated among the
Lenders by the Agent in accordance with the SCI Assignment.
Section 2.08 Borrowing Base.
(a) The Borrowing Base shall be determined in accordance
with Section 2.08(b) by the Agent with the concurrence of all of
the Lenders and is subject to redetermination in accordance with
Section 2.08(d). The first determination of the Borrowing Base
shall be made on the First Borrowing Base Determination Date. Upon
any determination or redetermination of the Borrowing Base, such
determination shall remain in effect until the next successive
Borrowing Base Redetermination Date. "Borrowing Base
Redetermination Date" shall mean the date that the Borrowing Base
as determined or redetermined becomes effective subject to the
notice requirements specified in Section 2.08(e) both for the
scheduled determination, scheduled redeterminations and
unscheduled redeterminations. After the First Borrowing Base
Determination Date, so long as any of the Commitments are in
effect or any Loans are outstanding hereunder, this facility shall
be governed by the then effective Borrowing Base.
(b) Upon receipt of the reports required by Section 8.07
and such other reports, data and supplemental information as may
from time to time be reasonably requested by the Agent (the
"Engineering Reports"), the Agent will determine or redetermine,
as appropriate, the Borrowing Base and shall take into
consideration, among other things, liquidity, market interest
rates, other Debt, Trade Payables, general and administrative
expenses and such other factors as the Lenders shall deem
material. Such determination or redetermination will be in
accordance with its normal and customary procedures for evaluating
oil and gas reserves and other related assets as such exist at
that particular time. The Agent, in its sole discretion, may make
adjustments to the rates, volumes and prices and other assumptions
set forth therein in accordance with its normal and customary
procedures for evaluating oil and gas reserves and other related
assets as such exist at that particular time. The Agent shall
propose to the Lenders a Borrowing Base within ten (10) days
following receipt by the Agent and the Lenders of the Engineering
Reports in a timely and complete manner. After having received
notice of such proposal by the Agent, the Lenders shall have five
(5) days to agree or disagree with such proposal. If at the end of
the 5 days, any Lender has not communicated its approval or
disapproval, such silence shall be deemed to be an
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approval. If the Lenders have not approved within 5 days, the
Lenders shall, within a reasonable period of time, agree on a new
Borrowing Base and if no such agreement is reached, the new
Borrowing Base shall be the lowest calculated by the BMO/Soc-Gen
Majority Lenders or the SCI Majority Lenders. The Agent and all of
the Lenders must approve the initial Borrowing Base and any
increase in the Borrowing Base. The Majority Lenders (one of which
must be the Agent) shall be required to approve a continuation or
decrease in any Borrowing Base.
(c) The Agent may exclude any Oil and Gas Property or
portion of production therefrom or any income from any other
Property from the Borrowing Base, at any time, because title
information is not reasonably satisfactory, such Property is not
Mortgaged Property or such Property is not assignable. No Property
of the Borrower subject to the New Mortgage nor any production or
income therefrom shall be included in the Borrowing Base until
such time as an amendment or supplement to the New Mortgage in
form satisfactory to the Agent is filed of record, which shall
contain with respect to such Property such representations,
warranties and covenants as to title, defense of title, revenue
and cost bearing interest, rentals paid and leases in effect, and
such other provisions as are contained in the Standard Mortgage,
as the Agent may request.
(d) So long as any of the Commitments are in effect and
until payment in full of all Loans hereunder, on the First
Borrowing Base Determination Date and on or around the 30th
calendar day of each March and September, thereafter (each being a
"Scheduled Borrowing Base Redetermination Date"), the Lenders
shall determine or redetermine, as appropriate, the amount of the
Borrowing Base in accordance with Section 2.08(b). In addition,
each of the Majority Lenders and the Borrower may initiate a
redetermination of the Borrowing Base during any consecutive
twelve (12) month period after the First Borrowing Base
Determination Date by specifying in writing the date on which such
redetermination is to occur, and Borrower may initiate the initial
determination of the Borrowing Base at any time prior to March 30,
2002, by specifying in writing the date on which such
determination is to occur.
(e) The Agent shall promptly notify in writing the Borrower
and the Lenders of the Borrowing Base as determined or
redetermined. Any determination of the Borrowing Base shall not be
in effect until written notice is received by the Borrower.
Section 2.09 Lending Offices. The Loans of each Type made by each
Lender shall be made and maintained at such Lender's Applicable Lending Office
for Loans of such Type.
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ARTICLE 3
PAYMENTS OF PRINCIPAL AND INTEREST
Section 3.01 Repayment of Loans. On the Revolving Credit
Termination Date the Borrower shall repay the outstanding aggregate principal
and accrued and unpaid interest under the Notes.
Section 3.02 Interest. The Borrower will pay to the Agent, for the
account of each Lender, interest on the unpaid principal amount of each Loan
made by such Lender for the period commencing on the date such Loan is made to
but excluding the date such Loan shall be paid in full, at the following rates
per annum:
(i) if such a Loan is a Base Rate Loan, the Base Rate
(as in effect from time to time) plus the Applicable
Margin (as in effect from time to time), but in no
event to exceed the Highest Lawful Rate; and
(ii) if such a Loan is a Eurodollar Loan, for each
Interest Period (or portion thereof) relating
thereto, the Eurodollar Rate for such Loan plus the
Applicable Margin (as in effect from time to time),
but in no event to exceed the Highest Lawful Rate.
Notwithstanding the foregoing, the Borrower will pay to the Agent, for the
account of each Lender interest at the applicable Post-Default Rate on any
principal of any Loan made by such Lender, and (to the fullest extent permitted
by law) on any other amount payable by the Borrower hereunder, under any Loan
Document or under any Note held by such Lender to or for account of such Lender,
for the period commencing on the date of an Event of Default until the same is
paid in full or all such Events of Default are cured or waived.
Accrued interest on Base Rate Loans shall be payable on the last
day of each calendar month, and accrued interest on each Eurodollar Loan shall
be payable on the last day of the Interest Period therefor and, if such Interest
Period is longer than one month at one-month intervals following the first day
of each Interest Period, except that interest payable at the Post-Default Rate
shall be payable from time to time on demand and interest on any Eurodollar Loan
that is converted into a Base Rate Loan (pursuant to Section 5.04) shall be
payable on the date of conversion (but only to the extent so converted).
Promptly after the determination of any interest rate provided for
herein or any change therein, the Agent shall notify the Lenders to which such
interest is payable and the Borrower thereof. Each determination by the Agent of
an interest rate or fee hereunder shall be prima facie evidence of the amount
thereof.
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ARTICLE 4
PAYMENTS; PRO RATA TREATMENT; COMPUTATIONS; ETC.
Section 4.01 Payments. Except to the extent otherwise provided
herein, all payments of principal, interest and other amounts to be made by the
Borrower under the Loan Documents shall be made in Dollars, in immediately
available funds, to the Agent at such account as the Agent shall specify by
notice to the Borrower from time to time, not later than noon Houston, Texas
time on the date on which such payments shall become due (each such payment made
after such time on such due date to be deemed to have been made on the next
succeeding Business Day). Such payments shall be made without (to the fullest
extent permitted by applicable law) defense, set-off or counterclaim. Each
payment received by the Agent under this Agreement or any Note for account of a
Lender shall be paid promptly to such Lender in immediately available funds.
Except as provided in clause (iii) of the definition of "Interest Period", if
the due date of any payment under this Agreement or any Note would otherwise
fall on a day which is not a Business Day such date shall be extended to the
next succeeding Business Day and interest shall be payable for any principal so
extended for the period of such extension. At the time of each payment to the
Agent of any principal of or interest on any borrowing, the Borrower shall
notify the Agent of the Loans to which such payment shall apply. In the absence
of such notice the Agent may specify the Loans to which such payment shall
apply, but to the extent possible such payment or prepayment will be applied
first to the Loans comprised of Base Rate Loans.
Section 4.02 Pro Rata Treatment. Except to the extent as provided
in the SCI Assignment or as otherwise provided herein each Lender agrees that:
(i) each borrowing from the Lenders under Section 2.01 and each continuation and
conversion under Section 2.02 shall be made from the Lenders pro rata in
accordance with their Percentage Share, each payment of commitment fee or other
fees under Sections 2.04(a) and (b) shall be made for account of the Lenders pro
rata in accordance with their Percentage Share, and each termination or
reduction of the amount of the Aggregate Maximum Credit Amounts under Section
2.03(b) shall be applied to the Commitment of each Lender, pro rata according to
the amounts of its respective Commitment; (ii) each payment of principal of
Loans by the Borrower shall be made for account of the Lenders pro rata in
accordance with the respective unpaid principal amount of the Loans held by the
Lenders; and (iii) each payment of interest on Loans by the Borrower shall be
made for account of the Lenders pro rata in accordance with the amounts of
interest due and payable to the respective Lenders.
Section 4.03 Computations. Interest on Eurodollar Loans and fees
shall be computed on the basis of a year of 360 days and actual days elapsed
(including the first day but excluding the last day) occurring in the period for
which such interest is payable, unless such calculation would exceed the Highest
Lawful Rate, in which case interest shall be calculated on the per annum basis
of a year of 365 or 366 days, as the case may be. Interest on Base Rate Loans
shall be computed on the basis of a year of 365 or 366 days, as the case may be,
and actual days elapsed (including the first day but excluding the last day)
occurring in the period for which such interest is payable.
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Section 4.04 Non-receipt of Funds by the Agent. Unless the Agent
shall have been notified by a Lender or the Borrower prior to the date on which
such notifying party is scheduled to make payment to the Agent (in the case of a
Lender) of the proceeds of a Loan or (in the case of the Borrower) a payment to
the Agent for account of one or more of the Lenders hereunder (such payment
being herein called the "Required Payment"), which notice shall be effective
upon receipt, that it does not intend to make the Required Payment to the Agent,
the Agent may assume that the Required Payment has been made and may, in
reliance upon such assumption (but shall not be required to), make the amount
thereof available to the intended recipient(s) on such date and, if such Lender
or the Borrower (as the case may be) has not in fact made the Required Payment
to the Agent, the recipient(s) of such payment shall, on demand, repay to the
Agent the amount so made available together with interest thereon in respect of
each day during the period commencing on the date such amount was so made
available by the Agent until but excluding the date the Agent recovers such
amount at a rate per annum which, for any Lender as recipient, will be equal to
the Federal Funds Rate, and for the Borrower as recipient, will be equal to the
Base Rate plus the Applicable Margin.
Section 4.05 Set-off, Sharing of Payments, Etc.
(a) The Borrower agrees that, in addition to (and without
limitation of) any right of set-off, bankers' lien or counterclaim
a Lender may otherwise have, each Lender shall have the right and
be entitled (after consultation with the Agent), at its option, to
offset balances held by it or by any of its Affiliates for account
of the Borrower at any of its offices, in Dollars or in any other
currency, against any principal of or interest on any of such
Lender's Loans, or any other amount payable to such Lender
hereunder, which is not paid when due (regardless of whether such
balances are then due to the Borrower), in which case it shall
promptly notify the Borrower and the Agent thereof, provided that
such Lender's failure to give such notice shall not affect the
validity thereof.
(b) If any Lender shall obtain payment of any principal of
or interest on any Loan made by it to the Borrower under this
Agreement through the exercise of any right of set-off, banker's
lien or counterclaim or similar right or otherwise, and, as a
result of such payment, such Lender shall have received a greater
percentage of the principal or interest then due hereunder by the
Borrower to such Lender than the percentage received by any other
Lenders, it shall promptly (i) notify the Agent and each other
Lender thereof and (ii) purchase from such other Lenders
participations in (or, if and to the extent specified by such
Lender, direct interests in) the Loans made by such other Lenders
(or in interest due thereon, as the case may be) in such amounts,
and make such other adjustments from time to time as shall be
equitable, to the end that all the Lenders shall share the benefit
of such excess payment (net of any expenses which may be incurred
by such Lender in obtaining or preserving such excess payment) pro
rata in accordance with the unpaid principal and/or interest on
the Loans held by each of the Lenders. To such end all the Lenders
shall make appropriate adjustments among themselves (by the resale
of participations sold or otherwise) if such payment is rescinded
or must otherwise be restored. The Borrower agrees that any Lender
so purchasing a participation (or direct interest) in the Loans
made by
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other Lenders (or in interest due thereon, as the case may be) may
exercise all rights of set-off, banker's lien, counterclaim or
similar rights with respect to such participation as fully as if
such Lender were a direct holder of Loans in the amount of such
participation. Nothing contained herein shall require any Lender
to exercise any such right or shall affect the right of any Lender
to exercise, and retain the benefits of exercising, any such right
with respect to any other indebtedness or obligation of the
Borrower. If under any applicable bankruptcy, insolvency or other
similar law, any Lender receives a secured claim in lieu of a
set-off to which this Section 4.05 applies, such Lender shall, to
the extent practicable, exercise its rights in respect of such
secured claim in a manner consistent with the rights of the
Lenders entitled under this Section 4.05 to share the benefits of
any recovery on such secured claim.
Section 4.06 Taxes.
(a) Payments Free and Clear. Any and all payments by the
Borrower hereunder shall be made, in accordance with Section 4
.01, 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 and the Agent, taxes imposed on its
income, and franchise or similar taxes imposed on it, by (i) any
jurisdiction (or political subdivision thereof) of which the Agent
or such Lender, as the case may be, is a citizen or resident or in
which such Lender has an Applicable Lending Office, (ii) the
jurisdiction (or any political subdivision thereof) in which the
Agent or such Lender is organized, or (iii) any jurisdiction (or
political subdivision thereof) in which such Lender or the Agent
is presently doing business in which taxes are imposed solely as a
result of doing business in such jurisdiction (all such
non-excluded taxes, levies, imposts, deductions, charges,
withholdings and liabilities being hereinafter referred to as
"Taxes"). If the Borrower shall be required by law to deduct any
Taxes from or in respect of any sum payable hereunder to the
Lenders or the Agent (i) the sum payable shall be increased by the
amount necessary so that after making all required deductions
(including deductions applicable to additional sums payable under
this Section 4.06) such Lender or the Agent (as the case may be)
shall receive an amount equal to the sum it would have received
had no such deductions been made, (ii) the Borrower shall make
such deductions and (iii) the Borrower shall pay the full amount
deducted to the relevant taxing authority or other Governmental
Authority in accordance with applicable law.
(b) Other Taxes. In addition, to the fullest extent
permitted by applicable law, the Borrower agrees to pay any
present or future stamp or documentary taxes or any other excise
or property taxes, charges or similar levies that arise from any
payment made hereunder or from the execution, delivery or
registration of, or otherwise with respect to, this Agreement, any
Assignment or any other Loan Document (hereinafter referred to as
"Other Taxes").
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(c) INDEMNIFICATION. TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, THE BORROWER WILL INDEMNIFY EACH LENDER AND THE
AGENT FOR THE FULL AMOUNT OF TAXES AND OTHER TAXES (INCLUDING, BUT
NOT LIMITED TO, ANY TAXES OR OTHER TAXES IMPOSED BY ANY
GOVERNMENTAL AUTHORITY ON AMOUNTS PAYABLE UNDER THIS SECTION 4.06)
PAID BY SUCH LENDER OR THE AGENT (ON THEIR BEHALF OR ON BEHALF OF
ANY LENDER), AS THE CASE MAY BE, AND ANY LIABILITY (INCLUDING
PENALTIES, INTEREST AND EXPENSES) ARISING THEREFROM OR WITH
RESPECT THERETO, WHETHER OR NOT SUCH TAXES OR OTHER TAXES WERE
CORRECTLY OR LEGALLY ASSERTED UNLESS THE PAYMENT OF SUCH TAXES WAS
NOT CORRECTLY OR LEGALLY ASSERTED AND SUCH LENDER'S PAYMENT OF
SUCH TAXES OR OTHER TAXES WAS THE RESULT OF ITS GROSS NEGLIGENCE
OR WILLFUL MISCONDUCT. ANY PAYMENT PURSUANT TO SUCH
INDEMNIFICATION SHALL BE MADE WITHIN THIRTY (30) DAYS AFTER THE
DATE ANY LENDER OR THE AGENT, AS THE CASE MAY BE, MAKES WRITTEN
DEMAND THEREFOR. IF ANY LENDER OR THE AGENT RECEIVES A REFUND OR
CREDIT IN RESPECT OF ANY TAXES OR OTHER TAXES FOR WHICH SUCH
LENDER OR THE AGENT HAS RECEIVED PAYMENT FROM THE BORROWER IT
SHALL PROMPTLY NOTIFY THE BORROWER OF SUCH REFUND OR CREDIT AND
SHALL, IF NO DEFAULT HAS OCCURRED AND IS CONTINUING, WITHIN THIRTY
(30) DAYS AFTER RECEIPT OF A REQUEST BY THE BORROWER (OR PROMPTLY
UPON RECEIPT, IF THE BORROWER HAS REQUESTED APPLICATION FOR SUCH
REFUND OR CREDIT PURSUANT HERETO), PAY AN AMOUNT EQUAL TO SUCH
REFUND OR CREDIT TO THE BORROWER WITHOUT INTEREST (BUT WITH ANY
INTEREST SO REFUNDED OR CREDITED), PROVIDED THAT THE BORROWER,
UPON THE REQUEST OF SUCH LENDER OR THE AGENT, AGREES TO RETURN
SUCH REFUND OR CREDIT (PLUS PENALTIES, INTEREST OR OTHER CHARGES)
TO SUCH LENDER OR THE AGENT IN THE EVENT SUCH LENDER OR THE AGENT
IS REQUIRED TO REPAY SUCH REFUND OR CREDIT.
(d) Lender Representations.
(i) Each Lender represents that it is either (1) a
corporation or banking association organized under
the laws of the United States of America or any
state thereof or (2) it is entitled to complete
exemption from United States withholding tax imposed
on or with respect to any payments, including fees,
to be made to it pursuant to this Agreement (A)
under an applicable provision of a tax convention to
which the United States of America is a party or (B)
because it is acting through a branch, agency or
office in the
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United States of America and any payment to be
received by it hereunder is effectively connected
with a trade or business in the United States of
America. Each Lender that is not a corporation or
banking association organized under the laws of the
United States of America or any state thereof agrees
to provide to the Borrower and the Agent on the
Closing Date, or on the date of its delivery of the
Assignment pursuant to which it becomes a Lender,
and at such other times as required by United States
law or as the Borrower or the Agent shall reasonably
request, two accurate and complete original signed
copies of either (A) Internal Revenue Service Form
4224 (or successor form) certifying that all
payments to be made to it hereunder will be
effectively connected to a United States trade or
business (the "Form 4224 Certification") or (B)
Internal Revenue Service Form 1001 (or successor
form) certifying that it is entitled to the benefit
of a provision of a tax convention to which the
United States of America is a party which completely
exempts from United States withholding tax all
payments to be made to it hereunder (the "Form 1001
Certification"). In addition, each Lender agrees
that if it previously filed a Form 4224
Certification, it will deliver to the Borrower and
the Agent a new Form 4224 Certification prior to the
first payment date occurring in each of its
subsequent taxable years; and if it previously filed
a Form 1001 Certification, it will deliver to the
Borrower and the Agent a new certification prior to
the first payment date falling in the third year
following the previous filing of such certification.
Each Lender also agrees to deliver to the Borrower
and the Agent such other or supplemental forms as
may at any time be required as a result of changes
in applicable law or regulation in order to confirm
or maintain in effect its entitlement to exemption
from United States withholding tax on any payments
hereunder, provided that the circumstances of such
Lender at the relevant time and applicable laws
permit it to do so. If a Lender determines, as a
result of any change in either (i) a Governmental
Requirement or (ii) its circumstances, that it is
unable to submit any form or certificate that it is
obligated to submit pursuant to this Section 4.06,
or that it is required to withdraw or cancel any
such form or certificate previously submitted, it
shall promptly notify the Borrower and the Agent of
such fact. If a Lender is organized under the laws
of a jurisdiction outside the United States of
America, unless the Borrower and the Agent have
received a Form 1001 Certification or Form 4224
Certification satisfactory to them indicating that
all payments to be made to such Lender hereunder are
not subject to United States withholding tax, the
Borrower shall withhold taxes from such payments at
the applicable statutory rate. Each Lender agrees to
indemnify and hold harmless the Borrower or Agent,
as applicable,
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from any United States taxes, penalties, interest
and other expenses, costs and losses incurred or
payable by (i) the Agent as a result of such
Lender's failure to submit any form or certificate
that it is required to provide pursuant to this
Section 4.06 or (ii) the Borrower or the Agent as a
result of their reliance on any such form or
certificate which such Lender has provided to them
pursuant to this Section 4.06.
(ii) For any period with respect to which a Lender has
failed to provide the Borrower with the form
required pursuant to this Section 4.06, if any,
(other than if such failure is due to a change in a
Governmental Requirement occurring subsequent to the
date on which a form originally was required to be
provided), such Lender shall not be entitled to
indemnification under Section 4.06 with respect to
taxes imposed by the United States which taxes would
not have been imposed but for such failure to
provide such forms; provided, however, that should a
Lender, which is otherwise exempt from or subject to
a reduced rate of withholding tax becomes subject to
taxes because of its failure to deliver a form
required hereunder, the Borrower shall take such
steps as such Lender shall reasonably request to
assist such Lender to recover such taxes.
(iii) Any Lender claiming any additional amounts payable
pursuant to this Section 4.06 shall use reasonable
efforts (consistent with legal and regulatory
restrictions) to file any certificate or document
requested by the Borrower or the Agent or to change
the jurisdiction of its Applicable Lending Office or
to contest any tax imposed if the making of such a
filing or change or contesting such tax would avoid
the need for or reduce the amount of any such
additional amounts that may thereafter accrue and
would not, in the sole determination of such Lender,
be otherwise disadvantageous to such Lender.
ARTICLE 5
CAPITAL ADEQUACY
Section 5.01 Additional Costs.
(a) Eurodollar Regulations, etc. The Borrower shall pay
directly to each Lender from time to time such amounts as such
Lender may determine to be necessary to compensate such Lender for
any costs which it determines are attributable to its making or
maintaining of any Eurodollar Loans hereunder or its obligation to
make any Eurodollar Loans hereunder, or any reduction in any
amount receivable by such Lender hereunder in respect of any of
such Eurodollar Loans or such obligation (such increases in costs
and reductions in amounts
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receivable being herein called "Additional Costs"), resulting from
any Regulatory Change which: (i) changes the basis of taxation of
any amounts payable to such Lender under this Agreement or any
Note in respect of any of such Eurodollar Loans (other than taxes
described as excluded under Section 4.06(a)); or (ii) imposes or
modifies any reserve, special deposit, minimum capital, capital
ratio or similar requirements relating to any extensions of credit
or other assets of, or any deposits with or other liabilities of
such Lender, or the Commitment or Loans of such Lender or the
Eurodollar interbank market; or (iii) imposes any other condition
affecting this Agreement or any Note (or any of such extensions of
credit or liabilities) or such Lender's Commitment or Loans. Each
Lender will notify the Agent and the Borrower of any event
occurring after the Closing Date which will entitle such Lender to
compensation pursuant to this Section 5.01(a) as promptly as
practicable after it obtains knowledge thereof and determines to
request such compensation, and will designate a different
Applicable Lending Office for the Loans of such Lender affected by
such event if such designation will avoid the need for, or reduce
the amount of, such compensation and will not, in the reasonable
opinion of such Lender, be disadvantageous to such Lender,
provided that such Lender shall have no obligation to so designate
an Applicable Lending Office located in the United States. If any
Lender requests compensation from the Borrower under this Section
5.01(a), the Borrower may, by notice to such Lender, suspend the
obligation of such Lender to make additional Loans of the Type
with respect to which such compensation is requested until the
Regulatory Change giving rise to such request cease to be in
effect (in which case the provisions of Section 5.04 shall be
applicable).
(b) Regulatory Change. Without limiting the effect of the
provisions of Section 5.01(a), in the event that, by reason of any
Regulatory Change or any other circumstances arising after the
Closing Date affecting such Lender, the Eurodollar interbank
market or such Lender's position in such market, any Lender either
(i) incurs Additional Costs based on or measured by the excess
above a specified level of the amount of a category of deposits or
other liabilities of such Lender which includes deposits by
reference to which the interest rate on Eurodollar Loans is
determined as provided in this Agreement or a category of
extensions of credit or other assets of such Lender which includes
Eurodollar Loans or (ii) becomes subject to restrictions on the
amount of such a category of liabilities or assets which it may
hold, then, if such Lender so elects by notice to the Borrower,
the obligation of such Lender to make additional Eurodollar Loans
shall be suspended until such Regulatory Change or other
circumstances cease to be in effect (in which case the provisions
of Section 5.04 shall be applicable).
(c) Capital Adequacy. Without limiting the effect of the
foregoing provisions of this Section 5.01 (but without
duplication), the Borrower shall pay directly to any Lender from
time to time on request such amounts as such Lender may reasonably
determine to be necessary to compensate such Lender or its parent
or holding company for any costs which it determines are
attributable to the maintenance by such Lender or its parent or
holding company (or any Applicable Lending Office), pursuant to
any Governmental Requirement resulting
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from any Regulatory Change, of capital in respect of its
Commitment, its Note or its Loans, such compensation to include,
without limitation, an amount equal to any reduction of the rate
of return on assets or equity of such Lender or its parent or
holding company (or any Applicable Lending Office) to a level
below that which such Lender or its parent or holding company (or
any Applicable Lending Office) could have achieved but for such
Regulatory Change. Such Lender will notify the Borrower that it is
entitled to compensation pursuant to this Section 5.01(c) as
promptly as practicable after it determines to request such
compensation.
(d) Compensation Procedure. Any Lender notifying the
Borrower of the incurrence of additional costs under this Section
5.01 shall in such notice to the Borrower and the Agent set forth
in reasonable detail the basis and amount of its request for
compensation. Determinations and allocations by each Lender for
purposes of this Section 5.01 of the effect of any Regulatory
Change pursuant to Section 5.01(a) or (b), or of the effect of
capital maintained pursuant to Section 5.01(c), on its costs or
rate of return of maintaining Loans or its obligation to make
Loans or on amounts receivable by it in respect of Loans, and of
the amounts required to compensate such Lender under this Section
5.01, shall be conclusive and binding for all purposes, provided
that such determinations and allocations are made on a reasonable
basis. Any request for additional compensation under this Section
5.01 shall be paid by the Borrower within thirty (30) days of the
receipt by the Borrower of the notice described in this Section
5.01(d).
Section 5.02 Limitation on Eurodollar Loans. Anything herein to
the contrary notwithstanding, if, on or prior to the determination of any
Eurodollar Rate for any Interest Period:
(a) the Agent determines (which determination shall be
conclusive, absent manifest error) that quotations of interest
rates for the relevant deposits referred to in the definition of
"Eurodollar Rate" in Section 1.02 are not being provided in the
relevant amounts or for the relevant maturities for purposes of
determining rates of interest for Eurodollar Loans as provided
herein; or
(b) the Agent determines (which determination shall be
conclusive, absent manifest error) that the relevant rates of
interest referred to in the definition of "Eurodollar Rate" in
Section 1.02 upon the basis of which the rate of interest for
Eurodollar Loans for such Interest Period is to be determined are
not sufficient to adequately cover the cost to the Lenders of
making or maintaining Eurodollar Loans;
then the Agent shall give the Borrower prompt notice thereof, and so long as
such condition remains in effect, the Lenders shall be under no obligation to
make additional Eurodollar Loans.
Section 5.03 Illegality. Notwithstanding any other provision of
this Agreement, in the event that it becomes unlawful for any Lender or its
Applicable Lending Office to honor
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its obligation to make or maintain Eurodollar Loans hereunder, then such Lender
shall promptly notify the Borrower thereof and such Lender's obligation to make
Eurodollar Loans shall be suspended until such time as such Lender may again
make and maintain Eurodollar Loans (in which case the provisions of Section 5.04
shall be applicable).
Section 5.04 Base Rate Loans Pursuant to Sections 5.01, 5.02 and
5.03. If the obligation of any Lender to make Eurodollar Loans shall be
suspended pursuant to Sections 5.01, 5.02 or 5.03 ("Affected Loans"), all
Affected Loans which would otherwise be made by such Lender shall be made
instead as Base Rate Loans (and, if an event referred to in Section 5.01(b) or
Section 5.03 has occurred and such Lender so requests by notice to the Borrower,
all Affected Loans of such Lender then outstanding shall be automatically
converted into Base Rate Loans on the date specified by such Lender in such
notice) and, to the extent that Affected Loans are so made as (or converted
into) Base Rate Loans, all payments of principal which would otherwise be
applied to such Lender's Affected Loans shall be applied instead to its Base
Rate Loans.
Section 5.05 Compensation. The Borrower shall pay to each Lender
within thirty (30) days of receipt of written request of such Lender (which
request shall set forth, in reasonable detail, the basis for requesting such
amounts and which shall be conclusive and binding for all purposes provided that
such determinations are made on a reasonable basis), such amount or amounts as
shall compensate it for any loss, cost, expense or liability which such Lender
determines are attributable to:
(a) any payment, prepayment or conversion of a Eurodollar
Loan properly made in accordance herewith by such Lender or the
Borrower for any reason (including, without limitation, the
acceleration of the Loans pursuant to Section 10.02) on a date
other than the last day of the Interest Period for such Loan; or
(b) any failure by the Borrower for any reason (including
but not limited to, the failure of any of the conditions precedent
specified in Article VI to be satisfied) to borrow, continue or
convert a Eurodollar Loan from such Lender on the date for such
borrowing, continuation or conversion specified in the relevant
notice given pursuant to Section 2.02(c).
Without limiting the effect of the preceding sentence, such compensation shall
include an amount equal to the excess, if any, of (i) the amount of interest
which would have accrued on the principal amount so paid, prepaid or converted
or not borrowed for the period from the date of such payment, prepayment or
conversion or failure to borrow to the last day of the Interest Period for such
Loan (or, in the case of a failure to borrow, the Interest Period for such Loan
which would have commenced on the date specified for such borrowing) at the
applicable rate of interest for such Loan provided for herein over (ii) the
interest component of the amount such Lender would have bid in the London
interbank market for Dollar deposits of leading banks in amounts comparable to
such principal amount and with maturities comparable to such period (as
reasonably determined by such Lender).
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Section 5.06 Replacement Lenders.
(a) If any Lender has notified the Borrower and the Agent
of its incurring additional costs under Section 5.01 hereof or has
required the Borrower to make payments for Taxes under Section
4.06 hereof, then the Borrower may, unless such Lender has
notified the Borrower and the Agent that the circumstances giving
rise to such notice no longer apply, terminate, in whole but not
in part, the Commitment of any Lender (other than the Agent) (the
"Terminated Lender") at any time upon five (5) Business Days'
prior written notice to the Terminated Lender and the Agent (such
notice referred to herein as a "Notice of Termination").
(b) In order to effect the termination of the Commitment of
the Terminated Lender, the Borrower shall: (i) obtain an agreement
with one or more Lenders to increase their Commitment or
Commitments and/or (ii) request any one or more other banking
institutions to become parties to this Agreement in place and
instead of such Terminated Lender and agree to accept a Commitment
or Commitments; provided, however, that such one or more other
banking institutions are reasonably acceptable to the Agent and
become parties by executing an Assignment (the Lenders or other
banking institutions that agree to accept in whole or in part the
Commitment of the Terminated Lender being referred to herein as
the "Replacement Lenders"), such that the aggregate increased
and/or accepted Commitments of the Replacement Lenders under
clauses (i) and (ii) above equal the Commitment of the Terminated
Lender.
(c) The Notice of Termination shall include the name of the
Terminated Lender, the date the termination will occur (the
"Termination Date"), and the Replacement Lender or Replacement
Lenders to which the Terminated Lender will assign its Commitment
and, if there will be more than one Replacement Lender, the
portion of the Terminated Lender's Commitment to be assigned to
each Replacement Lender.
(d) On the Termination Date, (i) the Terminated Lender
shall by execution and delivery of an Assignment assign its
Commitment to the Replacement Lender or Replacement Lenders (pro
rata, if there is more than one Replacement Lender, in proportion
to the portion of the Terminated Lender's Commitment to be
assigned to each Replacement Lender) indicated in the Notice of
Termination and shall assign to the Replacement Lender or
Replacement Lenders each of its Loans (if any) then outstanding,
(ii) the Terminated Lender shall endorse its Note, payable without
recourse, representation or warranty to the order of the
Replacement Lender or Replacement Lenders (pro rata as aforesaid),
(iii) the Replacement Lender or Replacement Lenders shall purchase
the Note held by the Terminated Lender (pro rata as aforesaid) at
a price equal to the unpaid principal amount thereof plus interest
and facility and other fees accrued and unpaid to the Termination
Date, and (iv) the Replacement Lender or Replacement Lenders will
thereupon (pro rata as aforesaid) succeed to and be substituted in
all respects for the Terminated Lender with like effect as if
becoming a Lender pursuant to the
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terms of Section 12.06(b), and the Terminated Lender will have the
rights and benefits of an assignor under Section 12.06(b). To the
extent not in conflict, the terms of Section 12.06(b) shall
supplement the provisions of this Section 5.06(d). For each
assignment made under this Section 5.06, the Replacement Lender
shall pay to the Agent the processing fee provided for in Section
12.06(b). The Borrower will be responsible for the payment of any
breakage costs associated with termination of the Terminated
Lender, as set forth in Section 5.05.
ARTICLE 6
CONDITIONS PRECEDENT
Section 6.01 Initial Funding.
The obligation of the Lenders to make the Initial Funding (which
shall include the rearrangement of the principal balance on the Prior Notes) is
subject to the receipt by the Agent and the Lenders of all fees payable pursuant
to Section 2.04 on or before the Closing Date and the receipt by the Agent of
the following documents and satisfaction of the other conditions provided in
this Section 6.01, each of which shall be satisfactory to the Agent in form and
substance:
(a) A certificate of the Secretary or an Assistant
Secretary of each of ▇▇▇▇▇▇▇ Exploration, the General Partner and
the manager of each other Guarantor setting forth (i) resolutions
of its board of directors with respect to its authorization to
execute and deliver the Loan Documents to which it is a party and
to enter into the transactions contemplated in those documents,
(ii) the officers (y) who are authorized to sign the Loan
Documents to which it is a party and (z) who will, until replaced
by another officer or officers duly authorized for that purpose,
act as its representative for the purposes of signing documents
and giving notices and other communications in connection with
this Agreement and the transactions contemplated hereby, (iii)
specimen signatures of its authorized officers, and (iv) its
articles or certificate of incorporation and bylaws or operating
agreement, certified as being true and complete. The Agent and the
Lenders may conclusively rely on such certificate until the Agent
receives notice in writing from the Borrower to the contrary.
(b) Certificates of the appropriate state agencies with
respect to the existence, qualification and good standing of the
Borrower and the Guarantors.
(c) A compliance certificate which shall be substantially
in the form of Exhibit C-1, duly and properly executed by a
Responsible Officer and dated as of the Closing Date.
(d) The Notes, duly completed and executed.
(e) The Loan Documents described on Exhibit D, duly
completed and executed in sufficient number of counterparts for
recording, if necessary, including the SCI Assignment, the New
Mortgage and the Standard Mortgage.
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(f) Execution and delivery of amendments to the
Subordinated Debt documents and the Subordination Agreement,
including the ratification of this transaction by the holders of
the Subordinated Debt.
(g) An opinion of ▇▇▇▇▇▇▇▇ & Knight LLP, special counsel to
the Borrower and the Guarantors in form reasonably satisfactory to
the Agent.
(h) A certificate of insurance coverage of the Borrower
evidencing that the Borrower is carrying insurance in accordance
with Section 7.19 hereof.
(i) The Agent shall be reasonably satisfied with the
environmental condition of the Mortgaged Properties.
(j) Appropriate UCC search certificates reflecting no prior
liens or security interests.
(k) Borrower shall have submitted to the Lenders the
projections of the Borrower reflecting projected Proved Reserves,
based upon the Borrower's various categories of reserves and on
the initial CAPEX Plan, which projections shall be satisfactory in
form and substance to the SCI Lenders.
(l) Borrower shall have submitted to the Lenders the
initial CAPEX Plan, which CAPEX Plan shall be satisfactory in form
and substance to the SCI Lenders.
(m) Borrower shall have submitted to the Lenders the
Hedging Agreements described on Schedule 7.20, which Hedging
Agreements shall be satisfactory in form and substance to the
Majority Lenders.
(n) Execution and delivery of the Agent's Fee Letter, the
SCI Fee Letter and the Soc-Gen Fee Letter.
(o) Such other documents as the Agent or any Lender or
special counsel to the Agent may reasonably request.
Notwithstanding the foregoing, the Borrower will deliver within thirty (30) days
after the Closing Date (i) the supplementary opinion to the opinion described in
6.01(g) above, (ii) this Agreement executed by ▇▇▇▇▇▇▇ Holdings I, LLC, (iii)
the First Amendment to Guaranty Agreement executed by ▇▇▇▇▇▇▇ Holdings I, LLC,
(iv) the Second Amendment to Security Agreement executed by ▇▇▇▇▇▇▇ Holdings I,
LLC, (v) this Agreement executed by ▇▇▇▇▇▇▇ Holdings II, LLC, (vi) the First
Amendment to Guaranty Agreement executed by ▇▇▇▇▇▇▇ Holdings II, LLC, (vii) the
Second Amendment to Security Agreement executed by ▇▇▇▇▇▇▇ Holdings II, LLC and
(viii) evidence that all other actions necessary, or in the opinion of Agent,
desirable to perfect and protect the security interests and liens granted
thereby have been taken. Failure to deliver the documents described above shall
constitute an "Event of Default" under this Agreement.
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Section 6.02 Initial, Subsequent Loans. The obligation of the
Lenders to purchase the Prior Notes and make Loans to the Borrower upon the
occasion of each borrowing hereunder (including the Initial Funding) is subject
to the further conditions precedent that, as of the date of such Loans and after
giving effect thereto:
(a) no Default shall have occurred and be continuing;
(b) no Material Adverse Effect shall have occurred and be
continuing; and
(c) the representations and warranties made by the Borrower
in Article VII and in the Loan Documents or by any Guarantor in
any other Loan Document shall be true in all material respects on
and as of the date of the making of such Loans with the same force
and effect as if made on and as of such date and following such
new borrowing, except to the extent such representations and
warranties are expressly limited to an earlier date or the
Majority Lenders may expressly consent in writing to the contrary.
Each request for a borrowing by the Borrower hereunder shall
constitute a certification by the Borrower to the effect set forth in Section
6.02(c) (as of the date of such notice and, unless the Borrower otherwise
notifies the Agent prior to the date of and immediately following such
borrowing).
Section 6.03 Conditions Precedent for the Benefit of Lenders. All
conditions precedent to the obligations of the Lenders to make any Loan are
imposed hereby solely for the benefit of the Lenders, and no other Person may
require satisfaction of any such condition precedent or be entitled to assume
that the Lenders will refuse to make any Loan in the absence of strict
compliance with such conditions precedent.
Section 6.04 No Waiver. No waiver of any condition precedent shall
preclude the Agent or the Lenders from requiring such condition to be met prior
to making any subsequent Loan or preclude the Lenders from thereafter declaring
that a subsequent failure of the Borrower to satisfy such condition precedent
constitutes a Default.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Agent and the Lenders
that (each representation and warranty herein is given as of the Closing Date
and shall be deemed repeated and reaffirmed on the dates of each borrowing as
provided in Section 6.02):
Section 7.01 Corporate Existence. The Borrower: (i) is a limited
partnership duly organized, legally existing and in good standing under the laws
of the jurisdiction of its formation; (ii) has all requisite power, and has all
material governmental licenses, authorizations, consents and approvals necessary
to own its assets and carry on its business as now being or as proposed to be
conducted; and (iii) is qualified to do business in all jurisdictions in which
the nature of the business conducted by it makes such qualification necessary
and where failure so to qualify would have a Material Adverse Effect.
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Section 7.02 Financial Condition. The audited consolidated balance
sheet of ▇▇▇▇▇▇▇ Exploration and its Consolidated Subsidiaries as at December
31, 1998 and the related consolidated statement of income, stockholders' equity
and cash flow of ▇▇▇▇▇▇▇ Exploration and its Consolidated Subsidiaries for the
fiscal year ended on said date, with the opinion thereon of Price Waterhouse
heretofore furnished to each of the Lenders and the unaudited consolidated
balance sheet of ▇▇▇▇▇▇▇ Exploration and its Consolidated Subsidiaries as at
September 30, 1999, and their related consolidated statements of income,
stockholders' equity and cash flow of ▇▇▇▇▇▇▇ Exploration and its Consolidated
Subsidiaries for the nine-month period ended on such date heretofore furnished
to the Agent, are complete and correct and fairly present the consolidated
financial condition of ▇▇▇▇▇▇▇ Exploration and its Consolidated Subsidiaries as
at said dates and the results of its operations for the fiscal year and the
nine-month period on said dates, all in accordance with GAAP, as applied on a
consistent basis (subject, in the case of the interim financial statements, to
normal year-end adjustments). Neither ▇▇▇▇▇▇▇ Exploration nor any Consolidated
Subsidiary has on the Closing Date any material Debt, Trade Payables, contingent
liabilities, liabilities for taxes, unusual forward or long-term commitments or
unrealized or anticipated losses from any unfavorable commitments, except as
referred to or reflected or provided for in the Financial Statements or in
Schedule 7.02. Since December 31, 1998, there has been no change or event having
a Material Adverse Effect, except as disclosed to the Lenders in writing. Since
the date of the Financial Statements, neither the business nor the Properties of
▇▇▇▇▇▇▇ Exploration Consolidated Subsidiaries, taken as a whole, have 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 any Governmental Authority, riot,
activities of armed forces or acts of God or of any public enemy.
Section 7.03 Litigation. Except as disclosed to the Lenders in
Schedule 7.03 hereto, at the Closing Date there is no litigation, legal,
administrative or arbitral proceeding, investigation or other action of any
nature pending or, to the knowledge of the Borrower threatened against or
affecting the Borrower or any Subsidiary which both (a) involves the possibility
of any judgment or liability against the Borrower or any Subsidiary not fully
covered by insurance (except for normal deductibles), and (b) would be more
likely than not to have a Material Adverse Effect.
Section 7.04 No Breach. Neither the execution and delivery of the
Loan Documents, nor compliance with the terms and provisions hereof will
conflict with or result in a breach of, or require any consent which has not
been obtained as of the Closing Date under, the Partnership Agreement, the
respective charter or by-laws of any Subsidiary or any Governmental Requirement
or any material agreement or instrument to which the Borrower or any Subsidiary
is a party or by which it is bound or to which it or its Properties are subject,
or constitute a default under any such agreement or instrument, or result in the
creation or imposition of any Lien upon any of the material revenues or assets
of the Borrower or any Subsidiary pursuant to the terms of any such agreement or
instrument other than the Liens created by the Loan Documents.
Section 7.05 Authority. The Borrower and each Subsidiary has all
necessary power and authority to execute, deliver and perform its obligations
under the Loan Documents to which it is a party; and the execution, delivery and
performance by the Borrower and each Subsidiary of the Loan Documents to which
it is a party, have been duly authorized by all
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necessary action on its part; and the Loan Documents constitute the legal, valid
and binding obligations of the Borrower and each Subsidiary, enforceable in
accordance with their terms, except as such enforceability may be limited by
bankruptcy, insolvency, fraudulent transfer and similar laws affecting
creditors' rights generally or by general principles of equity.
Section 7.06 Approvals. No authorizations, approvals or consents
of, and no filings or registrations with, any Governmental Authority are
necessary for the execution, delivery or performance by the Borrower or any
Subsidiary of the Loan Documents or for the validity or enforceability thereof.
Section 7.07 Use of Loans. Subject to the terms and conditions
elsewhere herein, the proceeds of the Loans (other than those representing the
purchase price for the outstanding indebtedness under the Prior Credit
Agreement), shall be used to pay payables, provide additional drilling capital
and for general working capital purposes. In no event shall the proceeds of the
Loans be used to finance in whole or in part any hostile acquisition. The
Borrower is not engaged principally, or as one of its important activities, in
the business of extending credit for the purpose, whether immediate, incidental
or ultimate, of buying or carrying margin stock (within the meaning of
Regulation G, U or X of the Board of Governors of the Federal Reserve System)
and no part of the proceeds of any Loan hereunder will be used to buy or carry
any margin stock.
Section 7.08 ERISA.
(a) The Borrower and each ERISA Affiliate have complied in
all material respects with ERISA and, where applicable, the Code
regarding each Plan.
(b) Each Plan is, and has been, maintained in substantial
compliance with ERISA and, where applicable, the Code.
(c) No act, omission or transaction has occurred which
could result in imposition on the Borrower or any ERISA Affiliate
(whether directly or indirectly) of an amount of $100,000 or more
as (i) either a civil penalty assessed pursuant to section 502(c),
(i) or (1) of ERISA or a tax imposed pursuant to Chapter 43 of
Subtitle D of the Code or (ii) breach of fiduciary duty liability
damages under section 409 of ERISA.
(d) No Plan (other than a defined contribution plan) or any
trust created under any such Plan has been terminated since
September 2, 1974. No liability to the PBGC in excess of $100,000
(other than for the payment of current premiums which are not past
due) by the Borrower or any ERISA Affiliate has been or is
expected by the Borrower or any ERISA Affiliate to be incurred
with respect to any Plan. No ERISA Event with respect to any Plan
has occurred which could reasonably be expected to result in
liabilities of $100,000 or more.
(e) Full payment when due has been made of all amounts
which the Borrower or any ERISA Affiliate is required under the
terms of each Plan or applicable law to have paid as contributions
to such Plan, and no accumulated funding deficiency in an amount
of $100,000 or more (as defined in section 302
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of ERISA and section 412 of the Code), whether or not waived,
exists with respect to any Plan.
(f) The actuarial present value of the benefit liabilities
under each Plan which is subject to Title IV of ERISA does not, as
of the end of the Borrower's most recently ended fiscal year,
exceed the current value of the assets (computed on a plan
termination basis in accordance with Title IV of ERISA) of such
Plan allocable to such benefit liabilities by $100,000 or more.
The term "actuarial present value of the benefit liabilities"
shall have the meaning specified in section 4041 of ERISA.
(g) None of the Borrower or any ERISA Affiliate sponsors,
maintains, or contributes to an employee welfare benefit plan, as
defined in section 3(1) of ERISA, including, without limitation,
any such plan maintained to provide benefits to former employees
of such entities, that may not be terminated by the Borrower or
any ERISA Affiliate in its sole discretion at any time without any
material liability.
(h) None of the Borrower or any ERISA Affiliate sponsors,
maintains or contributes to, or has at any time in the preceding
six calendar years, sponsored, maintained or contributed to, any
Multiemployer Plan.
(i) None of the Borrower or any ERISA Affiliate is required
to provide security under section 401(a)(29) of the Code due to a
Plan amendment that results in an increase in current liability
for the Plan.
Section 7.09 Taxes. Except as set out in Schedule 7.09, the
Borrower has filed all United States Federal income tax returns and all other
tax returns which are required to be filed by it and has paid all material taxes
due pursuant to such returns or pursuant to any assessment received by the
Borrower, except for any taxes which are being contested in good faith and by
proper proceedings and against which adequate reserves are being maintained. The
charges, accruals and reserves on the books of the Borrower in respect of taxes
and other governmental charges are, in the opinion of the Borrower, adequate. No
tax lien has been filed and, to the knowledge of the Borrower, no claim is being
asserted with respect to any such tax, fee or other charge, except for any
taxes, fees or other charges which are being contested in good faith and by
proper proceedings and against which adequate reserves are being maintained.
Section 7.10 Titles, etc.
(a) Subject to the matters set out in Schedule 7.10, each
of the Borrower and the Subsidiaries has good and defensible title
to (i) the Oil and Gas Properties that are both evaluated (A) in
the most recently delivered Reserve Report and (B) described in a
Standard Mortgage, free and clear of all Liens except Liens
permitted by Section 9.02, and (ii) to the best of Borrower's
knowledge, the balance of Borrower's material (individually or in
the aggregate) Oil and Gas Properties (and/or those of the
Subsidiaries) that are described in any other Mortgage or that are
otherwise evaluated in the most recently delivered Reserve
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Report, free and clear (to the best of Borrower's knowledge) of
all Liens except Liens permitted by Section 9.02. Except for
immaterial divergences, after giving full effect to the Excepted
Liens and the matters set forth in Schedule 7.10, the Borrower
owns the net interests in production attributable to the
Hydrocarbon Interests that are both (A) evaluated in the most
recently delivered Reserve Report and (b) reflected in a Standard
Mortgage, and the ownership of such Hydrocarbon Interests shall
not in any material respect obligate the Borrower to bear the
costs and expenses relating to the maintenance, development and
operations of each such Hydrocarbon Interest in an amount in
excess of the working interest of such Hydrocarbon Interest set
forth in a Standard Mortgage (without a corresponding increase in
net revenue interest). The Borrower does not believe, based upon
information in its possession, that its most recently delivered
Reserve Report materially overstates its oil and gas reserves,
bearing in mind that reserves are evaluated based upon estimates
and assumptions with respect to which reasonable minds of
competent reserve engineers may differ.
(b) All leases and agreements necessary for the conduct of
the business of the Borrower and the Subsidiaries are valid and
subsisting, in full force and effect and there exists no default
or event or circumstance which with the giving of notice or the
passage of time or both would give rise to a default under any
such lease or leases, which would affect in any material respect
the conduct of the business of the Borrower and the Subsidiaries.
(c) The Properties presently owned, leased or licensed by
the Borrower and the Subsidiaries, including, without limitation,
all easements and rights of way, include all Properties necessary
to permit the Borrower and the Subsidiaries to conduct their
business in all material respects in the same manner as its
business has been conducted prior to the Closing Date.
(d) All of the Properties of the Borrower and the
Subsidiaries which are reasonably necessary for the operation of
their business are in good working condition in all material
respects and are maintained in accordance with prudent business
standards.
Section 7.11 No Material Misstatements. Taken as a whole, the
written information, statements, exhibits, certificates, documents and reports
furnished to the Agent and the Lenders (or any of them) by the Borrower or any
Guarantor in connection with the negotiation of this Agreement do not contain
any material misstatement of fact or omit to state a material fact or any fact
necessary to make the statements contained therein not materially misleading in
the light of the circumstances in which made and with respect to the Borrower or
any Guarantor. As of the Closing Date, there is no fact peculiar to the Borrower
or Guarantor which has a Material Adverse Effect or in the future is reasonably
likely to have (so far as the Borrower can now foresee) a Material Adverse
Effect and which has not been set forth in this Agreement or the other
documents, certificates and statements furnished to the Agent by or on behalf of
the Borrower or any Guarantor prior to, or on, the Closing Date in connection
with the transactions contemplated hereby.
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Section 7.12 Investment Company Act. Neither the Borrower nor any
Subsidiary 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 7.13 Public Utility Holding Company Act. Neither the
Borrower nor any Subsidiary is a "holding company," or a "subsidiary company" of
a "holding company," or an "affiliate" of a "holding company" or of a
"subsidiary company" of a "holding company," or a "public utility" within the
meaning of the Public Utility Holding Company Act of 1935, as amended.
Section 7.14 Subsidiaries. Except as set forth on Schedule 7.14 or
as allowed by Section 9.16, the Borrower has no Subsidiaries.
Section 7.15 Location of Business and Offices. As of the Closing
Date, the Borrower's principal place of business and chief executive offices are
located at the address stated on the signature page of this Agreement. The
principal place of business and chief executive office of each Subsidiary are
located at the addresses stated on Schedule 7.14.
Section 7.16 Defaults. The Borrower is not in default nor has any
event or circumstance occurred which, but for the expiration of any applicable
grace period or the giving of notice, or both, would constitute a default under
any material agreement or instrument to which the Borrower is a party or by
which the Borrower is bound which default would have a Material Adverse Effect.
▇▇▇▇▇▇▇ Exploration is not in default nor has any event or circumstance occurred
which, but for the expiration of any applicable grace period or the giving of
notice, or both, would constitute a default under any material agreement or
instrument related to the Subordinated Debt. No Default hereunder or under the
Subordinated Debt has occurred and is continuing or will result from the
execution, delivery and performance of this Agreement and the other Loan
Documents.
Section 7.17 Environmental Matters. Except as provided in Schedule
7.17 or for matters which are more likely than not to not to have a Material
Adverse Effect (or with respect to (c), (d) and (e) below, where the failure to
take such actions is more likely than not to not have a Material Adverse
Effect):
(a) Neither any Property of ▇▇▇▇▇▇▇ Exploration or any of
its Subsidiaries nor the operations conducted thereon violate any
order or requirement of any court or Governmental Authority or any
Environmental Laws;
(b) Without limitation of clause (a) above, no Property of
▇▇▇▇▇▇▇ Exploration or any of its Subsidiaries nor the operations
currently conducted thereon or, to the best knowledge of the
Borrower, by any prior owner or operator of such Property or
operation, are in violation of or subject to any existing, pending
or threatened action, suit, investigation, inquiry or proceeding
by or before any court or Governmental Authority or to any
remedial obligations under Environmental Laws;
(c) All notices, permits, licenses or similar
authorizations, if any, required to be obtained or filed by the
Borrower or any of its Subsidiaries in connection
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with the operation or use of any and all Property of ▇▇▇▇▇▇▇
Exploration and each of its Subsidiaries, including without
limitation present, or to the best of Borrower's knowledge, past
treatment, storage, disposal or release of a hazardous substance
or solid waste into the environment, have been duly obtained or
filed, and ▇▇▇▇▇▇▇ Exploration and each Subsidiary thereof are in
compliance with the terms and conditions of all such notices,
permits, licenses and similar authorizations;
(d) All hazardous substances, solid waste, and oil and gas
exploration and production wastes, if any, generated at any and
all Property of ▇▇▇▇▇▇▇ Exploration and each of its Subsidiaries
have in the past, during Borrower's tenure of ownership and to the
best of Borrower's knowledge, prior thereto, been transported,
treated and disposed of in accordance with Environmental Laws and
so as not to pose an imminent and substantial endangerment to
public health or welfare or the environment, and, to the best
knowledge of the Borrower, all such transport carriers and
treatment and disposal facilities have been and are operating in
compliance with Environmental Laws and so as not to pose an
imminent and substantial endangerment to public health or welfare
or the environment, and are not the subject of any existing,
pending or threatened action, investigation or inquiry by any
Governmental Authority in connection with any Environmental Laws;
(e) The Borrower has taken all steps reasonably necessary
to determine and has determined that no hazardous substances,
solid waste, or oil and gas exploration and production wastes,
have been disposed of or otherwise released and there has been no
threatened release of any hazardous substances on or to any
Property of ▇▇▇▇▇▇▇ Exploration or any of its Subsidiaries except
in compliance with Environmental Laws and so as not to pose an
imminent and substantial endangerment to public health or welfare
or the environment;
(f) To the extent applicable, all Property of ▇▇▇▇▇▇▇
Exploration and each of its Subsidiaries currently satisfies all
design, operation, and equipment requirements imposed by the OPA
or scheduled as of the Closing Date to be imposed by OPA during
the term of this Agreement, and the Borrower does not have any
reason to believe that such Property, to the extent subject to
OPA, will not be able to maintain compliance with the OPA
requirements during the term of this Agreement; and
(g) Neither ▇▇▇▇▇▇▇ Exploration nor any of its Subsidiaries
has any known contingent liability in connection with any release
or threatened release of any oil, hazardous substance or solid
waste into the environment.
Section 7.18 Compliance with the Law. Neither the Borrower nor any
Subsidiary has violated any Governmental Requirement or failed to obtain any
license, permit, franchise or other governmental authorization necessary for the
ownership of any of its Properties or the conduct of its business, which
violation or failure would have (in the event such violation or failure were
asserted by any Person through appropriate action) a Material Adverse
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52
Effect. Except for such acts or failures to act as would not have a Material
Adverse Effect, the Oil and Gas Properties (and properties unitized therewith)
have been maintained, operated and developed in a good and workmanlike manner
and in conformity with all applicable laws and all rules, regulations and orders
of all duly constituted authorities having jurisdiction and in conformity with
the provisions of all leases, subleases or other contracts comprising a part of
the Hydrocarbon Interests and other contracts and agreements forming a part of
the Oil and Gas Properties; specifically in this connection, but subject to the
Material Adverse Effect qualification set forth above, (i) after the Closing
Date, no Oil and Gas Property is subject to having allowable production reduced
below the full and regular allowable (including the maximum permissible
tolerance) because of any overproduction (whether or not the same was
permissible at the time) prior to the Closing Date and (ii) none of the ▇▇▇▇▇
comprising a part of the Oil and Gas Properties (or properties unitized
therewith) are deviated from the vertical more than the maximum permitted by
applicable laws, regulations, rules and orders, and such ▇▇▇▇▇ are, in fact,
bottomed under and are producing from, and the well bores are wholly within, the
Oil and Gas Properties (or in the case of ▇▇▇▇▇ located on properties unitized
therewith, such unitized properties).
Section 7.19 Insurance. Schedule 7.19 attached hereto contains an
accurate and complete description of all material policies of fire, liability,
workmen's compensation and other forms of insurance owned or held by the
Borrower and each Subsidiary as of the Closing Date. Schedule 7.19 shall be
updated by the Borrower as appropriate from time to time and the representations
in this Section 7.19 shall apply to such updated Schedules. All such policies
are in full force and effect, all premiums with respect thereto covering all
periods up to and including the Closing Date have been paid, and no notice of
cancellation or termination has been received with respect to any such policy.
Such policies are sufficient for compliance with all requirements of law and of
all agreements to which the Borrower or any Subsidiary is a party; are valid,
outstanding and enforceable policies; provide adequate insurance coverage in at
least such amounts and against at least such risks (but including in any event
public liability) as are usually insured against in the same general area by
companies engaged in the same or a similar business for the assets and
operations of the Borrower and each Subsidiary; will remain in full force and
effect through the respective dates set forth in Schedule 7.19 without the
payment of additional premiums; and will not in any way be affected by, or
terminate or lapse by reason of, the transactions contemplated by this
Agreement. Schedule 7.19 identifies all material risks, if any, which the
General Partner of the Borrower, the Subsidiaries and their respective Board of
Directors or officers have designated as being self insured. Neither the
Borrower nor any Subsidiary has been refused any insurance with respect to its
assets or operations, nor has its coverage been limited below usual and
customary policy limits, by an insurance carrier to which it has applied for any
such insurance or with which it has carried insurance during the last three
years.
Section 7.20 Hedging Agreements. Schedule 7.20 sets forth, as of
the Closing Date, a true and complete list of all Hedging Agreements (including
commodity price swap agreements, forward agreements or contracts of sale which
provide for prepayment for deferred shipment or delivery of oil, gas or other
commodities) of the Borrower and each Subsidiary, the material terms thereof
(including the type, term, effective date, termination date and notional amounts
or volumes), the net ▇▇▇▇ to market value thereof, all credit support agreements
relating
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thereto (including any margin required or supplied), and the counterparty to
each such agreement.
Section 7.21 Restriction on Liens. Neither the Borrower nor any
Subsidiary is a party to or subject to any agreement or arrangement (other than
the Loan Documents, the documents described in Section 4.01(a) through (d) of
the Indenture, the Indenture, and any other documents permitted under Section
9.02(f)), or subject to any order, judgment, writ or decree, which either
restricts or purports to restrict its ability to grant Liens to other Persons on
or in respect of their respective assets or Properties.
Section 7.22 Material Agreements. Set forth on Schedule 7.22
hereto is 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 Closing Date (other than Hedging Agreements) providing for,
evidencing, securing or otherwise relating to any material Debt of the Borrower
or any Subsidiary, and all obligations of the Borrower or any Subsidiary to
issuers of surety or appeal bonds (excluding operator's bonds, plugging and
abandonment bonds, and similar surety obligations obtained in the ordinary
course of business) issued for account of the Borrower or any such Subsidiary,
and such list correctly sets forth the names of the debtor or lessee and
creditor or lessor with respect to the Debt or lease obligations outstanding or
to be outstanding and the property subject to any Lien securing such Debt or
lease obligation.
Section 7.23 Gas Imbalances. As of the Closing Date, except as set
forth in the most recent Reserve Report furnished to Agent or on Schedule 7.23
or on the most recent certificate delivered pursuant to Section 8.07(b), on a
net basis there are no gas imbalances, take or pay or other prepayments with
respect to the Borrower's or any Subsidiary's Hydrocarbon Interests which would
require the Borrower or such Subsidiary to deliver five percent (5%) or more of
the monthly production from the Borrower's and its Subsidiaries' Hydrocarbons
produced on a monthly basis from the Hydrocarbon Interests, at some future time
without then or thereafter receiving full payment therefor.
Section 7.24 Partnership Agreement. The Partnership Agreement has
not been terminated, is in full force and effect as of the date hereof and no
default has occurred and is in continuance thereunder which would have a
Material Adverse Effect.
Section 7.25 Prior Notes and Related Documents.
(a) The aggregate principal balance outstanding on the
Prior Notes as of the Closing Date plus all accrued interest on
the Prior Notes as of the Closing Date is $56,391,703.13.
(b) The Borrower has not assigned its rights or obligations
under the Prior Notes or the Prior Credit Agreement.
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ARTICLE 8
AFFIRMATIVE COVENANTS
The Borrower covenants and agrees that, so long as any of the
Commitments are in effect and until payment in full of all Indebtedness
hereunder, all interest thereon and all other amounts payable by the Borrower
hereunder:
Section 8.01 Financial Statements and Other Reports. The Borrower shall
deliver, or shall cause to be delivered, to the Agent with sufficient copies of
each for the Lenders:
(a) Annual Financial Statements. As soon as available and in any
event within 90 days after the end of each fiscal year of ▇▇▇▇▇▇▇
Exploration, the audited consolidated statements of income,
stockholders' equity, changes in financial position and cash flow of
▇▇▇▇▇▇▇ Exploration and its Consolidated Subsidiaries for such fiscal
year, and the related consolidated and unaudited consolidating balance
sheets of ▇▇▇▇▇▇▇ Exploration and its Consolidated Subsidiaries as at
the end of such fiscal year, and setting forth in each case in
comparative form the corresponding figures for the preceding fiscal
year, and accompanied by the related opinion of independent public
accountants of recognized national standing acceptable to the Agent
which opinion shall state that said financial statements fairly present
the consolidated financial condition and results of operations of
▇▇▇▇▇▇▇ Exploration and its Consolidated Subsidiaries as at the end of,
and for, such fiscal year and that such financial statements have been
prepared in accordance with GAAP except for such changes in such
principles with which the independent public accountants shall have
concurred and such opinion shall not contain a "going concern" or like
qualification or exception.
(b) Quarterly Financial Statements. As soon as available and in
any event within 45 days after the end of each of the first three
fiscal quarterly periods of each fiscal year of ▇▇▇▇▇▇▇ Exploration,
consolidated statements of income, stockholders' equity, changes in
financial position and cash flow of ▇▇▇▇▇▇▇ Exploration and its
Consolidated Subsidiaries for such period and for the period from the
beginning of the respective fiscal year to the end of such period, and
the related consolidated and consolidating balance sheets as at the end
of such period, and setting forth in each case in comparative form the
corresponding figures for the corresponding period in the preceding
fiscal year, accompanied by the certificate of a Responsible Officer,
which certificate shall state that said financial statements fairly
present the consolidated financial condition and results of operations
of ▇▇▇▇▇▇▇ Exploration and its Consolidated Subsidiaries in accordance
with GAAP, as at the end of, and for, such period (subject to normal
year-end audit adjustments).
(c) Monthly Financial Statements. As soon as available and in any
event within thirty (30) days after the end of each calendar month that
is not also the
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end of one of ▇▇▇▇▇▇▇ Exploration's first three fiscal quarterly
periods or of ▇▇▇▇▇▇▇ Exploration's fiscal year, consolidated
statements of income and changes in financial position of ▇▇▇▇▇▇▇
Exploration and its Consolidated Subsidiaries for such period and for
the period from the beginning of the respective fiscal year to the end
of such period, and the related consolidated balance sheets as at the
end of such period and, beginning March 31, 2000, statements setting
forth in each case in comparative form the corresponding figures for
the corresponding period in the preceding fiscal year, accompanied by
the certificate of a Responsible Officer, which certificate shall
state that such financial statements fairly present the consolidated
financial condition and results of operations of ▇▇▇▇▇▇▇ Exploration
and its Consolidated Subsidiaries in accordance with GAAP, as at the
end of, and for, such period (subject to normal year-end audit
adjustments).
(d) Notice of Default. Promptly after the Borrower knows that any
Default or any Material Adverse Effect has occurred, a notice of such
Default or Material Adverse Effect, describing the same in reasonable
detail and the action the Borrower proposes to take with respect
thereto.
(e) Other Accounting Reports. Promptly upon receipt thereof, a
copy of each other report or letter (excluding routine correspondence)
submitted to the Borrower or ▇▇▇▇▇▇▇ Exploration by independent
accountants in connection with any annual, interim or special audit
made by them of the books of the Borrower or ▇▇▇▇▇▇▇ Exploration, and a
copy of any response by the Borrower or ▇▇▇▇▇▇▇ Exploration to such
letter or report.
(f) SEC Filings, Etc. Promptly, upon its becoming available, each
financial statement, report, notice or proxy statement sent by ▇▇▇▇▇▇▇
Exploration to stockholders generally and each regular or periodic
report and any registration statement, prospectus or written
communication (other than transmittal letters) in respect thereof filed
by ▇▇▇▇▇▇▇ Exploration with or received by ▇▇▇▇▇▇▇ Exploration in
connection therewith from any securities exchange or the SEC or any
successor agency.
(g) Notices Under Other Loan Agreements. Promptly 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 including, but not limited to, any statement,
report or notice furnished to any Person pursuant to the Subordinated
Debt, other than this Agreement and not otherwise required to be
furnished to the Lenders pursuant to any other provision of this
Section 8.01.
(h) Other Matters. Subject to any applicable restrictions on
disclosure, from time to time such other information regarding the
business, affairs or financial condition of the Borrower or ▇▇▇▇▇▇▇
Exploration (including, without limitation, any Plan or Multiemployer
Plan and any reports or other information
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required to be filed under ERISA) as any Lender or the Agent may
reasonably request.
(i) Annual Budgets. On or before January 31 of each year, a
one-year financial projection for ▇▇▇▇▇▇▇ Exploration and its
Subsidiaries in form acceptable to the Agent, which projection shall
include revenues, expenses and capital expenditures.
(j) Monthly Operating Statements. As soon as available and in any
event within 30 days after the end of each month, monthly operating
statements of the Borrower including, without limitation, production
reports and general and administrative cost summaries by lease for its
Oil and Gas Properties, which reports shall include quantities or
volume of production, revenue, realized product prices, taxes, capital
expenditures by category and lease operating costs which have accrued
to the Borrower's accounts in such period, and such other information
with respect thereto as the Agent may require.
(k) Weekly Cash Budgets. During the period from the Closing Date
through the Covenant Release Date, the Borrower will cause ▇▇▇▇▇▇▇
Exploration to deliver weekly cash budgets reasonably satisfactory to
the Agent and each Lender and weekly cash flow statements reasonably
satisfactory to the Agent and each Lender based on such form, with
variance analysis to budget (including accounts receivables and
accounts payables reporting) not later than the Friday following the
week to which such budgets and statements relate.
(l) CAPEX Plans. A CAPEX Plan, delivered simultaneously with each
of the Reserve Reports to be delivered in March and September of each
year; the first such CAPEX Plan, to be submitted on the Closing Date,
shall be for the twelve month period beginning January 1, 2000, and
ending December 31, 2000, and each subsequent CAPEX Plan shall cover
the next succeeding twelve-month period. No such CAPEX Plan shall
include a blended risk profile that deviates materially from the risk
profile of the CAPEX Plan submitted on the Closing Date without the
consent of the SCI Lenders.
The Borrower will furnish to the Agent, at the time it furnishes each set of
financial statements pursuant to paragraph (a) or (b) above, a certificate
substantially in the form of Exhibit C-2 hereto executed by a Responsible
Officer (i) certifying as to the matters set forth therein and stating that no
Default has occurred and is continuing (or, if any Default has occurred and is
continuing, describing the same in reasonable detail), (ii) setting forth in
reasonable detail the computations necessary to determine whether ▇▇▇▇▇▇▇
Exploration is in compliance with Sections 5.2(q), (r) and (s) of its Guaranty
Agreement as of the end of the respective fiscal quarter or fiscal year, and
(iii) certifying that said financial statements fairly present the consolidated
and consolidating financial condition and consolidated results of operations in
accordance with GAAP, as at the end of, and for, such period (subject to normal
year-end audit adjustments).
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Section 8.02 Litigation. The Borrower shall promptly give to the Agent
notice of: (i) all legal or arbitral proceedings, and of all proceedings before
any Governmental Authority involving the Borrower or any Guarantor, except
proceedings which, if adversely determined within any reasonable range of loss,
would not have a Material Adverse Effect, and (ii) of any material litigation or
material proceeding against the Borrower or any Guarantor in which the amount
involved is not covered in full by insurance (subject to normal and customary
deductibles), or in which injunctive or similar relief is sought. The Borrower
will, and will cause each of the Guarantors to, promptly notify the Agent and
each of the Lenders of any claim, judgment, Lien or other encumbrance affecting
any Property of the Borrower or any Guarantor if the value of the claim,
judgment, Lien, or other encumbrance affecting such Property shall exceed
$1,000,000.
Section 8.03 Maintenance, Etc.
(a) The Borrower shall and shall cause each Subsidiary to:
preserve and maintain its corporate existence and all of its material
rights, privileges and franchises; keep books of record and account in
which full, true and correct entries will be made of all dealings or
transactions in relation to its business and activities; comply with
all Governmental Requirements if failure to comply with such
requirements will have a Material Adverse Effect; pay and discharge all
taxes, assessments and governmental charges or levies imposed on it or
on its income or profits or on any of its Property prior to the date on
which penalties attach thereto, except for any such tax, assessment,
charge or levy the payment of which is being contested in good faith
and by proper proceedings and against which adequate reserves are being
maintained; upon reasonable notice, permit representatives of the Agent
or any Lender (accompanied by the Agent), during normal business hours,
to examine, copy and make extracts from its financial books and
records, to inspect its Properties, and to discuss its business and
affairs with its officers, all to the extent reasonably requested by
such Lender or the Agent (as the case may be); and keep, or cause to be
kept, insured by financially sound and reputable insurers all Property
of a character usually insured by Persons engaged in the same or
similar business similarly situated against loss or damage of the kinds
and in the amounts customarily insured against by such Persons and
carry such other insurance as is usually carried by such Persons
including, without limitation, environmental risk insurance to the
extent reasonably available.
(b) Contemporaneously with the delivery of the financial
statements required by Section 8.01(a) to be delivered for each year,
the Borrower will furnish or cause to be furnished to the Agent and the
Lenders a certificate of insurance coverage from the insurer in form
and substance satisfactory to the Agent and, if requested by the Agent,
will furnish the Agent and the Lenders copies of the applicable
policies.
(c) The Borrower will and will cause each Subsidiary to operate
its Oil and Gas Properties or cause such Oil and Gas Properties to be
operated in a good and workmanlike manner in accordance with the
practices of the industry and in
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compliance in all material respects with all applicable contracts and
agreements and in compliance in all material respects with all
Governmental Requirements.
(d) The Borrower will and will cause each Subsidiary to, at its
own expense, do or cause to be done (to the extent it has the power to
do so) all things reasonably necessary to preserve and keep in good
repair, working order and efficiency all of its Oil and Gas Properties
and other material Properties including, without limitation, all
equipment, machinery and facilities, and from time to time will make
all the reasonably necessary repairs, renewals and replacements so that
at all times the state and condition of its Oil and Gas Properties and
other material Properties will be fully preserved and maintained,
except to the extent a portion of such Properties is not capable of
producing Hydrocarbons in economically reasonable amounts. The Borrower
will and will cause each Subsidiary to promptly: (i) pay and discharge,
or make reasonable and customary efforts to cause to be paid and
discharged, all delay rentals, royalties, expenses and indebtedness
accruing under the leases or other agreements affecting or pertaining
to its Oil and Gas Properties, (ii) perform or make reasonable and
customary efforts to cause to be performed, in accordance with industry
standards, the obligations required by each and all of the assignments,
deeds, leases, sub-leases, contracts and agreements affecting its
interests in its Oil and Gas Properties and other material Properties,
(iii) will and will cause each Subsidiary to do all other things
necessary to keep unimpaired, except for Liens described in Section
9.02, its rights with respect to its Oil and Gas Properties and other
material Properties and prevent any forfeiture thereof or a default
thereunder, except to the extent a portion of such Properties is no
longer capable of producing Hydrocarbons in economically reasonable
amounts. The Borrower will and will cause each Subsidiary to operate
its Oil and Gas Properties and other material Properties or cause or
make reasonable and customary efforts to cause such Oil and Gas
Properties and other material Properties to be operated in a good and
workmanlike manner in accordance with the practices of the industry and
in compliance with all applicable contracts and agreements and in
compliance in all material respects with all Governmental Requirements.
The covenants contained in this Section 8.03(d) shall not apply to
insignificant Properties unless a failure of such covenant could have a
Material Adverse Effect.
(e) The Borrower will provide to the Agent from time to time upon
request by the Agent the certificate of a Responsible Officer of the
Borrower stating that, except as disclosed in a schedule thereto, the
Borrower has not received written notice that any mechanics' liens have
been filed or will be filed on the Mortgaged Properties; provided that
mere receipt of an invoice for services rendered shall not constitute
written notice that a mechanics' lien will be filed.
Section 8.04 Environmental Matters.
(a) To the extent that a reasonably prudent owner or operator
would do so under the same or similar circumstances, the Borrower will
and will cause each Subsidiary to establish and implement such
procedures as may be reasonably
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necessary to periodically determine and assure that any failure of the
following does not have a Material Adverse Effect: (i) all Property of
the Borrower and the Subsidiaries and the operations conducted thereon
and other activities of the Borrower and the Subsidiaries are in
compliance with and do not violate the requirements of any
Environmental Laws, (ii) no oil, hazardous substances or solid wastes
are disposed of or otherwise released on o r to any Property owned by
any such party except in compliance with Environmental Laws, (iii) no
hazardous substance will be released on or to any such Property in a
quantity equal to or exceeding that quantity which requires reporting
pursuant to Section 103 of CERCLA, and (iv) no oil, oil and gas
exploration and production wastes or hazardous substance is released on
or to any such Property so as to pose an imminent and substantial
endangerment to public health or welfare or the environment.
(b) The Borrower will promptly notify the Agent and the Lenders in
writing of any threatened action, investigation or inquiry by any
Governmental Authority of which the Borrower has knowledge in
connection with any Environmental Laws with respect to the Property of
the Borrower or any Subsidiary, excluding routine testing, compliance
and corrective action.
Section 8.05 Further Assurances. The Borrower will and will cause each
Guarantor to cure promptly any defects in the creation and issuance of the Notes
and the execution and delivery of the Loan Documents. The Borrower at its
expense will and will cause each Guarantor to promptly execute and deliver to
the Agent upon request all such other documents, agreements and instruments to
comply with or accomplish the covenants and agreements of the Borrower or any
Guarantor, as the case may be, in the Loan Documents, or to further evidence and
more fully describe the collateral intended as security for the Notes, or to
correct any omissions in the Loan Documents, or to state more fully the security
obligations set out herein or in any of the Loan Documents, or to perfect,
protect or preserve any Liens created pursuant to any of the Loan Documents, or
to make any recordings, to file any notices or obtain any consents, all as may
be necessary or appropriate in connection therewith.
Section 8.06 Performance of Obligations. The Borrower will pay the
Notes according to the reading, tenor and effect thereof; and the Borrower will
and will cause each Guarantor to do and perform every act and discharge all of
the obligations to be performed and discharged by them under the Loan Documents,
at the time or times and in the manner specified.
Section 8.07 Engineering Reports.
(a) Not less than 15 days prior to each of the First Borrowing
Base Determination Date, the First Asset Valuation Date, each Scheduled
Asset Valuation Date and any Scheduled Borrowing Base Redetermination
Date, the Borrower shall furnish to the Agent and the Lenders a Reserve
Report. The Reserve Report furnished for the First Asset Valuation Date
shall be prepared as of July 31, 2000, and the Reserve Report furnished
for the First Borrowing Base Determination Date shall be prepared as of
December 31, 2001. The Reserve Report furnished for the Scheduled Asset
Valuation Date or Borrowing Base
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Redetermination Date to occur in March of each year shall be prepared
as of the preceding December 31, and the Reserve Report furnished for
the Scheduled Asset Valuation Date or the Scheduled Borrowing Base
Redetermination Date to occur in September of each year shall be
prepared as of the preceding June 30. The Reserve Report to be
furnished in March of each year shall be prepared by certified
independent petroleum engineers or other independent petroleum
consultant(s) acceptable to the Agent and the Reserve Reports to be
furnished in September of each year shall be prepared by or under the
supervision of the chief engineer or Vice President of Operations of
the Borrower who shall certify such Reserve Report to have been
prepared in accordance with the procedures used in the immediately
preceding March Reserve Report. At Borrower's option, the Reserve
Report to be furnished in September of each year may instead consist of
a report from the independent petroleum engineers referred to above on
any new ▇▇▇▇▇ and a roll-forward by Borrower on any ▇▇▇▇▇ previously
reported in the Reserve Report described in the immediately preceding
March.
(b) In the event of an unscheduled Borrowing Base redetermination,
the Borrower shall furnish to the Agent and the Lenders a Reserve
Report prepared by or under the supervision of the chief engineer of
the Borrower who shall certify such Reserve Report to be true and
accurate and to have been prepared in accordance with the procedures
used in the immediately preceding Reserve Report. For any unscheduled
Borrowing Base redetermination requested by the Lenders or the Borrower
pursuant to Section 2.08(d), the Borrower shall provide such Reserve
Report with an "as of" date as required by the Majority Lenders as soon
as possible, but in any event no later than 30 days following the
receipt of the request by the Agent on behalf of the Lenders.
(c) With the delivery of each Reserve Report, the Borrower shall
provide to the Agent and the Lenders:
(A) a certificate from a Responsible Officer certifying that,
to the best of his knowledge and in all material respects: (i) the
most recently delivered Reserve Report does not in the belief of
such officer and based upon information in the Borrower's
possession, materially overstate the oil and gas reserves of the
Borrower and the Subsidiaries as a whole bearing in mind that
reserves are evaluated based upon estimates and assumptions with
respect to which reasonable minds of competent engineers may
differ, (ii) except as set forth in such Reserve Report or on an
exhibit to the certificate, on a net basis there are no gas
imbalances, take or pay or other prepayments with respect to its
Oil and Gas Properties evaluated in such Reserve Report which
would violate Section 9.18, (iii) none of its proved Hydrocarbon
Interests have been sold since the date of the last Borrowing Base
determination except as set forth on an exhibit to the
certificate, which certificate shall list all of its proved
Hydrocarbon Interests sold and in such detail as reasonably
required by the Majority Lenders, (iv) attached to the certificate
is a list of its proved Hydrocarbon Interests added to and deleted
from the immediately prior Reserve Report
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and a list showing any change in working interest or net revenue
interest in its Hydrocarbon Interests occurring, (v) at the
Agent's request, attached to the certificate is a list of all
Persons disbursing proceeds to the Borrower from its Oil and Gas
Properties and (vi) except as set forth on a schedule attached to
the certificate all of proved Hydrocarbon Interests evaluated by
such Reserve Report are Mortgaged Property; and
(B) a certificate from a Responsible Officer certifying that,
to the best of his knowledge and in all material respects (i) the
representations of the Borrower in Section 7.10 are true and
correct and apply to the Hydrocarbon Interests evaluated in the
Reserve Report that are described in a Standard Mortgage and (ii)
the Borrower has, with respect to those material Hydrocarbon
Interests that are evaluated in the most recently delivered
Reserve Report, but that are not covered by a Standard Mortgage,
conducted overall title due diligence that, in all material
respects, equals or exceeds industry standards given the
applicable facts and circumstances.
Section 8.08 Reserved.
Section 8.09 Additional Collateral.
(a) The Borrower will grant and will cause each of its
Subsidiaries to grant to the Agent as security for the Indebtedness a
perfected Lien on the Borrower's or such Subsidiary's interest in any
Oil and Gas Properties that are (i) acquired after the date hereof at
the cash acquisition cost to the Borrower or such Subsidiary equal to
or exceeding $1,000,000, and (ii) do not constitute Proved Reserves,
which Lien will be created and perfected by and in accordance with the
provisions of deeds of trust, security agreements and financing
statements, or other Loan Documents, all in form substantially the same
as the New Mortgage (subject to such changes as are necessary as a
result of, to reflect and/or to account for changes in applicable law)
and in sufficient executed (and acknowledged where necessary or
appropriate) counterparts for recording purposes.
(b) The Borrower will grant and will cause each of its
Subsidiaries to grant to the Agent as security for the Indebtedness a
first-priority Lien interest (subject only to Excepted Liens and the
matters set forth on Schedule 7.10 hereto) on the Borrower's or such
Subsidiary's interest in any Oil and Gas Properties identified after
the Closing Date as containing Proved Reserves, which Lien will be
created and perfected by and in accordance with the provisions of deeds
of trust, security agreements and financing statements, or other Loan
Documents, all in form substantially the same as the Standard Mortgage
(subject to such changes as are necessary as a result of, to reflect
and/or to account for changes in applicable law) and in sufficient
executed (and acknowledged where necessary or appropriate) counterparts
for recording purposes.
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(c) Concurrently with the granting of the Lien or other action
referred to in Section 8.09(b) above, the Borrower will provide to the
Agent title information in form and substance satisfactory to the Agent
in its sole discretion with respect to the Borrower's and its
Subsidiaries' interests in such Oil and Gas Properties to the extent
needed to cause the Agent to have received, together with title
information previously delivered to the Agent, satisfactory title
information on at least 90% of the value of the proved Hydrocarbon
Interests evaluated by the most recent Reserve Report.
(d) Also, promptly after the filing of any new Loan Document in
any state, other than the New Mortgage and any other mortgage filed
pursuant to subsection (a) of this Section 8.09 or any other mortgage
substantially in the form of the New Mortgage, upon the reasonable
request of the Agent, the Borrower will provide to the Agent an opinion
addressed to the Agent for the benefit of the Lenders in form and
substance reasonably satisfactory to the Agent in its sole discretion
from counsel acceptable to Agent, stating that such Loan Document is
valid, binding and enforceable in accordance with its terms and in
legally sufficient form for such jurisdiction.
Section 8.10 ERISA Information and Compliance. The Borrower will
promptly furnish and will cause any ERISA Affiliate to promptly furnish to the
Agent with sufficient copies to the Lenders (i) if requested by the Agent
promptly after the filing thereof with the United States Secretary of Labor, the
Internal Revenue Service or the PBGC, copies of each annual and other report
with respect to each Plan or any trust created thereunder, (ii) immediately upon
becoming aware of the occurrence of any ERISA Event or of any "prohibited
transaction," as described in section 406 of ERISA or in section 4975 of the
Code, in connection with any Plan or any trust created thereunder, a written
notice signed by a Responsible Officer specifying the nature thereof, what
action the Borrower or the ERISA Affiliate is taking or proposes to take with
respect thereto, and, when known, any action taken or proposed by the Internal
Revenue Service, the Department of Labor or the PBGC with respect thereto, and
(iii) immediately upon receipt thereof, copies of any notice of the PBGC's
intention to terminate or to have a trustee appointed to administer any Plan.
With respect to each Plan (other than a Multiemployer Plan), the Borrower will,
and will cause each ERISA Affiliate to, (i) satisfy in full and in a timely
manner, without incurring any late payment or underpayment charge or penalty and
without giving rise to any lien, all of the contribution and funding
requirements of section 412 of the Code (determined without regard to
subsections (d), (e), (f) and (k) thereof) and of section 302 of ERISA
(determined without regard to sections 303, 304 and 306 of ERISA), and (ii) pay,
or cause to be paid, to the PBGC in a timely manner, without incurring any late
payment or underpayment charge or penalty, all premiums required pursuant to
sections 4006 and 4007 of ERISA.
Section 8.11 Subsidiary Security. Should the Borrower create or acquire
any Subsidiary pursuant to Section 9.16 hereof it will promptly grant to the
Agent for the benefit of the Lenders a security interest and pledge of all the
capital stock of such Subsidiary in form and substance satisfactory to the Agent
and the Borrower will cause such Subsidiary to enter into a guaranty of the
Indebtedness in form and substance satisfactory to the Agent. The delivery of
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such security and guaranty shall be accompanied by such back up corporate
authority and opinions of counsel as the Agent may reasonably request.
Section 8.12 Payment of Trade Payables. The Borrower will pay and cause
all of its Subsidiaries to pay all of their Trade Payables now or hereafter
incurred within 60 days of the date the invoice is received by Borrower, unless
subject to legal offset or unless being contested in good faith by appropriate
proceedings and reserves adequate under GAAP shall have been established
therefor.
Section 8.13 Target Asset Value. On the First Asset Valuation Date and
on each Scheduled Asset Valuation Date thereafter, the Borrower and its
Subsidiaries shall have Proved Reserves with a value (the "Target Asset Value")
that would, if a Borrowing Base were set in accordance with the parameters and
procedures set out in Section 2.08 hereof, support borrowings of at least the
Maximum Credit Amounts of the BMO/Soc-Gen Lenders at the time the valuation is
made; such a valuation shall be made by the BMO/Soc-Gen Lenders only. In the
event the Target Asset Value is less at the First Target Asset Valuation Date or
at any Scheduled Asset Valuation Date than the Maximum Credit Amounts of the
BMO/Soc-Gen Lenders at that time, the SCI Lenders shall have the right, but not
the obligation, to purchase that portion of the Maximum Credit Amounts of the
BMO/Soc-Gen Lenders that exceeds the applicable Target Asset Value (the
"Deficiency Amount"); such right must be exercised within 30 days after receipt
by the SCI Lenders of notice from the BMO/Soc-Gen Lenders of the Deficiency
Amount, and if it is so exercised, it shall, except as otherwise provided in the
next succeeding sentence, be deemed that the Borrower is, until the next
succeeding Scheduled Asset Valuation Date, in compliance with this Section 8.13.
If the SCI Lenders fail to exercise such right, then the Borrower shall prepay
the Loans of the BMO/Soc-Gen Lenders within such same thirty day period in an
aggregate principal amount equal to the Deficiency Amount. Each of the
BMO/Soc-Gen Lenders and the Borrower may initiate a new calculation of the
Target Asset Value once during each consecutive twelve (12) month period by
specifying in writing the date on which such new calculation is to be made. In
the event of an unscheduled Target Asset Value calculation, the Borrower shall
furnish to the Agent and the Lenders a Reserve Report prepared by or under the
supervision of the chief engineer of the Borrower who shall certify such Reserve
Report to be true and accurate and to have been prepared in accordance with the
procedures used in the immediately preceding Reserve Report. For any unscheduled
Target Asset Value calculation, requested by the BMO/Soc-Gen Lenders or the
Borrower, the Borrower shall provide such Reserve Report with an "as of" date as
required by the BMO/Soc-Gen Lenders as soon as possible, but in any event no
later than 30 days following the receipt of the request by the Agent on behalf
of the BMO/Soc-Gen Lenders.
ARTICLE 9
NEGATIVE COVENANTS
The Borrower covenants and agrees that, so long as any of the
Commitments are in effect and until payment in full of the Indebtedness
hereunder, all interest thereon and all other amounts payable by the Borrower
hereunder, without the prior written consent of the Majority Lenders:
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Section 9.01 Debt. Neither the Borrower nor any Subsidiary will incur,
create, assume or suffer to exist any Debt, except:
(a) the Notes or other Indebtedness arising under the Loan
Documents or any guaranty of or suretyship arrangement for the Notes or
other Indebtedness arising under the Loan Documents;
(b) Debt of the Borrower existing on the Closing Date which is
reflected in the Financial Statements or is disclosed in Schedule 9.01,
and any renewals or extensions (but not increases) thereof;
(c) accounts payable for the deferred purchase price of Property
or services (other than Trade Payables) from time to time incurred in
the ordinary course of business which, if greater than 60 days past the
date the invoice is received by Borrower, are being contested in good
faith by appropriate proceedings if reserves adequate under GAAP shall
have been established therefor;
(d) Debt owing to a Guarantor which is subordinated to the
Indebtedness as provided in such Guarantor's Guaranty Agreement or
owing to the Borrower.
(e) Debt of the Borrower under capital leases (as required to be
reported on the financial statements of the Borrower pursuant to GAAP)
not to exceed $2,000,000;
(f) Debt of the Borrower under Hedging Agreements made with a
Person that is made (i) with a Person that is, at the time such Hedging
Agreement is made, either a Lender or an Affiliate of a Lender, or (ii)
with another investment grade counterparty, provided that the aggregate
notional amounts under all such Hedging Agreements do not exceed 80% of
Borrower's anticipated oil and/or gas production to be produced during
the term of such Hedging Agreements and that such Hedging Agreements
are entered into 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 and its Subsidiaries' operations;
(g) Debt associated with bonds or surety obligations required by
Governmental Requirements in connection with the operation of the Oil
and Gas Properties; and
(h) Debt of the Borrower described on Schedule 9.01(h) and such
other Debt of the Borrower related to the acquisition of software and
licensing rights related thereto that does not exceed $100,000 at any
one time outstanding.
(i) Guarantees of the Borrower and its Subsidiaries which have
executed prior and senior guarantees of the Indebtedness in form and
substance satisfactory to the Agent, of the Subordinated Debt, which
Guarantees are subordinated to the Indebtedness and otherwise in form
and substance satisfactory to the Agent consistent with the
Subordination Agreement.
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Section 9.02 Liens. Neither the Borrower nor any Subsidiary will create,
incur, assume or permit to exist any Lien on any of its Properties (now owned or
hereafter acquired), except:
(a) Liens securing the payment of any Indebtedness;
(b) Excepted Liens;
(c) Liens securing leases allowed under Section 9.01(e) but only
on the Property under lease;
(d) Liens disclosed on Schedule 9.02;
(e) Any Permitted Encumbrances as described in the Prior Mortgages
or the Mortgage;
(f) Liens securing the Subordinated Debt or Guarantees permitted
under Section 9.01(i) on Properties upon which prior Liens have been
granted to secure the Indebtedness pursuant to documents in form and
substance satisfactory to the Agent, provided such Liens (i) are
subordinated to those in favor of the Lenders and are otherwise in form
and substance satisfactory to the Agent consistent with the
Subordination Agreement and (ii) do not directly or indirectly secure
any Hedging Agreements; and
(g) the Term ORRI.
Section 9.03 Investments, Loans and Advances. Neither the Borrower nor
any Subsidiary will make or permit to remain outstanding any loans or advances
to or investments in any Person, except that the foregoing restriction shall not
apply to:
(a) investments, loans or advances reflected in the Financial
Statements or which are disclosed to the Lenders in Schedule 9.03;
(b) accounts receivable arising in the ordinary course of
business;
(c) for the Borrower only, direct obligations of the United States
or any agency thereof, or obligations guaranteed by the United States
or any agency thereof, in each case maturing within one year from the
date of creation thereof;
(d) for the Borrower only, commercial paper maturing within one
year from the date of creation thereof rated in the highest grade by
Standard & Poors Corporation or ▇▇▇▇▇'▇ Investors Service, Inc.;
(e) for the Borrower only, deposits maturing within one year from
the date of creation thereof with, including certificates of deposit
issued by, any Lender or any office located in the United States,
Canada, or England of any other bank or trust company which is
organized under the laws of the United States, Canada or England or any
state or province thereof, has capital, surplus and undivided
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profits aggregating at least $100,000,000.00 (as of the date of such
Lender's or bank or trust company's most recent financial reports) and
has a short term deposit rating of no lower than A2 or P2, as such
rating is set forth from time to time, by Standard & Poors Corporation
or ▇▇▇▇▇'▇ Investors Service, Inc., respectively;
(f) for the Borrower only, deposits in money market funds
investing exclusively in investments described in Section 9.03(c),
9.03(d) or 9.03(e);
(g) investments of the Borrower up to $100,000 in the aggregate in
Quest Resources L.L.C.;
(h) investments by the Borrower in direct or indirect (through a
Subsidiary to the extent permitted by Section 9.16 below) ownership
interests in additional Oil and Gas Properties and gas gathering
systems gas plants, and similar assets related thereto;
(i) investments, distributions, loans and advances by a Subsidiary
to the Borrower; and
(j) investments, distributions, loans and advances by the
Borrower:
(a) to ▇▇▇▇▇▇▇ Exploration, ▇▇▇▇▇▇▇, Inc., ▇▇▇▇▇▇▇ Holdings
I, LLC and/or ▇▇▇▇▇▇▇ Holdings II, LLC
(i) to pay Federal or State taxes owing by any of them,
payroll and payroll related taxes and other reasonable
general and administrative expenses, or consisting of
forgiveness of indebtedness, and
(ii) so long as no Borrowing Base deficiency exists or
will be created thereby, no Event of Default or, with
respect to Section 5.2(q), (r), (s) or (u) of the Guaranty
Agreement of ▇▇▇▇▇▇▇ Exploration, Default, is in existence
or will be created thereby, to enable ▇▇▇▇▇▇▇ Exploration to
pay accrued and unpaid interest owing on the "Notes" (as
defined in the Indenture).
(b) to Subsidiaries which are Guarantors.
Section 9.04 Dividends, Distributions and Redemptions. The Borrower
will not declare or pay any dividend, purchase, redeem or otherwise acquire for
value any of its stock now or hereafter outstanding, return any capital to its
stockholders or make any distribution of its assets to its partners, except as
permitted under Section 9.03(j)(a) above.
Section 9.05 Sales and Leasebacks. Neither the Borrower nor any
Subsidiary will enter into any arrangement, directly or indirectly, with any
Person whereby the Borrower or any Subsidiary shall sell or transfer any of its
Property, whether now owned or hereafter
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acquired, and whereby the Borrower or any Subsidiary shall then or thereafter
rent or lease as lessee such Property or any part thereof or other Property
which the Borrower or any Subsidiary intends to use for substantially the same
purpose or purposes as the Property sold or transferred.
Section 9.06 Nature of Business. Neither the Borrower nor any
Subsidiary will allow any material change to be made in the character of its
business as an independent oil and gas exploration and production company. Among
other things, a transfer of a substantial portion of Borrower's seismic data and
Hydrocarbon Interests which do not contain identified proved Hydrocarbon
reserves (other than transfers to participants of any participation interest
earned by them in the ordinary course of Borrower's business and abandonment of
prospects) shall be considered a material change in Borrower's business.
Section 9.07 Limitation on Leases. Neither the Borrower nor any
Subsidiary will create, incur, assume or suffer to exist any obligation for the
payment of rent or hire of Property of any kind whatsoever (real or personal
including capital leases but excluding leases of Hydrocarbon Interests and the
equipment used thereon), under leases or lease agreements which would cause the
aggregate amount of all payments made by the Borrower and the Subsidiaries
pursuant to all such leases or lease agreements to exceed $2,000,000 in any
period of twelve consecutive calendar months during the life of such leases.
Section 9.08 Mergers, Etc.. The Borrower will not and will not permit
any Subsidiary to merge into or with or consolidate with any other Person or
sell, lease or otherwise dispose of (whether in one transaction or in a series
of transactions) all or substantially all of its Property or assets to any other
Person unless the Borrower, ▇▇▇▇▇▇▇ Exploration or any Guarantor whose Guaranty
Agreement is in full force and effect is the surviving entity and no Default
exists or will be created thereby.
Section 9.09 Proceeds of Notes. The Borrower will not permit the
proceeds of the Notes to be used for any purpose other than those permitted by
Section 7.07. Neither the Borrower nor any Person acting on behalf of the
Borrower has taken or will take any action which might cause any of the Loan
Documents to violate Regulation G, 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.
Section 9.10 ERISA Compliance. The Borrower will not at any time:
(a) Engage in, or permit any ERISA Affiliate to engage in, any
transaction in connection with which the Borrower or any ERISA
Affiliate could be subjected to either a civil penalty assessed
pursuant to section 502(c), (i) or (1) of ERISA or a tax imposed by
Chapter 43 of Subtitle D of the Code in excess of $100,000;
(b) Terminate, or permit any ERISA Affiliate to terminate, any
Plan in a manner, or take any other action with respect to any Plan,
which could reasonably be expected to result in any liability of the
Borrower or any ERISA Affiliate to the PBGC in excess of $100,000;
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(c) Fail to make, or permit any ERISA Affiliate to fail to make,
full payment when due of all amounts under the provisions of any Plan,
agreement relating thereto or applicable law, the Borrower or any ERISA
Affiliate is required to pay as contributions thereto;
(d) Permit to exist, or allow any ERISA Affiliate to permit to
exist, any accumulated funding deficiency in excess of $100,000 within
the meaning of Section 302 of ERISA or section 412 of the Code, whether
or not waived, with respect to any Plan;
(e) Permit, or allow any ERISA Affiliate to permit, the actuarial
present value of the benefit liabilities under any Plan maintained by
the Borrower 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 by an amount in excess of
$100,000. The term "actuarial present value of the benefit liabilities"
shall have the meaning specified in section 4041 of ERISA;
(f) Contribute to or assume an obligation to contribute to, or
permit any ERISA Affiliate to contribute to or assume an obligation to
contribute to, any Multiemployer Plan;
(g) Acquire, or permit any ERISA Affiliate to acquire, an interest
in any Person that causes such Person to become an ERISA Affiliate with
respect to the Borrower 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 ERISA Affiliate to incur, a liability to
or on account of a Plan under sections 515, 4062, 4063, 4064, 4201 or
4204 of ERISA which the aggregate for all such liability exceeds
$100,000;
(i) Contribute to or assume an obligation to contribute to, or
permit any ERISA Affiliate to contribute to or assume an obligation to
contribute to, any employee welfare benefit plan, as defined in section
3(1) of ERISA, including, without limitation, any such plan maintained
to provide benefits to former employees of such entities, that may not
be terminated by such entities in their sole discretion at any time
without any material liability; or
(j) Amend or permit any ERISA Affiliate to amend, a Plan resulting
in an increase in current liability such that the Borrower or any ERISA
Affiliate is required to provide security to such Plan under section
401(a)(29) of the Code.
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Section 9.11 Sale or Discount of Receivables. Neither the Borrower nor
any Subsidiary will discount or sell (with or without recourse) any of its notes
receivable or accounts receivable.
Section 9.12 [INTENTIONALLY OMITTED]
Section 9.13 Sale of Oil and Gas Properties. The Borrower will not, and
will not permit any Subsidiary to, sell, assign, farm-out, convey or otherwise
transfer any Hydrocarbon Interests except for (i) the sale of Hydrocarbons in
the ordinary course of business; and (ii) the sale or transfer of equipment that
is no longer necessary for the business of the Borrower or such Subsidiary or is
replaced by equipment of at least comparable value and use.
Section 9.14 Environmental Matters. Neither the Borrower nor any
Subsidiary will knowingly cause or permit any of its Property to be in violation
of, or knowingly do anything or permit anything to be done which will subject
any such Property to any remedial obligations under any Environmental Laws,
assuming disclosure to the applicable Governmental Authority of all relevant
facts, conditions and circumstances, if any, pertaining to such Property where
such violations or remedial obligations would have a Material Adverse Effect.
Section 9.15 Transactions with Affiliates. Neither the Borrower nor any
Subsidiary will enter into any transaction, including, without limitation, any
purchase, sale, lease or exchange of Property or the rendering of any service,
with any Affiliate unless such transactions are otherwise not in violation of
this Agreement, are in the ordinary course of its business and are upon fair and
reasonable terms no less favorable to it than it would obtain in a comparable
arm's length transaction with a Person not an Affiliate.
Section 9.16 Subsidiaries. The Borrower will not, and will not permit
any Subsidiary to, create any additional Subsidiaries or make any additional
investment in a Subsidiary. All Subsidiaries together at no time shall own or
hold Oil and Gas Properties having proved reserves with a net discounted present
value calculated in the same manner as in the most recent Reserve Report in
excess of 10% of the total net discounted present value of Proved Reserves of
the Borrower and its Subsidiaries as reflected in said Reserve Report (plus such
Subsidiaries' proved reserves not included in such Reserve Report). No
Subsidiary may enter into any agreement other than the Loan Documents which
limits upstream transfer of dividends to the Borrower (other than the Indenture,
the documents described in Section 4.01(a) through (d) of the Indenture, and any
other documents permitted under Section 9.02(f)). No assets may be transferred
to a Subsidiary which is not a Guarantor.
Section 9.17 Negative Pledge Agreements. The Borrower will not and will
not permit any Subsidiary to create, incur, assume or suffer to exist any
contract, agreement or understanding (other than the Loan Documents) which in
any way prohibits or restricts (i) the granting, conveying, creation or
imposition of any Lien on any of its Property (other than the Indenture, the
documents described in Section 4.01(a) through (d) of the Indenture, and any
other documents permitted under Section 9.02 (f) or (g)) or (ii) any Subsidiary
from paying dividends or making any other distribution to the Borrower or which
requires the consent of or notice to other Persons in connection with any of the
foregoing.
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Section 9.18 Gas Imbalances, Take-or-Pay or Other Prepayments. The
Borrower will not allow gas imbalances, take-or-pay or other prepayments with
respect to the Hydrocarbon Interests of the Borrower and its Subsidiaries which
would require the Borrower or its Subsidiaries to deliver five percent (5%) or
more of the Borrower's and its Subsidiaries' Hydrocarbons produced on a monthly
basis from the Hydrocarbon Interests at some future time without then or
thereafter receiving full payment therefor.
Section 9.19 Borrower as Operator. The Borrower will not and will not
permit any of the Subsidiaries to voluntarily resign as operator of more than
twenty-five percent (25%) of their currently operated Oil and Gas Properties
unless the new operator is acceptable to the Majority Lenders.
Section 9.20 Quest Resources LLC. The Borrower will not, and will not
permit any of its Subsidiaries to, (i) transfer any assets to Quest Resources
LLC or (ii) make any investments in or loans or advances to Quest Resources LLC.
Section 9.21 Subordinated Debt. The Borrower shall not prepay any of
the Subordinated Debt except as authorized in the Amended and Restated Guaranty
Agreement as of the date hereof by ▇▇▇▇▇▇▇ Exploration in favor of Agent, for
the Lenders.
Section 9.22 Restrictions While Outstanding Indebtedness Exceeds the
Borrowing Base. The Borrower covenants and agrees that until the Covenant
Release Date without prior written consent of the Majority Lenders:
(a) The Borrower will not permit Net Seismic and Land Expenditures
to exceed two million dollars (the NSLE Limit). Upon completion of the
CAPEX Plan submitted on the Closing Date, the NSLE Limit will increase
at the beginning of each succeeding quarter of a year by an amount
equal to 10% of the total projected capital expenditures for such
quarter. This limitation in this subsection (a)shall only be in place
at any time that Indebtedness at the end of the quarter plus actual Net
Seismic and Land Expenditures for such quarter divided by such
quarter's EBITDA minus capitalized general and administrative expenses
is greater than 16:1 (or 4:1 on an annualized basis). The two million
dollar limitation and 10% of the total projected capital expenditures
shall increase respectively to three million dollars and 15% at such
time as ▇▇▇▇▇▇▇ Exploration has raised four million dollars in equity.
(b) The Borrower will not permit its capital expenditures to
deviate materially from the then current CAPEX Plan, with the
materiality of any such deviation to be determined by the SCI Lenders
in their sole but reasonable discretion.
(c) The Borrower will not allow growth in general and
administrative expenses to exceed the amount which is reasonable and
necessary to retain key employees and to execute the Borrower's
business plan to maximize growth in resources, net assets, cash flow
and equity value.
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(d) The Borrower will not permit any new ▇▇▇▇▇ to be spudded for
which the weekly cash budget indicates that there will be insufficient
working capital to complete, after taking into account availability
under this Agreement.
(e) The Borrower will not permit RAPRV to fall below a value of
(i) $50,000,000 as of July 31, 2000, (ii) $62,500,000 as of January 1,
2001, and (iii) $67,500,000 as of July 31, 2001, if the Subordinated
Debt does not exceed $25,000,000, or $72,500,000 as of July 31, 2001,
if the Subordinated Debt does exceed $25,000,000.
ARTICLE 10
EVENTS OF DEFAULT; REMEDIES
Section 10.01 Events of Default. One or more of the following events
shall constitute an "Event of Default":
(a) the Borrower shall default in the payment or prepayment when
due of any principal of or interest on any Loan or any fees or other
amount payable by it hereunder or under any other Loan Document and
such default, other than a default of a payment or prepayment of
principal (which shall have no cure period), shall continue unremedied
for a period of three (3) Business Days; or
(b) the Borrower or any Guarantor shall default in the payment
when due of any principal of or interest on any of its other Debt
aggregating $1,000,000 or more, or any event specified in any note,
agreement, indenture or other document evidencing or relating to any
such Debt shall occur if the effect of such event is to cause, or (with
the giving of any notice or the lapse of time or both) to permit the
holder or holders of such Debt (or a trustee or agent on behalf of such
holder or holders) to cause, such Debt to become due prior to its
stated maturity; or
(c) any representation, warranty, or certification made or deemed
made herein or in any other Loan Document by the Borrower or any
Guarantor, or any certificate furnished by the Borrower or any
Guarantor to any Lender or the Agent pursuant to the provisions hereof
or any Loan Document, shall prove to have been false or misleading as
of the time made or furnished in any material and adverse respect; or
(d) the Borrower shall default in the performance of any of its
obligations under Article IX or Section 8.01(c) of this Agreement; or
the Borrower shall default in the performance of any of its obligations
under any other Article of the Agreement or under or any other Loan
Document to which it is a party (other than the payment of amounts due
which shall be governed by Section 10.01(a)) and such default shall
continue unremedied for a period of thirty (30) days after notice
thereof to the Borrower by the Agent or any of the Lenders (through the
Agent); or
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(e) any Guarantor shall default in the performance of its
obligation to pay the Liabilities (as defined therein) at maturity or,
with respect to ▇▇▇▇▇▇▇ Exploration, performance of any covenant under
Section 5.1(i) or Section 5.2 of its Guaranty Agreement; or any
Guarantor shall default in the performance of any of its other
obligations under its Guaranty Agreement and such default shall
continue unremedied for a period of thirty (30) days after notice
thereof to the Guarantor by the Agent or the any of the Lenders
(through the Agent); or
(f) the Borrower shall admit in writing its inability to, or be
generally unable to, pay its debts as such debts become due; or
(g) the Borrower shall (i) apply for or consent to the appointment
of, or the taking of possession by, a receiver, custodian, trustee or
liquidator of itself or of all or a substantial part of its property,
(ii) make a general assignment for the benefit of its creditors, (iii)
commence a voluntary case under the Federal Bankruptcy Code (as now or
hereafter in effect), (iv) tile a petition seeking to take advantage of
any other law relating to bankruptcy, insolvency, reorganization,
winding-up, liquidation or composition or readjustment of debts, (v)
fail to controvert in a timely and appropriate manner, or acquiesce in
writing to, any petition filed against it in an involuntary case under
the Federal Bankruptcy Code, or (vi) take any corporate action for the
purpose of effecting any of the foregoing; or
(h) a proceeding or case shall be commenced, without the
application or consent of the Borrower, in any court of competent
jurisdiction, seeking (i) its liquidation, reorganization, dissolution
or winding-up, or the composition or readjustment of its debts, (ii)
the appointment of a trustee, receiver, custodian, liquidator or the
like of the Borrower of all or any substantial part of its assets, or
(iii) similar relief in respect of the Borrower under any law relating
to bankruptcy, insolvency, reorganization, winding-up, or composition
or adjustment of debts, and such proceeding or case shall continue
undismissed, or an order, judgment or decree approving or ordering any
of the foregoing shall be entered and continue unstayed and in effect,
for a period of 60 days; or an order for relief against the Borrower
shall be entered in an involuntary case under the Federal Bankruptcy
Code; or
(i) a judgment or judgments for the payment of money in excess of
$1,000,000 in the aggregate shall be rendered by a court against the
Borrower and the same shall not be discharged (or provision shall not
be made for such discharge), or a stay of execution thereof shall not
be procured, within thirty (30) days from the date of entry thereof and
the Borrower shall not, within said period of 30 days, or such longer
period during which execution of the same shall have been stayed,
appeal therefrom and cause the execution thereof to be stayed during
such appeal; or
(j) the Loan Documents after delivery thereof shall for any
reason, except to the extent permitted by the terms thereof, cease to
be in full force and effect
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and valid, binding and enforceable in all material respects in
accordance with their terms, or cease in any material respect to create
a valid and perfected Lien of the priority required thereby on any of
the collateral purported to be covered thereby, except to the extent
permitted by the terms of this Agreement, or the Borrower or any
Guarantor shall so state in writing; or
(k) any Guarantor discontinues its usual business or suffers to
exist any material change in its ownership, control or management; or
(l) any Guarantor takes, suffers or permits to exist any of the
events or conditions referred to in paragraphs (f), (g), (h) or (i)
hereof or if any guaranty agreement related thereto shall for any
reason cease to be valid and binding on such Guarantor in all material
respects or if such Guarantor shall so state in writing; or
(m) ▇▇▇▇▇▇▇ Exploration ceases to own (directly or indirectly)
100% of the Borrower; or
(n) the Borrower ceases to be the primary operating entity for
▇▇▇▇▇▇▇ Exploration and its Subsidiaries and the Borrower and its
Subsidiaries cease to be the only ▇▇▇▇▇▇▇ Exploration entities owning
Oil and Gas Properties.
Section 10.02 Remedies.
(a) At any time during the continuance of an Event of Default
other than one referred to in clauses (f), (g) or (h) of Section 10.01
or in clause (m) to the extent it relates to clauses (f), (g) or (h),
the Agent, upon request of the Majority Lenders, shall, by notice to
the Borrower, cancel the Commitments and/or declare the principal
amount then outstanding of, and the accrued interest on, the Loans and
all other amounts payable by the Borrower hereunder and under the Notes
to be forthwith due and payable, whereupon such amounts shall be
immediately due and payable without presentment, demand, protest,
notice of intent to accelerate, notice of acceleration or other
formalities of any kind, all of which are hereby expressly waived by
the Borrower. Once an acceleration has been declared pursuant to the
foregoing, no subsequent cure of the Event of Default shall negate such
acceleration or the rights and remedies of the Agent and the Lenders
with respect thereto without the express written consent of all of the
Lenders.
(b) In the case of the occurrence of an Event of Default referred
to in clauses (f), (g) or (h) of Section 10.01 or in clause (m) to the
extent it relates to clauses (f), (g) or (h), the Commitments shall be
automatically canceled and the principal amount then outstanding of,
and the accrued interest on, the Loans and all other amounts payable by
the Borrower hereunder and under the Notes shall become automatically
immediately due and payable without presentment, demand, protest,
notice of intent to accelerate, notice of acceleration or other
formalities of any kind, all of which are hereby expressly waived by
the Borrower.
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(c) All proceeds received after maturity of the Notes, whether by
acceleration or otherwise shall be applied first to reimbursement of
expenses and indemnities provided for in the Loan Documents; second to
accrued interest on the Notes of the BMO/Soc-Gen Lenders; third to fees
of the BMO/Soc-Gen Lenders; fourth pro rata to principal outstanding on
the Notes and other Indebtedness of the BMO/Soc-Gen Lenders; fifth to
accrued interest on the Notes of the SCI Lenders; sixth to fees of the
SCI Lenders; seventh, pro rata to principal outstanding on the Notes
and other Indebtedness of the SCI Lenders and any excess shall be paid
to the Borrower or as otherwise required by any Governmental
Requirement.
Section 10.03 Production and Proceeds. Notwithstanding that, by the
terms of the various Mortgages and other Loan Documents, the Borrower and any
other mortgagors are and will be assigning to Agent all of the Hydrocarbons
covered thereby and all of the products thereof and proceeds and revenues
attributable thereto and all payments in lieu of such Hydrocarbons (in this
section collectively called the "Production and Proceeds"), so long as no
Default has occurred and is continuing (a) the Borrower and such mortgagors may
continue to receive all such Production and Proceeds, subject, however, to the
Liens created under the Mortgages and other Loan Documents, and (b) upon the
Borrower's request the Agent will confirm to any purchasers of Hydrocarbons,
title examiners, or other Persons that the Borrower and such mortgagors continue
to have the right so to receive such Production and Proceeds until notification
by the Agent of the occurrence of a Default. During the continuance of a
Default, however, the Agent may exercise its rights and remedies granted under
the Mortgages and the other Loan Documents, including the rights and remedies
granted under the Mortgages and the other Loan Documents, including the right to
obtain possession of all Production and Proceeds then held by the Borrower and
such mortgagors and to receive directly from the purchasers of Hydrocarbons all
other Production Proceeds. In no case shall any failure by the Agent to collect
directly any such Production and Proceeds constitute in any way a release of any
of its rights under the Loan Documents.
ARTICLE 11
THE AGENT
Section 11.01 Appointment, Powers and Immunities. Each Lender hereby
irrevocably appoints and authorizes the Agent to act as its agent hereunder and
under the other Loan Documents with such powers as are specifically delegated to
the Agent by the terms of this Agreement and the other Loan Documents, together
with such other powers as are reasonably incidental thereto. The Agent (which
term as used in this sentence and in Section 11.05 and the first sentence of
Section 11.06 shall include reference to its Affiliates and its and its
Affiliates' officers, directors, employees, attorneys, accountants, experts and
agents): (i) shall have no duties or responsibilities except those expressly set
forth in the Loan Documents, and shall not by reason of the Loan Documents be a
trustee or fiduciary for any Lender; (ii) makes no representation or warranty to
any Lender and shall not be responsible to the Lenders for any recitals,
statements, representations or warranties contained in this Agreement, or in any
certificate or other document referred to or provided for in, or received by any
of them under, this Agreement, or for the value, validity, effectiveness,
genuineness, execution, effectiveness,
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legality, enforceability or sufficiency of this Agreement, any Note or any other
document referred to or provided for herein or for any failure by the Borrower
or any other Person (other than the Agent) to perform any of its obligations
hereunder or thereunder or for the existence, value, perfection or priority of
any collateral security or the financial or other condition of the Borrower, the
Subsidiaries or any other obligor or guarantor; (iii) except pursuant to Section
11.07 shall not be required to initiate or conduct any litigation or collection
proceedings hereunder; and (iv) SHALL NOT BE RESPONSIBLE FOR ANY ACTION TAKEN OR
OMITTED TO BE TAKEN BY IT HEREUNDER OR UNDER ANY OTHER DOCUMENT OR INSTRUMENT
REFERRED TO OR PROVIDED FOR HEREIN OR IN CONNECTION HEREWITH INCLUDING ITS OWN
ORDINARY NEGLIGENCE, EXCEPT FOR ITS OWN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
The Agent may employ agents, accountants, attorneys and experts and shall not be
responsible for the negligence or misconduct of any such agents, accountants,
attorneys or experts selected by it in good faith or any action taken or omitted
to be taken in good faith by it in accordance with the advice of such agents,
accountants, attorneys or experts. The Agent may deem and treat the payee of any
Note as the holder thereof for all purposes hereof unless and until a written
notice of the assignment or transfer thereof permitted hereunder shall have been
filed with the Agent. The Agent is authorized to release any collateral that is
permitted to be sold or released pursuant to the terms of the Loan Documents.
Section 11.02 Reliance by Agent. The Agent shall be entitled to rely
upon any certification, notice or other communication (including any thereof by
telephone, telex, telecopier, telegram or cable) believed by it to be genuine
and correct and to have been signed or sent by or on behalf of the proper Person
or Persons, and upon advice and statements of legal counsel, independent
accountants and other experts selected by the Agent.
Section 11.03 Defaults. The Agent shall not be deemed to have knowledge
of the occurrence of a Default (other than the non-payment of principal of or
interest on Loans or of fees) unless the Agent has received notice from a Lender
or the Borrower specifying such Default and stating that such notice is a
"Notice of Default." In the event that the Agent receives such a notice of the
occurrence of a Default, the Agent shall give prompt notice thereof to the
Lenders. In the event of a payment Default, the Agent shall give each Lender
prompt notice of each such payment Default.
Section 11.04 Rights as a Lender. With respect to its Commitments and
the Loans made by it, BMO (and any successor BMO/Soc-Gen Lender acting as Agent)
in its capacity as a BMO/Soc-Gen Lender hereunder shall have the same rights and
powers hereunder as any other BMO/Soc-Gen Lender and may exercise the same as
though it were not acting as the Agent, and the term "Lender" or "Lenders"
shall, unless the context otherwise indicates, include the Agent in its
individual capacity. BMO (and any successor acting as Agent) and its Affiliates
may (without having to account therefor to any Lender) accept deposits from,
lend money to and generally engage in any kind of banking, trust or other
business with the Borrower (and any of its Affiliates) as if it were not acting
as the Agent, and BMO and its Affiliates may accept fees and other consideration
from the Borrower for services in connection with this Agreement or otherwise
without having to account for the same to the Lenders.
Section 11.05 INDEMNIFICATION. THE LENDERS AGREE TO INDEMNIFY THE AGENT
RATABLY IN ACCORDANCE WITH THEIR PERCENTAGE SHARES FOR THE INDEMNITY MATTERS AS
DESCRIBED IN
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SECTION 12.03 TO THE EXTENT NOT INDEMNIFIED OR REIMBURSED BY THE BORROWER UNDER
SECTION 12.03, BUT WITHOUT LIMITING THE OBLIGATIONS OF THE BORROWER UNDER SAID
SECTION 12.03 AND FOR ANY AND ALL OTHER LIABILITIES, OBLIGATIONS, LOSSES,
DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES OR DISBURSEMENTS
OF ANY KIND AND NATURE WHATSOEVER WHICH MAY BE IMPOSED ON, INCURRED BY OR
ASSERTED AGAINST THE AGENT IN ANY WAY RELATING TO OR ARISING OUT OF: (I) THIS
AGREEMENT, THE OTHER LOAN DOCUMENTS OR ANY OTHER DOCUMENTS CONTEMPLATED BY OR
REFERRED TO HEREIN OR THE TRANSACTIONS CONTEMPLATED HEREBY, BUT EXCLUDING,
UNLESS A DEFAULT HAS OCCURRED AND IS CONTINUING, NORMAL ADMINISTRATIVE COSTS AND
EXPENSES INCIDENT TO THE PERFORMANCE OF ITS AGENCY DUTIES HEREUNDER OR (II) THE
ENFORCEMENT OF ANY OF THE TERMS OF THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR OF
ANY SUCH OTHER DOCUMENTS; WHETHER OR NOT ANY OF THE FOREGOING SPECIFIED IN THIS
SECTION 11.05 ARISES FROM THE SOLE OR CONCURRENT NEGLIGENCE OF THE AGENT,
PROVIDED THAT NO LENDER SHALL BE LIABLE FOR ANY OF THE FOREGOING TO THE EXTENT
THEY ARISE FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE AGENT.
Section 11.06 Non-Reliance on Agent and other Lenders. Each Lender
acknowledges and agrees that it has, independently and without reliance on the
Agent or any other Lender, and based on such documents and information as it has
deemed appropriate, made its own credit analysis of the Borrower and its
decision to enter into this Agreement, and that it will, independently and
without reliance upon the 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 analysis and decisions in taking or not taking action under this Agreement.
The Agent shall not be required to keep itself informed as to the performance or
observance by the Borrower of the Loan Documents or any other document referred
to or provided for herein or to inspect the properties or books of the Borrower.
Except for notices, reports and other documents and information expressly
required to be furnished to the Lenders by the Agent hereunder, the Agent shall
not have any duty or responsibility to provide any Lender with any credit or
other information concerning the affairs, financial condition or business of the
Borrower (or any of its Affiliates) which may come into the possession of the
Agent or any of its Affiliates. In this regard, each Lender acknowledges that
Weil, Gotshal & ▇▇▇▇▇▇ LLP is acting in this transaction as special counsel to
the Agent only, except to the extent otherwise expressly stated in any legal
opinion or any Loan Document. Each Lender will consult with its own legal
counsel to the extent that it deems necessary in connection with the Loan
Documents and the matters contemplated therein.
Section 11.07 Action by Agent. Except for action or other matters
expressly required of the Agent hereunder, the Agent shall in all cases be fully
justified in failing or refusing to act hereunder unless it shall (i) receive
written instructions from the Majority Lenders (or all of the Lenders as
expressly required by Section 12.04) specifying the action to be taken, and (ii)
be indemnified to its satisfaction by the Lenders against any and all liability
and expenses which may be incurred by it by reason of taking or continuing to
take any such action. The instructions of the Majority Lenders (or all of the
Lenders as expressly required by
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Section 12.04) and any action taken or failure to act pursuant thereto by the
Agent shall be binding on all of the Lenders. If a Default has occurred and is
continuing, the Agent shall take such action with respect to such Default as
shall be directed by the Majority Lenders (or all of the Lenders as required by
Section 12.04) in the written instructions (with indemnities) described in this
Section 11.07, provided that, unless and until the Agent shall have received
such directions, the Agent may (but shall not be obligated to) take such action,
or refrain from taking such action, with respect to such Default as it shall
deem advisable in the best interests of the Lenders. In no event, however, shall
the Agent be required to take any action which exposes the Agent to personal
liability or which is contrary to this Agreement and the other Loan Documents or
applicable law.
Section 11.08 Resignation or Removal of Agent. Subject to the
appointment and acceptance of a successor Agent as provided below, the Agent may
resign at any time by giving notice thereof to the Lenders and the Borrower, and
the Agent may be removed at any time with or without cause by the Majority
Lenders. Upon any such resignation or removal, the BMO/Soc-Gen Majority Lenders
shall have the right to appoint a successor Agent. If no successor Agent shall
have been so appointed by the BMO/Soc-Gen Majority Lenders and shall have
accepted such appointment within thirty (30) days after the retiring Agent's
giving of notice of resignation or the Majority Lenders' removal of the retiring
Agent, then the retiring Agent may, on behalf of the Lenders, appoint a
successor Agent from among the BMO/Soc-Gen Lenders. Upon the acceptance of such
appointment hereunder by a successor Agent, such successor Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring Agent, and the retiring Agent shall be discharged from its
duties and obligations hereunder. After any retiring Agent's resignation or
removal hereunder as Agent, the provisions of this Article XI and Section 12.03
shall continue in effect for its benefit in respect of any actions taken or
omitted to be taken by it while it was acting as the Agent.
ARTICLE 12
MISCELLANEOUS
Section 12.01 Waiver. No failure on the part of the Agent or any Lender
to exercise and no delay in exercising, and no course of dealing with respect
to, any right, power or privilege under any of the Loan Documents shall operate
as a waiver thereof, nor shall any single or partial exercise of any right,
power or privilege under any of the Loan Documents preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. The
remedies provided herein are cumulative and not exclusive of any remedies
provided by law.
Section 12.02 Notices. All notices and other communications provided
for herein and in the other Loan Documents (including, without limitation, any
modifications of, or waivers or consents under, this Agreement or the other Loan
Documents) shall be given or made by telex, telecopy, courier or U.S. Mail or in
writing and telexed, telecopied, mailed or delivered to the intended recipient
at the "Address for Notices" specified below its name on the signature pages
hereof or in the Loan Documents or, as to any party, at such other address as
shall be designated by such party in a notice to each other party. Except as
otherwise provided in this Agreement or in the other Loan Documents, all such
communications shall be deemed to have been duly given when transmitted, if
transmitted before 1:00 p.m. Houston time on a Business Day (otherwise on
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the next succeeding Business Day) by telex or telecopier and evidence or
confirmation of receipt is obtained, or personally delivered or, in the case of
a mailed notice, three (3) Business Days after the date deposited in the mails,
postage prepaid, in each case given or addressed as aforesaid.
Section 12.03 Payment of Expenses, Indemnities, etc. The Borrower
agrees:
(a) whether or not the transactions hereby contemplated are
consummated, to pay all reasonable expenses of the Agent and one SCI
Lender in the administration (both before and after the execution
hereof and including advice of counsel as to the rights and duties of
the Agent and the Lenders with respect thereto) of, and in connection
with the negotiation, syndication, investigation, preparation,
execution and delivery of, recording or filing of, preservation of
rights under, enforcement of, and refinancing, renegotiation or
restructuring of, the Loan Documents and any amendment, waiver or
consent relating thereto (including, without limitation, the reasonable
fees and disbursements of counsel and other outside consultants for the
Agent and, in the case of enforcement, the reasonable fees and
disbursements of counsel for the Agent and any of the Lenders); and
promptly reimburse the Agent for all amounts expended, advanced or
incurred by the Agent or the Lenders to satisfy any obligation of the
Borrower under this Agreement or any other Loan Document, including
without limitation, all costs and expenses of foreclosure;
(b) TO INDEMNIFY THE AGENT AND EACH LENDER AND EACH OF THEIR
AFFILIATES AND EACH OF THEIR OFFICERS, DIRECTORS, EMPLOYEES,
REPRESENTATIVES, AGENTS, ATTORNEYS, ACCOUNTANTS AND EXPERTS
("INDEMNIFIED PARTIES") FROM, HOLD EACH OF THEM HARMLESS AGAINST AND
PROMPTLY UPON DEMAND PAY OR REIMBURSE EACH OF THEM FOR, THE INDEMNITY
MATTERS WHICH MAY BE INCURRED BY OR ASSERTED AGAINST OR INVOLVE ANY OF
THEM (WHETHER OR NOT ANY OF THEM IS DESIGNATED A PARTY THERETO) AS A
RESULT OF, ARISING OUT OF OR IN ANY WAY RELATED TO (I) ANY ACTUAL OR
PROPOSED USE BY THE BORROWER OF THE PROCEEDS OF ANY OF THE LOANS, (II)
THE EXECUTION, DELIVERY AND PERFORMANCE OF THE LOAN DOCUMENTS, (III)
THE OPERATIONS OF THE BUSINESS OF THE BORROWER AND THE SUBSIDIARIES,
(IV) THE FAILURE OF THE BORROWER OR ANY GUARANTOR TO COMPLY WITH THE
TERMS OF ANY OTHER LOAN DOCUMENT OR THIS AGREEMENT, OR WITH ANY
GOVERNMENTAL REQUIREMENT, (V) ANY INACCURACY OF ANY REPRESENTATION OR
ANY BREACH OF ANY WARRANTY OF THE BORROWER OR ANY GUARANTOR SET FORTH
IN ANY OF THE LOAN DOCUMENTS, (VI) ANY ASSERTION THAT THE LENDERS WERE
NOT ENTITLED TO RECEIVE THE PROCEEDS RECEIVED PURSUANT TO THE LOAN
DOCUMENTS OR (VII) ANY OTHER ASPECT OF THE LOAN DOCUMENTS,
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INCLUDING, WITHOUT LIMITATION, THE REASONABLE FEES AND DISBURSEMENTS OF
COUNSEL AND ALL OTHER REASONABLE EXPENSES INCURRED IN CONNECTION WITH
INVESTIGATING, DEFENDING OR PREPARING TO DEFEND ANY SUCH ACTION, SUIT,
PROCEEDING (INCLUDING ANY INVESTIGATIONS, LITIGATION OR INQUIRIES) OR
CLAIM AND INCLUDING ALL INDEMNITY MATTERS ARISING BY REASON OF THE
ORDINARY NEGLIGENCE OF ANY INDEMNIFIED PARTY, BUT EXCLUDING ALL
INDEMNITY MATTERS ARISING SOLELY BY REASON OF CLAIMS BETWEEN THE
LENDERS OR ANY LENDER AND THE AGENT OR A LENDER'S SHAREHOLDERS AGAINST
THE AGENT OR LENDER OR BY REASON OF THE GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT ON THE PART OF ANY INDEMNIFIED PARTY; AND
(c) TO INDEMNIFY AND HOLD HARMLESS FROM TIME TO TIME THE
INDEMNIFIED PARTY FROM AND AGAINST ANY AND ALL LOSSES, CLAIMS, COST
RECOVERY ACTIONS, ADMINISTRATIVE ORDERS OR PROCEEDINGS, DAMAGES AND
LIABILITIES TO WHICH ANY SUCH PERSON MAY BECOME SUBJECT (I) UNDER ANY
ENVIRONMENTAL LAW APPLICABLE TO THE BORROWER OR ANY OF ITS PROPERTIES,
INCLUDING WITHOUT LIMITATION, THE TREATMENT OR DISPOSAL OF HAZARDOUS
SUBSTANCES ON ANY OF THEIR PROPERTIES, (II) AS A RESULT OF THE BREACH
OR NONCOMPLIANCE BY THE BORROWER WITH ANY ENVIRONMENTAL LAW APPLICABLE
TO THE BORROWER, (III) DUE TO PAST OWNERSHIP BY THE BORROWER OF ANY OF
ITS PROPERTIES OR PAST ACTIVITY ON ANY OF ITS PROPERTIES WHICH, THOUGH
LAWFUL AND FULLY PERMISSIBLE AT THE TIME, RESULTS IN PRESENT LIABILITY,
(IV) THE PRESENCE, USE, RELEASE, STORAGE, TREATMENT OR DISPOSAL OF
HAZARDOUS SUBSTANCES ON OR AT ANY OF THE PROPERTIES OWNED OR OPERATED
BY THE BORROWER OR (V) ANY OTHER ENVIRONMENTAL, HEALTH OR SAFETY
CONDITION IN CONNECTION WITH THE LOAN DOCUMENTS, PROVIDED, HOWEVER, NO
INDEMNITY SHALL BE AFFORDED UNDER THIS SECTION 12.03(C) IN RESPECT OF
ANY PROPERTY FOR ANY OCCURRENCE ARISING FROM THE ACTS OR OMISSIONS OF
THE AGENT OR ANY LENDER DURING THE PERIOD AFTER WHICH SUCH PERSON, ITS
SUCCESSORS OR ASSIGNS, OR THEIR AGENTS OR REPRESENTATIVES, SHALL HAVE
OBTAINED POSSESSION OF SUCH PROPERTY (WHETHER BY FORECLOSURE OR DEED IN
LIEU OF FORECLOSURE, AS MORTGAGEE-IN-POSSESSION OR OTHERWISE).
(d) No Indemnified Party may settle any claim to be indemnified
without the consent of the indemnitor, such consent not to be
unreasonably withheld; provided, that the indemnitor may not reasonably
withhold consent to any
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settlement that an Indemnified Party proposes, if the indemnitor does
not have the financial ability to pay all its obligations outstanding
and asserted against the indemnitor at that time, including, without
limitation, the maximum potential claims against the Indemnified Party
to be indemnified pursuant to this Section 12.03.
(e) In the case of any indemnification hereunder, the Agent or
Lender, as appropriate shall give notice to the Borrower of any such
claim or demand being made against the Indemnified Party and the
Borrower shall have the non-exclusive right to join in the defense
against any such claim or demand provided that if the Borrower provides
a defense, the Indemnified Party shall bear its own cost of defense
unless there is a conflict between the Borrower and such Indemnified
Party.
(f) THE FOREGOING INDEMNITIES SHALL EXTEND TO THE INDEMNIFIED
PARTIES NOTWITHSTANDING THE SOLE OR CONCURRENT NEGLIGENCE OF EVERY KIND
OR CHARACTER WHATSOEVER, WHETHER ACTIVE OR PASSIVE, WHETHER AN
AFFIRMATIVE ACT OR AN OMISSION, INCLUDING WITHOUT LIMITATION, ALL TYPES
OF NEGLIGENT CONDUCT IDENTIFIED IN THE RESTATEMENT (SECOND) OF TORTS OF
ONE OR MORE OF THE INDEMNIFIED PARTIES OR BY REASON OF STRICT LIABILITY
IMPOSED WITHOUT FAULT ON ANY ONE OR MORE OF THE INDEMNIFIED PARTIES. TO
THE EXTENT THAT AN INDEMNIFIED PARTY IS FOUND TO HAVE COMMITTED AN ACT
OF GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, THIS CONTRACTUAL OBLIGATION
OF INDEMNIFICATION SHALL CONTINUE BUT SHALL ONLY EXTEND TO THE PORTION
OF THE CLAIM THAT IS DEEMED TO HAVE OCCURRED BY REASON OF EVENTS OTHER
THAN THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH INDEMNIFIED
PARTY.
(g) The Borrower's obligations under this Section 12.03 shall
survive any termination of this Agreement and the payment of the Notes
and shall continue thereafter in full force and effect.
(h) The Borrower shall pay any amounts due under this Section
12.03 within thirty (30) days of the receipt by the Borrower of notice
of the amount due.
Section 12.04 Amendments, Etc. Any provision of this Agreement or any
other Loan Document may be amended, modified or waived with the Borrower's and
the Majority Lenders' written consent; provided that (i) no amendment,
modification or waiver which extends the final maturity of the Loans, increases
the Aggregate Maximum Credit Amounts, allows an increase in the Borrowing Base
without the approval of all the Lenders, forgives the principal amount of any
Indebtedness outstanding under this Agreement, releases any guarantor of the
Indebtedness or releases all or substantially all of the collateral, reduces the
interest rate applicable to the Loans or the fees payable to the Lenders
generally, affects Section 2.03(a), this
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Section 12.04 or Section 12.06(a) or modifies the definition of "Majority
Lenders" shall be effective without consent of all Lenders; (ii) no amendment,
modification or waiver which increases the Maximum Credit Amount of any Lender
shall be effective without the consent of such Lender; and (iii) no amendment,
modification or waiver which modifies the rights, duties or obligations of the
Agent shall be effective without the consent of the Agent. No SCI Lender may
modify or amend any material term or provision of the Equity Conversion
Agreement without the consent of the BMO/Soc-Gen Majority Lenders; provided that
a waiver of a default under the Equity Conversion Agreement shall not constitute
a modification or amendment or require the consent of any BMO/Soc-Gen Lender.
Section 12.05 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
Section 12.06 Assignments and Participations
(a) The Borrower may not assign its rights or obligations
hereunder or under the Notes without the prior consent of all of the
Lenders and the Agent.
(b) No SCI Lender may assign its rights or obligations hereunder
or under the Notes without the prior consent of BMO and its successors
and Soc-Gen and its successors which consents shall not be unreasonably
withheld.
(c) Any BMO/Soc-Gen Lender may sell, assign, transfer or negotiate
to one or more other lenders, commercial banks, insurance companies,
other financial institutions or any other Person all or any portion of
its rights and obligations hereunder, and acceptance of such assignment
by any assignee shall constitute the agreement of such assignee to be
bound by the terms of this Agreement applicable to the assigning
Lender.
(d) Promptly after receiving evidence of an assignment under
Section 12.06(c) and following the consent of the BMO/Soc-Gen Majority
Lenders to an assignment pursuant to Section 12.06(b), the Agent shall
send a notice of such assignment to the Borrower. Upon receipt of such
notice and of the Notes that are the subject thereof, the Borrower
will, at its own expense, execute and deliver new Notes to the assignor
and/or assignee, as appropriate, in accordance with their respective
interests. Upon receipt of such executed Assignment and of the Notes
which are the subject thereof, the Borrower will, at its own expense,
execute and deliver new Notes to the assignor and/or assignee, as
appropriate, in accordance with their respective interests as they
appear. Upon the effectiveness of any assignment pursuant to Section
12.06(b) or (c), the assignee will become a "Lender," if not already a
"Lender," for all purposes of this Agreement and the other Loan
Documents. The assignor shall be relieved of its obligations hereunder
to the extent of such assignment (and if the assigning Lender no longer
holds any rights or obligations under this Agreement, such assigning
Lender shall cease to be a "Lender" hereunder except that its rights
under Sections 4.06, 5.01, 5.05 and 12.03 shall not be affected). The
Agent will
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prepare on the last Business Day of each month during which an
assignment has become effective pursuant to Section 12.06(b) or (c), a
new Annex I giving effect to all such assignments effected during such
month, and will promptly provide the same to the Borrower and each of
the Lenders.
(e) Each Lender may transfer, grant or assign participations in
all or any part of such Lender's interests hereunder pursuant to this
Section 12.06(e) to any Person, provided that: (i) such Lender shall
remain a "Lender" for all purposes of this Agreement and the transferee
of such participation shall not constitute a "Lender" hereunder; and
(ii) no participant under any such participation shall have rights to
approve any amendment to or waiver of any of the Loan Documents except
to the extent such amendment or waiver would (x) forgive any principal
owing on any Indebtedness or extend the final maturity of the Loans,
(y) reduce the interest rate (other than as a result of waiving the
applicability of any post-default increases in interest rates) or fees
applicable to any of the Commitments or Loans in which such participant
is participating, or postpone the payment of any thereof, or (z)
release any guarantor of the Indebtedness or release all or
substantially all of the collateral (except as provided in the Loan
Documents) supporting any of the Commitments or Loans in which such
participant is participating. In the case of any such participation,
the participant shall not have any rights under this Agreement or any
of the other Loan Documents (the participant's rights against the
granting Lender in respect of such participation to be those set forth
in the agreement with such Lender creating such participation), and all
amounts payable by the Borrower hereunder shall be determined as if
such Lender had not sold such participation, provided that such
participant shall be entitled to receive additional amounts under
Article V on the same basis as if it were a Lender and be indemnified
under Section 12.03 as if it were a Lender. In addition, each agreement
creating any participation must include an agreement by the participant
to be bound by the provisions of Section 12.15.
(f) The Lenders may furnish any information concerning the
Borrower in the possession of the Lenders from time to time to
assignees and participants (including prospective assignees and
participants; provided that, such Persons agree to be bound by the
provisions of Section 12.15 hereof.
(g) Notwithstanding anything in this Section 12.06 to the
contrary, any Lender may assign and pledge its Note to any Federal
Reserve Bank or the United States Treasury as collateral security
pursuant to Regulation A of the Board of Governors of the Federal
Reserve System and any operating circular issued by such Federal
Reserve System and/or such Federal Reserve Bank. No such assignment
and/or pledge shall release the assigning and/or pledging Lender from
its obligations hereunder.
(h) Notwithstanding any other provisions of this Section 12.06, no
transfer or assignment of the interests or obligations of any Lender or
any grant of participations therein shall be permitted if such
transfer, assignment or grant
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would require the Borrower to file a registration statement with the
SEC or to qualify the Loans under the "Blue Sky" laws of any state.
Section 12.07 Invalidity. In the event that any one or more of the
provisions contained in any of the Loan Documents shall, for any reason, be held
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of the Notes, this
Agreement or any other Loan Document.
Section 12.08 Counterparts. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument and any of the parties hereto may execute this Agreement by
signing any such counterpart.
Section 12.09 References. The words "herein," "hereof," "hereunder" and
other words of similar import when used in this Agreement refer to this
Agreement as a whole, and not to any particular article, section or subsection.
Any reference herein to a Section shall be deemed to refer to the applicable
Section of this Agreement unless otherwise stated herein. Any reference herein
to an exhibit or schedule shall be deemed to refer to the applicable exhibit or
schedule attached hereto unless otherwise stated herein.
Section 12.10 Survival. The obligations of the parties under Section
4.06, Article V, and Sections 11.05 and 12.03 shall survive the repayment of the
Loans and the termination of the Commitments. To the extent that any payments on
the Indebtedness or proceeds of any collateral are subsequently invalidated,
declared to be fraudulent or preferential, set aside or required to be repaid to
a trustee, debtor in possession, receiver or other Person under any bankruptcy
law, common law or equitable cause, then to such extent, the Indebtedness so
satisfied shall be revived and continue as if such payment or proceeds had not
been received and the Agent's and the Lenders' Liens, security interests,
rights, powers and remedies under this Agreement and each other Loan Document
shall continue in full force and effect. In such event, each Loan Document shall
be automatically reinstated and the Borrower shall take such action as may be
reasonably requested by the Agent and the Lenders to effect such reinstatement.
Section 12.11 Captions. Captions and section headings appearing herein
are included solely for convenience of reference and are not intended to affect
the interpretation of any provision of this Agreement.
Section 12.12 NO ORAL AGREEMENTS. THE LOAN DOCUMENTS EMBODY THE ENTIRE
AGREEMENT AND UNDERSTANDING BETWEEN THE PARTIES AND SUPERSEDE ALL OTHER
AGREEMENTS AND UNDERSTANDINGS BETWEEN SUCH PARTIES RELATING TO THE SUBJECT
MATTER HEREOF AND THEREOF. THE LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
Section 12.13 GOVERNING LAW; SUBMISSION TO JURISDICTION.
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(a) THIS AGREEMENT, THE LOANS AND THE NOTES SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS EXCEPT
TO THE EXTENT THAT UNITED STATES FEDERAL LAW PERMITS ANY LENDER TO
CHARGE INTEREST AT THE RATE ALLOWED BY THE LAWS OF THE STATE WHERE SUCH
LENDER IS LOCATED. CHAPTER 346 OF THE TEXAS FINANCE CODE (WHICH
REGULATES CERTAIN REVOLVING LOAN ACCOUNTS AND REVOLVING TRI-PARTY
ACCOUNTS) SHALL NOT APPLY TO THIS AGREEMENT, THE LOANS, OR THE NOTES.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THE LOAN
DOCUMENTS SHALL BE BROUGHT IN THE COURTS OF THE STATE OF TEXAS OR OF
THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF TEXAS, AND,
BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE BORROWER HEREBY
ACCEPTS FOR ITSELF AND (TO THE EXTENT PERMITTED BY LAW) IN RESPECT OF
ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE
AFORESAID COURTS. THE BORROWER HEREBY IRREVOCABLY WAIVES ANY OBJECTION,
INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR
BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH
RESPECTIVE JURISDICTIONS. THIS SUBMISSION TO JURISDICTION IS
NON-EXCLUSIVE AND DOES NOT PRECLUDE THE AGENT OR ANY LENDER FROM
OBTAINING JURISDICTION OVER THE BORROWER IN ANY COURT OTHERWISE HAVING
JURISDICTION.
(c) EACH OF THE BORROWER AND EACH LENDER HEREBY (I) IRREVOCABLY
AND UNCONDITIONALLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW,
TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN;
(II) IRREVOCABLY WAIVE, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW,
ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY
SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES, OR DAMAGES OTHER
THAN, OR IN ADDITION TO, ACTUAL DAMAGES; (III) CERTIFY THAT NO PARTY
HERETO NOR ANY REPRESENTATIVE OR AGENT OF COUNSEL FOR ANY PARTY HERETO
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY
WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVERS, AND (IV) ACKNOWLEDGE THAT IT HAS BEEN INDUCED TO ENTER INTO
THIS AGREEMENT, THE OTHER LOAN DOCUMENTS AND
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THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION
12.13.
Section 12.14 Interest. It is the intention of the parties hereto that
each Lender shall conform strictly to usury laws applicable to it. Accordingly,
if the transactions contemplated hereby would be usurious as to any Lender under
laws applicable to it (including the laws of the United States of America and
the State of Texas or any other jurisdiction whose laws may be mandatorily
applicable to such Lender notwithstanding the other provisions of this
Agreement), then, in that event, notwithstanding anything to the contrary in any
of the Loan Documents or any agreement entered into in connection with or as
security for the Loans, it is agreed as follows: (i) the aggregate of all
consideration which constitutes interest under law applicable to any Lender that
is contracted for, taken, reserved, charged or received by such Lender under any
of the Loan Documents or agreements or otherwise in connection with the Loans
shall under no circumstances exceed the maximum amount allowed by such
applicable law, and any excess shall be cancelled automatically and if
theretofore paid shall be credited by such Lender on the principal amount of the
Indebtedness (or, to the extent that the principal amount of the Indebtedness
shall have been or would thereby be paid in full, refunded by such Lender to the
Borrower), and (ii) in the event that the maturity of the Notes is accelerated
resulting from any Event of Default under this Agreement or otherwise, or in the
event of any required or permitted prepayment, then such consideration that
constitutes interest under law applicable to any Lender may never include more
than the maximum amount allowed by such applicable law, and excess interest, if
any, provided for in this Agreement or otherwise shall be cancelled
automatically by such Lender as of the date of such acceleration or prepayment
and, if theretofore paid, shall be credited by such Lender on the principal
amount of the Indebtedness (or, to the extent that the principal amount of the
Indebtedness shall have been or would thereby be paid in full, refunded by such
Lender to the Borrower). All sums paid or agreed to be paid to any Lender for
the use, forbearance or detention of sums due hereunder or under any other Loan
Document shall, to the extent permitted by law applicable to such Lender, be
amortized, prorated, allocated and spread throughout the full term of the Loans
evidenced by the Notes until payment in full so that the rate or amount of
interest on account of any Loans hereunder does not exceed the maximum amount
allowed by such applicable law. If at any time and from time to time (i) the
amount of interest payable to any Lender on any date shall be computed at the
Highest Lawful Rate applicable to such Lender pursuant to this Section 12.14 and
(ii) in respect of any subsequent interest computation period the amount of
interest otherwise payable to such Lender would be less than the amount of
interest payable to such Lender computed at the Highest Lawful Rate applicable
to such Lender, then the amount of interest payable to such Lender in respect of
such subsequent interest computation period shall continue to be computed at the
Highest Lawful Rate applicable to such Lender until the total amount of interest
payable to such Lender shall equal the total amount of interest which would have
been payable to such Lender if the total amount of interest had been computed
without giving effect to this Section 12.14. To the extent that Chapter 303 of
the Texas Finance Code is relevant for the purpose of determining the Highest
Lawful Rate, such Lender elects to determine the applicable rate ceiling under
such Article by the weekly ceiling from time to time in effect.
Section 12.15 Confidentiality. In the event that the Borrower or any
Guarantor (hereinafter called the "Subject Entities") provides to the Agent or
the Lenders written
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86
confidential information or, if communicated as confidential, oral confidential
information belonging to any Subject Entity, the Agent and the Lenders shall
thereafter maintain such information in confidence in accordance with the
standards of care and diligence that each utilizes in maintaining its own
confidential information. This obligation of confidence shall not apply to such
portions of the information which (i) are in the public domain, (ii) hereafter
become part of the public domain without the Agent or the Lenders breaching
their obligation of confidence to any Subject Entity, (iii) are previously known
by the Agent or the Lenders from some source other than any Subject Entity, (iv)
are hereafter developed by the Agent or the Lenders without using a Subject
Entity's information, (v) are hereafter obtained by or available to the Agent or
the Lenders from a third party who owes no obligation of confidence to any
Subject Entity with respect to such information, (vi) are disclosed with a
Subject Entity's consent, (vii) must be disclosed either pursuant to any
Governmental Requirement or to Persons regulating the activities of the Agent or
the Lenders, or (viii) as may be required by law or regulation or order of any
Governmental Authority in any judicial, arbitration or governmental proceeding.
Further, the Agent or a Lender may disclose any such information to any other
Lender, any independent petroleum engineers or consultants, any independent
certified public accountants, any legal counsel employed by such Person in
connection with this Agreement or any other Loan Document, including without
limitation, the enforcement or exercise of all rights and remedies thereunder,
or, subject to Section 12.06, any assignee or participant (including prospective
assignees to which the Borrower has consented and participants) in the Loans;
provided, however, that the Agent or the Lenders shall receive a confidentiality
agreement from the Person to whom such information is disclosed such that said
Person shall have the same obligation to maintain the confidentiality of such
information as is imposed upon the Agent or the Lenders hereunder.
Notwithstanding anything to the contrary provided herein, this obligation of
confidence shall cease three (3) years from the date the information was
furnished, unless the Borrower requests in writing at least thirty (30) days
prior to the expiration of such three year period, to maintain the
confidentiality of such information for an additional three year period.
Section 12.16 Prior Credit Agreement. The Prior Credit Agreement is
superseded by this Agreement and is of no further force or effect.
Section 12.17 Release Regarding the Prior Notes and Related Documents.
To induce Lenders to purchase the Prior Notes and the rights under certain of
the documents securing said Prior Notes (the "Prior Security Documents"), the
Borrower hereby fully releases and discharges the Agent and the Lenders, and
each of their officers, directors, employees, representatives, agents and
affiliates, from all claims, demands, causes of action, liabilities or other
obligations of any kind whatsoever, including, without limitation, offsets,
reductions, rebatements or claims of usury, known or unknown, whether now
existing or hereafter asserted in connection with the Prior Notes and the Prior
Security Documents arising from matters occurring before the date of the
Lender's purchase.
Section 12.18 Effectiveness. This Agreement shall be effective on the
Closing Date (the "Effective Date") upon its execution and delivery by Borrower,
BMO, Soc-Gen and SCI. Although ▇▇▇▇▇▇▇ Exploration, ▇▇▇▇▇▇▇, Inc., ▇▇▇▇▇▇▇
Holdings I, LLC and ▇▇▇▇▇▇▇ Holdings II, LLC, are not parties to this Agreement
they are executing this Agreement as Releasing Parties under Section 12.20 below
and Section 12.20 will become effective as to each Releasing Party as described
in Section 12.20(c).
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Section 12.19 EXCULPATION PROVISIONS. EACH OF THE PARTIES HERETO
SPECIFICALLY AGREES THAT IT HAS A DUTY TO READ THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS AND AGREES THAT IT IS CHARGED WITH NOTICE AND KNOWLEDGE OF THE TERMS
OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS; THAT IT HAS IN FACT READ THIS
AGREEMENT AND IS FULLY INFORMED AND HAS FULL NOTICE AND KNOWLEDGE OF THE TERMS,
CONDITIONS AND EFFECTS OF THIS AGREEMENT; THAT IT HAS BEEN REPRESENTED BY
INDEPENDENT LEGAL COUNSEL OF ITS CHOICE THROUGHOUT THE NEGOTIATIONS PRECEDING
ITS EXECUTION OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS; AND HAS RECEIVED
THE ADVICE OF ITS ATTORNEY IN ENTERING INTO THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS; AND THAT IT RECOGNIZES THAT CERTAIN OF THE TERMS OF THIS AGREEMENT
AND THE OTHER LOAN DOCUMENTS RESULT IN ONE PARTY ASSUMING THE LIABILITY INHERENT
IN SOME ASPECTS OF THE TRANSACTION AND RELIEVING THE OTHER PARTY OF ITS
RESPONSIBILITY FOR SUCH LIABILITY. EACH PARTY HERETO AGREES AND COVENANTS THAT
IT WILL NOT CONTEST THE VALIDITY OR ENFORCEABILITY OF ANY EXCULPATORY PROVISION
OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS ON THE BASIS THAT THE PARTY HAD
NO NOTICE OR KNOWLEDGE OF SUCH PROVISION OR THAT THE PROVISION IS NOT
"CONSPICUOUS."
Section 12.20 RELEASE.
(a) Each of the Releasing Parties desires and intends fully to
compromise, release and settle any and all of the Released Claims; and
each of the Releasing Parties hereby covenants, warrants and represents
unto each of the Released Parties that such Releasing Party does hereby
FOREVER RELEASE, ACQUIT, WAIVE AND DISCHARGE each of the Released
Parties of and from the Released Claims and each of the Releasing
Parties hereby declares the same FOREVER RELEASED, ACQUITTED, WAIVED,
SETTLED AND DISCHARGED. This release is effective without regard to
whether (i) such Released Claims are known or unknown, (ii) damages
arising out of such Released Claims have yet accrued, (iii) such
Released Claims arose collaterally, directly, derivatively, or
otherwise between the parties hereto or (iv) an ordinary person in the
same or similar circumstances would or would not, through the exercise
of due care, have discovered such claims by the date of this Agreement.
In connection with the foregoing release:
(b) Borrower and each of the Guarantors represents and warrants
that it has the full power and authority to perform the release granted
in this Section 12.20 and that it has not in any manner made any
assignment of any Released Claim to any third party.
(c) The release granted in this Section 12.20 by each Releasing
Party will be effective upon execution of this Agreement by such
Releasing Party hereto.
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(d) Each party executing this Agreement understands and agrees
that the release granted in this Section 12.20 is a full, final and
complete release of the Released Claims and that such release may be
pleaded as an absolute and final bar to any or all suits which may
hereafter be filed or prosecuted by any one or more of the Releasing
Parties or anyone claiming by, through or under any one or more of the
Releasing Parties in respect of any of the matters released hereby, and
that no recovery on account of the Released Claims may hereafter be had
from any of the Released Parties; and that the consideration given for
such release is not an admission of liability or fault on the part of
any of the Released Parties (it being the express intent of the parties
hereto to obtain peace of mind and avoid the expense and uncertainty of
potential litigation), and that none of the Releasing Parties or those
claiming by, through or under any of them will ever claim that it is.
(e) The parties hereto acknowledge that the release granted by
this Section 12.20 does not have any effect with respect to
relationships between the Borrower and each of the Guarantors and the
Lenders and the Agent other than in connection with the Lending
Relationship.
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89
The parties hereto have caused this Agreement to be duly executed as of
the day and year first above written.
BORROWER: ▇▇▇▇▇▇▇ OIL & GAS, L.P.
By: ▇▇▇▇▇▇▇, Inc., its General Partner
By:
----------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chief Financial Officer
Address for Notices:
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
GUARANTOR: ▇▇▇▇▇▇▇ EXPLORATION COMPANY
(for purposes of Section 12.20)
By:
----------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President
GUARANTOR: ▇▇▇▇▇▇▇, INC.
(for purposes of Section 12.20)
By:
----------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chief Financial Officer
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90
GUARANTOR: ▇▇▇▇▇▇▇ HOLDINGS I, LLC
(for purposes of Section 12.20)
By:
----------------------------------
Name:
--------------------------------
Title:
--------------------------------
GUARANTOR: ▇▇▇▇▇▇▇ HOLDINGS II, LLC
(for purposes of Section 12.20)
By:
----------------------------------
Name:
Title:
LENDER AND AGENT: BANK OF MONTREAL
By:
----------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Director
Lending Office for Base Rate Loans and
Eurodollar Loans:
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
With a copy to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Director, U.S. Corporate Banking
Bank of Montreal
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Address for Notices:
Bank of Montreal
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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91
LENDER: SOCIETE GENERALE, SOUTHWEST AGENCY
By:
----------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇
Title: Director
Address for Notices:
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇
LENDER: SHELL CAPITAL INC.
By:
----------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President
Address for Notices:
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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92
ANNEX 1
LIST OF MAXIMUM CREDIT AMOUNTS
PRIOR TO AN INCREASE EVENT AFTER AN INCREASE EVENT
Name of Lender Percentage Share Maximum Credit Amount Percentage Share Maximum Credit Amount
--------------- ---------------- --------------------- ---------------- ---------------------
SCI 50.00000000% $35,000,000 53.33333333% $40,000,000
BMO 33.07690000% 23,153,830 30.87177333% 23,153,830
Soc-Gen 16.92310000% 11,846,170 15.79489333% 11,846,170
Annex 1, Page 1
93
EXHIBIT A
FORM OF NOTE
$______________________ _______________ , __________
FOR VALUE RECEIVED, ▇▇▇▇▇▇▇ OIL & GAS, L.P., a Delaware limited
partnership (the "Borrower") hereby promises to pay to the order of __________
(the "Lender"), at the Principal Office of BANK OF MONTREAL (the "Agent"), at
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, the principal sum of
________________________ Dollars ($_______) (or such lesser amount as shall
equal the aggregate unpaid principal amount of the Loans made by the Lender to
the Borrower under the Credit Agreement, as hereinafter defined), in lawful
money of the United States of America and in immediately available funds, on the
dates and in the principal amounts provided in the Credit Agreement, and to pay
interest on the unpaid principal amount of each such Loan, at such office, in
like money and funds, for the period commencing on the date of such Loan until
such Loan shall be paid in full, at the rates per annum and on the dates
provided in the Credit Agreement.
The date, amount, Type, interest rate, Interest Period and maturity of
each Loan made by the Lender to the Borrower, and each payment made on account
of the principal thereof, shall be recorded by the Lender on its books and,
prior to any transfer of this Note, may be endorsed by the Lender on the
schedules attached hereto or any continuation thereof or on any separate record
maintained by the Lender.
This Note is one of the Notes referred to in the Amended and Restated
Credit Agreement dated as of February ___, 2000 among the Borrower, the Lenders
which are or become parties thereto (including the Lender) and the Agent, and
evidences Loans made by the Lender thereunder (such Amended and Restated Credit
Agreement as the same may be amended or supplemented from time to time, the
"Credit Agreement"). Capitalized terms used in this Note have the respective
meanings assigned to them in the Credit Agreement.
This Note is issued pursuant to the Credit Agreement and is entitled to
the benefits provided for in the Credit Agreement and the other Loan Documents.
The Credit Agreement provides for the acceleration of the maturity of this Note
upon the occurrence of certain events, for prepayments of Loans upon the terms
and conditions specified therein and other provisions relevant to this Note.
Exh A, Page 1
94
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF TEXAS.
▇▇▇▇▇▇▇ OIL & GAS, L.P.
By: ▇▇▇▇▇▇▇, Inc., its General Partner
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
Exh A, Page 2
95
EXHIBIT B
FORM OF BORROWING, CONTINUATION AND CONVERSION REQUEST
_____________________, ▇▇▇▇
▇▇▇▇▇▇▇ OIL & GAS, L.P., a Delaware limited partnership (the
"Borrower"), pursuant to the Amended and Restated Credit Agreement dated as of
February ____, 2000 (together with all amendments or supplements thereto, the
"Credit Agreement") among the Borrower, BANK OF MONTREAL, as Agent and the
lenders (the "Lenders") which are or become parties thereto, and such Lenders
(the "Lender"), hereby makes the requests indicated below (unless otherwise
defined herein, capitalized terms are defined in the Credit Agreement):
[ ] 1. Loans:
(a) Aggregate amount of new Loans to be $ ________________ ;
(b) Requested funding date is _______________ , 2000;
(c) $___________________of such borrowings are to be Eurodollar
Loans;
$___________________of such borrowings are to be Base Rate
Loans; and
(d) Length of Interest Period for Eurodollar Loans is:
___________________.
[ ] 2. Eurodollar Loan Continuation for Eurodollar Loans maturing
on ______________;
(a) Aggregate amount to be continued as Eurodollar Loans is
$_______________ ;
(b) Aggregate amount to be converted to Base Rate Loans is
$_________________;
(c) Length of Interest Period for continued Eurodollar Loans
is _____________.
[ ] 3. Conversion of Outstanding Base Rate Loans to Eurodollar Loans:
Convert $ _________________________ of the outstanding Base Rate
Loans to Eurodollar Loans on _____________ with an Interest
Period of ______.
[ ] 4. Conversion of outstanding Eurodollar Loans to Base Rate Loans:
Convert $ ________________ of the outstanding Eurodollar Loans
with Interest Period maturing on __________________, 2000, to
Base Rate Loans.
Exh B, Page 1
96
The undersigned certifies that he is the _____________________________
of the Borrower, and that as such he is authorized to execute this certificate
on behalf of the Borrower. The undersigned further certifies, represents and
warrants on behalf of the Borrower that the Borrower is entitled to receive the
requested borrowing, continuation or conversion under the terms and conditions
of the Credit Agreement.
▇▇▇▇▇▇▇ OIL & GAS, L.P.
By: ▇▇▇▇▇▇▇, Inc., its General Partner
By:
---------------------------------
Name:
--------------------------------
Title:
---------------------------------
Exh B, Page 2
97
EXHIBIT C-1
FORM OF COMPLIANCE CERTIFICATE
The undersigned hereby certifies that he is the ________________ of
▇▇▇▇▇▇▇, INC., a Nevada corporation, as general partner of ▇▇▇▇▇▇▇ OIL & GAS,
L.P., a Delaware limited partnership (the "Borrower") and that as such he is
authorized to execute this certificate on behalf of the Borrower. With reference
to the Amended and Restated Credit Agreement dated as of February ____, 2000
(together with all amendments or supplements thereto being the "Agreement")
among the Borrower, BANK OF MONTREAL, as Agent for the lenders (the "Lenders")
which are or become a party thereto, and such Lenders, the undersigned
represents and warrants as follows (each capitalized term used herein having the
same meaning given to it in the Agreement unless otherwise specified):
(a) The representations and warranties of the Borrower contained
in Article VII of the Agreement and in the other Loan Documents and
otherwise made in writing by or on behalf of the Borrower pursuant to
the Agreement and the other Loan Documents were true and correct when
made, and are repeated at and as of the time of delivery hereof and are
true and correct at and as of the time of delivery hereof, except to
the extent such representations and warranties are expressly limited to
an earlier date or the Majority Lenders have expressly consented in
writing to the contrary.
(b) The Borrower has performed and complied with all agreements
and conditions contained in the Agreement and in the other Loan
Documents required to be performed or complied with by it prior to or
at the time of delivery hereof.
(c) Since December 31, 1998, no change has occurred, either in any
case or in the aggregate, in the condition, financial or otherwise, of
the Borrower which would have a Material Adverse Effect.
(d) There exists, and, after giving effect to the loan or loans
with respect to which this certificate is being delivered, will exist,
no Default under the Agreement or any event or circumstance which
constitutes, or with notice or lapse of time (or both) would
constitute, an event of default under any loan or credit agreement,
indenture, deed of trust, security agreement or other agreement or
instrument evidencing or pertaining to any Debt of the Borrower or
under any material agreement or instrument to which the Borrower is a
party or by which the Borrower is bound.
Exh C-1, Page 1
98
EXECUTED AND DELIVERED this ________day of ___________________.
▇▇▇▇▇▇▇ OIL & GAS, L.P.
By: ▇▇▇▇▇▇▇, Inc., its General Partner
By:
-----------------------------------
Name:
---------------------------------
Title:
---------------------------------
Exh C-1, Page 2
99
EXHIBIT C-2
FORM OF CERTIFICATE ACCOMPANYING
FINANCIAL STATEMENTS
Reference is made to that certain Amended and Restated Credit Agreement dated as
of February ___, 2000 (as from time to time amended, the "Agreement"), by and
among ▇▇▇▇▇▇▇ OIL & GAS, L.P., a Delaware limited partnership ("Borrower"), BANK
OF MONTREAL, as Agent ("Agent"), and certain financial institutions ("Lenders").
Terms which are defined in the Agreement are used herein with the meanings given
them in the Agreement.
This Certificate is furnished pursuant to Section 8.01 of the
Agreement. Together herewith Borrower is furnishing to Agent and each Lender
Borrower's *[audited/unaudited] financial statements (the "Financial
Statements") as at ____________ (the "Reporting Date"). Borrower hereby
represents and warrants to Agent and each Lender that:
(a) The officer of Borrower signing this instrument is the duly
elected, qualified and acting _________ of Borrower and as such is a
Responsible Officer.
(b) No Default existed on the Reporting Date or otherwise exists
on the date of this certificate [EXCEPT AS SPECIFIED ON A SCHEDULE
ATTACHED HERETO]. [EXCEPT AS SPECIFIED ON A SCHEDULE ATTACHED HERETO,]
the representations and warranties of Borrower set forth in the
Agreement and the other Loan Documents are true and correct in all
material respects on and as of the date hereof (except to the extent
that such representations and warranties are expressly limited to an
earlier date or the Majority Lenders have expressly consented in
writing to the contrary).
(c) The Borrower has performed and complied with all agreements
and conditions contained in the Agreement and in the other Loan
Documents required to be performed or complied with by it prior to or
at the time of delivery hereof.
(d) No change or event has occurred which has caused a Material
Adverse Effect that is continuing.
(e) Attached hereto is a schedule of computations showing ▇▇▇▇▇▇▇
Exploration's compliance with Sections 5.2(q), (r) and (s) of its
Guaranty Agreement as of the Reporting Date.
(f) The Financial Statements fairly present the consolidated and
consolidating financial condition and consolidated results of
operations of ▇▇▇▇▇▇▇ Exploration and its Consolidated Subsidiaries in
Exh C-2, Page 1
100
accordance with GAAP, as at the end of, and for, the period indicated
therein (subject to normal year-end audit adjustments).
The undersigned officer is executing this certificate in his capacity
as an officer of General Partner and not in any individual capacity.
IN WITNESS WHEREOF, this certificate is executed as of
_________________________.
▇▇▇▇▇▇▇ OIL & GAS COMPANY
By: ▇▇▇▇▇▇▇, Inc., its General Partner
By:
-----------------------------------
Name:
---------------------------------
Title:
---------------------------------
Exh C-2, Page 2
101
EXHIBIT D-1
LIST OF LOAN DOCUMENTS
1. Assignment of Note and Liens among the Borrower, Bank One, Texas, N.A. and
the Agent and corresponding Financing Statement Assignments
2. Amended and Restated Mortgage, Deed of Trust, Assignment of Production,
Security Agreement and Financing Statement execute by the Borrower and the
Agent
3. Guaranty Agreement executed by ▇▇▇▇▇▇▇, Inc.
4. Guaranty Agreement executed by ▇▇▇▇▇▇▇ Holding I, L.L.C.
5. Guaranty Agreement executed by ▇▇▇▇▇▇▇ Holding II, L.L.C.
6. Guaranty Agreement executed by ▇▇▇▇▇▇▇ Exploration Company
7. Security Agreement executed by ▇▇▇▇▇▇▇ Exploration Company covering stock
in ▇▇▇▇▇▇▇, Inc.
8. Financing Statement executed by ▇▇▇▇▇▇▇ Exploration Company with respect to
item 7 above
9. Stock power executed by ▇▇▇▇▇▇▇ Exploration Company and related stock
certificate of ▇▇▇▇▇▇▇, Inc. issued in the name of ▇▇▇▇▇▇▇ Exploration
Company
10. Security Agreement executed by the Borrower covering accounts, general
intangibles, equipment and inventory
11. Financing Statement executed by the Borrower with respect to item 10 above
12. Mortgage, Deed of Trust, Assignment of Production, Security Agreement and
Financing Statement executed by Borrower and Agent in substantially the
form attached hereto as Exhibit F.
13. Mortgage, Deed of Trust, Assignment of Production, Security Agreement and
Financing Statement executed by both Borrower and Agent in substantially
the form attached hereto as Exhibit G.
14. Second Amendment to Security Agreement (Accounts) - Borrower.
15. Second Amendment to Security Agreement (Stock) - Borrower.
Exh D-1, Page 1
102
16. Third Supplement to Mortgage (1998) - Borrower.
17. Supplement to Mortgage (August 1998) - Borrower.
18. Supplement to Mortgage (January 1999) - Borrower.
19. Supplement to Mortgage (March 1999) - Borrower.
20. Supplement to Mortgage (June 1999) - Borrower.
21. Supplement to Mortgage (September 1999) - Borrower.
22. Amendment to January 26, 1998 Security Agreement - ▇▇▇▇▇▇▇ Exploration.
23. Amendment to August 20, 1998 Security Agreement - ▇▇▇▇▇▇▇ Exploration.
24. First Amendment to Guaranty Agreement - ▇▇▇▇▇▇▇, Inc.
25. Second Amendment to Guaranty Agreement - ▇▇▇▇▇▇▇, Inc.
26. First Amendment to Guaranty Agreement - ▇▇▇▇▇▇▇ Holdings II, LLC.
27. Second Amendment to Security Agreement - ▇▇▇▇▇▇▇ Holdings II, LLC.
28. First Amendment to Guaranty Agreement - ▇▇▇▇▇▇▇ Holdings I, LLC.
29. Second Amendment to Security Agreement - ▇▇▇▇▇▇▇ Holdings I, LLC.
30. Amended and Restated Guaranty Agreement executed by ▇▇▇▇▇▇▇ Exploration
Company
31. Amended and Restated Credit Agreement
32. Lenders' Partial Assignment of Notes
33. Second Amendment to Intercreditor and Subordination Agreement executed by
Enron/Chase Bank of Texas, National Association
Exh D-1, Page 2
103
EXHIBIT E
FORM OF
ASSIGNMENT AGREEMENT
THIS ASSIGNMENT AGREEMENT ("Agreement") dated as of _________________,
_________ is between __________________________ (the "Assignor") and
___________________(the "Assignee").
RECITALS
A. The Assignor is a party to the Amended and Restated Credit Agreement
dated as of February ___, 2000 (as amended and supplemented and in effect from
time to time, the "Credit Agreement") among ▇▇▇▇▇▇▇ OIL & GAS, L.P., a
______________ limited partnership (the "Borrower"), each of the lenders that is
or becomes a party thereto as provided in Section 12.06 of the Credit Agreement
(individually, together with its successors and assigns, a "Lender", and
collectively, together with their successors and assigns, the "Lenders"), and
BANK OF MONTREAL, in its individual capacity ("BMO"), and as agent for the
Lenders (in such capacity, together with its successors in such capacity, the
"Agent").
B. The Assignor proposes to sell, assign and transfer to the Assignee,
and the Assignee proposes to purchase and assume from the Assignor, [all] [a
portion] of the Assignor's Maximum Credit Amount, outstanding Loans, all on the
terms and conditions of this Agreement.
C. In consideration of the foregoing and the mutual agreements
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
Definitions.
Section 1.01 Definitions. All capitalized terms used but not defined
herein have the respective meanings given to such terms in the Credit Agreement.
Section 1.02 Other Definitions. As used herein, the following terms
have the following respective meanings:
"Assigned Interest" shall mean all of Assignor's (in its
capacity as a "Lender") rights and obligations (i) under the
Exh E, Page 1
104
Credit Agreement and the other Loan Documents in respect of the Maximum
Credit Amount of the Assignor in the principal amount equal to $ , and
(ii) to make Loans under the Maximum Credit Amount and any right to
receive payments for the Loans outstanding under the Maximum Credit
Amount $ (the "Loan Balance"), plus the interest and fees which will
accrue from and after the Assignment Date.
"Assignment Date" shall mean ________________,2000.
ARTICLE II
SALE AND ASSIGNMENT.
Section 2.01 Sale and Assignment. On the terms and conditions set forth
herein, effective on and as of the Assignment Date, the Assignor hereby sells,
assigns and transfers to the Assignee, and the Assignee hereby purchases and
assumes from the Assignor, all of the right, title and interest of the Assignor
in and to, and all of the obligations of the Assignor in respect of, the
Assigned Interest. Such sale, assignment and transfer is without recourse and,
except as expressly provided in this Agreement, without representation or
warranty.
Section 2.02 Assumption of Obligations. The Assignee agrees with the
Assignor (for the express benefit of the Assignor and the Borrower) that the
Assignee will, from and after the Assignment Date, perform all of the
obligations of the Assignor in respect of the Assigned Interest. From and after
the Assignment Date: (a) the Assignor shall be released from the Assignor's
obligations in respect of the Assigned Interest, and (b) the Assignee shall be
entitled to all of the Assignor's rights, powers and privileges under the Credit
Agreement and the other Loan Documents in respect of the Assigned Interest.
Section 2.03 Acknowledgement by Agent and Borrower. By executing this
Agreement as provided below, in accordance with Section 12.06(b) of the Credit
Agreement, the Agent and the Borrower hereby acknowledge notice of the
transactions contemplated by this Agreement.
Exh E-1, Page 2
105
ARTICLE III
PAYMENTS.
Section 3.01 Payments. As consideration for the sale, assignment and
transfer contemplated by Section 2.01 hereof, the Assignee shall, on the
Assignment Date, assume Assignor's obligations in respect of the Assigned
Interest and pay to the Assignor an amount equal to the Loan Balance, if any. An
amount equal to all accrued and unpaid interest and fees shall be paid to the
Assignor as provided in Section 3.02 (iii) below. Except as otherwise provided
in this Agreement, all payments hereunder shall be made in Dollars and in
immediately available funds, without setoff, deduction or counterclaim.
Section 3.02 Allocation of Payments. The Assignor and the Assignee agree
that (i) the Assignor shall be entitled to any payments of principal with
respect to the Assigned Interest made prior to the Assignment Date, together
with any interest and fees with respect to the Assigned Interest accrued prior
to the Assignment Date, (ii) the Assignee shall be entitled to any payments of
principal, with respect to the Assigned Interest made from and after the
Assignment Date, together with any and all interest and fees with respect to the
Assigned Interest accruing from and after the Assignment Date, and (iii) the
Agent is authorized and instructed to allocate payments received by it for
account of the Assignor and the Assignee as provided in the foregoing clauses.
Each party hereto agrees that it will hold any interest, fees or other amounts
that it may receive to which the other party hereto shall be entitled pursuant
to the preceding sentence for account of such other party and pay, in like money
and funds, any such amounts that it may receive to such other party promptly
upon receipt.
Section 3.03 Delivery of Notes. Promptly following the receipt by the
Assignor of the consideration required to be paid under Section 3.01 hereof, the
Assignor shall, in the manner contemplated by Section 12.06(b) of the Credit
Agreement, (i) deliver to the Agent (or its counsel) the Note held by the
Assignor and (ii) notify the Agent to request that the Borrower execute and
deliver new Notes to the Assignor, if Assignor continues to be a Lender, and the
Assignee, dated the date of this Agreement in respective principal amounts equal
to the respective Maximum Credit Amounts of the Assignor (if appropriate) and
the Assignee after giving effect to the sale, assignment and transfer
contemplated hereby.
Section 3.04 Further Assurances. The Assignor and the Assignee hereby agree
to execute and deliver such other instruments, and take such other actions, as
either party may reasonably request in connection with the transactions
contemplated by this Agreement.
Exh E, Page 3
106
ARTICLE IV
CONDITIONS PRECEDENT.
Section 4.01 Conditions Precedent. The effectiveness of the sale,
assignment and transfer contemplated hereby is subject to the satisfaction of
each of the following conditions precedent:
(a) the execution and delivery of this Agreement by the Assignor and
the Assignee;
(b) the receipt by the Assignor of the payment required to be made by
the Assignee under Section 3.01 hereof; and
(c) the acknowledgment by the Agent and the Borrower contemplated by
Section 2.03 hereof.
ARTICLE V
REPRESENTATIONS AND WARRANTIES.
Section 5.01 Representations and Warranties of the Assignor. The Assignor
represents and warrants to the Assignee as follows:
(a) it has all requisite power and authority, and has taken all action
necessary to execute and deliver this Agreement and to fulfill its
obligations under, and consummate the transactions contemplated by, this
Agreement;
(b) the execution, delivery and compliance with the terms hereof by
Assignor and the delivery of all instruments required to be delivered by it
hereunder do not and will not violate any Governmental Requirement
applicable to it;
(c) this Agreement has been duly executed and delivered by it and
constitutes the legal, valid and binding obligation of the Assignor,
enforceable against it in accordance with its terms;
(d) all approvals and authorizations of, all filings with and all
actions by any Governmental Authority necessary for the validity or
enforceability of its obligations under this Agreement have been obtained;
Exh E, Page 4
107
(e) the Assignor has good title to, and is the sole legal and
beneficial owner of, the Assigned Interest, free and clear of all Liens,
claims, participations or other charges of any nature whatsoever; and
(f) the transactions contemplated by this Agreement are commercial
banking transactions entered into in the ordinary course of the banking
business of the Assignor.
Section 5.02 Disclaimer. Except as expressly provided in Section 5.01
hereof, the Assignor does not make any representation or warranty, nor shall it
have any responsibility to the Assignee, with respect to the accuracy of any
recitals, statements, representations or warranties contained in the Credit
Agreement or in any certificate or other document referred to or provided for
in, or received by any Lender under, the Credit Agreement, or for the value,
validity, effectiveness, genuineness, execution, effectiveness, legality,
enforceability or sufficiency of the Credit Agreement, the Notes or any other
document referred to or provided for therein or for any failure by the Borrower
or any other Person (other than Assignor) to perform any of its obligations
thereunder or for the existence, value, perfection or priority of any collateral
security or the financial or other condition of the Borrower or the Subsidiaries
or any other obligor or guarantor, or any other matter relating to the Credit
Agreement or any other Loan Document or any extension of credit thereunder.
Section 5.03 Representations and Warranties of the Assignee. The Assignee
represents and warrants to the Assignor as follows:
(a) it has all requisite power and authority, and has taken all action
necessary to execute and deliver this Agreement and to fulfill its
obligations under, and consummate the transactions contemplated by, this
Agreement;
(b) the execution, delivery and compliance with the terms hereof by
Assignee and the delivery of all instruments required to be delivered by it
hereunder do not and will not violate any Governmental Requirement
applicable to it;
(c) this Agreement has been duly executed and delivered by it and
constitutes the legal, valid and binding obligation of the Assignee,
enforceable against it in accordance with its terms;
(d) all approvals and authorizations of, all filings with and all
actions by any Governmental Authority necessary for the validity or
enforceability of its obligations under this Agreement have been obtained;
(e) the Assignee has fully reviewed the terms of the Credit Agreement
and the other Loan Documents and has independently and without reliance
upon the Assignor, and based on such information as the Assignee has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement;
Exh E, Page 5
108
(f) the Assignee hereby affirms that the representations contained in
Section 4.06(d)(i)(1) of the Credit Agreement are true and accurate as to
Assignee. If Section 4.06(d)(i)(2) is applicable to the Assignee, Assignee
shall promptly deliver to the Agent and the Borrower such certifications as
are required thereby to avoid the withholding taxes referred to in Section
4.06; and
(g) the transactions contemplated by this Agreement are commercial
transactions entered into in the ordinary course of the business of the
Assignee.
ARTICLE VI
MISCELLANEOUS.
Section 6.01 Notices. All notices and other communications provided for
herein (including, without limitation, any modifications of, or waivers,
requests or consents under, this Agreement) shall be given or made in writing
(including, without limitation, by telex or telecopy) to the intended recipient
at its "Address for Notices" specified below its name on the signature pages
hereof or, as to either party, at such other address as shall be designated by
such party in a notice to the other party.
Section 6.02 Amendment, Modification or Waiver. No provision of this
Agreement may be amended, modified or waived except by an instrument in writing
signed by the Assignor and the Assignee.
Section 6.03 Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns. The representations and warranties made herein by the
Assignee are also made for the benefit of the Agent and the Borrower, and the
Assignee agrees that the Agent and the Borrower are entitled to rely upon such
representations and warranties.
Section 6.04 Assignments. Neither party hereto may assign any of its rights
or obligations hereunder except in accordance with the terms of the Credit
Agreement.
Section 6.05 Captions. The captions and section headings appearing herein
are included solely for convenience of reference and are not intended to affect
the interpretation of any provision of this Agreement.
Section 6.06 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be identical and all of which, taken together,
shall constitute one and the same instrument, and each of the parties hereto may
execute this Agreement by signing any such counterpart.
Exh E, Page 6
109
Section 6.07 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the law of the State of Texas.
Section 6.08 Expense. To the extent not paid by the Borrower pursuant to
the terms of the Credit Agreement, each party hereto shall bear its own expenses
in connection with the execution, delivery and performance of this Agreement.
Section 6.09 Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY AND ALL RIGHT TO
TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
Exh E, Page 7
110
IN WITNESS WHEREOF, the parties hereto have caused this Assignment
Agreement to be executed and delivered as of the date first above written.
ASSIGNOR
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
Address for Notices:
Telecopier No.:
Telephone No.:
Attention:
ASSIGNEE
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
Address for Notices:
Telecopier No.:
Telephone No.:
Attention:
ACKNOWLEDGED TO:
,
as Agent
By:
-------------------------
Name:
-----------------------
Title:
----------------------
Exh E, Page 8
111
EXHIBIT F
FORM OF STANDARD MORTGAGE
MORTGAGE, DEED OF TRUST, ASSIGNMENT OF PRODUCTION,
SECURITY AGREEMENT AND FINANCING STATEMENT
(STANDARD MORTGAGE)
FROM
▇▇▇▇▇▇▇ OIL & GAS, L.P.
TO
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, AS TRUSTEE
FOR THE BENEFIT OF
BANK OF MONTREAL, AS AGENT
A POWER OF SALE HAS BEEN GRANTED IN THIS INSTRUMENT. IN CERTAIN STATES, A POWER
OF SALE MAY ALLOW THE TRUSTEE OR THE AGENT TO TAKE THE MORTGAGED PROPERTY AND
SELL IT WITHOUT GOING TO COURT IN A FORECLOSURE ACTION UPON DEFAULT BY THE
GRANTOR UNDER THIS INSTRUMENT.
THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS.
THIS INSTRUMENT SECURES PAYMENT OF FUTURE ADVANCES.
THIS INSTRUMENT COVERS PROCEEDS OF MORTGAGED PROPERTY.
Exh F-1
112
MORTGAGE, DEED OF TRUST, ASSIGNMENT OF
PRODUCTION, SECURITY AGREEMENT AND FINANCING STATEMENT
This MORTGAGE, DEED OF TRUST, ASSIGNMENT OF PRODUCTION, SECURITY AGREEMENT
AND FINANCING STATEMENT (this "Mortgage") is entered into as of the effective
time and date hereinafter stated (the "Effective Date") by ▇▇▇▇▇▇▇ OIL & GAS,
L.P., a Delaware limited partnership, whose address for notice is ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ ("Mortgagor"), to
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, as Trustee, whose address for notice is ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ ("Trustee") for the benefit of BANK OF MONTREAL, AS
AGENT, whose address for notice is ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇ (together with any successor agents, "Agent") for the Lenders (hereinafter
defined), and for the benefit of the Lenders ("Mortgagee").
R E C I T A L S:
A. Mortgagor, Mortgagee and the Lenders executed that certain Amended and
Restated Credit Agreement dated as of February 17, 2000 (such agreement, as may
from time to time be amended or supplemented, called the "Credit Agreement")
pursuant to which the Lenders have made or agreed to make certain advances to
and on behalf of the Mortgagor.
B. Pursuant to the Credit Agreement, Mortgagor has agreed to enter into
this Mortgage.
C. Therefore, in order to comply with the terms and conditions of the
Credit Agreement and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Mortgagor hereby agrees as
follows:
ARTICLE I
Grant of Lien and Indebtedness Secured
Section 1.01 Grant of Liens. To secure payment of the Indebtedness (as
hereinafter defined) and the performance of the covenants and obligations herein
contained, Mortgagor does by these presents hereby, subject to the reservations
and restrictions set forth herein below, (i) GRANT, BARGAIN, SELL, ASSIGN, SET
OVER, TRANSFER and CONVEY unto ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, as Trustee, whose address for
notice hereunder is ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ ("Trustee")
and the Trustee's successors and substitutes in trust hereunder with power of
sale, for the use and benefit of Agent and the Lenders, all of the following
described real and personal property, rights, titles, interests and estates
which are located in (or cover properties located in) the State of Texas or
which are located within (or cover properties located within) the offshore area
over which the United States of America asserts jurisdiction and to which the
laws of such state are applicable with respect to this Mortgage and/or the
Exh F-2
113
liens or security interests created hereby (the "Deed of Trust Mortgaged
Property") and (ii) GRANT, MORTGAGE, PLEDGE AND HYPOTHECATE to Mortgagee, for
its benefit and the benefit of the Lenders, with respect to, all of the
following described real and personal property, rights, titles, interests and
estates which were not granted to Trustee in clause (i) above (the "Other
Mortgaged Property") (the Deed of Trust Property and the Other Mortgaged
Property herein collectively called the "Mortgaged Property"):
(a) All rights, titles, interests and estates now owned or hereafter
acquired by Mortgagor in and to the oil and gas leases and/or oil, gas and other
mineral leases and other interests and estates and the lands and premises
covered or affected thereby which are described on Exhibit A attached hereto
(collectively called the "Hydrocarbon Property") or which Hydrocarbon Property
is otherwise referred to herein, and specifically, but without limitation, the
undivided interests of Mortgagor which are more particularly described on
Exhibit A hereto.
(b) All rights, titles, interests and estates now owned or hereafter
acquired by Mortgagor in and to (i) the properties now or hereafter pooled or
unitized with the Hydrocarbon Property; (ii) all presently existing or future
unitization, communitization, pooling agreements and declarations of pooled
units and the units created thereby (including, without limitation, all units
created under orders, regulations, rules or other official acts of any Federal,
State or other governmental body or agency having jurisdiction and any units
created solely among working interest owners pursuant to operating agreements or
otherwise) which may affect all or any portion of the Hydrocarbon Property
including, without limitation, those units which may be described or referred to
on attached Exhibit A; (iii) all operating agreements, production sales or other
contracts, farmout agreements, farm-in agreements, area of mutual interest
agreements, equipment leases and other agreements described or referred to in
this Mortgage or which relate to any of the Hydrocarbon Property or interests in
the Hydrocarbon Property described or referred to herein or on Exhibit A or to
the production, sale, purchase, exchange, processing, handling, storage,
transporting or marketing of the Hydrocarbons (hereinafter defined) from or
attributable to such Hydrocarbon Property or interests; and (iv) subject to
applicable restrictions on disclosure and/or transfer, all geological,
geophysical, engineering, accounting, title, legal, and other technical or
business data concerning the Mortgaged Property, the Hydrocarbons, or any other
item of Property which are in the possession of Mortgagor or in which Mortgagor
can otherwise grant a security interest, and all books, files, records, magnetic
media, computer records, and other forms of recording or obtaining access to
such data.
(c) All rights, titles, interests and estates now owned or hereafter
acquired by Mortgagor in and to all oil, gas, casinghead gas, condensate,
distillate, liquid hydrocarbons, gaseous hydrocarbons and all products refined
therefrom and all other minerals (collectively called the "Hydrocarbons") in and
under and which may be produced and saved from or attributable to the
Hydrocarbon Property, the lands pooled or unitized therewith and Mortgagor's
interests therein, including all oil in tanks and all rents, issues, profits,
proceeds, products, revenues and other income from or attributable to the
Hydrocarbon Property, the lands pooled or unitized therewith and Mortgagor's
Exh F-3
114
interests therein which are subjected or required to be subjected to the liens
and security interests of this Mortgage.
(d) All tenements, hereditaments, appurtenances and properties in anywise
appertaining, belonging, affixed or incidental to the Hydrocarbon Property,
rights, titles, interests and estates described or referred to in paragraphs (a)
and (b) above, which are now owned or which may hereafter be acquired by
Mortgagor, including, without limitation, any and all property, real or
personal, now owned or hereafter acquired and situated upon, used, held for use,
or useful in connection with the operating, working or development of any of
such Hydrocarbon Property or the lands pooled or unitized therewith (excluding
drilling rigs, trucks, automotive equipment or other personal property which may
be taken to the premises for the purpose of drilling a well or for other similar
temporary uses) and including any and all oil ▇▇▇▇▇, gas ▇▇▇▇▇, injection ▇▇▇▇▇
or other ▇▇▇▇▇, buildings, structures, field separators, liquid extraction
plants, plant compressors, pumps, pumping units, pipelines, sales and flow
lines, gathering systems, field gathering systems, salt water disposal
facilities, tanks and tank batteries, fixtures, valves, fittings, machinery and
parts, engines, boilers, meters, apparatus, equipment, appliances, tools,
implements, cables, wires, towers, casing, tubing and rods, surface leases,
rights-of-way, easements, servitudes, licenses and other surface and subsurface
rights together with all additions, substitutions, replacements, accessions and
attachments to any and all of the foregoing properties.
(e) Any property that may from time to time hereafter, by delivery or by
writing of any kind, be subjected to the lien and security interest hereof by
Mortgagor or by anyone on Mortgagor's behalf; and the Trustee is hereby
authorized to receive the same at any time as additional security hereunder.
(f) All of the rights, titles and interests of every nature whatsoever now
owned or hereafter acquired by Mortgagor in and to the Hydrocarbon Property
rights, titles, interests and estates and every part and parcel thereof,
including, without limitation, the Hydrocarbon Property rights, titles,
interests and estates as the same may be enlarged by the discharge of any
payments out of production or by the removal of any charges or Permitted
Encumbrances (as hereinafter defined in Section 3.01) to which any of the
Hydrocarbon Property rights, titles, interests or estates are subject, or
otherwise; all rights of Mortgagor to liens and security interests securing
payment of proceeds from the sale of production from the Mortgaged Property,
including, but not limited to, those liens and security interests provided in
Tex. Bus. & Com. Code ▇▇▇.Section.9.319 (Tex. UCC) (▇▇▇▇▇▇ Supp. 1989)
("Section.9.319 Tex. UCC"), as amended from time to time; together with any and
all renewals and extensions of any of the Hydrocarbon Property rights, titles,
interests or estates; all contracts and agreements supplemental to or amendatory
of or in substitution for the contracts and agreements described or mentioned
above; and any and all additional interests of any kind hereafter acquired by
Mortgagor in and to the Hydrocarbon Property rights, titles, interests or
estates.
(g) All accounts, contract rights, inventory, general intangibles,
insurance contracts and insurance proceeds constituting a part of, relating to
or arising out of those portions of the Mortgaged Property which are described
in paragraphs (a) through (f)
Exh F-4
115
above and all proceeds and products of all such portions of the Mortgaged
Property and payments in lieu of production (such as "take or pay" payments),
whether such proceeds or payments are goods, money, documents, instruments,
chattel paper, securities, accounts, general intangibles, fixtures, real
property, or other assets.
Notwithstanding any provision hereof to the contrary, this Mortgage does
not cover, and there is expressly excepted and excluded from the definition of
Mortgaged Property, any properties, rights and interests as may now or hereafter
be beneficially or equitable owned by (or contractually owing to) a third party
under any one or more of the agreements or other arrangements described in
Schedule 7.10 of the Credit Agreement (the "Participating Third Parties"), but
only to the extent any such exception and exclusion does not cause the undivided
interests specified in Exhibit A to be reduced or otherwise adversely affected.
Without limitation of the generality of the foregoing, any undivided interest
(a) with respect to which Mortgagor holds legal title (whether of record or
not), and (b) that is in excess of the undivided interests in such Mortgaged
Property as are specified in Exhibit A hereto shall be excluded from the
definition of Mortgaged Property to the extent a Participating Third Party now
or hereafter has an interest therein and, to that extent, shall otherwise be
free and clear of this Mortgage (and any security agreement and/or financing
statement associated herewith).
TO HAVE AND TO HOLD the Mortgaged Property unto the Trustee and to his
successors and assigns forever to secure the payment of the Indebtedness
(hereinafter defined) and to secure the performance of the covenants,
agreements, and obligations of the Mortgagor herein contained.
Section 1.02 Grant of Security Interest. To further secure the
Indebtedness, Mortgagor hereby grants to Mortgagee, subject to the reservations
and restrictions set forth herein below, a security interest in and to the
Mortgaged Property (whether now or hereafter acquired by operation of law or
otherwise) insofar as the Mortgaged Property consists of equipment, accounts,
contract rights, general intangibles (subject in the case of geological and
geophysical data (including without limitation raw data and interpretations)
contract rights and general intangibles to any existing restrictions on
disclosure and/or transfer), insurance contracts, insurance proceeds, inventory,
Hydrocarbons, fixtures and any and all other personal property of any kind or
character defined in and subject to the provisions of the Uniform Commercial
Code presently in effect in the jurisdiction in which the Mortgaged Property is
situated ("Applicable UCC"), including the proceeds and products from any and
all of such personal property. Upon the happening of any of the Events of
Default, Mortgagee is and shall be entitled to all of the rights, powers and
remedies afforded a secured party by the Applicable UCC with reference to the
personal property and fixtures in which Mortgagee has been granted a security
interest herein, or the Trustee or Mortgagee may proceed as to both the real and
personal property covered hereby in accordance with the rights and remedies
granted under this Mortgage in respect of the real property covered hereby. Such
rights, powers and remedies shall be cumulative and in addition to those granted
to the Trustee or Mortgagee under any other provision of this Mortgage or under
any other Security Instrument. Written notice mailed to Mortgagor as provided
herein at least five (5) days prior to the date of public sale of any part of
the Mortgaged Property which is personal
Exh F-5
116
property subject to the provisions of the Applicable UCC, or prior to the date
after which private sale of any such part of the Mortgaged Property will be
made, shall constitute reasonable notice.
Section 1.03 Indebtedness Secured. This Mortgage is executed and delivered
by Mortgagor to secure and enforce the following (the "Indebtedness"):
(a) Payment of and performance of any and all indebtedness, obligations and
liabilities of Mortgagor pursuant to the Credit Agreement, whether now existing
or hereafter arising, including without limitation, (i) that certain promissory
note by Mortgagor in favor of Bank of Montreal and being in the principal amount
of $23,153,830, dated February 17, 2000 with final maturity on or before
December 31, 2002 and all other notes given in substitution therefor or in
modification, renewal or extension thereof, in whole or in part (such notes, as
from time to time supplemented, amended or modified and all other notes given in
substitution therefor or in modification, renewal or extension thereof, in whole
or in part, being hereafter called the "BMO Note"), (ii) that certain promissory
note by Mortgagor in favor of Societe Generale, Southwest Agency and being in
the principal amount of $11,846,170, dated February 17, 2000 with final maturity
on or before December 31, 2002 and all other notes given in substitution
therefor or in modification, renewal or extension thereof, in whole or in part
(such notes, as from time to time supplemented, amended or modified and all
other notes given in substitution therefor or in modification, renewal or
extension thereof, in whole or in part, being hereafter called the "Soc-Gen
Note,") (iii) that certain promissory note by Mortgagor in favor of Shell
Capital Inc. and being in the principal amount of $40,000,000, dated February
17, 2000 with final maturity on or before December 31, 2002 and all other notes
given in substitution therefor or in modification, renewal or extension thereof,
in whole or in part (such notes, as from time to time supplemented, amended or
modified and all other notes given in substitution therefor or in modification,
renewal or extension thereof, in whole or in part, being hereafter called the
"SCI Note" and, together with the BMO Note and the Soc-Gen Note, the "Notes")
and (iv) any commodity, interest rate or currency swap, cap, floor, collar,
forward agreement or other exchange or protection agreements or any option with
respect to any such transaction in existence as of the date hereof or hereafter
arising between (i) Mortgagor and Bank of Montreal and its successors or assigns
(a "BMO Hedge Party") and Soc-Gen and its successors or assigns (a "Soc-Gen
Hedge Party") entered into while such BMO Hedge Party or such Soc-Gen Hedge
Party is a Lender; and (ii) Mortgagor and SCI and its successors or assigns
(with Loans or Commitments of $20 million or more) or any Affiliate of SCI (SCI
and any Affiliate of SCI a "SCI Hedge Party") entered into while such SCI Hedge
Party or Fathom Energy Capital I, L.L.C, is a Lender. For purposes of this
Section 1.03, the parties intend that any commodity, interest rate or currency
swap, cap, floor, collar, forward agreement or other exchange or protection
agreements or any option entered into between the Mortgagor and a Lender or in
the case of SCI, a SCI Hedge Party, while such Person was a party to the Credit
Agreement shall continue to be secured even after the time such Person ceases to
be a party to the Credit Agreement as a Lender.
Exh F-6
117
(b) Any sums which may be advanced or paid by Mortgagee under the terms
hereof or of the Credit Agreement on account of the failure of Mortgagor to
comply with the covenants of Mortgagor contained herein or in the Credit
Agreement; and all other indebtedness of Mortgagor arising pursuant to the
provisions of this Mortgage.
Section 1.04 Fixture Filing, Etc. Without in any manner limiting the
generality of any of the other provisions of this Mortgage: (i) some portions of
the goods described or to which reference is made herein are or are to become
fixtures on the land described or to which reference is made herein or on
attached Exhibit A; (ii) the security interests created hereby under applicable
provisions of the Applicable UCC will attach to Hydrocarbons (minerals including
oil and gas) or the accounts resulting from the sale thereof at the wellhead or
minehead located on the land described or to which reference is made herein;
(iii) this Mortgage is to be filed of record in the real estate records as a
financing statement, and (iv) Mortgagor is the record owner of the real estate
or interests in the real estate comprised of the Mortgaged Property.
Section 1.05 Defined Terms. Any capitalized term used in this Mortgage and
not defined in this Mortgage shall have the meaning assigned to such term in the
Credit Agreement.
ARTICLE II
Assignment of Production
Section 2.01 Assignment. Mortgagor has absolutely and unconditionally
assigned, transferred, and conveyed, and does hereby absolutely and
unconditionally assign, transfer and convey unto Mortgagee, its successors and
assigns, all of the Hydrocarbons and all products obtained or processed
therefrom, and the revenues and proceeds now and hereafter attributable to the
Hydrocarbons and said products and all payments in lieu of the Hydrocarbons such
as "take or pay" payments or settlements. The Hydrocarbons and products are to
be delivered into pipe lines connected with the Mortgaged Property, or to the
purchaser thereof, to the credit of Mortgagee, free and clear of all taxes,
charges, costs, and expenses; and all such revenues and proceeds shall be paid
directly to Mortgagee, at its banking quarters in Chicago, Illinois with no duty
or obligation of any party paying the same to inquire into the rights of
Mortgagee to receive the same, what application is made thereof, or as to any
other matter. Mortgagor agrees to perform all such acts, and to execute all such
further assignments, transfers and division orders, and other instruments as may
be required or desired by Mortgagee or any party in order to have said proceeds
and revenues so paid to Mortgagee. Mortgagee is fully authorized to receive and
receipt for said revenues and proceeds; to 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 said revenues or proceeds and to
hold the proceeds thereof in a bank account as additional collateral securing
the Indebtedness; and to execute transfer and division orders in the name of
Mortgagor, or otherwise, with warranties binding Mortgagor. All proceeds
received by the Mortgagee pursuant to this assignment shall be applied as
provided in the other Loan Documents. Mortgagee shall not be liable for any
delay, neglect, or failure to effect collection of any
Exh F-7
118
proceeds or to take any other action in connection therewith or hereunder; but
Mortgagee shall have the right, at its election, 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 funds and to protect the
interests of Mortgagee, and/or Mortgagor, with all costs, expenses and
attorneys' fees incurred in connection therewith being paid by Mortgagor.
Mortgagor hereby appoints Mortgagee as its attorney-in-fact to pursue any and
all rights of Mortgagor to liens on and security interests in the Hydrocarbons
securing payment of proceeds of runs attributable to the Hydrocarbons. In
addition to the rights granted to Trustee and/or Mortgagee in Section 1.01 (f)
of this Mortgage, Mortgagor hereby further transfers and assigns to Mortgagee
any and all such liens, security interests, financing statements or similar
interests of Mortgagor attributable to its interest in the Hydrocarbons and
proceeds of runs therefrom arising under or created by said statutory provision,
judicial decision or otherwise. The power of attorney granted to Mortgagee in
this Section 2.01, being coupled with an interest, shall be irrevocable so long
as the Indebtedness or any part thereof remains unpaid.
Section 2.02 Rights Under Texas Act. Mortgagor hereby grants, sells,
assigns, sets over and mortgages unto Mortgagee during the term hereof, all of
Mortgagor's rights and interests pursuant to the provisions of Section 9.319
Tex. UCC, hereby vesting in Mortgagee all of Mortgagor's rights as an interest
owner to the continuing security interest in and lien upon the Mortgaged
Property.
Section 2.03 No Modification of Payment Obligations. Nothing herein
contained shall modify or otherwise alter the obligation of Mortgagor to make
prompt payment of all principal and interest owing on the Indebtedness when and
as the same become due regardless of whether the proceeds of the Hydrocarbons
are sufficient to pay the same and the rights provided in accordance with the
foregoing assignment provision shall be cumulative of all other security of any
and every character now or hereafter existing to secure payment of the
Indebtedness.
ARTICLE III
Representations, Warranties and Covenants
Mortgagor hereby represents, warrants and covenants as follows:
Section 3.01 Title. To the extent of the undivided interests specified on
attached Exhibit A, after reducing same on account of the "Term ORRI" created
under the Term ORRI Conveyance as hereinafter defined, Mortgagor has good and
indefeasible title to and is possessed of the Mortgaged Property. The Mortgaged
Property is free of any and all Liens (as defined in the Credit Agreement)
except Excepted Liens and Liens, if any, described in Exhibit A (collectively,
the "Permitted Encumbrances").
Section 3.02 Defend Title. This Mortgage is, and always will be kept, a
direct first lien and security interest upon the Mortgaged Property subject only
to the Permitted Encumbrances and Mortgagor will not create or suffer to be
created or permit to exist any lien, security interest or charge prior or junior
to or on a parity with the lien and security
Exh F-8
119
interest of this Mortgage upon the Mortgaged Property or any part thereof or
upon the rents, issues, revenues, profits and other income therefrom. Mortgagor
will warrant and defend the title to the Mortgaged Property against the claims
and demands of all other persons whomsoever and will maintain and preserve the
lien created hereby so long as any of the Indebtedness secured hereby remains
unpaid. Should an adverse claim be made against or a cloud develop upon the
title to any part of the Mortgaged Property, Mortgagor agrees it will
immediately defend against such adverse claim or take appropriate action to
remove such cloud at Mortgagor's cost and expense, and Mortgagor further agrees
that the Trustee and/or Mortgagee may take such other action as they deem
advisable to protect and preserve their interests in the Mortgaged Property, and
in such event Mortgagor will indemnify the Trustee and Mortgagee against any and
all cost, attorney's fees and other expenses which they may incur in defending
against any such adverse claim or taking action to remove any such cloud.
Section 3.03 Not a Foreign Person. Mortgagor is not a "foreign person"
within the meaning of the Internal Revenue Code of 1986, as amended (hereinafter
called the "Code"), Sections 1445 and 7701 (i.e. Mortgagor is not a non-resident
alien, foreign corporation, foreign partnership, foreign trust or foreign estate
as those terms are defined in the Code and any regulations promulgated
thereunder).
Section 3.04 Power to Create Lien and Security. The Mortgagor has, in all
material respects, full power and lawful authority to grant, bargain, sell,
assign, transfer, mortgage, and convey a security interest in all of the
Mortgaged Property in the manner and form herein provided and without obtaining
the authorization, approval, consent or waiver of any lessor, sublessor,
Governmental Authority or other party or parties whomsoever.
Section 3.05 Revenue and Cost Bearing Interest. Mortgagor's ownership of
the Hydrocarbon Property and the undivided interests therein as specified on
Exhibit A will, after giving full effect to all Permitted Encumbrances, 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 Hydrocarbon
Property specified as net revenue interest (NRI) on Exhibit A, less the Term
ORRI, and will cause Mortgagor to bear not more than that portion (expressed as
a fraction, percentage or decimal), specified as working interest (WI) on
Exhibit A, of the costs of drilling, developing and operating the ▇▇▇▇▇
identified on Exhibit A.
Section 3.06 Rentals Paid; Leases in Effect. All rentals and royalties due
and payable in accordance with the terms of any leases or subleases comprising
any material part of the Hydrocarbon Property have been duly paid or provided
for and all leases or subleases comprising any material part of the Hydrocarbon
Property are in full force and effect.
Section 3.07 Operation By Third Parties. All or portions of the Mortgaged
Property may be comprised of interests in the Hydrocarbon Property which are
other than working interests or which may be operated by a party or parties
other than Mortgagor and with respect to all or any such interests and
properties as may be comprised of
Exh F-9
120
interests other than working interests or which may be operated by parties other
than Mortgagor, Mortgagor's covenants as expressed in this Article III are
modified to require that Mortgagor use its best efforts to obtain compliance
with such covenants by the working interest owners or the operator or operators
of such leases or properties.
Section 3.08 Abandon, Sales. The Mortgagor will not sell, lease, assign,
transfer or otherwise dispose or abandon any of the Mortgaged Property except as
permitted by the Credit Agreement.
Section 3.09 Failure to Perform. The Mortgagor agrees that if the
Mortgagor, after receipt from Mortgagee of written notice and demand, fails to
perform any act or to take any action which the Mortgagor is required to perform
or take hereunder or pay any money which the Mortgagor is required to pay
hereunder, each of the Mortgagee and the Trustee in the Mortgagor's name or its
or their own name may, but shall not be obligated to, perform or cause to
perform such act or take such action or pay such money, and any expenses so
incurred by either of them and any money so paid by either of them shall be a
demand obligation owing by the Mortgagor to the Mortgagee or the Trustee, as the
case may be, and each of the Mortgagee and the Trustee, upon making such
payment, shall be subrogated to all of the rights of the Person receiving such
payment. Each amount due and owing by Mortgagor to each of the Mortgagee and the
Trustee pursuant to this Mortgage shall bear interest from the date of such
expenditure or payment or other occurrence which gives rise to such amount being
owed to such Person until paid at the Post-Default Rate, and all such amounts
together with such interest thereon shall be a part of the Indebtedness
described in Section 1.03 hereof.
ARTICLE IV
Rights and Remedies
Section 4.01 Event of Default. An "Event of Default" under the Credit
Agreement shall be an Event of Default under this Mortgage.
Section 4.02 Foreclosure and Sale. If an Event of Default shall occur and
be continuing, Mortgagee shall have the right and option to proceed with
foreclosure by directing the Trustee, or his successors or substitutes in trust,
to proceed with foreclosure and to sell, to the extent permitted by law, all or
any portion of the Mortgaged Property at one or more sales, as an entirety or in
parcels, at such place or places in otherwise such manner and upon such notice
as may be required by law, or, in the absence of any such requirement, as the
Mortgagee may deem appropriate, and to make conveyance to the purchaser or
purchasers. Where the Mortgaged Property is situated in more than one county,
notice as above provided shall be posted and filed in all such counties (if such
notices are required by law), and all such Mortgaged Property may be sold in any
such county and any such notice shall designate the county where such Mortgaged
Property is to be sold. Nothing contained in this Section 4.02 shall be
construed so as to limit in any way the Trustee's rights to sell the Mortgaged
Property, or any portion thereof, by private sale if, and to the extent that,
such private sale is permitted under the laws of the applicable jurisdiction or
by public or private sale after entry of a judgment by any court
Exh F-10
121
of competent jurisdiction so ordering. Mortgagor hereby irrevocably appoints the
Trustee to be the attorney 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 the Trustee. At
any such sale: (i) whether made under the power herein contained or any other
legal enactment, or by virtue of any judicial proceedings or any other legal
right, remedy or recourse, it shall not be necessary for Trustee to have
physically present, or to have constructive possession of, the Mortgaged
Property (Mortgagor hereby covenanting and agreeing to deliver to Trustee any
portion of the Mortgaged Property not actually or constructively possessed by
Trustee immediately upon demand by Trustee) and the title to and right of
possession of any such property shall pass to the purchaser thereof as
completely as if the same had been actually present and delivered to purchaser
at such sale, (ii) each instrument of conveyance executed by Trustee shall
contain a general warranty of title, binding upon Mortgagor and its successors
and assigns, (iii) each and every recital contained in any instrument of
conveyance made by Trustee shall conclusively establish the truth and accuracy
of the matters recited therein, including, without limitation, nonpayment of the
Indebtedness, advertisement and conduct of such sale in the manner provided
herein and otherwise by law and appointment of any successor Trustee hereunder,
(iv) any and all prerequisites to the validity thereof shall be conclusively
presumed to have been performed, (v) the receipt of Trustee or of such other
party or officer making the sale shall be a sufficient discharge to the
purchaser or purchasers for its purchase money and no such purchaser or
purchasers, or its assigns or personal representatives, shall thereafter be
obligated to see to the application of such purchase money, or be in any way
answerable for any loss, misapplication or nonapplication thereof, (vi) to the
fullest extent permitted by law, Mortgagor shall be completely and irrevocably
divested of all of its right, title, interest, claim and demand whatsoever,
either at law or in equity, in and to the property sold and such sale shall be a
perpetual bar both at law and in equity against Mortgagor, and against any and
all other persons claiming or to claim the property sold or any part thereof,
by, through or under Mortgagor, and (vii) to the extent and under such
circumstances as are permitted by law, Mortgagee may be a purchaser at any such
sale, and shall have the right, after paying or accounting for all costs of said
sale or sales, to credit the amount of the bid upon the amount of the
Indebtedness (in the order of priority set forth in Section 4.13 hereof) in lieu
of cash payment.
Section 4.03 Substitute Trustees and Agents. The Trustee or his successor
or substitute may appoint or delegate any one or more persons as agent to
perform any act or acts necessary or incident to any sale held by Trustee,
including the posting of notices and the conduct of sale, but in the name and on
behalf of Trustee, his successor or substitute. If Trustee or his successor or
substitute shall have given notice of sale hereunder, any successor or
substitute trustee thereafter appointed may complete the sale and the conveyance
of the property pursuant thereto as if such notice had been given by the
successor or substitute trustee conducting the sale.
Exh F-11
122
Section 4.04 Judicial Foreclosure; Receivership. If any of the Indebtedness
shall become due and payable and shall not be promptly paid, the Trustee or
Mortgagee shall have the right and power to proceed by a suit or suits in equity
or at law, whether for the specific performance of any covenant or agreement
herein contained or in aid of the execution of any power herein granted, or for
any foreclosure hereunder or for the sale of the Mortgaged Property under the
judgment or decree of any court or courts of competent jurisdiction, or for the
appointment of a receiver pending any foreclosure hereunder or the sale of the
Mortgaged Property under the order of a court or courts of competent
jurisdiction or under executory or other legal process, or for the enforcement
of any other appropriate legal or equitable remedy. Any money advanced by the
Trustee and/or Mortgagee in connection with any such receivership shall be a
demand obligation (which obligation Mortgagor hereby expressly promises to pay)
owing by Mortgagor to the Trustee and/or Mortgagee and shall bear interest from
the date of making such advance by the Trustee and/or Mortgagee until paid at
the Post Default Rate.
Section 4.05 Foreclosure for Installments. Mortgagee shall also have the
option to proceed with foreclosure in satisfaction of any installments of the
Indebtedness which have not been paid when due either through the courts or by
directing the Trustee or his successors in trust to proceed with foreclosure in
satisfaction of the matured but unpaid portion of the Indebtedness as if under a
full foreclosure, conducting the sale as herein provided and without declaring
the entire principal balance and accrued interest due; such sale may be made
subject to the unmatured portion of the Indebtedness, and any such sale shall
not in any manner affect the unmatured portion of the Indebtedness, but as to
such unmatured portion of the Indebtedness this Mortgage shall remain in full
force and effect just as though no sale had been made hereunder. It is further
agreed that several sales may be made hereunder without exhausting the right of
sale for any unmatured part of the Indebtedness, it being the purpose hereof to
provide for a foreclosure and sale of the security for any matured portion of
the Indebtedness without exhausting the power to foreclose and sell the
Mortgaged Property for any subsequently maturing portion of the Indebtedness.
Section 4.06 Separate Sales The Mortgaged Property may be sold in one or
more parcels and in such manner and order as Mortgagee, in its sole discretion,
may elect, it being expressly understood and agreed that the right of sale
arising out of any Event of Default shall not be exhausted by any one or more
sales.
Section 4.07 Occupancy After Foreclosure. In the event there is a
foreclosure sale hereunder and at the time of such sale Mortgagor or Mortgagor's
heirs, devisees, representatives, successors or assigns or any other person
claiming any interest in the Mortgaged Property by, through or under Mortgagor,
are occupying or using the Mortgaged Property or any part thereof, each and all
shall immediately become the tenant of the purchaser at such sale, which tenancy
shall be a tenancy from day to day, terminable at the will of either the
landlord or tenant, or at a reasonable rental per day based upon the value of
the property occupied, such rental to be due daily to the purchaser; to the
extent permitted by applicable law, the purchaser at such sale shall,
notwithstanding any language herein apparently to the contrary, have the sole
option to demand immediate possession following the sale or to permit the
occupants to remain as
Exh F-12
123
tenants at will. In the event the tenant fails to surrender possession of said
property upon demand, the purchaser shall be entitled to institute and maintain
a summary action for possession of the Mortgaged Property (such as an action for
forcible entry and detainer) in any court having jurisdiction.
Section 4.08 Remedies Cumulative, Concurrent and Nonexclusive. Every right,
power and remedy herein given to the Trustee or Mortgagee shall be cumulative
and in addition to every other right, power and remedy herein specifically given
or now or hereafter existing in equity, at law or by statute (including
specifically those granted by the Applicable UCC in effect and applicable to the
Mortgaged Property or any portion thereof) each and every right, power and
remedy whether specifically herein given or otherwise existing may be exercised
from time to time and so often and in such order as may be deemed expedient by
the Trustee or Mortgagee, and the exercise, or the beginning of the exercise, of
any such right, power or remedy shall 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 Mortgagee in the exercise of any right,
power or remedy shall 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.
Section 4.09 No Release of Obligations. Neither Mortgagor, any guarantor
nor any other person hereafter obligated for payment of all or any part of the
Indebtedness shall be relieved of such obligation by reason of (a) the failure
of Trustee to comply with any request of Mortgagor, or any guarantor or any
other person so obligated to foreclose the lien of this Mortgage or to enforce
any provision hereunder or under the Credit Agreement; (b) the release,
regardless of consideration, of the Mortgaged Property or any portion thereof or
interest therein or the addition of any other property to the Mortgaged
Property; (c) any agreement or stipulation between any subsequent owner of the
Mortgaged Property and Mortgagee extending, renewing, rearranging or in any
other way modifying the terms of this Mortgage without first having obtained the
consent of, given notice to or paid any consideration to Mortgagor, any
guarantor or such other person, and in such event Mortgagor, guarantor and all
such other persons shall continue to be liable to make payment according to the
terms of any such extension or modification agreement unless expressly released
and discharged in writing by Mortgagee; or (d) by any other act or occurrence
save and except the complete payment of the Indebtedness and the complete
fulfillment of all obligations hereunder or under the Credit Agreement.
Section 4.10 Release of and Resort to Collateral. Mortgagee may release,
regardless of consideration, any part of the Mortgaged Property without, as to
the remainder, in any way impairing, affecting, subordinating or releasing the
lien or security interest created in or evidenced by this Mortgage or its
stature as a first and prior lien and security interest in and to the Mortgaged
Property, and without in any way releasing or diminishing the liability of any
person or entity liable for the repayment of the Indebtedness. For payment of
the Indebtedness, Mortgagee may resort to any other security therefor held by
Mortgagee or Trustee in such order and manner as Mortgagee may elect.
Exh F-13
124
Section 4.11 Waiver of Redemption, Notice and Marshalling of Assets, Etc.
To the fullest extent permitted by law, Mortgagor hereby irrevocably and
unconditionally waives and releases (a) all benefits that might accrue to
Mortgagor by virtue of any present or future moratorium law or other law
exempting the Mortgaged Property from attachment, levy or sale on execution or
providing for any appraisement, valuation, stay of execution, exemption from
civil process, redemption or extension of time for payment and (b) any right to
a marshalling of assets or a sale in inverse order of alienation. If any law
referred to in this Mortgage and now in force, of which Mortgagor or its
successor or successors might take advantage despite the provisions hereof,
shall hereafter be repealed or cease to be in force, such law shall thereafter
be deemed not to constitute any part of the contract herein contained or to
preclude the operation or application of the provisions hereof. Provided,
however, that if the laws of any state do not permit the redemption period to be
waived, the redemption period is specifically reduced to the minimum amount of
time allowable by statute.
Section 4.12 Discontinuance of Proceedings In case Mortgagee shall have
proceeded to invoke any right, remedy or recourse permitted hereunder or under
the Credit Agreement and shall thereafter elect to discontinue or abandon same
for any reason, Mortgagee shall have the unqualified right so to do and, in such
an event, Mortgagor and Mortgagee shall be restored to their former positions
with respect to the Indebtedness, this Mortgage, the Credit Agreement, the
Mortgaged Property and otherwise, and the rights, remedies, recourses and powers
of Mortgagee shall continue as if same had never been invoked.
Section 4.13 Application of Proceeds. The proceeds of any sale of the
Mortgaged Property or any part thereof and all other monies received by the
Trustee or Mortgagee in any proceedings for the enforcement hereof or otherwise,
whose application has not elsewhere herein been specifically provided for, shall
be applied:
(a) first, to the payment of all reasonable expenses incurred by the
Trustee or Mortgagee incident to the enforcement of this Mortgage, the Credit
Agreement or any of the Indebtedness (including, without limiting the generality
of the foregoing, expenses of any entry or taking of possession, of any sale, of
advertisement thereof, and of conveyances, and court costs, compensation of
agents and employees, legal fees and a reasonable commission to the Trustee
acting), and to the payment of all other charges, reasonable expenses,
liabilities and advances incurred or made by the Trustee or Mortgagee under this
Mortgage or in executing any trust or power hereunder;
(b) second to payment of the Indebtedness in such order and manner as
Mortgagee may elect; and
(c) third, to Mortgagor; or as otherwise required by any Governmental
Requirement.
Section 4.14 Resignation of Operator. In addition to all rights and
remedies under this Mortgage, at law and in equity, if any Event of Default
shall occur and Trustee or the Mortgagee shall exercise any possessory remedies
under this Mortgage with
Exh F-14
125
respect to any portion of the Hydrocarbon Property (or Mortgagor shall transfer
any Mortgaged Property "in lieu of" foreclosure), the Mortgagee or the Trustee
shall have the right to request that any operator of any Hydrocarbon Property
which is either Mortgagor or any Affiliate of Mortgagor to resign as operator
under the joint operating agreement applicable thereto, and no later than 60
days after receipt by Mortgagor of any such request, Mortgagor shall resign (or
cause such other party to resign) as operator of such Hydrocarbon Property.
Section 4.15 Indemnity. In connection with any action taken by the Trustee
and/or Mortgagee pursuant to this Mortgage, the Trustee and/or Mortgagee and
their officers, directors, employees, representatives, agents, attorneys,
accountants and experts ("Indemnified Parties") shall not be liable for any loss
sustained by Mortgagor resulting from an assertion that Mortgagee has received
funds from the production of Hydrocarbons claimed by third persons or any act or
omission of any Indemnified Party in administering, managing, operating or
controlling the Mortgaged Property including such loss which may result from the
ordinary negligence of an Indemnified Party unless such loss is caused by the
gross negligence willful misconduct or bad faith of an Indemnified Party, nor
shall the Trustee and/or Mortgagee be obligated to perform or discharge any
obligation, duty or liability of Mortgagor. Mortgagor shall and does hereby
agree to indemnify each Indemnified Party for, and to hold each Indemnified
Party harmless from, any and all liability, loss or damage which may or might be
incurred by any Indemnified Party by reason of this Mortgage or the exercise of
rights or remedies hereunder; should the Trustee and/or Mortgagee make any
expenditure on account of any such liability, loss or damage, the amount
thereof, including costs, expenses and reasonable attorneys' fees, shall be a
demand obligation (which obligation Mortgagor hereby expressly promises to pay)
owing by Mortgagor to the Trustee and/or Mortgagee and shall bear interest from
the date expended until paid at the Post-Default Rate, shall be a part of the
Indebtedness and shall be secured by this Mortgage and any other Security
Instrument. Mortgagor hereby assents to, ratifies and confirms any and all
actions of the Trustee and/or Mortgagee with respect to the Mortgaged Property
taken under, and in compliance with the terms of, this Mortgage. The liabilities
of the Mortgagor as set forth in this Section 4.15 shall survive the termination
of this Mortgage.
ARTICLE V
The Trustee
Section 5.01 Duties, Rights, and Powers of Trustee. It shall be no part of
the duty of the Trustee to see to any recording, filing or registration of this
Mortgage or any other instrument in addition or supplemental thereto, or to give
any notice thereof, or to see to the payment of or be under any duty in respect
of any tax or assessment or other governmental charge which may be levied or
assessed on the Mortgaged Property, or 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. The Trustee shall not be responsible for the
execution, acknowledgment or validity of this Mortgage 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
Exh F-15
126
respect of the rights of Mortgagee. The Trustee shall have the right to advise
with counsel upon any matters arising hereunder and shall be fully protected in
relying as to legal matters on the advice of counsel. The Trustee shall not
incur any personal liability hereunder except for Trustee's own gross
negligence, bad faith and/or 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.
Section 5.02 Successor Trustee. The Trustee may resign by written notice
addressed to Mortgagee or be removed at any time with or without cause by an
instrument in writing duly executed on behalf of 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, or, in the absence of any such requirement,
without other formality than appointment and designation in writing. Written
notice of such appointment and designation shall be given by Mortgagee to
Mortgagor, but the validity of any such appointment shall not be impaired or
affected by failure to give such notice or by any defect therein. Such
appointment and designation shall be full evidence of the right and authority to
make the same and of all the facts therein recited, and, upon the making of any
such appointment and designation, this Mortgage shall vest in the successor
trustee all the estate and title in and to all of the Mortgaged Property, and
the successor trustee shall thereupon succeed to all of the rights, powers,
privileges, immunities and duties hereby conferred upon the Trustee named
herein, and one such appointment and designation shall not exhaust the right to
appoint and designate a successor trustee hereunder but such right may be
exercised repeatedly as long as any Indebtedness remains unpaid hereunder. To
facilitate the administration of the duties hereunder, Mortgagee may appoint
multiple trustees to serve in such capacity or in such jurisdictions as
Mortgagee may designate.
Section 5.03 Retention of Moneys. All moneys received by Trustee shall,
until used or applied as herein provided, be held in trust for the purposes for
which they were received, but need not be segregated in any manner from any
other moneys (except to the extent required by law), and Trustee shall be under
no liability for interest on any moneys received by him hereunder.
ARTICLE VI
Miscellaneous
Section 6.01 Instrument Construed as Mortgage, Etc. With respect to any
portions of the Mortgaged Property located in any state or other jurisdiction
the laws of which do not provide for the use or enforcement of a deed of trust
or the office, rights and authority of the Trustee as herein provided, the
general language of conveyance hereof to the Trustee is intended and the same
shall be construed as words of mortgage unto and in favor of Mortgagee and the
rights and authority granted to the Trustee herein may be enforced and asserted
by Mortgagee in accordance with the laws of the jurisdiction in which such
portion of the Mortgaged Property is located and the same may be foreclosed at
the option of Mortgagee as to any or all such portions of the Mortgaged Property
in
Exh F-16
127
any manner permitted by the laws of the jurisdiction in which such portions of
the Mortgaged Property is situated. This Mortgage may be construed as a
mortgage, deed of trust, chattel mortgage, conveyance, assignment, security
agreement, pledge, financing statement, hypothecation or contract, or any one or
more of them, in order fully to effectuate the lien hereof and the purposes and
agreements herein set forth.
Section 6.02 Release of Mortgage. If all Indebtedness secured hereby shall
be paid and the Credit Agreement terminated, Mortgagee shall forthwith cause
satisfaction and discharge of this Mortgage to be entered upon the record at the
expense of Mortgagor and shall execute and deliver or cause to be executed and
delivered such instruments of satisfaction and reassignment as may be
appropriate. Otherwise, this Mortgage shall remain and continue in full force
and effect.
Section 6.03 Severability. If any provision hereof is invalid or
unenforceable in any jurisdiction, the other provisions hereof shall remain in
full force and effect in such jurisdiction and the remaining provisions hereof
shall be liberally construed in favor of the Trustee and Mortgagee in order to
effectuate the provisions hereof, and the invalidity or unenforceability of any
provision hereof in any jurisdiction shall not affect the validity or
enforceability of any such provision in any other jurisdiction.
Section 6.04 Successors and Assigns of Parties. The term "Mortgagee" as
used herein shall mean and include any legal owner, holder, assignee or pledgee
of any of the Indebtedness secured hereby. The terms used to designate Trustee,
Mortgagee and Mortgagor shall be deemed to include the respective heirs, legal
representatives, successors and assigns of such parties.
Section 6.05 Satisfaction of Prior Encumbrance. To the extent that proceeds
of the Credit Agreement are used to pay indebtedness secured by any outstanding
lien, security interest, charge or prior encumbrance against the Mortgaged
Property, such proceeds have been advanced by Mortgagee at Mortgagor's request,
and Mortgagee shall be subrogated to any and all rights, security interests and
liens owned by any owner or holder of such outstanding liens, security
interests, charges or encumbrances, irrespective of whether said liens, security
interests, charges or encumbrances are released, and it is expressly understood
that, in consideration of the payment of such other indebtedness by Mortgagee,
Mortgagor hereby waives and releases all demands and causes of action for
offsets and payments to, upon and in connection with the said indebtedness.
Section 6.06 Subrogation of Trustee. This Mortgage is made with full
substitution and subrogation of the Trustee and his successors in this trust and
his and their assigns in and to all covenants and warranties by others
heretofore given or made in respect of the Mortgaged Property or any part
thereof.
Section 6.07 Nature of Covenants. The covenants and agreements herein
contained shall constitute covenants running with the land and interests covered
or affected hereby and shall be binding upon the heirs, legal representatives,
successors and assigns of the parties hereto.
Exh F-17
128
Section 6.08 Notices. All notices, requests, consents, demands and other
communications required or permitted hereunder shall be in writing and shall be
deemed sufficiently given or furnished if delivered by registered or certified
United States mail, postage prepaid, or by personal service (including express
or courier service) at the addresses specified in the first paragraph of this
Mortgage (unless changed by similar notice in writing given by the particular
party whose address is to be changed). Any such notice or communication shall be
deemed to have been given either at the time of personal delivery or, in the
case of delivery at the address and in the manner provided herein, upon receipt;
provided that, service of notice as required by the laws of any state in which
portions of the Mortgaged Property may be situated shall for all purposes be
deemed appropriate and sufficient with the giving of such notice.
Section 6.09 Counterparts. This Mortgage is being executed in several
counterparts, all of which are identical, except that to facilitate recordation,
if the Mortgaged Property is situated in more than one county, descriptions of
only those portions of the Mortgaged Property located in the county in which a
particular counterpart is recorded shall be attached as Exhibit A thereto. A
complete Exhibit A will be attached to that certain counterpart to be attached
to a Financing Statement and filed with the Secretary of State of Texas in the
Uniform Commercial Code Records. Each of such counterparts shall for all
purposes be deemed to be an original and all such counterparts shall together
constitute but one and the same instrument.
Section 6.10 Exculpation Provisions. Each of the parties hereto
specifically agrees that it has a duty to read this Mortgage; and agrees that it
is charged with notice and knowledge of the terms of this Mortgage; that it has
in fact read this Mortgage and is fully informed and has full notice and
knowledge of the terms, conditions and effects of this Mortgage; that it has
been represented by independent legal counsel of its choice throughout the
negotiations preceding its execution of this Mortgage; and has received the
advice of its attorney in entering into this Mortgage; and that it recognizes
that certain of the terms of this Mortgage result in one party assuming the
liability inherent in some aspects of the transaction and relieving the other
party of its responsibility for such liability. Each party hereto agrees and
covenants that it will not contest the validity or enforceability of any
exculpatory provision of this Mortgage on the basis that the party had no notice
or knowledge of such provision or that the provision is not "conspicuous."
Exh F-18
129
WITNESS THE EXECUTION HEREOF, this 17th day of February, 2000, as of 7:01
a.m. Houston, Texas time, immediately after giving effect to the execution and
effective time of that certain Conveyance of Adjustable Term Overriding Royalty
Interest of even date herewith from Mortgagor to ECT Merchant Investments Corp.
and Joint Energy Development Investments II Limited Partnership (the "Term ORRI
Conveyance") (the "Effective Date").
MORTGAGOR:
▇▇▇▇▇▇▇ OIL & GAS, L.P.
By: ▇▇▇▇▇▇▇, Inc., its General Partner
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
Exh F-19
▇▇▇
▇▇▇▇▇ ▇▇ ▇▇▇▇▇ )
)
COUNTY OF ▇▇▇▇▇▇ )
TEXAS
This instrument was acknowledged before me on February 17, 2000 by
____________________________, ______________________ of ▇▇▇▇▇▇▇, INC., a Nevada
corporation, as general partner of ▇▇▇▇▇▇▇ OIL & GAS, L.P., a Delaware limited
partnership, on behalf of such corporation, as general partner of the limited
partnership.
--------------------------------
Notary Public in and for the
State of Texas
Notarial Seal:
OKLAHOMA
Before me, a Notary Public in and for said county and state, on this 17th
day of February, 2000, personally appeared ____________________________, to me
known to be the identical person who subscribed the name of the maker thereof to
the foregoing instrument as ______________________ of ▇▇▇▇▇▇▇, INC., a Nevada
corporation, as general partner of ▇▇▇▇▇▇▇ OIL & GAS, L.P., a Delaware limited
partnership, and acknowledged to me that ______ executed the same as _______
free and voluntary act and deed, and as the free and voluntary act and deed of
such corporation for the uses and purposes therein set forth.
--------------------------------
Notary Public in and for the
State of Texas
Notarial Seal:
Exh F-20
131
EXHIBIT G
FORM OF NEW MORTGAGE
MORTGAGE, DEED OF TRUST, ASSIGNMENT OF PRODUCTION,
SECURITY AGREEMENT AND FINANCING STATEMENT
FROM
▇▇▇▇▇▇▇ OIL & GAS, L.P.
TO
▇▇▇▇▇▇ ▇▇▇▇▇▇, AS TRUSTEE
FOR THE BENEFIT OF
BANK OF MONTREAL, AS AGENT
A POWER OF SALE HAS BEEN GRANTED IN THIS INSTRUMENT. A POWER OF SALE MAY
ALLOW THE TRUSTEE OR THE AGENT TO TAKE THE MORTGAGED PROPERTY AND SELL IT
WITHOUT GOING TO COURT IN A FORECLOSURE ACTION UPON DEFAULT BY THE GRANTOR UNDER
THIS INSTRUMENT.
THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS.
THIS INSTRUMENT SECURES PAYMENT OF FUTURE ADVANCES.
THIS INSTRUMENT COVERS PROCEEDS OF MORTGAGED PROPERTY.
THIS IS DEEMED TO BE A LINE OF CREDIT MORTGAGE UNDER THE PROVISIONS OF SECTION
48-7-4 N.M.S.A.
Exh G-1
132
MORTGAGE, DEED OF TRUST, ASSIGNMENT OF
PRODUCTION, SECURITY AGREEMENT AND FINANCING STATEMENT
This MORTGAGE, DEED OF TRUST, ASSIGNMENT OF PRODUCTION, SECURITY AGREEMENT
AND FINANCING STATEMENT (this "Mortgage") is entered into as of the effective
time and date hereinafter stated (the "Effective Date") by ▇▇▇▇▇▇▇ OIL & GAS,
L.P., a Delaware limited partnership, whose address for notice is ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ ("Mortgagor"), to
▇▇▇▇▇▇ ▇▇▇▇▇▇, as Trustee, whose address for notice is ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ ("Trustee") for the benefit of BANK OF MONTREAL, AS
AGENT, whose address for notice is ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇ ("Mortgagee").
R E C I T A L S:
A. Mortgagor, Mortgagee and the Lenders (herein so called) described
therein executed that certain Amended and Restated Credit Agreement dated as of
February 17, 2000, (as so amended and as the same may be further amended or
supplemented from time to time, the "Credit Agreement") pursuant to which the
Lenders have made or agreed to make certain advances to and on behalf of the
Mortgagor.
B. Therefore, in order to comply with the terms and conditions of the
Credit Agreement and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Mortgagor hereby agrees as
follows:
ARTICLE I
Grant of Lien and Indebtedness Secured
Section 1.1 Grant of Liens. To secure payment of the Indebtedness (as
hereinafter defined) and the performance of the covenants and obligations herein
contained, Mortgagor does by these presents hereby, subject to the reservations
and restrictions set forth herein below, (i) GRANT, BARGAIN, SELL, ASSIGN, SET
OVER, TRANSFER and CONVEY unto Trustee and the Trustee's successors and
substitutes in trust hereunder with power of sale, for the use and benefit of
Agent and the Lenders, all of the following described Oil and Gas Leasehold
interests, personal property, rights, titles, interests and estates which are
located in (or cover properties located in) the State of Texas or which are
located within (or cover properties located within) the offshore area over which
the United States of America asserts jurisdiction and to which the laws of such
state are applicable with respect to this Mortgage and/or the liens or security
interests created hereby (the "Deed of Trust Mortgaged Property") and (ii)
GRANT, MORTGAGE, PLEDGE, HYPOTHECATE AND GRANT A POWER OF SALE to Mortgagee, for
its benefit and the benefit of the Lenders, with respect to all of the following
described Oil and Gas Leasehold interests, personal property, rights, titles,
interests and estates which were not granted to Trustee in clause (i) above but
which are located in (or cover properties located in) the State of [ ] or
which are located within (or cover properties located within) the offshore area
over which the United States of America asserts jurisdiction and to which the
laws of the aforementioned states are applicable with respect to this
Exh G-2
133
Mortgage and/or the liens or security interests created hereby (collectively,
the "Other Mortgaged Property") (the Deed of Trust Property and the Other
Mortgaged Property are hereinafter collectively referred to as the "Mortgaged
Property"):
(a) All rights, titles, interests and estates now owned or
hereafter acquired by Mortgagor in and to the oil and gas leases and/or oil, gas
and other mineral leases and other interests and estates and the lands and
premises covered or affected thereby which are described on Exhibit A attached
hereto (the "Hydrocarbon Property") or which Hydrocarbon Property is otherwise
referred to herein.
(b) All rights, titles, interests and estates now owned or
hereafter acquired by Mortgagor in and to (i) the properties now or hereafter
pooled or unitized with the Hydrocarbon Property; (ii) all presently existing or
future unitization, communitization, pooling agreements and declarations of
pooled units and the units created thereby (including, without limitation, all
units created under orders, regulations, rules or other official acts of any
Federal, State or other governmental body or agency having jurisdiction and any
units created solely among working interest owners pursuant to operating
agreements or otherwise) which may affect all or any portion of the Hydrocarbon
Property including, without limitation, those units which may be described or
referred to on attached Exhibit A attached hereto; (iii) all operating
agreements, production sales or other contracts, farm-out agreements, farm-in
agreements, area of mutual interest agreements, equipment leases and other
agreements described or referred to in this Mortgage or which relate to any of
the Hydrocarbon Property or interests in the Hydrocarbon Property described or
referred to herein or on Exhibit A attached hereto or to the production, sale,
purchase, exchange, processing, handling, storage, transporting or marketing of
the Hydrocarbons (hereinafter defined) from or attributable to such Hydrocarbon
Property or interests including, without limitation, all agreements and
arrangements described in Schedule 7.10 of the Credit Agreement; and (iv)
subject to applicable restrictions on disclosure and/or transfer, all
geological, geophysical, engineering, accounting, title, legal, and other
technical or business data concerning the Mortgaged Property, the Hydrocarbons,
or any other item of property which are in the possession of Mortgagor or in
which Mortgagor can otherwise grant a security interest, and all books, files,
records, magnetic media, computer records, and other forms of recording or
obtaining access to such data.
(c) All rights, titles, interests and estates now owned or
hereafter acquired by Mortgagor in and to all oil, gas, casinghead gas,
condensate, distillate, liquid hydrocarbons, gaseous hydrocarbons and all
products refined therefrom and all other minerals (collectively called the
"Hydrocarbons") in and under and which may be produced and saved from or
attributable to the Hydrocarbon Property, the lands pooled or unitized therewith
and Mortgagor's interests therein, including all oil in tanks and all rents,
issues, profits, proceeds, products, revenues and other income from or
attributable to the Hydrocarbon Property, the lands pooled or unitized therewith
and Mortgagor's interests therein which are subjected or required to be
subjected to the liens and security interests of this Mortgage.
(d) All tenements, hereditaments, appurtenances and properties in
anywise appertaining, belonging, affixed or incidental to the Hydrocarbon
Property rights, titles, interests and estates described or referred to in
paragraphs (a) and (b) above, which are now owned or which may hereafter be
acquired by Mortgagor, including, without limitation, any and
Exh G-3
134
all property, real or personal, now owned or hereafter acquired and situated
upon, used, held for use, or useful in connection with the operating, working or
development of any of such Hydrocarbon Property or the lands pooled or unitized
therewith (excluding drilling rigs, trucks, automotive equipment or other
personal property which may be taken to the premises for the purpose of drilling
a well or for other similar temporary uses) and including any and all oil ▇▇▇▇▇,
gas ▇▇▇▇▇, injection ▇▇▇▇▇ or other ▇▇▇▇▇, buildings, structures, field
separators, liquid extraction plants, plant compressors, pumps, pumping units,
pipelines, sales and flow lines, gathering systems, field gathering systems,
salt water disposal facilities, tanks and tank batteries, fixtures, valves,
fittings, machinery and parts, engines, boilers, meters, apparatus, equipment,
appliances, tools, implements, cables, wires, towers, casing, tubing and rods,
surface leases, rights-of-way, easements, servitudes, licenses and other surface
and subsurface rights together with all additions, substitutions, replacements,
accessions and attachments to any and all of the foregoing properties.
(e) Any property that may from time to time hereafter, by
delivery or by writing of any kind, be subjected to the lien and security
interest hereof by Mortgagor or by anyone on Mortgagor's behalf; and the Trustee
is hereby authorized to receive the same at any time as additional security
hereunder.
(f) All of the rights, titles and interests of every nature
whatsoever now owned or hereafter acquired by Mortgagor in and to the
Hydrocarbon Property rights, titles, interests and estates and every part and
parcel thereof, including, without limitation, the Hydrocarbon Property rights,
titles, interests and estates as the same may be enlarged by the discharge of
any payments out of production or by the removal of any charges or Permitted
Encumbrances (as hereinafter defined) to which any of the Hydrocarbon Property
rights, titles, interests or estates are subject, or otherwise; all rights of
Mortgagor to liens and security interests securing payment of proceeds from the
sale of production from the Mortgaged Property, including, but not limited to,
those liens and security interests provided in Tex. Bus. & Com. Code ▇▇▇.
Section 9.319 (Tex. UCC) (▇▇▇▇▇▇ Supp. 1989) ("Section 9.319 Tex. UCC"), as
amended from time to time; together with any and all renewals and extensions of
any of the Hydrocarbon Property rights, titles, interests or estates; all
contracts and agreements supplemental to or amendatory of or in substitution for
the contracts and agreements described or mentioned above; and any and all
additional interests of any kind hereafter acquired by Mortgagor in and to the
Hydrocarbon Property rights, titles, interests or estates.
(g) All accounts, contract rights, inventory, general
intangibles, insurance contracts and insurance proceeds constituting a part of,
relating to or arising out of those portions of the Mortgaged Property which are
described in paragraphs (a) through (f) above and all proceeds and products of
all such portions of the Mortgaged Property and payments in lieu of production
(such as "take or pay" payments), whether such proceeds or payments are goods,
money, documents, instruments, chattel paper, securities, accounts, general
intangibles, fixtures, real property, or other assets.
Notwithstanding any provision hereof to the contrary, this Mortgage does
not cover, and there is expressly excepted and excluded from the definition of
Mortgaged Property, any properties, rights and interests as may be beneficially
or equitably owned by (or contractually owing or potentially owing to), or
otherwise as may become owing a third party (the
Exh G-4
135
"Participating Third Parties") whether in an absolute or in a contingent manner,
under any one or more of the agreements or other arrangements described in
Schedule 7.10 of the Credit Agreement as such agreements or arrangements are in
effect at the date hereof, as read notwithstanding the last sentence of such
Schedule 7.10, to the extent only that such agreement or arrangement has
heretofore been entered into by Mortgagor and any such Participating Third
Parties, until such time, if ever, as the interest or potential interest of such
Participating Third Party vests in Mortgagor; without limiting the generality of
the foregoing, any undivided interest with respect to which Mortgagor holds
legal title (whether of record or not), shall be excluded from the definition of
Mortgaged Property to the extent a Participating Third Party now has an
interest, whether beneficial or equitable, vested or contingent, therein.
TO HAVE AND TO HOLD the Mortgaged Property unto the Trustee and to his
successors and assigns forever to secure the payment of the Indebtedness
(hereinafter defined) and to secure the performance of the covenants,
agreements, and obligations of the Mortgagor herein contained, subject to (i)
all Excepted Liens (as defined in the Credit Agreement) and any other Liens
described in Exhibit A attached hereto and (ii) all other agreements described
in Schedule 7.10 of the Credit Agreement as such agreements or arrangements are
in effect at the date hereof as read notwithstanding the last sentence thereof,
only to the extent that such agreement or arrangement has heretofore been
entered into by Mortgagor and any Participating Third Party (items (i) and (ii)
above are hereinafter collectively referred to as the "Permitted Encumbrances").
Section 1.2 Grant of Security Interest. To further secure the
Indebtedness, Mortgagor hereby grants to Mortgagee, subject to the reservations
and restrictions set forth herein below, a security interest in and to the
Mortgaged Property (whether now or hereafter acquired by operation of law or
otherwise) insofar as the Mortgaged Property consists of equipment, accounts,
contract rights, general intangibles (subject in the case of geological and
geophysical data (including without limitation raw data and interpretations),
contract rights and general intangibles to any existing restrictions on
disclosure and/or transfer), insurance contracts, insurance proceeds, inventory,
Hydrocarbons, fixtures and any and all other personal property of any kind or
character defined in and subject to the provisions of the Uniform Commercial
Code presently in effect in the jurisdiction in which the Mortgaged Property is
situated ("Applicable UCC"), including the proceeds and products from any and
all of such Mortgaged Property. Upon the happening of any of the Events of
Default, Mortgagee is and shall be entitled to all of the rights, powers and
remedies afforded a secured party by the Applicable UCC with reference to the
personal property and fixtures in which Mortgagee has been granted a security
interest herein, or the Trustee or Mortgagee may proceed as to both the real and
personal property covered hereby in accordance with the rights and remedies
granted under this Mortgage in respect of the real property covered hereby. Such
rights, powers and remedies shall be cumulative and in addition to those granted
to the Trustee or Mortgagee under any other provision of this Mortgage or under
any other Security Instrument. Written notice mailed to Mortgagor as provided
herein at least five (5) days prior to the date of public sale of any part of
the Mortgaged Property which is personal property subject to the provisions of
the Applicable UCC, or prior to the date after which private sale of any such
part of the Mortgaged Property will be made, shall constitute reasonable notice.
Exh G-5
136
Section 1.3 Indebtedness Secured. This Mortgage is executed and
delivered by Mortgagor to secure and enforce the following (the "Indebtedness"):
(a) Payment of and performance of any and all indebtedness,
obligations and liabilities of Mortgagor pursuant to the Credit Agreement,
whether now existing or hereafter arising, including without limitation, (i)
that certain promissory note by Mortgagor in favor of Bank of Montreal and being
in the principal amount of $23,153,830, dated February 17, 2000 with final
maturity on or before December 31, 2002 and all other notes given in
substitution therefor or in modification, renewal or extension thereof, in whole
or in part (such notes, as from time to time supplemented, amended or modified
and all other notes given in substitution therefor or in modification, renewal
or extension thereof, in whole or in part, being hereafter called the "BMO
Note"), (ii) that certain promissory note by Mortgagor in favor of Societe
Generale, Southwest Agency and being in the principal amount of $11,846,170,
dated February 17, 2000 with final maturity on or before December 31, 2002 and
all other notes given in substitution therefor or in modification, renewal or
extension thereof, in whole or in part (such notes, as from time to time
supplemented, amended or modified and all other notes given in substitution
therefor or in modification, renewal or extension thereof, in whole or in part,
being hereafter called the "Soc-Gen Note,") (iii) that certain promissory note
by Mortgagor in favor of Shell Capital Inc. and being in the principal amount of
$40,000,000, dated February 17, 2000 with final maturity on or before December
31, 2002 and all other notes given in substitution therefor or in modification,
renewal or extension thereof, in whole or in part (such notes, as from time to
time supplemented, amended or modified and all other notes given in substitution
therefor or in modification, renewal or extension thereof, in whole or in part,
being hereafter called the "SCI Note" and, together with the BMO Note and the
Soc-Gen Note, the "Notes") and (iv) any commodity, interest rate or currency
swap, cap, floor, collar, forward agreement or other exchange or protection
agreements or any option with respect to any such transaction in existence as of
the date hereof or hereafter arising between (i) Mortgagor and Bank of Montreal
and its successors or assigns (a "BMO Hedge Party") and Soc-Gen and its
successors or assigns (a "Soc-Gen Hedge Party") entered into while such BMO
Hedge Party or such Soc-Gen Hedge Party is a Lender; and (ii) Mortgagor and SCI
and its successors or assigns (with Loans or Commitments of $20 million or more)
or any Affiliate of SCI (SCI and any Affiliate of SCI a "SCI Hedge Party")
entered into while such SCI Hedge Party or Fathom Energy Capital I, L.L.C, is a
Lender. For purposes of this Section 1.03, the parties intend that any
commodity, interest rate or currency swap, cap, floor, collar, forward agreement
or other exchange or protection agreements or any option entered into between
the Mortgagor and a Lender or in the case of SCI, a SCI Hedge Party, while such
Person was a party to the Credit Agreement shall continue to be secured even
after the time such Person ceases to be a party to the Credit Agreement as a
Lender.
(b) Any sums which may be advanced or paid by Mortgagee or any
Lender under the terms hereof or of the Credit Agreement or the other Loan
Documents on account of the failure of Mortgagor to comply with the covenants of
Mortgagor contained herein or in the Credit Agreement or such other Loan
Documents; and all other indebtedness of Mortgagor arising pursuant to the
provisions of this Mortgage.
Section 1.4 Fixture Filing, Etc. Without in any manner limiting the
generality of any of the other provisions of this Mortgage: (i) some portions of
the goods described or to which reference is made herein are or are to become
fixtures on the land described or to which
Exh G-6
137
reference is made herein or on attached Exhibit A; (ii) the security interests
created hereby under applicable provisions of the Applicable UCC will attach to
Hydrocarbons (minerals including oil and gas) or the accounts resulting from the
sale thereof at the wellhead or minehead located on the land described or to
which reference is made herein; (iii) this Mortgage is to be filed of record in
the real estate records as a financing statement; and (iv) Mortgagor is the
record owner of the real estate or interests in the real estate comprised of the
Mortgaged Property.
Section 1.5 Defined Terms. Any capitalized term used in this Mortgage
and not defined in this Mortgage shall have the meaning assigned to such term in
the Credit Agreement.
ARTICLE II
Assignment of Production
Section 2.1 Assignment. Mortgagor has absolutely and unconditionally
assigned, transferred, and conveyed, and does hereby absolutely and
unconditionally assign, transfer and convey unto Mortgagee, its successors and
assigns, all of the Hydrocarbons and all products obtained or processed
therefrom, and the revenues and proceeds now and hereafter attributable to the
Hydrocarbons and said products and all payments in lieu of the Hydrocarbons such
as "take or pay" payments or settlements. The Hydrocarbons and products are to
be delivered into pipe lines connected with the Mortgaged Property, or to the
purchaser thereof, to the credit of Mortgagee, free and clear of all taxes,
charges, costs, and expenses; and all such revenues and proceeds shall be paid
directly to Mortgagee, at its banking quarters in Chicago, Illinois, with no
duty or obligation of any party paying the same to inquire into the rights of
Mortgagee to receive the same, what application is made thereof, or as to any
other matter. Mortgagor agrees to perform all such acts, and to execute all such
further assignments, transfers and division orders, and other instruments as may
be required or desired by Mortgagee or any party in order to have said proceeds
and revenues so paid to Mortgagee. Mortgagee is fully authorized to receive and
receipt for said revenues and proceeds; to 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 said revenues or proceeds and to
hold the proceeds thereof in a bank account as additional collateral securing
the Indebtedness; and to execute transfer and division orders in the name of
Mortgagor, or otherwise, with warranties binding Mortgagor. All proceeds
received by the Mortgagee pursuant to this assignment shall be applied as
provided in the other Loan Documents. Mortgagee shall not be liable for any
delay, neglect, or failure to effect collection of any proceeds or to take any
other action in connection therewith or hereunder; but Mortgagee shall have the
right, at its election, 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 funds and to protect the interests of Mortgagee, and/or
Mortgagor, with all costs, expenses and attorneys' fees incurred in connection
therewith being paid by Mortgagor. Mortgagor hereby appoints Mortgagee as its
attorney-in-fact to pursue any and all rights of Mortgagor to liens on and
security interests in the Hydrocarbons securing payment of proceeds of runs
attributable to the Hydrocarbons. In addition to the rights granted to Trustee
and/or Mortgagee in Section 1.1(f) of this Mortgage, Mortgagor hereby further
transfers and assigns to Mortgagee any and all such liens, security interests,
financing statements or similar interests of Mortgagor attributable to its
interest in the Hydrocarbons and proceeds of
Exh G-7
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runs therefrom arising under or created by said statutory provision, judicial
decision or otherwise. The power of attorney granted to Mortgagee in this
Section 2.1, being coupled with an interest, shall be irrevocable so long as the
Indebtedness or any part thereof remains unpaid.
Section 2.2 Rights Under Texas Act. Mortgagor hereby grants, sells,
assigns, sets over and mortgages unto Mortgagee during the term hereof, all of
Mortgagor's rights and interests pursuant to the provisions of Section 9.319
Tex. UCC, hereby vesting in Mortgagee all of Mortgagor's rights as an interest
owner to the continuing security interest in and lien upon the Deed of Trust
Mortgaged Property.
Section 2.3 No Modification of Payment Obligations. Nothing herein
contained shall modify or otherwise alter the obligation of Mortgagor to make
prompt payment of all principal and interest owing on the Indebtedness when and
as the same become due, regardless of whether the proceeds of the Hydrocarbons
are sufficient to pay the same, and the rights provided in accordance with the
foregoing assignment provision shall be cumulative of all other security of any
and every character now or hereafter existing to secure payment of the
Indebtedness.
ARTICLE III
Representations, Warranties and Covenants
Mortgagor hereby represents, warrants and covenants as follows:
Section 3.1 Defend Title. The Mortgaged Property is free of any and
all Liens (as defined in the Credit Agreement) created by, through or under
Mortgagor (but not otherwise) except the Permitted Encumbrances. Mortgagor will
not create or suffer to be created or permit to exist any lien, security
interest or charge prior or junior to or on a parity with the lien and security
interest of this Mortgage upon the Mortgaged Property or any part thereof or
upon the rents, issues, revenues, profits and other income therefrom, excluding
only Permitted Encumbrances. Mortgagor will maintain and preserve the lien
created hereby so long as any of the Indebtedness secured hereby remains unpaid.
Section 3.2 Not a Foreign Person. Mortgagor is not a "foreign person"
within the meaning of the Internal Revenue Code of 1986, as amended (hereinafter
called the "Code"), Sections 1445 and 7701 (i.e. Mortgagor is not a non-resident
alien, foreign corporation, foreign partnership, foreign trust or foreign estate
as those terms are defined in the Code and any regulations promulgated
thereunder).
Section 3.3 Power to Create Lien and Security. The Mortgagor has, in
all material respects, full power and lawful authority to grant, bargain, sell,
assign, transfer, mortgage, and convey a security interest in all of the
Mortgaged Property in the manner and form herein provided and without obtaining
the authorization, approval, consent or waiver of any lessor, sublessor,
Governmental Authority or other party or parties whomsoever.
Section 3.4 Operation By Third Parties. All or portions of the
Mortgaged Property may be comprised of interests in the Hydrocarbon Property
which are other than working interests or which may be operated by a party or
parties other than Mortgagor and with
Exh G-8
139
respect to all or any such interests and properties as may be comprised of
interests other than working interests or which may be operated by parties other
than Mortgagor, Mortgagor's covenants as expressed in this Article III are
modified to require that Mortgagor use its best efforts to obtain compliance
with such covenants by the working interest owners or the operator or operators
of such leases or properties.
Section 3.5 Abandonment; Sales. The Mortgagor will not sell, lease,
assign, transfer or otherwise dispose or abandon any of the Mortgaged Property
except as permitted by the Credit Agreement.
Section 3.6 Failure to Perform. The Mortgagor agrees that if the
Mortgagor, after receipt from Mortgagee of written notice and demand, fails to
perform any act or to take any action which the Mortgagor is required to perform
or take hereunder or pay any money which the Mortgagor is required to pay
hereunder, each of the Mortgagee and the Trustee in the Mortgagor's name or its
or their own name may, but shall not be obligated to, perform or cause to
perform such act or take such action or pay such money, and any expenses so
incurred by either of them and any money so paid by either of them shall be a
demand obligation owing by the Mortgagor to the Mortgagee or the Trustee, as the
case may be, and each of the Mortgagee and the Trustee, upon making such
payment, shall be subrogated to all of the rights of the Person receiving such
payment. Each amount due and owing by Mortgagor to each of the Mortgagee and the
Trustee pursuant to this Mortgage shall bear interest from the date of such
expenditure or payment or other occurrence which gives rise to such amount being
owed to such Person until paid at the Post-Default Rate, and all such amounts
together with such interest thereon shall be a part of the Indebtedness
described in Section 1.3 hereof.
ARTICLE IV
Rights and Remedies
Section 4.1 Event of Default. An "Event of Default" under the Credit
Agreement shall be an Event of Default under this Mortgage.
Section 4.2 Foreclosure and Sale. If an Event of Default shall occur
and be continuing, Mortgagee shall have the right and option to proceed with
foreclosure by directing the Trustee, or his successors or substitutes in trust,
to proceed with foreclosure and to sell, to the extent permitted by governing
law, all or any portion of the Mortgaged Property at one or more sales, as an
entirety or in parcels, at such place or places in otherwise such manner and
upon such notice as may be required by governing law, or, in the absence of any
such requirement, as the Mortgagee may deem appropriate, and to make conveyance
to the purchaser or purchasers. Where the Mortgaged Property is situated in more
than one county, notice as above provided shall be posted and filed in all such
counties (if such notices are required by governing law), and all such Mortgaged
Property may be sold in any such county and any such notice shall designate the
county where such Mortgaged Property is to be sold. Nothing contained in this
Section 4.2 shall be construed so as to limit in any way the Trustee's rights to
sell the Mortgaged Property, or any portion thereof, by private sale if, and to
the extent that, such private sale is permitted under the laws of the applicable
jurisdiction or by public or private sale after entry of a judgment by any court
of competent jurisdiction so ordering. Mortgagor hereby irrevocably appoints the
Exh G-9
140
Trustee to be the attorney 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 the Trustee. At
any such sale: (i) whether made under the power herein contained or any other
legal enactment, or by virtue of any judicial proceedings or any other legal
right, remedy or recourse, it shall not be necessary for Trustee to have
physically present, or to have constructive possession of, the Mortgaged
Property (Mortgagor hereby covenanting and agreeing to deliver to Trustee any
portion of the Mortgaged Property not actually or constructively possessed by
Trustee immediately upon demand by Trustee) and the title to and right of
possession of any such property shall pass to the purchaser thereof as
completely as if the same had been actually present and delivered to purchaser
at such sale, (ii) each instrument of conveyance executed by Trustee shall
contain a general warranty of title, binding upon Mortgagor and its successors
and assigns, (iii) each and every recital contained in any instrument of
conveyance made by Trustee shall conclusively establish the truth and accuracy
of the matters recited therein, including, without limitation, nonpayment of the
Indebtedness, advertisement and conduct of such sale in the manner provided
herein and otherwise by law and appointment of any successor Trustee hereunder,
(iv) any and all prerequisites to the validity thereof shall be conclusively
presumed to have been performed, (v) the receipt of Trustee or of such other
party or officer making the sale shall be a sufficient discharge to the
purchaser or purchasers for its purchase money and no such purchaser or
purchasers, or its assigns or personal representatives, shall thereafter be
obligated to see to the application of such purchase money, or be in any way
answerable for any loss, misapplication or nonapplication thereof, (vi) to the
fullest extent permitted by governing law, Mortgagor shall be completely and
irrevocably divested of all of its right, title, interest, claim and demand
whatsoever, either at law or in equity, in and to the property sold and such
sale shall be a perpetual bar both at law and in equity against Mortgagor, and
against any and all other persons claiming or to claim the property sold or any
part thereof, by, through or under Mortgagor, and (vii) to the extent and under
such circumstances as are permitted by governing law, Mortgagee may be a
purchaser at any such sale, and shall have the right, after paying or accounting
for all costs of said sale or sales, to credit the amount of the bid upon the
amount of the Indebtedness (in the order of priority set forth in Section 4.13
hereof) in lieu of cash payment.
Section 4.3 Substitute Trustees and Agents. The Trustee or his
successor or substitute may appoint or delegate any one or more persons as agent
to perform any act or acts necessary or incident to any sale held by Trustee,
including the posting of notices and the conduct of sale, but in the name and on
behalf of Trustee, his successor or substitute. If Trustee or his successor or
substitute shall have given notice of sale hereunder, any successor or
substitute trustee thereafter appointed may complete the sale and the conveyance
of the property pursuant thereto as if such notice had been given by the
successor or substitute trustee conducting the sale.
Section 4.4 Judicial Foreclosure; Receivership. If any of the
Indebtedness shall become due and payable and shall not be promptly paid, the
Trustee or Mortgagee shall have the right and power to proceed by a suit or
suits in equity or at law, whether for the specific performance of any covenant
or agreement herein contained or in aid of the execution of any
Exh G-10
141
power herein granted, or for any foreclosure hereunder or for the sale of the
Mortgaged Property under the judgment or decree of any court or courts of
competent jurisdiction, the appointment of (and Trustee or Mortgagee shall be
entitled to the appointment of) a receiver pending any foreclosure hereunder or
the sale of the Mortgaged Property under the order of a court or courts of
competent jurisdiction or under executory or other legal process, or for the
enforcement of any other appropriate legal or equitable remedy. Any money
advanced by the Trustee and/or Mortgagee in connection with any such
receivership shall be a demand obligation (which obligation Mortgagor hereby
expressly promises to pay) owing by Mortgagor to the Trustee and/or Mortgagee
and shall bear interest from the date of making such advance by the Trustee
and/or Mortgagee until paid at the Post Default Rate.
Section 4.5 Foreclosure for Installments. Mortgagee shall also have
the option to proceed with foreclosure in satisfaction of any installments of
the Indebtedness which have not been paid when due either through the courts of
competent jurisdiction or by directing the Trustee or his successors in trust to
proceed with foreclosure in satisfaction of the matured but unpaid portion of
the Indebtedness as if under a full foreclosure, conducting the sale as herein
provided and without declaring the entire principal balance and accrued interest
due; such sale may be made subject to the unmatured portion of the Indebtedness,
and any such sale shall not in any manner affect the unmatured portion of the
Indebtedness, but as to such unmatured portion of the Indebtedness, this
Mortgage shall remain in full force and effect just as though no sale had been
made hereunder. It is further agreed that several sales may be made hereunder
without exhausting the right of sale for any unmatured part of the Indebtedness,
it being the purpose hereof to provide for a foreclosure and sale of the
security for any matured portion of the Indebtedness without exhausting the
power to foreclose and sell the Mortgaged Property for any subsequently maturing
portion of the Indebtedness.
Section 4.6 Separate Sales. The Mortgaged Property may be sold in one
or more parcels and in such manner and order as Mortgagee, in its sole
discretion, may elect, it being expressly understood and agreed that the right
of sale arising out of any Event of Default shall not be exhausted by any one or
more sales.
Section 4.7 Occupancy After Foreclosure. In the event there is a
foreclosure sale hereunder and at the time of such sale Mortgagor or Mortgagor's
heirs, devisees, representatives, successors or assigns or any other person
claiming any interest in the Mortgaged Property by, through or under Mortgagor,
are occupying or using the Mortgaged Property or any part thereof, each and all
shall immediately become the tenant of the purchaser at such sale, which tenancy
shall be a tenancy from day to day, terminable at the will of either the
landlord or tenant, or at a reasonable rental per day based upon the value of
the property occupied, such rental to be due daily to the purchaser; to the
extent permitted by applicable law, the purchaser at such sale shall,
notwithstanding any language herein apparently to the contrary, have the sole
option to demand immediate possession following the sale or to permit the
occupants to remain as tenants at will. In the event the tenant fails to
surrender possession of said property upon demand, the purchaser shall be
entitled to institute and maintain a summary action for possession of the
Mortgaged Property (such as an action for forcible entry and detainer) in any
court having jurisdiction.
Exh G-11
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Section 4.8 Remedies Cumulative, Concurrent and Nonexclusive. Every
right, power and remedy herein given to the Trustee or Mortgagee shall be
cumulative and in addition to every other right, power and remedy herein
specifically given or now or hereafter existing in equity, at law or by statute
(including specifically those granted by the Applicable UCC in effect and
applicable to the Mortgaged Property or any portion thereof) each and every
right, power and remedy whether specifically herein given or otherwise existing
may be exercised from time to time and so often and in such order as may be
deemed expedient by the Trustee or Mortgagee, and the exercise, or the beginning
of the exercise, of any such right, power or remedy shall 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 Mortgagee in the exercise of
any right, power or remedy shall 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.
Section 4.9 No Release of Obligations. Neither Mortgagor, any
guarantor nor any other person hereafter obligated for payment of all or any
part of the Indebtedness shall be relieved of such obligation by reason of (a)
the failure of Trustee to comply with any request of Mortgagor, or any guarantor
or any other person so obligated to foreclose the lien of this Mortgage or to
enforce any provision hereunder or under the Credit Agreement; (b) the release,
regardless of consideration, of the Mortgaged Property or any portion thereof or
interest therein or the addition of any other property to the Mortgaged
Property; (c) any agreement or stipulation between any subsequent owner of the
Mortgaged Property and Mortgagee extending, renewing, rearranging or in any
other way modifying the terms of this Mortgage without first having obtained the
written consent of, given notice to or paid any consideration to Mortgagor, any
guarantor or such other person, and in such event Mortgagor, guarantor and all
such other persons shall continue to be liable to make payment according to the
terms of any such extension or modification agreement unless expressly released
and discharged in writing by Mortgagee; or (d) by any other act or occurrence
save and except the complete payment of the Indebtedness and the complete
fulfillment of all obligations hereunder or under the Credit Agreement.
Section 4.10 Release of and Resort to Collateral. Mortgagee may
release, regardless of consideration, any part of the Mortgaged Property
without, as to the remainder, in any way impairing, affecting, subordinating or
releasing the lien or security interest created in or evidenced by this Mortgage
or its stature as a first and prior lien and security interest in and to the
Mortgaged Property, and without in any way releasing or diminishing the
liability of any person or entity liable for the repayment of the Indebtedness.
For payment of the Indebtedness, Mortgagee may resort to any other security
therefor held by Mortgagee or Trustee in such order and manner as Mortgagee may
elect.
Section 4.11 Waiver of Redemption, Notice and Marshalling of Assets,
Etc. To the fullest extent permitted by applicable law, Mortgagor hereby
irrevocably and unconditionally waives and releases (a) all benefits that might
accrue to Mortgagor by virtue of any present or future moratorium law or other
law exempting the Mortgaged Property from attachment, levy or sale on execution
or providing for any appraisement (except as otherwise provided in Section 4.16
of this Mortgage), valuation (except as otherwise provided in Section 4.16 of
this Mortgage), stay of execution, exemption from civil process, redemption or
extension of time for payment and (b) any right to a marshalling of assets or a
sale in inverse order of alienation. If any law referred to in this Mortgage and
now in force, of which Mortgagor or its successor or
Exh G-12
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successors might take advantage despite the provisions hereof, shall hereafter
be repealed or cease to be in force, such law shall thereafter be deemed not to
constitute any part of the contract herein contained or to preclude the
operation or application of the provisions hereof. Provided, however, that if
the laws of any state do not permit the redemption period to be waived, the
redemption period is specifically reduced to the minimum amount of time
allowable by governing statute, and specifically for any property located in the
State of New Mexico, the redemption period hereunder shall be reduced to one
month.
Section 4.12 Discontinuance of Proceedings. In case Mortgagee shall
have proceeded to invoke any right, remedy or recourse permitted hereunder or
under the Credit Agreement and shall thereafter elect to discontinue or abandon
same for any reason, Mortgagee shall have the unqualified right so to do and, in
such an event, Mortgagor and Mortgagee shall be restored to their former
positions with respect to the Indebtedness, this Mortgage, the Credit Agreement,
the Mortgaged Property and otherwise, and the rights, remedies, recourses and
powers of Mortgagee shall continue as if same had never been invoked.
Section 4.13 Application of Proceeds. The proceeds of any sale of the
Mortgaged Property or any part thereof and all other monies received by the
Trustee or Mortgagee in any proceedings for the enforcement hereof or otherwise,
whose application has not elsewhere herein been specifically provided for, shall
be applied:
(a) first, to the payment of all reasonable expenses incurred by
the Trustee or Mortgagee incident to the enforcement of this Mortgage, the
Credit Agreement or any of the Indebtedness (including, without limiting the
generality of the foregoing, expenses of any entry or taking of possession, of
any sale, of advertisement thereof, and of conveyances, and court costs,
compensation of agents and employees, legal fees and a reasonable commission to
the Trustee acting), and to the payment of all other charges, reasonable
expenses, liabilities and advances incurred or made by the Trustee or Mortgagee
under this Mortgage or in executing any trust or power hereunder;
(b) second to payment of the Indebtedness in such order and
manner as Mortgagee may elect; and
(c) third, to Mortgagor; or as otherwise required by any
Governmental Requirement.
Section 4.14 Resignation of Operator. In addition to all rights and
remedies under this Mortgage, at law and in equity, if any Event of Default
shall occur and Trustee or the Mortgagee shall exercise any possessory remedies
under this Mortgage with respect to any portion of the Hydrocarbon Property (or
Mortgagor shall transfer any Mortgaged Property "in lieu of" foreclosure), the
Mortgagee or the Trustee shall have the right to request that any operator of
any Hydrocarbon Property which is either Mortgagor or any Affiliate of Mortgagor
to resign as operator under the joint operating agreement applicable thereto,
and no later than 60 days after receipt by Mortgagor of any such request,
Mortgagor shall resign (or cause such other party to resign) as operator of such
Hydrocarbon Property.
Exh G-13
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Section 4.15 INDEMNITY. IN CONNECTION WITH ANY ACTION TAKEN BY THE
TRUSTEE AND/OR MORTGAGEE PURSUANT TO THIS MORTGAGE, THE TRUSTEE AND/OR MORTGAGEE
AND THEIR OFFICERS, DIRECTORS, EMPLOYEES, REPRESENTATIVES, AGENTS, ATTORNEYS,
ACCOUNTANTS AND EXPERTS ("INDEMNIFIED PARTIES") SHALL NOT BE LIABLE FOR ANY LOSS
SUSTAINED BY MORTGAGOR RESULTING FROM AN ASSERTION THAT MORTGAGEE HAS RECEIVED
FUNDS FROM THE PRODUCTION OF HYDROCARBONS CLAIMED BY THIRD PERSONS OR ANY ACT OR
OMISSION OF ANY INDEMNIFIED PARTY IN ADMINISTERING, MANAGING, OPERATING OR
CONTROLLING THE MORTGAGED PROPERTY, INCLUDING SUCH LOSS WHICH MAY RESULT FROM
THE ORDINARY NEGLIGENCE OF AN INDEMNIFIED PARTY, UNLESS SUCH LOSS IS CAUSED BY
THE GROSS NEGLIGENCE, WILLFUL MISCONDUCT OR BAD FAITH OF AN INDEMNIFIED PARTY,
NOR SHALL THE TRUSTEE AND/OR MORTGAGEE BE OBLIGATED TO PERFORM OR DISCHARGE ANY
OBLIGATION, DUTY OR LIABILITY OF MORTGAGOR. MORTGAGOR SHALL AND DOES HEREBY
AGREE TO INDEMNIFY EACH INDEMNIFIED PARTY FOR, AND TO HOLD EACH INDEMNIFIED
PARTY HARMLESS FROM, ANY AND ALL LIABILITY, LOSS OR DAMAGE WHICH MAY OR MIGHT BE
INCURRED BY ANY INDEMNIFIED PARTY BY REASON OF THIS MORTGAGE OR THE EXERCISE OF
RIGHTS OR REMEDIES HEREUNDER. SHOULD THE TRUSTEE AND/OR MORTGAGEE MAKE ANY
EXPENDITURE ON ACCOUNT OF ANY SUCH LIABILITY, LOSS OR DAMAGE, THE AMOUNT
THEREOF, INCLUDING COSTS, EXPENSES AND REASONABLE ATTORNEYS' FEES, SHALL BE A
DEMAND OBLIGATION (WHICH OBLIGATION MORTGAGOR HEREBY EXPRESSLY PROMISES TO PAY)
OWING BY MORTGAGOR TO THE TRUSTEE AND/OR MORTGAGEE AND SHALL BEAR INTEREST FROM
THE DATE EXPENDED UNTIL PAID AT THE POST-DEFAULT RATE, SHALL BE A PART OF THE
INDEBTEDNESS AND SHALL BE SECURED BY THIS MORTGAGE AND ANY OTHER SECURITY
INSTRUMENT. MORTGAGOR HEREBY ASSENTS TO, RATIFIES AND CONFIRMS ANY AND ALL
ACTIONS OF THE TRUSTEE AND/OR MORTGAGEE WITH RESPECT TO THE MORTGAGED PROPERTY
TAKEN UNDER, AND IN COMPLIANCE WITH THE TERMS OF, THIS MORTGAGE. THE LIABILITIES
OF THE MORTGAGOR AS SET FORTH IN THIS SECTION 4.15 SHALL SURVIVE THE TERMINATION
OF THIS MORTGAGE.
Section 4.16 Power of Sale in Oklahoma. Any sale of any part of the
Mortgaged Property located in the State of Oklahoma shall be made in conformity
to the laws thereof, and it is agreed that the appraisement of any such
properties is expressly waived or not waived at the option of the Agent, and any
such option may be exercised prior to the time judgment is rendered in any
foreclosure hereon. A POWER OF SALE HAS BEEN GRANTED IN THIS MORTGAGE. A POWER
OF SALE MAY ALLOW THE AGENT TO TAKE THE MORTGAGED PROPERTY AND SELL IT WITHOUT
GOING TO COURT IN A FORECLOSURE ACTION UPON DEFAULT BY GRANTOR UNDER THIS
MORTGAGE. The parties hereto are cognizant of and acknowledge the Oklahoma Power
of Sale Mortgage Foreclosure Act which went into effect November 1, 1986.
Notwithstanding any provision of Article IV to the contrary, it is the intent of
the parties that the provisions herein relating to the power of sale which are
applicable to the Mortgaged Property located in the State of Oklahoma are
subject to the provisions of the Oklahoma Power of Sale
Exh G-14
145
Mortgage Foreclosure Act. In addition, it is the intent of the parties that the
power of sale granted herein may be exercised by the Mortgagee pursuant to the
terms and provisions of the Oklahoma Power of Sale Mortgage Foreclosure Act. To
that end, Mortgagor hereby confers and grants to the Agent and Trustee the power
to sell the Mortgaged Property and the interests of persons therein in the
manner provided in the Oklahoma Power of Sale Mortgage Foreclosure Act. No
action of the Agent or the Trustee based on the provisions in this Mortgage or
the Oklahoma Power of Sale Mortgage Foreclosure Act, including the giving of the
Notice of Intent to Foreclose by Power of Sale or the Notice of Sale, shall
constitute an election of remedies that would preclude the Agent or Trustee from
pursuing judicial foreclosure before or at any time after commencement of the
power of sale foreclosure procedure mandated by the Oklahoma Power of Sale
Mortgage Foreclosure Act.
ARTICLE V
The Trustee
Section 5.1 Duties, Rights, and Powers of Trustee. It shall be no part
of the duty of the Trustee to see to any recording, filing or registration of
this Mortgage or any other instrument in addition or supplemental thereto, or to
give any notice thereof, or to see to the payment of or be under any duty in
respect of any tax or assessment or other governmental charge which may be
levied or assessed on the Mortgaged Property, or 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. The Trustee shall not be responsible
for the execution, acknowledgment or validity of this Mortgage 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. The Trustee shall have the
right to advise with counsel upon any matters arising hereunder and shall be
fully protected in relying as to legal matters on the advice of counsel. The
Trustee shall not incur any personal liability hereunder except for Trustee's
own gross negligence, bad faith and/or 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.
Section 5.2 Successor Trustee. The Trustee may resign by written
notice addressed to Mortgagee or be removed at any time with or without cause by
an instrument in writing duly executed on behalf of 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, or, in the absence of any such requirement,
without other formality than appointment and designation in writing. Written
notice of such appointment and designation shall be given by Mortgagee to
Mortgagor, but the validity of any such appointment shall not be impaired or
affected by failure to give such notice or by any defect therein. Such
appointment and designation shall be full evidence of the right and authority to
make the same and of all the facts therein recited, and, upon the making of any
such appointment and designation, this Mortgage shall vest in the successor
trustee all the estate and title in and to all of the Mortgaged Property, and
the successor trustee shall thereupon succeed to all of the rights, powers,
privileges, immunities and duties hereby conferred upon the Trustee named
herein, and one such appointment and designation shall not exhaust the right to
appoint and
Exh G-15
146
designate a successor trustee hereunder but such right may be exercised
repeatedly as long as any Indebtedness remains unpaid hereunder. To facilitate
the administration of the duties hereunder, Mortgagee may appoint multiple
trustees to serve in such capacity or in such jurisdictions as Mortgagee may
designate.
Section 5.3 Retention of Moneys. All moneys received by Trustee shall,
until used or applied as herein provided, be held in trust for the purposes for
which they were received, but need not be segregated in any manner from any
other moneys (except to the extent required by applicable law), and Trustee
shall be under no liability for interest on any moneys received by him
hereunder.
ARTICLE VI
Miscellaneous
Section 6.1 Instrument Construed as Mortgage, Etc. With respect to any
portions of the Mortgaged Property located in any state or other jurisdiction
the laws of which do not provide for the use or enforcement of a deed of trust
or the office, rights and authority of the Trustee as herein provided, the
general language of conveyance hereof to the Trustee is intended and the same
shall be construed as words of mortgage unto and in favor of Mortgagee and the
rights and authority granted to the Trustee herein may be enforced and asserted
by Mortgagee in accordance with the laws of the jurisdiction in which such
portion of the Mortgaged Property is located, and the same may be foreclosed at
the option of Mortgagee as to any or all such portions of the Mortgaged Property
in any manner permitted by the laws of the jurisdiction in which such portions
of the Mortgaged Property is situated. This Mortgage may be construed as a
mortgage, deed of trust, chattel mortgage, conveyance, assignment, security
agreement, pledge, financing statement, hypothecation or contract, or any one or
more of them, in order fully to effectuate the lien hereof and the purposes and
agreements herein set forth.
Section 6.2 Release of Mortgage. If all Indebtedness secured hereby
shall be paid and the Credit Agreement terminated, Mortgagee shall forthwith
cause satisfaction and discharge of this Mortgage to be entered upon the record
at the expense of Mortgagor and shall execute and deliver or cause to be
executed and delivered such instruments of satisfaction and reassignment as may
be appropriate. Otherwise, this Mortgage shall remain and continue in full force
and effect.
Section 6.3 Severability. If any provision hereof is invalid or
unenforceable in any jurisdiction, the other provisions hereof shall remain in
full force and effect in such jurisdiction and the remaining provisions hereof
shall be liberally construed in favor of the Trustee and Mortgagee in order to
effectuate the provisions hereof, and the invalidity or unenforceability of any
provision hereof in any jurisdiction shall not affect the validity or
enforceability of any such provision in any other jurisdiction.
Section 6.4 Successors and Assigns of Parties. The term "Mortgagee" as
used herein shall mean and include any legal owner, holder, assignee or pledgee
of any of the Indebtedness secured hereby. The terms used to designate Trustee,
Mortgagee and Mortgagor
Exh G-16
147
shall be deemed to include the respective heirs, legal representatives,
successors and assigns of such parties.
Section 6.5 Satisfaction of Prior Encumbrance. To the extent that
proceeds of the Credit Agreement are used to pay indebtedness secured by any
outstanding lien, security interest, charge or prior encumbrance against the
Mortgaged Property, such proceeds have been advanced by Mortgagee at Mortgagor's
request, Mortgagee shall be subrogated to any and all rights, security interests
and liens owned by any owner or holder of such outstanding liens, security
interests, charges or encumbrances, irrespective of whether said liens, security
interests, charges or encumbrances are released, and it is expressly understood
that, in consideration of the payment of such other indebtedness by Mortgagee,
Mortgagor hereby waives and releases all demands and causes of action for
offsets and payments to, upon and in connection with the said indebtedness.
Section 6.6 Subrogation of Trustee. This Mortgage is made with full
substitution and subrogation of the Trustee and his successors in this trust and
his and their assigns in and to all covenants and warranties by others
heretofore given or made in respect of the Mortgaged Property or any part
thereof.
Section 6.7 Nature of Covenants. The covenants and agreements herein
contained shall constitute covenants running with the land and interests covered
or affected hereby and shall be binding upon the heirs, legal representatives,
successors and assigns of the parties hereto.
Section 6.8 Notices. All notices, requests, consents, demands and
other communications required or permitted hereunder shall be in writing and
shall be deemed sufficiently given or furnished if delivered by registered or
certified United States mail, postage prepaid, or by personal service (including
express or courier service) at the addresses specified in the first paragraph of
this Mortgage (unless changed by similar notice in writing given by the
particular party whose address is to be changed). Any such notice or
communication shall be deemed to have been given either at the time of personal
delivery or, in the case of delivery at the address and in the manner provided
herein, upon receipt; provided that service of notice as required by the laws of
any state in which portions of the Mortgaged Property may be situated shall for
all purposes be deemed appropriate and sufficient with the giving of such
notice.
Section 6.9 Counterparts. This Mortgage is being executed in several
counterparts, all of which are identical, except that to facilitate recordation,
if the Mortgaged Property is situated in more than one county, descriptions of
only those portions of the Mortgaged Property located in the county in which a
particular counterpart is recorded shall be attached as Exhibit A thereto. A
complete Exhibit A will be attached to that certain counterpart to be attached
to a Financing Statement and filed (a) with respect to the Deed of Trust
Mortgaged Property, with the Secretary of State of [ ] in the Uniform
Commercial Code Records, and (b) with respect to the Other Mortgaged Property,
with the [ ]. Each of such counterparts shall for all
purposes be deemed to be an original, and all such counterparts shall together
constitute but one and the same instrument.
Exh G-17
148
Section 6.10 Exculpation Provisions. Each of the parties hereto
specifically agrees that it has a duty to read this Mortgage; and agrees that it
is charged with notice and knowledge of the terms of this Mortgage; that it has
in fact read this Mortgage and is fully informed and has full notice and
knowledge of the terms, conditions and effects of this Mortgage; that it has
been represented by independent legal counsel of its choice throughout the
negotiations preceding its execution of this Mortgage; that it has received the
advice of its attorney in entering into this Mortgage; and that it recognizes
that certain of the terms of this Mortgage result in one party assuming the
liability inherent in some aspects of the transaction and relieving the other
party of its responsibility for such liability. Each party hereto agrees and
covenants that it will not contest the validity or enforceability of any
exculpatory provision of this Mortgage on the basis that the party had no notice
or knowledge of such provision or that the provision is not "conspicuous."
Exh G-18
149
WITNESS THE EXECUTION HEREOF, this 17th day of February, 2000, as of 7:01
a.m. Houston, Texas time, immediately after giving effect to the execution and
effective time of that certain Conveyance of Adjustable Term Overriding Royalty
Interest of even date herewith from Mortgagor to ECT Merchant Investments Corp.
and Joint Energy Development Investments II Limited partnership (the "Term ORRI
Conveyance") (the "Effective Date").
MORTGAGOR:
▇▇▇▇▇▇▇ OIL & GAS, L.P.
By: ▇▇▇▇▇▇▇, Inc., its General Partner
By:
--------------------------------------
Name:
Title:
EXECUTION
WITNESSED BY:
-------------------------------
Name:
--------------------------
-------------------------------
Name:
--------------------------
Exh ▇-▇▇
▇▇▇
▇▇▇▇▇ ▇▇ ▇▇▇▇▇ )
)
COUNTY OF ▇▇▇▇▇▇ )
OKLAHOMA
Before me, a Notary Public in and for said county and state, on this 17th
day of February, 2000, personally appeared _________________________________, to
me known to be the identical person who subscribed the name of the maker thereof
to the foregoing instrument as _______________________ of ▇▇▇▇▇▇▇, INC., a
Nevada corporation, as general partner of ▇▇▇▇▇▇▇ OIL & GAS, L.P., a Delaware
limited partnership, and acknowledged to me that ______ executed the same as
_____ free and voluntary act and deed, and as the free and voluntary act and
deed of such corporation for the uses and purposes therein set forth.
TEXAS
This instrument was acknowledged before me on February 17, 2000, by
___________________________, _____________ of ▇▇▇▇▇▇▇, INC., a Nevada
corporation, as general partner of ▇▇▇▇▇▇▇ OIL & GAS, L.P., a Delaware limited
partnership, on behalf of such corporation, as general partner of the limited
partnership.
------------------------------
Notary Public in and for the
State of Texas
Notarial Seal:
Exh G-20
151
EXHIBIT A
MORTGAGED PROPERTY
Exh G-21
152
EXHIBIT B
ASSIGNMENTS
Exh G-22
153
SCHEDULE 7.02
LIABILITIES
Any matter disclosed in any Schedule hereto and any additional matter disclosed
in ▇▇▇▇▇▇▇ Exploration Company's financial statements and/or any cash budget
heretofore delivered to the Agent.
Sch 7.2-1
154
SCHEDULE 7.03
LITIGATION
NONE
Sch 7.03-1
155
SCHEDULE 7.09
TAXES
NONE
Sch 7.09-1
156
SCHEDULE 7.10
TITLES, ETC.
(a) The rights and interests afforded Gasco Limited Partnership ("Gasco") and
its successors and assigns under the terms of (i) that certain Expense
Allocation and Participation Agreement dated as of April 1, 1996, by and between
Gasco and Borrower, as heretofore and/or hereafter amended, expanded,
supplemented, renewed and/or extended, and (ii) that certain Expense Allocation
and Participation Agreement II dated as of April 1, 1997, by and between Gasco
and Borrower, as heretofore and/or hereafter amended, expanded, supplemented,
renewed and/or extended, and (iii) that certain Expense Allocation and
Participation Agreement III dated as of March 1, 1998, by and between Gasco and
Borrower, as heretofore and/or hereafter amended, expanded, supplemented,
renewed and/or extended.
(b) The rights and interests afforded Middle Bay Oil Company ("Middle Bay") and
its successors and assigns under the terms of that certain Expense Allocation
and Participation Agreement dated as of April 1, 1996, by and between Middle Bay
and Borrower, as heretofore and/or hereafter amended, modified, expanded,
supplemented, renewed and/or extended.
(c) The rights and interests afforded ▇▇▇▇▇▇▇▇ Production Company ("▇▇▇▇▇▇▇▇")
and its successors and assigns under the terms of that certain Anadarko Basin
Joint Participation Agreement dated as of May 1, 1996, by and between Borrower
and ▇▇▇▇▇▇▇▇, as heretofore and/or hereafter amended, modified, expanded,
supplemented, renewed and/or extended.
(d) The rights and interests afforded Vintage Petroleum, Inc. ("Vintage") and
its successors and assigns under the terms of that certain Anadarko Basin Joint
Participation Agreement dated as of May 1, 1996, by and between Borrower and
Vintage, as heretofore and/or hereafter amended, modified, expanded,
supplemented, renewed and/or extended.
(e) The rights and interests afforded ▇▇▇▇▇▇▇-▇▇▇▇ (Delaware) LLC ("Duke") and
its successors and assigns under the terms of that certain Joint Development
Agreement dated as of February 17, 1999, by and between Duke and Borrower, as
heretofore amended.
(f) The rights and interests afforded third parties under the terms of various
farmout, exploration, joint participation and/or operating agreements, whether
now existing or hereafter entered into and further as heretofore and/or
hereafter amended, modified, expanded, supplemented, renewed and/or extended,
under or in relation to which Borrower agrees to farm-out to one or more third
parties one or more Oil and Gas Property and/or undertakes with one or more
third party(ies) the joint exploration and/or development of one or more Oil and
Gas Properties (which rights and interests may
Sch 7.10-1
157
include, without limitation, rights under Area of Mutual Interests agreements
and rights in respect of forfeiture of all or a portion of Borrower's interests
in an Oil and Gas Property, or part thereof or interest therein, that is
triggered by an election not to participate in a proposed operation);
(g) consulting agreements, whether now existing or hereafter entered into and
further as heretofore and/or hereafter amended, expanded, supplemented, renewed
and/or extended, with third party geologists, landmen or other oil and gas
industry participants who agree to perform services in return, in whole or in
part, for an overriding royalty interest or other interest in or relating to any
Oil and Gas Properties; and
(h) the Term ORRI.
In no event will any agreement or other matter referred to in this Schedule
7.10, other than the Term ORRI, cause the Borrower's net interest in production
or net cost and expense obligation with respect to Hydrocarbon Interests as
reflected in a Standard Mortgage to be reduced or otherwise adversely affected.
Sch 7.10-2
158
SCHEDULE 7.14
SUBSIDIARIES AND PARTNERSHIPS
▇▇▇▇▇▇▇, Inc.
▇▇▇▇▇▇▇ Oil & Gas, ▇.▇.
▇▇▇▇▇▇▇ Holdings I, LLC
▇▇▇▇▇▇▇ Holdings II, LLC
Quest Resources, LLC
Venture Acquisitions, LP
Each of the foregoing is owned 100% (directly by or indirectly) by Seller, other
than Venture Acquisitions, LP.
The address for each of the foregoing is:
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Sch 7.14-1
159
SCHEDULE 7.17
ENVIRONMENTAL MATTERS
NONE
Sch 7.17-1
160
SCHEDULE 7.19
INSURANCE
INTEREST Property Coverage
Carrier Security Insurance Company of Hartford
Policy Period August 1, 1999 to August 1, 2000
Policy ▇▇. ▇▇▇▇▇▇▇▇▇▇
Limits $1,520,000 (Austin), $100,000 (Houston)-personal;
$2,515,000 computer equipment
Deductible $1,000
INTEREST Commercial General
Carrier Northfield Insurance Company (Chubb)
Policy Period August 1, 1999 to August 1, 2000
Policy No. NN100139
Limits $2,000,000 general aggregate
$1,000,000 product/completed ops
injury each occurrence/underground
$100,000 fire to rended properties
$5,000 medical expenses
Deductible $5,000 per claim
INTEREST Pollution Coverage
Carrier
Policy Period August 1, 1999 to August 1, 2000
Policy No. NN100139
Limits $1,000,000 each pollution incident
$2,000,000 annual aggregate
Deductible $5,000
INTEREST Workers' Comp/Employee
Carrier Texas Workers' Compensation Fund
Policy Period August 1, 1999 to August 1, 2000
Policy No. TSF0012623201-19990801
Limits $1,000,000
Deductible None
INTEREST Primary Umbrella Liability
Carrier Northfield Insurance Company
Policy Period August 1, 1999 to August 1, 2000
Policy No. NU101446
Limits $10,000,000 per occurrence
$10,000,000 annual aggregate
Retention $25,000
Sch 7.19-1
161
INTEREST Excess Primary Umbrella
Carrier Westchester Fire Insurance Company
Policy Period August 1, 1999 to August 1, 2000
Policy No. XLS310890
Limits $20,000,000 per occurrence and aggregate, except
$2,000,000 over the pollution coverage
INTEREST Control of Well
Carrier Lexington Insurance Company
Policy Period August 1, 1999 to August 1, 2000
Policy No. 8799881
Limits $5,000,000 control of well
$500,000 care, custody and control
$50,000 control of well
$25,000 care, custody and control
INTEREST Directors and Officers
Carrier Executive Risk Speciality Insurance Company
Policy Period May 30, 1997 to May 30, 2000
Policy No. 75106733497
Limits $5,000,000
Retention $0-250,000 per claim
Sch 7.19-2
162
SCHEDULE 7.20
HEDGING AGREEMENTS
ISDA Master Agreement dated as of February 26, 1998, as amended, together with
any confirmations and written call options.
Sch 7.20-1
163
SCHEDULE 7.22
MATERIAL AGREEMENTS
(a) the Senior Loan Documents (and the loan relating thereto).
(b) Two Bridge Point Lease Agreement dated as of September 20, 1996, by and
between Investors Life Insurance Company of North America and ▇▇▇▇▇▇▇ Oil & Gas,
L.P., as amended (office lease).
(c) Paragon One Lease Agreement dated as of December 14, 1996, covering the
Houston office space.
(d) Capital Lease/Financing Agreements for purchase of software and/or
equipment, more particularly described as follows:
CURRENT
PRINCIPAL
ENDING BALANCE
LESSOR DATE AS OF 2/1/00 DESCRIPTION
-------------------------------------------------------------------------------------------
Siemens Credit Corp 12/1/99 $7,112.51 Houston Phone System
Siemens Credit Corp 7/1/02 $81,149.02 Austin Phone System
Universal Finance & Leasing
Equipment 8/1/00 $18,779.88 Workstation
Universal Finance & Leasing
Equipment 1/10/01 $21,282.13 Workstation
Universal Finance & Leasing
Equipment 4/21/01 $77,421.75 Workstation
Geoquest Equipment 8/1/00 $11,026.14 Workstation
Universal Finance & Leasing
Equipment 9/22/00 $5,517.90 Workstation
BA Credit Corp 8/18/01 $57,141.05 Workstation
First Sierra Financial, Inc. 2/1/02 $34,955.28 Workstation
TOTAL CURRENT PRINCIPAL BALANCE $314,025.66
(e) Insurance premium financing agreements:
Sch 7.22-1
164
Premium financing agreement dated June 1, 1997 relating to 3-year O&D
policy. [Payoff at December 31, 1999 was $16,855.14]
Premium financing agreement dated August 1, 1999 relating to G.L.,
Property, Umbrella and OEE policies.
(f) The matters disclosed in the other Schedules.
(g) The Subordinated Debt.
Sch 7.22-2
165
SCHEDULE 7.23
GAS IMBALANCES
NONE
Sch 7.23-1
166
SCHEDULE 9.01
DEBT
The matters disclosed in other Schedules hereto and those divulged in
▇▇▇▇▇▇▇ Exploration Company's financial statements or any cash budget provided
to the Agent.
Sch. 9.01-1
167
SCHEDULE 9.01(h)
The matters described in Schedules 7.22 and/or 9.01.
Sch 9.01(h)-1
168
SCHEDULE 9.02
LIENS
None
Sch 9.02-1
169
SCHEDULE 9.03
INVESTMENTS, LOANS AND ADVANCES
NONE
Sch 9.03-1