EXECUTION VERSION
Exhibit 10.4
SECOND LIEN TERM LOAN AGREEMENT
DATED AS OF
NOVEMBER 15, 2005
AMONG
PARALLEL PETROLEUM CORPORATION AND
PARALLEL, L.P.,
AS THE BORROWERS,
BNP PARIBAS,
AS ADMINISTRATIVE AGENT,
AND
THE LENDERS PARTY HERETO
JOINT LEAD ARRANGERS AND CO-BOOKRUNNERS
BNP PARIBAS AND CITIBANK TEXAS, N.A.
TABLE OF CONTENTS
PAGE
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ARTICLE I
Definitions and Accounting Matters
Section 1.01 Terms Defined Above...................................... 1
Section 1.02 Certain Defined Terms.................................... 1
Section 1.03 Types of Loans and Borrowings............................ 17
Section 1.04 Terms Generally; Rules of Construction................... 17
Section 1.05 Accounting Terms and Determinations; GAAP................ 18
ARTICLE II
The Loans
Section 2.01 Term Loans............................................... 18
Section 2.02 Loans.................................................... 18
Section 2.03 Requests for the Loans................................... 19
Section 2.04 Interest Elections....................................... 20
Section 2.05 Funding the Loans........................................ 21
Section 2.06 Termination.............................................. 22
Section 2.07 Total Reserve Value...................................... 22
Section 2.08 Subordination of Loans................................... 22
ARTICLE III
Payments of Principal and Interest; Prepayments; Fees
Section 3.01 Repayment of the Loans................................... 23
Section 3.02 Interest................................................. 23
Section 3.03 Alternate Rate of Interest............................... 23
Section 3.04 Prepayments.............................................. 24
Section 3.05 Fees..................................................... 24
ARTICLE IV
Payments; Pro Rata Treatment; Sharing of Set-offs
Section 4.01 Payments Generally; Pro Rata Treatment; Sharing of
Set-offs................................................. 25
Section 4.02 Presumption of Payment by the Borrowers.................. 26
Section 4.03 Certain Deductions by the Administrative Agent........... 26
Section 4.04 Disposition of Proceeds.................................. 26
ARTICLE V
Increased Costs; Break Funding Payments; Taxes; Illegality
Section 5.01 Increased Costs.......................................... 26
Section 5.02 Break Funding Payments................................... 27
Section 5.03 Taxes.................................................... 28
Section 5.04 Designation of Different Lending Office.................. 29
Section 5.05 Illegality............................................... 29
ARTICLE VI
Conditions Precedent
Section 6.01 Effective Date........................................... 29
Section 6.02 Additional Conditions Precedent.......................... 32
ARTICLE VII
Representations and Warranties
Section 7.01 Organization; Powers..................................... 33
Section 7.02 Authority; Enforceability................................ 33
Section 7.03 Approvals; No Conflicts.................................. 33
Section 7.04 Financial Condition; No Material Adverse Change.......... 34
Section 7.05 Litigation............................................... 34
Section 7.06 Environmental Matters.................................... 34
Section 7.07 Compliance with the Laws and Agreements; No Defaults..... 35
Section 7.08 Investment Company Act................................... 36
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Section 7.09 Public Utility Holding Company Act....................... 36
Section 7.10 Taxes.................................................... 36
Section 7.11 ERISA.................................................... 36
Section 7.12 Disclosure; No Material Misstatements.................... 37
Section 7.13 Insurance................................................ 38
Section 7.14 Restriction on Liens..................................... 38
Section 7.15 Subsidiaries............................................. 38
Section 7.16 Location of Business and Offices......................... 38
Section 7.17 Properties; Titles, Etc.................................. 39
Section 7.18 Maintenance of Properties................................ 40
Section 7.19 Gas Imbalances, Prepayments.............................. 40
Section 7.20 Marketing of Production.................................. 40
Section 7.21 Swap Agreements.......................................... 41
Section 7.22 Use of Loans............................................. 41
Section 7.23 Solvency................................................. 41
Section 7.24 Acquisition Documents.................................... 41
ARTICLE VIII
Affirmative Covenants
Section 8.01 Financial Statements; Ratings Change; Other
Information.............................................. 42
Section 8.02 Notices of Material Events............................... 44
Section 8.03 Existence; Conduct of Business........................... 45
Section 8.04 Payment of Obligations................................... 45
Section 8.05 Performance of Obligations under Loan Documents.......... 45
Section 8.06 Operation and Maintenance of Properties.................. 45
Section 8.07 Insurance................................................ 46
Section 8.08 Books and Records; Inspection Rights..................... 46
Section 8.09 Compliance with Laws..................................... 46
Section 8.10 Environmental Matters.................................... 46
Section 8.11 Further Assurances....................................... 47
Section 8.12 Reserve Reports.......................................... 48
Section 8.13 Title Information........................................ 49
Section 8.14 Additional Collateral; Additional Guarantors............. 49
Section 8.15 ERISA Compliance......................................... 50
Section 8.16 Acquisition.............................................. 51
ARTICLE IX
Negative Covenants
Section 9.01 Financial Covenants...................................... 51
Section 9.02 Debt..................................................... 51
Section 9.03 Liens.................................................... 52
Section 9.04 Dividends, Distributions and Redemptions................. 52
Section 9.05 Investments, Loans and Advances.......................... 52
Section 9.06 Nature of Business....................................... 54
Section 9.07 Foreign Subsidiaries or International Operations......... 54
Section 9.08 Limitation on Leases..................................... 54
Section 9.09 Proceeds of Notes........................................ 54
Section 9.10 ERISA Compliance......................................... 54
Section 9.11 Sale or Discount of Receivables.......................... 55
Section 9.12 Mergers, Etc............................................. 56
Section 9.13 Sale of Properties....................................... 56
Section 9.14 Environmental Matters.................................... 56
Section 9.15 Transactions with Affiliates............................. 57
Section 9.16 Subsidiaries............................................. 57
Section 9.17 Negative Pledge Agreements; Dividend Restrictions........ 57
Section 9.18 Gas Imbalances, Take-or-Pay or Other Prepayments......... 57
Section 9.19 Swap Agreements.......................................... 57
Section 9.20 Acquisition Documents.................................... 58
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Section 9.21 Anti-Layering............................................ 58
ARTICLE X
Events of Default; Remedies
Section 10.01 Events of Default........................................ 58
Section 10.02 Remedies................................................. 60
ARTICLE XI
The Administrative Agent
Section 11.01 Appointment; Powers...................................... 61
Section 11.02 Duties and Obligations of Administrative Agent........... 61
Section 11.03 Action by Administrative Agent........................... 62
Section 11.04 Reliance by Administrative Agent......................... 62
Section 11.05 Subagents................................................ 63
Section 11.06 Resignation or Removal of the Administrative Agent....... 63
Section 11.07 Administrative Agent as Lender........................... 63
Section 11.08 No Reliance.............................................. 63
Section 11.09 Administrative Agent May File Proofs of Claim............ 64
Section 11.10 Authority of Administrative Agent to Release Collateral
and Liens................................................ 65
Section 11.11 The Arrangers............................................ 65
ARTICLE XII
Miscellaneous
Section 12.01 Notices.................................................. 65
Section 12.02 Waivers; Amendments...................................... 66
Section 12.03 Expenses, Indemnity; Damage Waiver....................... 67
Section 12.04 Successors and Assigns................................... 69
Section 12.05 Survival; Revival; Reinstatement......................... 71
Section 12.06 Counterparts; Integration; Effectiveness................. 72
Section 12.07 Severability............................................. 73
Section 12.08 Right of Setoff.......................................... 73
Section 12.09 GOVERNING LAW; JURISDICTION.............................. 73
Section 12.10 Headings................................................. 74
Section 12.11 Confidentiality.......................................... 74
Section 12.12 Interest Rate Limitation................................. 75
Section 12.13 EXCULPATION PROVISIONS................................... 76
Section 12.14 No Third Party Beneficiaries............................. 76
Section 12.15 USA Patriot Act Notice................................... 76
Section 12.16 Waiver................................................... 77
Section 12.17 Joint and Several Nature of Obligation................... 77
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Annexes, Exhibits and Schedules
Annex I Commitments
Exhibit A Form of Note
Exhibit B Form of Borrowing Request
Exhibit C Form of Interest Election Request
Exhibit D Form of Compliance Certificate
Exhibit E Security Instruments
Exhibit F Form of Assignment and Assumption
Schedule 7.05 Litigation
Schedule 7.15 Subsidiaries and Partnerships
Schedule 7.19 Gas Imbalances
Schedule 7.20 Marketing Contracts
Schedule 7.21 Swap Agreements
Schedule 9.05 Investments
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THIS SECOND LIEN TERM LOAN AGREEMENT dated as of November 15, 2005, is
among Parallel Petroleum Company, a corporation duly formed and existing under
the laws of the State of Delaware ("PPC"), Parallel, L.P., a limited partnership
duly formed and existing under the laws of the State of Texas ("PLP" and with
PPC, the "Borrowers" and each a "Borrower"); each of the Lenders from time to
time party hereto; and BNP Paribas (in its individual capacity, "BNP Paribas"),
as administrative agent for the Lenders (in such capacity, together with its
successors in such capacity, the "Administrative Agent").
RECITALS
A. The Borrowers have requested that the Lenders provide a $50,000,000
second lien term loan to the Borrowers.
B. Each Lender has severally agreed to make its ratable portion of such
loan subject to the terms and conditions of this Agreement.
C. In consideration of the mutual covenants and agreements herein contained
and of the loans and commitments hereinafter referred to, the parties hereto
agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING MATTERS
Section 1.01 Terms Defined Above. As used in this Agreement, each term
defined above has the meaning indicated above.
Section 1.02 Certain Defined Terms. As used in this Agreement, the
following terms have the meanings specified below:
"ABR", when used in reference to any Tranche, refers to whether such Trache
is bearing interest at a rate determined by reference to the Alternate Base
Rate.
"Acquisition" means the acquisition by PLP of certain properties located in
▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ Counties, Texas from Lynx Production Company, Inc. et al.
pursuant to the terms and conditions of the Acquisition Documents.
"Acquisition Documents" means the Purchase and Sale Agreement and all bills
of sale, assignments, agreements, instruments and documents executed and
delivered in connection therewith, as amended.
"Acquisition Properties" means the Oil and Gas Properties and other
properties acquired in stages directly or indirectly by the Borrowers or any
Guarantor pursuant to the Acquisition Documents.
"Administrative Questionnaire" means an Administrative Questionnaire in a
form supplied by the Administrative Agent.
"Affected Portion" has the meaning assigned such term in Section 5.05.
"Affiliate" means, with respect to a specified Person, another Person that
directly, or indirectly through one or more intermediaries, Controls or is
Controlled by or is under common Control with the Person specified.
"Agreement" means this Second Lien Term Loan Agreement, as the same may
from time to time be amended, modified, supplemented or restated.
"Alternate Base Rate" means, for any day, a rate per annum equal to the
greater of (a) the Prime Rate in effect on such day and (b) the Federal Funds
Effective Rate in effect on such day plus 1/2 of 1%. Any change in the Alternate
Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate
shall be effective from and including the effective date of such change in the
Prime Rate or the Federal Funds Effective Rate, respectively.
"Applicable Margin" means (a) with respect to each Eurodollar Tranche, a
rate per annum equal to 4.5%; and (b) with respect to each ABR Tranche, a rate
per annum equal to 3.5%.
"Approved Counterparty" means (a) any "Lender" as such term is defined
under the Senior Revolving Credit Agreement or any Affiliate of such Lender or
(b) any other Person whose long term senior unsecured debt rating is A-/A3 by
S&P or ▇▇▇▇▇'▇ (or their equivalent) or higher.
"Arrangers" means BNP Paribas and Citibank Texas, N.A., in their capacities
as the joint lead arrangers hereunder.
"Asset Coverage Ratio" shall mean the ratio computed pursuant to Section
9.01(b).
"Assignment and Assumption" means an assignment and assumption entered into
by a Lender and an assignee (with the consent of any party whose consent is
required by Section 12.04(b)), and accepted by the Administrative Agent, in the
form of Exhibit F or any other form approved by the Administrative Agent.
"Board" means the Board of Governors of the Federal Reserve System of the
United States of America or any successor Governmental Authority.
"Borrowing Request" means the request by any Borrower for the Loans in
accordance with Section 2.03.
"Business Day" means any day that is not a Saturday, Sunday or other day on
which commercial banks in New York City or Houston, Texas are authorized or
required by law to remain closed; and if such day relates to a Tranche or
continuation of, a payment or prepayment of principal of or interest on, or a
conversion of or into, or the Interest Period for, a Eurodollar Tranche or a
notice by any Borrower with respect to any such Tranche 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.
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"Capital Leases" means, in respect of any Person, all leases which shall
have been, or should have been, in accordance with GAAP, recorded as capital
leases on the balance sheet of the Person liable (whether contingent or
otherwise) for the payment of rent thereunder.
"Casualty Event" means any loss, casualty or other insured damage to, or
any nationalization, taking under power of eminent domain or by condemnation or
similar proceeding of, any Property of any Borrower or any of their Subsidiaries
having a fair market value in excess of $500,000 in the aggregate for any
calendar year.
"Change in Control" means (a) the acquisition of ownership, directly or
indirectly, beneficially or of record, by any person or group (within the
meaning of the Securities Exchange Act of 1934 and the rules of the SEC
thereunder as in effect on the date hereof) of Equity Interests representing
more than 35% of the aggregate ordinary voting power represented by the issued
and outstanding Equity Interests of PPC (or its successor by merger,
consolidation or purchase of all or substantially all of its assets); (b) the
first day on which a majority of the members of the board of directors of PPC
are not Continuing Directors; or (c) the sale, lease, transfer, conveyance or
other disposition (other than by way of merger or consolidation), in one or a
series of related transactions, of all or substantially all of the assets of PPC
and its Subsidiaries taken as a whole to any "person" (as such term is used in
Section 13(d) and 14(d) of the Securities and Exchange Act of 1934).
"Change in Law" means (a) the adoption of any law, rule or regulation after
the date of this Agreement, (b) any change in any law, rule or regulation or in
the interpretation or application thereof by any Governmental Authority after
the date of this Agreement or (c) compliance by any Lender (or, for purposes of
Section 5.01(b), by any lending office of such Lender or by such Lender's
holding company, if any) with any request, guideline or directive (whether or
not having the force of law) of any Governmental Authority made or issued after
the date of this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and any successor statute.
"Commitment" means, with respect to each Lender, the commitment of such
Lender to make its Loan on the Effective Date hereunder and "Commitments" means
the aggregate amount of the Commitments of all Lenders. The amount of each
Lender's Commitment is set forth on Annex I.
"Consolidated Net Income" means with respect to PPC and the Consolidated
Subsidiaries, for any period, the aggregate of the net income (or loss) of PPC
and the Consolidated Subsidiaries after allowances for taxes for such period
determined on a consolidated basis in accordance with GAAP; provided that there
shall be excluded from such net income (to the extent otherwise included
therein) the following: (a) the net income of any Person in which PPC or a
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 PPC and
the Consolidated Subsidiaries in accordance with GAAP), except to the extent of
the amount of dividends or distributions actually paid in cash during such
period by such other Person to PPC or to a Consolidated Subsidiary, as the case
may be; (b) the net income (but not loss) during such
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period of any Consolidated Subsidiary to the extent that the declaration or
payment of dividends or similar distributions or transfers or loans by that
Consolidated Subsidiary is not at the time permitted by operation of the terms
of its charter or any agreement, instrument or Governmental Requirement
applicable to such Consolidated Subsidiary or is otherwise restricted or
prohibited, in each case determined in accordance with GAAP; (c) 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; (d) any extraordinary gains or
losses during such period, (e) non-cash gains, losses or adjustments under FASB
Statement Nos. 133 or 143; (f) any gains or losses attributable to writeups or
writedowns of assets, including ceiling test writedowns and writedowns under
FASB Statements Nos. 19, 142 and 144; and provided further that for purposes of
calculating the financial ratios in Sections 9.01(a) and (b), if PPC or any
Consolidated Subsidiary shall acquire or dispose of any material Property (other
than Acquisition Properties) during the period of four fiscal quarters ending on
the last day of the fiscal quarter immediately preceding the date of
determination for which financial statements are available and up to and
including the date of the consummation of such acquisition, disposition or
redesignation, then Consolidated Net Income shall be calculated after giving pro
forma effect to such acquisition (including the revenues of the Properties
acquired), merger, disposition or redesignation, as if such acquisition, merger,
disposition or redesignation had occurred on the first day of such period.
"Consolidated Subsidiaries" means each Subsidiary of PPC (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 the
PPC in accordance with GAAP.
"Continuing Directors" means, as of any date of determination, any member
of the board of directors of PPC who: (a) was a member of such board of
directors on the date hereof; or (b) was nominated for election or elected to
such board of directors with the approval of a majority of the Continuing
Directors who were members of such board at the time of such nomination or
election.
"Control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of a Person, whether
through the ability to exercise voting power, by contract or otherwise. For the
purposes of this definition, and without limiting the generality of the
foregoing, any Person that owns directly or indirectly 10% or more of the Equity
Interests having ordinary voting power for the election of the directors or
other governing body of a Person (other than as a limited partner of such other
Person) will be deemed to "control" such other Person. "Controlling" and
"Controlled" have meanings correlative thereto.
"Debt" means, for any Person, the sum of the following (without
duplication): (a) all obligations of such Person for borrowed money or evidenced
by bonds, bankers' acceptances, debentures, notes or other similar instruments;
(b) all obligations of such Person (whether contingent or otherwise) in respect
of letters of credit, surety or other bonds and similar instruments, (c) all
accounts payable and all accrued expenses, liabilities or other obligations of
such Person to pay the deferred purchase price of Property or services; (d) all
obligations under Capital Leases; (e) all obligations under Synthetic Leases;
(f) all Debt (as defined in the other clauses of this definition) of others
secured by a Lien on any Property of such Person, whether or not such Debt is
assumed by such Person; (g) all Debt (as defined in the other clauses of this
definition) of others guaranteed by such Person or in which such Person
otherwise assures a
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creditor against loss of the Debt (howsoever such assurance shall be made) to
the extent of the lesser of the amount of such Debt and the maximum stated
amount of such guarantee or assurance against loss; (h) all obligations or
undertakings of such Person to maintain or cause to be maintained the financial
position or covenants of others or to purchase the Debt or Property of others;
(i) obligations to deliver commodities, goods or services, including, without
limitation, Hydrocarbons, in consideration of one or more advance payments,
other than gas balancing arrangements in the ordinary course of business; (j)
obligations to pay for goods or services whether or not such goods or services
are actually received or utilized by such Person; (k) any Debt of a partnership
for which such Person is liable either by agreement, by operation of law or by a
Governmental Requirement but only to the extent of such liability; (l)
Disqualified Capital Stock; and (m) the undischarged balance of any production
payment created by such Person or for the creation of which such Person directly
or indirectly received payment. The Debt of any Person shall include all
obligations of such Person of the character described above to the extent such
Person remains legally liable in respect thereof notwithstanding that any such
obligation is not included as a liability of such Person under GAAP.
"Default" means any event or condition which constitutes an Event of
Default or which upon notice, lapse of time or both would, unless cured or
waived, become an Event of Default.
"Disqualified Capital Stock" means any Equity Interest that, by its terms
(or by the terms of any security into which it is convertible or for which it is
exchangeable) or upon the happening of any event, matures or is mandatorily
redeemable for any consideration other than other Equity Interests (which would
not constitute Disqualified Capital Stock), pursuant to a sinking fund
obligation or otherwise, or is convertible or exchangeable for Debt or
redeemable for any consideration other than other Equity Interests (which would
not constitute Disqualified Capital Stock) at the option of the holder thereof,
in whole or in part, on or prior to the date that is one year after the earlier
of (a) the Maturity Date and (b) the date on which there are no Loans or other
obligations hereunder outstanding.
"dollars" or "$" refers to lawful money of the United States of America.
"Domestic Subsidiary" means any Subsidiary that is organized under the laws
of the United States of America or any state thereof or the District of
Columbia.
"EBITDAX" means, for any period, the sum of Consolidated Net Income for
such period plus the following expenses or charges to the extent deducted from
Consolidated Net Income in such period: interest, income taxes, depreciation,
depletion, amortization, exploration expenses and other noncash charges, minus
all noncash income added to Consolidated Net Income; provided that EBITDAX shall
be calculated as follows for the first three fiscal quarters following the
Effective Date:
(a) for the fiscal quarter ending December 31, 2005, EBITDAX shall be
EBITDAX for such quarter multiplied by four;
(b) for the fiscal quarter ending March 31, 2006, EBITDAX shall be EBITDAX
for the six-month period ending on such date multiplied by two;
(c) for the fiscal quarter ending June 30, 2006, EBITDAX shall be EBITDAX
for the nine-month period ending on such date multiplied by 4/3.
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Thereafter, EBITDAX shall be calculated using EBITDAX for the period of
four fiscal quarters ending on the last day of the fiscal quarter immediately
preceding the date of determination for which financial statements are
available.
"Effective Date" means the date on which the conditions specified in
Section 6.01 are satisfied (or waived in accordance with Section 12.02).
"Environmental Laws" means any and all Governmental Requirements pertaining
in any way to health, safety the environment or the preservation or reclamation
of natural resources, in effect in any and all jurisdictions in which any
Borrower or any of their Subsidiaries is conducting or at any time has conducted
business, or where any Property of any Borrower or any of their Subsidiaries is
located, including without limitation, the Oil Pollution Act of 1990 ("OPA"), as
amended, the Clean Air Act, as amended, the Comprehensive Environmental,
Response, Compensation, and Liability Act of 1980 ("CERCLA"), as amended, the
Federal Water Pollution Control Act, as amended, the Occupational Safety and
Health Act of 1970, as amended, the Resource Conservation and Recovery Act of
1976 ("RCRA"), as amended, the Safe Drinking Water Act, as amended, the Toxic
Substances Control Act, as amended, the Superfund Amendments and Reauthorization
Act of 1986, as amended, the Hazardous Materials Transportation Act, as amended,
and other environmental conservation or protection Governmental Requirements.
The term "oil" shall have the meaning specified in OPA, the terms "hazardous
substance" and "release" (or "threatened release") have the meanings specified
in CERCLA, the terms "solid waste" and "disposal" (or "disposed") have the
meanings specified in RCRA and the term "oil and gas waste" shall have the
meaning specified in Section 91.1011 of the Texas Natural Resources Code
("Section 91.1011"); provided, however, that (a) in the event either OPA,
CERCLA, RCRA or Section 91.1011 is amended so as to broaden the meaning of any
term defined thereby, such broader meaning shall apply subsequent to the
effective date of such amendment and (b) to the extent the laws of the state or
other jurisdiction in which any Property of any Borrower or any of their
Subsidiaries is located establish a meaning for "oil," "hazardous substance,"
"release," "solid waste," "disposal" or "oil and gas waste" which is broader
than that specified in either OPA, CERCLA, RCRA or Section 91.1011, such broader
meaning shall apply.
"Equity Interests" means shares of capital stock, partnership interests,
membership interests in a limited liability company, beneficial interests in a
trust or other equity ownership interests in a Person, and any warrants, options
or other rights entitling the holder thereof to purchase or acquire any such
Equity Interest.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute.
"ERISA Affiliate" means each trade or business (whether or not
incorporated) which together with any Borrower or any of their Subsidiaries
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" means (a) a "Reportable Event" described in section 4043 of
ERISA and the regulations issued thereunder, (b) the withdrawal of any Borrower
or any of their
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Subsidiaries or any ERISA Affiliate from a Plan during a plan year in which it
was a "substantial employer" as defined in section 4001(a)(2) of ERISA, (c) the
filing of a notice of intent to terminate a Plan or the treatment of a Plan
amendment as a termination under section 4041 of ERISA, (d) the institution of
proceedings to terminate a Plan by the PBGC, (e) receipt of a notice of
withdrawal liability pursuant to Section 4202 of ERISA or (f) any other event or
condition which might constitute grounds under section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Plan.
"Eurodollar", when used in reference to any Tranche, refers to whether such
Tranche is bearing interest at a rate determined by reference to the LIBO Rate.
"Event of Default" has the meaning assigned such term in Section 10.01.
"Excepted Liens" means: (a) Liens for Taxes, assessments or other
governmental charges or levies which are not delinquent or which are being
contested in good faith by appropriate action and for which adequate reserves
have been maintained in accordance with GAAP; (b) Liens in connection with
workers' compensation, unemployment insurance or other social security, old age
pension or public liability obligations which are not delinquent or which are
being contested in good faith by appropriate action and for which adequate
reserves have been maintained in accordance with GAAP; (c) statutory landlord's
liens, operators', vendors', carriers', warehousemen's, repairmen's, mechanics',
suppliers', workers', materialmen's, construction or other like Liens arising by
operation of law in the ordinary course of business or incident to the
exploration, development, operation and maintenance of Oil and Gas Properties
each of which is in respect of obligations that are not delinquent or which are
being contested in good faith by appropriate action and for which adequate
reserves have been maintained in accordance with GAAP; (d) contractual Liens
which arise in the ordinary course of business under operating agreements, joint
venture agreements, oil and gas partnership agreements, oil and gas leases,
farm-out agreements, division orders, contracts for the sale, transportation or
exchange of oil and natural gas, unitization and pooling declarations and
agreements, area of mutual interest agreements, overriding royalty agreements,
marketing agreements, processing agreements, net profits agreements, development
agreements, gas balancing or deferred production agreements, injection,
repressuring and recycling agreements, salt water or other disposal agreements,
seismic or other geophysical permits or agreements, and other agreements which
are usual and customary in the oil and gas business and are for claims which are
not delinquent or which are being contested in good faith by appropriate action
and for which adequate reserves have been maintained in accordance with GAAP,
provided that any such Lien referred to in this clause does not materially
impair the use of the Property covered by such Lien for the purposes for which
such Property is held by any Borrower or any of their Subsidiaries or materially
impair the value of such Property subject thereto; (e) Liens arising solely by
virtue of any statutory or common law provision relating to banker's liens,
rights of set-off or similar rights and remedies and burdening only deposit
accounts or other funds maintained with a creditor depository institution,
provided that no such deposit account is a dedicated cash collateral account or
is subject to restrictions against access by the depositor in excess of those
set forth by regulations promulgated by the Board and no such deposit account is
intended by the such Borrower or any of its Subsidiaries to provide collateral
to the depository institution; (f) easements, restrictions, servitudes, permits,
conditions, covenants, exceptions or reservations in any Property of any
Borrower or any of their Subsidiaries for the purpose of roads, pipelines,
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transmission lines, transportation lines, distribution lines for the removal of
gas, oil, coal or other minerals or timber, and other like purposes, or for the
joint or common use of real estate, rights of way, facilities and equipment,
that do not secure any monetary obligations and which in the aggregate do not
materially impair the use of such Property for the purposes of which such
Property is held by any Borrower or any of their Subsidiaries or materially
impair the value of such Property subject thereto; (g) Liens on cash or
securities pledged to secure performance of tenders, surety and appeal bonds,
government contracts, performance and return of money bonds, bids, trade
contracts, leases, statutory obligations, regulatory obligations and other
obligations of a like nature incurred in the ordinary course of business and (h)
judgment and attachment Liens not giving rise to an Event of Default, provided
that any appropriate legal proceedings which may have been duly initiated for
the review of such judgment shall not have been finally terminated or the period
within which such proceeding may be initiated shall not have expired and no
action to enforce such Lien has been commenced; provided, further that Liens
described in clauses (a) through (e) shall remain "Excepted Liens" only for so
long as no action to enforce such Lien has been commenced and no intention to
subordinate the Lien granted in favor of the Administrative Agent and the
Lenders is to be hereby implied or expressed by the permitted existence of such
Excepted Liens.
"Excluded Taxes" means, with respect to the Administrative Agent, any
Lender or any other recipient of any payment to be made by or on account of any
obligation of any Borrower or any Guarantor hereunder or under any other Loan
Document, (a) income or franchise taxes imposed on (or measured by) its net
income by the United States of America or such other jurisdiction under the laws
of which such recipient is organized or in which its principal office is located
or, in the case of any Lender, in which its applicable lending office is
located, (b) any branch profits taxes imposed by the United States of America or
any similar tax imposed by any other jurisdiction in which any Borrower or any
Guarantor is located and (c) in the case of a Foreign Lender (other than an
assignee pursuant to a request by any Borrower under Section 5.04(b)), any
withholding tax that is imposed on amounts payable to such Foreign Lender at the
time such Foreign Lender becomes a party to this Agreement (or designates a new
lending office) or is attributable to such Foreign Lender's failure to comply
with Section 5.03(e), except to the extent that such Foreign Lender (or its
assignor, if any) was entitled, at the time of designation of a new lending
office (or assignment), to receive additional amounts with respect to such
withholding tax pursuant to Section 5.03(a) or Section 5.03(c).
"Federal Funds Effective Rate" means, for any day, the weighted average
(rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on
overnight Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers, as published on the next succeeding Business
Day by the Federal Reserve Bank of New York, or, if such rate is not so
published for any day that is a Business Day, the average (rounded upwards, if
necessary, to the next 1/100 of 1%) of the quotations for such day for such
transactions received by the Administrative Agent from three Federal funds
brokers of recognized standing selected by it.
"Financial Officer" means, for any Person, the president, the chief
financial officer, principal accounting officer, treasurer or controller of such
Person. Unless otherwise specified, all references herein to a Financial Officer
means a Financial Officer of PPC.
8
"Financial Statements" means the financial statement or statements of PPC
and its Consolidated Subsidiaries referred to in Section 7.04(a).
"Foreign Lender" means any Lender that is organized under the laws of a
jurisdiction other than that in which any Borrower is located. For purposes of
this definition, the United States of America, each State thereof and the
District of Columbia shall be deemed to constitute a single jurisdiction.
"Foreign Subsidiary" means any Subsidiary that is not a Domestic
Subsidiary.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect from time to time subject to the terms and conditions
set forth in Section 1.05.
"Governmental Authority" means the government of the United States of
America, any other nation or any political subdivision thereof, whether state or
local, and any agency, authority, instrumentality, regulatory body, court,
central bank or other entity exercising executive, legislative, judicial,
taxing, regulatory or administrative powers or functions of or pertaining to
government over the Borrowers or any of their Subsidiaries, any of their
Properties, the Administrative Agent or any Lender.
"Governmental Requirement" means any law, statute, code, ordinance, order,
determination, rule, regulation, judgment, decree, injunction, franchise,
permit, certificate, license, authorization or other directive or requirement,
whether now or hereinafter in effect, including, without limitation,
Environmental Laws, energy regulations and occupational, safety and health
standards or controls, of any Governmental Authority.
"Guarantors" means (a) Parallel, L.L.C. and (b) each other Material
Domestic Subsidiary or other Domestic Subsidiary of PPC or PLP that guarantees
the Indebtedness pursuant to Section 8.14.
"Guaranty Agreement" means the Second Lien Guarantee and Collateral
Agreement executed by the Borrowers, as pledgors, and the Guarantors in form and
substance reasonably satisfactory to the Administrative Agent, inter alia,
unconditionally guarantying on a joint and several basis, payment of the
Indebtedness, as the same may be amended, modified or supplemented from time to
time.
"Highest Lawful Rate" means, with respect to each Lender, the maximum
nonusurious interest rate, if any, that at any time or from time to time may be
contracted for, taken, reserved, charged or received on 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 allow as of the date hereof.
"Hydrocarbon Interests" means all rights, titles, interests and estates now
or hereafter acquired in and to oil and gas leases, oil, gas and mineral leases,
or other liquid or gaseous hydrocarbon leases, mineral fee interests, overriding
royalty and royalty interests, net profit interests and production payment
interests, including any reserved or residual interests of whatever nature owned
by any Borrower.
9
"Hydrocarbons" means oil, gas, casinghead gas, drip gasoline, natural
gasoline, condensate, distillate, liquid hydrocarbons, gaseous hydrocarbons and
all products refined or separated therefrom.
"Indebtedness" means any and all amounts owing or to be owing by each
Borrower, any of their Subsidiaries or any Guarantor whether direct or indirect
(including those acquired by assumption), absolute or contingent, due or to
become due, now existing or hereafter arising to the Administrative Agent or any
Lender under any Loan Document and all renewals, extensions and/or
rearrangements of any of the above.
"Indemnified Taxes" means Taxes other than Excluded Taxes.
"Initial Reserve Report" means the two reports of [▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ &
Associates, Inc. dated as of October 31, 2005, using bank pricing cases and
covering the Oil and Gas Properties described therein and the Acquisition
Properties.]
"Intercreditor Agreement" means that certain Intercreditor and
Subordination Agreement, dated as of the Effective Date, by and among the
Borrowers, Guarantors, the Administrative Agent and Citibank Texas, N.A., as
administrative agent under the Senior Revolving Credit Documents.
"Interest Election Request" means a request by any Borrower to convert or
continue a Tranche in accordance with Section 2.04.
"Interest Expense" means, for any period, the sum (determined without
duplication) of the aggregate gross interest expense of each of the Borrowers
and the Consolidated Subsidiaries for such period, including (a) to the extent
included in interest expense under GAAP: (i) amortization of debt discount, (ii)
capitalized interest and (iii) the portion of any payments or accruals under
Capital Leases allocable to interest expense, plus the portion of any payments
or accruals under Synthetic Leases allocable to interest expense whether or not
the same constitutes interest expense under GAAP and (b) cash dividend payments
by any Borrower in respect of any Disqualified Capital Stock.
"Interest Payment Date" means (a) with respect to any ABR Tranche, the last
day of each March, June, September and December and (b) with respect to any
Eurodollar Tranche, the last day of the Interest Period applicable to such
Tranche and, in the case of a Eurodollar Tranche with an Interest Period of more
than three months' duration, each day prior to the last day of such Interest
Period that occurs at intervals of three months' duration after the first day of
such Interest Period.
"Interest Period" means with respect to any Eurodollar Tranche, the period
commencing on the date of such Tranche and ending on the numerically
corresponding day in the calendar month that is one, two, three or six months
thereafter, as any Borrower may elect; provided, that (a) if any Interest Period
would end on a day other than a Business Day, such Interest Period shall be
extended to the next succeeding Business Day unless such next succeeding
Business Day would fall in the next calendar month, in which case such Interest
Period shall end on the next preceding Business Day and (b) any Interest Period
pertaining to a Eurodollar Tranche that commences on the last Business Day of a
calendar month (or on a day for which there is no
10
numerically corresponding day in the last calendar month of such Interest
Period) shall end on the last Business Day of the last calendar month of such
Interest Period. For purposes hereof, the date of a Tranche initially shall be
the date on which such Loans comprising such Tranche are made and thereafter
shall be the effective date of the most recent conversion or continuation of
such Tranche.
"Investment" means, for any Person: (a) the acquisition (whether for cash,
Property, services or securities or otherwise) of Equity Interests of any other
Person or any agreement to make any such acquisition (including, without
limitation, any "short sale" or any sale of any securities at a time when such
securities are not owned by the Person entering into such short sale); (b) the
making of any deposit with, or advance, loan or other extension of credit to,
any other Person (including the purchase of Property from another Person subject
to an understanding or agreement, contingent or otherwise, to resell such
Property to such Person, but excluding any such advance, loan or extension of
credit having a term not exceeding ninety (90) days representing the purchase
price of inventory or supplies sold by such Person in the ordinary course of
business) or (c) the entering into of any guarantee of, or other contingent
obligation (including the deposit of any Equity Interests to be sold) with
respect to, Debt or other liability of any other Person and (without
duplication) any amount committed to be advanced, lent or extended to such
Person.
"Lenders" means the Persons listed on Annex I and any Person that shall
have become a party hereto pursuant to an Assignment and Assumption, but not any
such Person that ceases to be a party hereto pursuant to an Assignment and
Assumption.
"LIBO Rate" means, with respect to any Eurodollar Tranche for any Interest
Period, the rate appearing on Page 3750 of the Dow ▇▇▇▇▇ Market Service (or on
any successor or substitute page of such Service, or any successor to or
substitute for such Service, providing rate quotations comparable to those
currently provided on such page of such Service, as determined by the
Administrative Agent from time to time for purposes of providing quotations of
interest rates applicable to dollar deposits in the London interbank market) at
approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period, as the rate for dollar deposits with a
maturity comparable to such Interest Period. In the event that such rate is not
available at such time for any reason, then the "LIBO Rate" with respect to such
Eurodollar Tranche for such Interest Period shall be the rate (rounded upwards,
if necessary, to the next 1/16th of 1%) at which dollar deposits of $5,000,000
and for a maturity comparable to such Interest Period are offered by the
principal London office of the Administrative Agent in immediately available
funds in the London interbank market at approximately 11:00 a.m., London time,
two Business Days prior to the commencement of such Interest Period.
"Lien" means any interest in Property securing an obligation owed to, or a
claim by, a Person other than the owner of the Property, whether such interest
is based on the common law, statute or contract, and whether such obligation or
claim is fixed or contingent, and including but not limited to (a) the lien or
security interest arising from a mortgage, encumbrance, pledge, security
agreement, conditional sale or trust receipt or a lease, consignment or bailment
for security purposes or (b) production payments and the like payable out of Oil
and Gas Properties. The term "Lien" shall include easements, restrictions,
servitudes, permits, conditions, covenants, exceptions or reservations. For the
purposes of this Agreement, each Borrower and their
11
Subsidiaries shall be deemed to be the owner of any Property which they have
acquired or hold 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" means this Agreement, the Notes, the Intercreditor
Agreement and the Security Instruments.
"Loans" means the loans made by the Lenders to the Borrowers pursuant to
this Agreement.
"Majority Lenders" means Lenders having at least sixty-six and two-thirds
percent (66-2/3%) of the outstanding principal amount of the Loans.
"Material Adverse Effect" means a material adverse change in, or material
adverse effect on (a) the business, operations, Property, liabilities (actual or
contingent) or condition (financial or otherwise) of the Borrowers and the
Guarantors taken as a whole, (b) the ability of any Borrower, any of its
Subsidiaries or any Guarantor to perform any of its obligations under any Loan
Document to which it is a party, (c) the validity or enforceability of any Loan
Document or (d) the rights and remedies of or benefits available to the
Administrative Agent or any Lender under any Loan Document.
"Material Domestic Subsidiary" means, as of any date, any Domestic
Subsidiary that (a) is a Wholly-Owned Subsidiary and (b) together with its
Subsidiaries, owns Property having a fair market value of $1,000,000 or more.
"Material Indebtedness" means Debt (other than the Loans), or obligations
in respect of one or more Swap Agreements, of the Borrowers and their
Subsidiaries in an aggregate principal amount exceeding $2,500,000. For purposes
of determining Material Indebtedness, the "principal amount" of the obligations
of the Borrowers or any of their Subsidiaries in respect of any Swap Agreement
at any time shall be the maximum aggregate amount (giving effect to any netting
agreements) that such Borrower or such Subsidiary would be required to pay if
such Swap Agreement were terminated at such time.
"Maturity Date" means November 15, 2010.
"Moody's" means ▇▇▇▇▇'▇ Investors Service, Inc. and any successor thereto
that is a nationally recognized rating agency.
"Mortgaged Property" means any Property owned by any Borrower or any
Guarantor which is subject to the Liens existing and to exist under the terms of
the Security Instruments.
"Multiemployer Plan" means a Plan which is a multiemployer plan as defined
in section 3(37) or 4001 (a)(3) of ERISA.
"Notes" means the promissory notes of the Borrowers described in Section
2.02(d) and being substantially in the form of Exhibit A, together with all
amendments, modifications, replacements, extensions and rearrangements thereof.
12
"Oil and Gas Properties" means (a) Hydrocarbon Interests; (b) the
Properties now or hereafter pooled or unitized with Hydrocarbon Interests; (c)
all presently existing or future unitization, pooling agreements and
declarations of pooled units and the units created thereby (including without
limitation all units created under orders, regulations and rules of any
Governmental Authority) which may affect all or any portion of the Hydrocarbon
Interests; (d) all operating agreements, contracts and other agreements,
including production sharing contracts and agreements, which relate to any of
the Hydrocarbon Interests or the production, sale, purchase, exchange or
processing of Hydrocarbons from or attributable to such Hydrocarbon Interests;
(e) all Hydrocarbons in and under and which may be produced and saved or
attributable to the Hydrocarbon Interests, including all oil in tanks, and all
rents, issues, profits, proceeds, products, revenues and other incomes from or
attributable to the Hydrocarbon Interests; (f) all tenements, hereditaments,
appurtenances and Properties in any manner appertaining, belonging, affixed or
incidental to the Hydrocarbon Interests and (g) all Properties, rights, titles,
interests and estates described or referred to above, including any and all
Property, real or personal, now owned or hereinafter acquired and situated upon,
used, held for use or useful in connection with the operating, working or
development of any of such Hydrocarbon Interests or Property (excluding drilling
rigs, service rigs, trailers, backhoes, automotive equipment, rental equipment
or other personal Property which may be on such premises for the purpose of
drilling and servicing a well or for other similar temporary uses) and including
any and all oil ▇▇▇▇▇, gas ▇▇▇▇▇, injection ▇▇▇▇▇ or other ▇▇▇▇▇, buildings,
structures, fuel separators, liquid extraction plants, plant compressors, pumps,
pumping units, field gathering systems, tanks and tank batteries, fixtures,
valves, fittings, machinery and parts, engines, boilers, meters, apparatus,
equipment, appliances, tools, implements, cables, wires, towers, casing, tubing
and rods, surface leases, rights-of-way, easements and servitudes together with
all additions, substitutions, replacements, accessions and attachments to any
and all of the foregoing.
"Other Taxes" means any and all present or future stamp or documentary
taxes or any other excise or Property taxes, charges or similar levies arising
from any payment made hereunder or from the execution, delivery or enforcement
of, or otherwise with respect to, this Agreement and any other Loan Document.
"Participant" has the meaning set forth in Section 12.04(c)(i).
"PBGC" means the Pension Benefit Guaranty Corporation, or any successor
thereto.
"PDP PV" means the PV of Proved Developed Producing Reserves of Borrowers
and their Subsidiaries as described in the most recently delivered Reserve
Report as increased or decreased to reflect the economic impact and cash flows
of Swap Agreements (provided that Swap Agreements with non-investment grade
counterparties shall not be taken into account to the extent that such Swap
Agreements improve the position of or otherwise benefit the Borrowers or any of
their Subsidiaries).
"Person" means any natural person, corporation, limited liability company,
trust, joint venture, association, company, partnership, Governmental Authority
or other entity.
"Plan" means any employee pension benefit plan, as defined in section 3(2)
of ERISA, which (a) is currently or hereafter sponsored, maintained or
contributed to by any Borrower, any
13
of its Subsidiaries or an ERISA Affiliate or (b) was at any time during the six
calendar years preceding the date hereof, sponsored, maintained or contributed
to by any Borrower, any of its Subsidiaries or an ERISA Affiliate.
"Prime Rate" means the rate of interest per annum publicly announced from
time to time by the Administrative Agent as its prime rate in effect at its
principal office in New York City; each change in the Prime Rate shall be
effective from and including the date such change is publicly announced as being
effective. Such rate is set by the Administrative Agent as a general reference
rate of interest, taking into account such factors as the Administrative Agent
may deem appropriate; it being understood that many of the Administrative
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 Administrative Agent may make various commercial or other loans at
rates of interest having no relationship to such rate.
"Property" means any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible, including, without
limitation, cash, securities, accounts and contract rights.
"Proved Oil and Gas Properties" means Oil and Gas Properties that are
Proved Reserves.
"Proved Reserves" means "Proved Reserves" as defined in the Definitions for
Oil and Gas Reserves (in this paragraph, the "Definitions") promulgated by the
Society of Petroleum Engineers (or any generally recognized successor) as in
effect at the time in question. "Proved Developed Producing Reserves" means
Proved Reserves which are categorized as both "Developed" and "Producing" in the
Definitions, "Proved Developed Nonproducing Reserves" means Proved Reserves
which are categorized as both "Developed" and "Nonproducing" in the Definitions,
and "Proved Undeveloped Reserves" means Proved Reserves which are categorized as
"Undeveloped" in the Definitions.
"Purchase and Sale Agreement" means that certain Purchase and Sale
Agreement dated as of October 14, 2005 by and among PLP (as buyer) and Lynx
Production Company, Inc. et al. (as sellers).
"Redemption" means with respect to any Debt, the repurchase, redemption,
prepayment, repayment or defeasance (or the segregation of funds with respect to
any of the foregoing) of such Debt. "Redeem" has the correlative meaning
thereto.
"Register" has the meaning assigned such term in Section 12.04(b)(iv).
"Regulation D" means Regulation D of the Board, as the same may be amended,
supplemented or replaced from time to time.
"Related Parties" means, with respect to any specified Person, such
Person's Affiliates and the respective directors, officers, employees, agents
and advisors (including attorneys, accountants and experts) of such Person and
such Person's Affiliates.
"Remedial Work" has the meaning assigned such term in Section 8.10(a).
14
"Reserve Report" means a report, in form and substance reasonably
satisfactory to the Administrative Agent, setting forth, as of each January 1st
or July 1st (or such other date in the event of an interim redetermination) the
oil and gas reserves attributable to the Oil and Gas Properties of the Borrowers
and their Subsidiaries, together with a projection of the rate of production and
future net income, taxes, operating expenses and capital expenditures with
respect thereto as of such date, based upon the economic assumptions consistent
with the Administrative Agent's lending requirements at the time.
"Responsible Officer" means, as to any Person, the Chief Executive Officer,
the President, any Financial Officer or any Vice President of such Person.
Unless otherwise specified, all references to a Responsible Officer herein shall
mean a Responsible Officer of PPC.
"Restricted Payment" means any dividend or other distribution (whether in
cash, securities or other Property) with respect to any Equity Interests in any
Borrower or any of their Subsidiaries, or any payment (whether in cash,
securities or other Property), including any sinking fund or similar deposit, on
account of the purchase, redemption, retirement, acquisition, cancellation or
termination of any such Equity Interests in any Borrower or any of their
Subsidiaries or any option, warrant or other right to acquire any such Equity
Interests in each Borrower or any of their Subsidiaries.
"SEC" means the Securities and Exchange Commission or any successor
Governmental Authority.
"Security Instruments" means the Guaranty Agreement, mortgages, deeds of
trust and other agreements, instruments or certificates described or referred to
in Exhibit E, and any and all other agreements, instruments, consents or
certificates now or hereafter executed and delivered by any Borrower or any
other Person (other than participation or similar agreements between any Lender
and any other lender or creditor with respect to any Indebtedness pursuant to
this Agreement) in connection with, or as security for the payment or
performance of the Indebtedness, the Notes, this Agreement, as such agreements
may be amended, modified, supplemented or restated from time to time.
"Senior Notes" means those certain promissory notes issued by the Borrowers
pursuant to the Senior Revolving Credit Agreement.
"Senior Revolving Credit Agreement" means that certain Second Amended and
Restated Credit Agreement dated as of September 27, 2004, among the Borrowers,
as borrowers, Citibank Texas, N.A. (formerly known as First American Bank, SSB),
as administrative agent and the other agents and lenders from time to time
parties thereto and any "Loan Documents" (as defined therein) executed in
connection therewith, in each case, as hereafter amended, supplemented,
modified, restated, refinanced or replaced from time to time, subject to Section
9.02(d) and Section 9.03(d).
"Senior Revolving Credit Documents" means the Senior Revolving Credit
Agreement, the Senior Notes and any "Loan Documents" (as defined therein), in
each case, together with all amendments, modifications and supplements thereto.
15
"S&P" means Standard & Poor's Ratings Group, a division of The ▇▇▇▇▇▇-▇▇▇▇
Companies, Inc., and any successor thereto that is a nationally recognized
rating agency.
"Subsidiary" means: (a) any Person of which at least a majority of the
outstanding Equity Interests having by the terms thereof ordinary voting power
to elect a majority of the board of directors, manager or other governing body
of such Person (irrespective of whether or not at the time Equity Interests of
any other class or classes of such Person shall have or might have voting power
by reason of the happening of any contingency) is at the time directly or
indirectly owned or controlled by any Borrower or one or more of their
Subsidiaries and (b) any partnership of which any Borrower or any of their
Subsidiaries is a general partner. Unless otherwise indicated herein, each
reference to the term "Subsidiary" shall mean a Subsidiary of PPC.
"Swap Agreement" means any agreement with respect to any swap, forward,
future or derivative transaction or option or similar agreement, whether
exchange traded, "over-the-counter" or otherwise, involving, or settled by
reference to, one or more rates, currencies, commodities, equity or debt
instruments or securities, or economic, financial or pricing indices or measures
of economic, financial or pricing risk or value or any similar transaction or
any combination of these transactions; provided that no phantom stock or similar
plan providing for payments only on account of services provided by current or
former directors, officers, employees or consultants of any Borrower or any of
their Subsidiaries shall be a Swap Agreement.
"Synthetic Leases" means, in respect of any Person, all leases which shall
have been, or should have been, in accordance with GAAP, treated as operating
leases on the financial statements of the Person liable (whether contingently or
otherwise) for the payment of rent thereunder and which were properly treated as
indebtedness for borrowed money for purposes of U.S. federal income taxes, if
the lessee in respect thereof is obligated to either purchase for an amount in
excess of, or pay upon early termination an amount in excess of, 80% of the
residual value of the Property subject to such operating lease upon expiration
or early termination of such lease.
"Taxes" means any and all present or future taxes, levies, imposts, duties,
deductions, charges or withholdings imposed by any Governmental Authority.
"Termination Date" means the earlier of the Maturity Date and the date that
the Loans are accelerated hereunder.
"Total Debt" means, at any date, all Debt of PPC and the Consolidated
Subsidiaries on a consolidated basis, excluding (i) non-cash obligations under
FAS 133 or 143 and (ii) accounts payable and other accrued liabilities (for the
deferred purchase price of Property or services) from time to time incurred in
the ordinary course of business which are not greater than sixty (60) days past
the date of invoice or delinquent or which are being contested in good faith by
appropriate action and for which adequate reserves have been maintained in
accordance with GAAP.
"Total Reserve Value" means, with respect to any Proved Reserves expected
to be produced from any Oil and Gas Properties, the net present value,
discounted at 10% per annum,
16
of the future net revenues expected to accrue to the Borrowers' and their
Subsidiaries' collective interests in such reserves during the remaining
expected economic lives of such reserves. Each calculation of such expected
future net revenues shall be made in accordance with the then existing standards
of the Society of Petroleum Engineers, provided that in any event (a)
appropriate deductions shall be made for severance and ad valorem taxes, and for
operating, gathering, transportation and marketing costs required for the
production and sale of such reserves, (b) the pricing assumptions used in
determining Total Reserve Value for any particular reserves shall be based upon
the following price decks: (i) for natural gas, the lesser of (A) the quotation
for deliveries of natural gas for each such year from the New York Mercantile
Exchange for ▇▇▇▇▇ Hub and (B) $6.00/Mcf, and (ii) for crude oil, the lesser of
(A) the quotation for deliveries of West Texas Intermediate crude oil for each
such calendar year from the New York Mercantile Exchange for Cushing, Oklahoma,
and (B) $40.00/Bbl and (d) the cash-flows derived from the pricing assumptions
set forth in clause (b) above shall be further adjusted to account for the
historical basis differentials for each month during the preceding 12-month
period calculated by comparing realized crude oil and natural gas prices to
Cushing, Oklahoma and ▇▇▇▇▇ Hub NYMEX prices for each month during such period;
provided that the Total Reserve Value shall be further adjusted, if necessary,
to exclude a portion of reserves other than Proved Developed Producing Reserves
such that not less than 70% of Total Reserve Value is attributable to PDP PV.
"Tranche" means a division or portion of the Loans.
"Transactions" means the execution, delivery and performance by the
Borrowers and each Guarantor, as applicable, of this Agreement, and each other
Loan Document and Acquisition Document to which it is a party, the borrowing of
Loans, the Acquisition, the use of the proceeds thereof and the issuance of
Letters of Credit hereunder, and the grant of Liens by the Borrowers on
Mortgaged Properties pursuant to the Security Instruments.
"Type", when used in reference to any Tranche, refers to whether the rate
of interest on such Tranche is determined by reference to the Alternate Base
Rate or the LIBO Rate.
"Wholly-Owned Subsidiary" means any Subsidiary of which all of the
outstanding Equity Interests (other than any directors' qualifying shares
mandated by applicable law), on a fully-diluted basis, are owned by any Borrower
or one or more of the Wholly-Owned Subsidiaries or are owned by any Borrower and
one or more of the Wholly-Owned Subsidiaries.
Section 1.03 Types of Loans and Borrowings. For purposes of this Agreement,
Tranches may be classified and referred to by Type (e.g., a "Eurodollar
Tranche").
Section 1.04 Terms Generally; Rules of Construction. The definitions of
terms herein shall apply equally to the singular and plural forms of the terms
defined. Whenever the context may require, any pronoun shall include the
corresponding masculine, feminine and neuter forms. The words "include",
"includes" and "including" shall be deemed to be followed by the phrase "without
limitation". The word "will" shall be construed to have the same meaning and
effect as the word "shall". Unless the context requires otherwise (a) any
definition of or reference to any agreement, instrument or other document herein
shall be construed as referring to such agreement, instrument or other document
as from time to time amended, supplemented or
17
otherwise modified (subject to any restrictions on such amendments, supplements
or modifications set forth herein), (b) any reference herein to any law shall be
construed as referring to such law as amended, modified, codified or reenacted,
in whole or in part, and in effect from time to time, (c) any reference herein
to any Person shall be construed to include such Person's successors and assigns
(subject to the restrictions contained herein), (d) the words "herein", "hereof"
and "hereunder", and words of similar import, shall be construed to refer to
this Agreement in its entirety and not to any particular provision hereof, (e)
with respect to the determination of any time period, the word "from" means
"from and including" and the word "to" means "to and including" and (f) any
reference herein to Articles, Sections, Annexes, Exhibits and Schedules shall be
construed to refer to Articles and Sections of, and Annexes, Exhibits and
Schedules to, this Agreement. No provision of this Agreement or any other Loan
Document shall be interpreted or construed against any Person solely because
such Person or its legal representative drafted such provision.
Section 1.05 Accounting Terms and Determinations; GAAP. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
determinations with respect to accounting matters hereunder shall be made, and
all financial statements and certificates and reports as to financial matters
required to be furnished to the Administrative Agent or the Lenders hereunder
shall be prepared, in accordance with GAAP, applied on a basis consistent with
the Financial Statements except for changes in which the Borrowers' independent
certified public accountants concur and which are disclosed to Administrative
Agent on the next date on which financial statements are required to be
delivered to the Lenders pursuant to Section 8.01(a); provided that, unless the
Borrowers and the Majority Lenders shall otherwise agree in writing, no such
change shall modify or affect the manner in which compliance with the covenants
contained herein is computed such that all such computations shall be conducted
utilizing financial information presented consistently with prior periods.
ARTICLE II
THE LOANS
Section 2.01 Term Loans. Subject to the terms and conditions set forth
herein, each Lender agrees on the Effective Date to make a Loan in dollars to
the Borrowers in an aggregate principal amount equal to such Lender's
Commitment. The Commitments are not revolving and amounts repaid or prepaid may
not be re-borrowed under any circumstance. Any portion of the Commitments not
utilized by the Borrowers on or before 3:00 p.m. New York City time on the
Effective Date shall be permanently cancelled.
Section 2.02 Loans.
(a) Several Obligations. Each Loan shall be made on the Effective Date
as part of a single borrowing consisting of one or more Tranches, which shall be
allocated ratably to the Lenders' Loans in accordance with their respective
Commitments. The failure of any Lender to fund its Loan shall not relieve any
other Lender of its obligations hereunder; provided that the Commitments are
several and no Lender shall be responsible for any other Lender's failure to
fund its Loan as required.
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(b) Types of Tranches. Subject to Section 3.03, each Tranche shall be
an ABR Tranche or Eurodollar Tranche as the Borrowers may request in accordance
herewith. Each Lender at its option may fund any Eurodollar Tranches by causing
any domestic or foreign branch or Affiliate of such Lender to fund such
Eurodollar Tranche; provided that any exercise of such option shall not affect
the obligation of the Borrowers to repay such Lender's Loan in accordance with
the terms of this Agreement.
(c) Minimum Amounts; Limitations on Borrowings. At the commencement of
each Interest Period for any Eurodollar Tranche, such Tranche shall be in an
aggregate amount that is an integral multiple of $500,000 and not less than
$1,000,000. At the time that each ABR Tranche is made, such Tranche shall be in
an aggregate amount that is an integral multiple of $500,000 and not less than
$1,000,000. Tranches of more than one Type may be outstanding at the same time,
provided that there shall not at any time be more than a total of four
Eurodollar Tranches outstanding. Notwithstanding any other provision of this
Agreement, the Borrowers shall not be entitled to elect to convert or continue
any Tranche if the Interest Period requested with respect thereto would end
after the Maturity Date.
(d) Notes. The Loan made by each Lender shall be evidenced by a single
promissory note of the Borrowers in substantially the form of Exhibit A, dated,
in the case of (i) any Lender party hereto, as of the date of this Agreement, or
(ii) any Lender that becomes a party hereto pursuant to an Assignment and
Assumption, as of the effective date of the Assignment and Assumption, payable
to the order of such Lender in a principal amount equal to such Lender's funded
Loan as in effect on such date, and otherwise duly completed. The date, amount,
Type, interest rate and, if applicable, Interest Period of each Tranche
consisting of a portion of the 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 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 Borrowers' rights or
obligations in respect of its Loan or affect the validity of such transfer by
any Lender of its Note.
Section 2.03 Requests for the Loans Not later than 12:00 noon, New York
City time, three Business Days before the Effective Date, the Borrowers shall
request the Loans by notifying the Administrative Agent by telephone or fax (or
electronic communication, if arrangements for doing so have been approved by the
Administrative Agent), and shall confirm such request by delivering to the
Administrative Agent and the Lenders a written Borrowing Request in
substantially the form of Exhibit B and signed by the Borrowers. Such
telephonic, electronic or written request shall be irrevocable and shall specify
the following information in compliance with Section 2.02:
(i) the aggregate amount of the requested Loans;
(ii) whether any portion of such Loans is to be an ABR Tranche or
a Eurodollar Tranche;
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(iii) in the case of a Eurodollar Tranche, the initial Interest
Period to be applicable thereto, which shall be a period contemplated by the
definition of the term "Interest Period"; and
(iv) the location and number of the Borrowers' accounts to which
funds are to be disbursed, which shall comply with the requirements of Section
2.05.
If no election as to the Type is specified, then the entire portion of the Loans
shall be an ABR Tranche. If no Interest Period is specified with respect to any
requested Eurodollar Tranche, then the Borrowers shall be deemed to have
selected an Interest Period of one month's duration.
Promptly following receipt of the Borrowing Request in accordance with this
Section 2.03, the Administrative Agent shall advise each Lender of the details
thereof and of the amount of such Lender's Loan to be made and the
Administrative Agent shall promptly provide such Loan subject to and as set
forth in Section 2.05(a).
Section 2.04 Interest Elections.
(a) Conversion and Continuance. Each Tranche initially shall be of the
Type specified in the Borrowing Request and, in the case of a Eurodollar
Tranche, shall have an initial Interest Period as specified in the Borrowing
Request. Thereafter, the Borrowers may elect to convert any Tranche to a
different Type or to continue such Tranche and, in the case of a Eurodollar
Tranche, may elect Interest Periods therefor, all as provided in this Section
2.04. The Borrowers may elect different options with respect to different
portions of the affected Tranche, in which case each such portion shall be
allocated ratably among the Lenders' Loans, and each such portion shall be
considered a separate Tranche.
(b) Interest Election Requests. To make an election pursuant to this
Section 2.04, the Borrowers shall notify the Administrative Agent of such
election by telephone or fax (or transmit by electronic communication, if
arrangements for doing so have been approved by the Administrative Agent) (i) in
the case of a Eurodollar Tranche, not later than 12:00 noon, New York City time,
three Business Days before the first day of the Interest Period related to such
Tranche and (ii) in the case of an ABR Tranche, not later than 12:00 noon, New
York City time, on the same Business Day of the proposed conversion or
continuation. Each such telephonic (or electronic communication) Interest
Election Request shall be irrevocable and shall be confirmed promptly by hand
delivery or telecopy to the Administrative Agent of a written Interest Election
Request in substantially the form of Exhibit C and signed by the Borrowers.
(c) Information in Interest Election Requests. Each telephonic,
electronic communication and written Interest Election Request shall specify the
following information in compliance with Section 2.02:
(i) the Tranche to which such Interest Election Request applies
and, if different options are being elected with respect to different portions
thereof, the portions thereof to be allocated to each resulting Tranche (in
which case the information to be specified pursuant to Section 2.04(c)(iii) and
(iv) shall be specified for each resulting Tranche);
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(ii) the effective date of the election made pursuant to such
Interest Election Request, which shall be a Business Day;
(iii) whether the resulting Tranche is to be an ABR Tranche or a
Eurodollar Tranche; and
(iv) if the resulting Tranche is a Eurodollar Tranche, the
Interest Period to be applicable thereto after giving effect to such election,
which shall be a period contemplated by the definition of the term "Interest
Period".
If any such Interest Election Request requests a Eurodollar Tranche but does not
specify an Interest Period, then the Borrowers shall be deemed to have selected
an Interest Period of one month's duration.
(d) Notice to Lenders by the Administrative Agent. Promptly following
receipt of an Interest Election Request, the Administrative Agent shall advise
each Lender of the details thereof and of such Lender's portion of each
resulting Tranche.
(e) Effect of Failure to Deliver Timely Interest Election Request and
Events of Default on Interest Election. If the Borrowers fail to deliver a
timely Interest Election Request with respect to a Eurodollar Tranche prior to
the end of the Interest Period applicable thereto, then, unless such Tranche is
repaid as provided herein, at the end of such Interest Period such Tranche shall
be converted to an ABR Tranche. Notwithstanding any contrary provision hereof,
if an Event of Default has occurred and is continuing: (i) no outstanding
Tranche may be converted to or continued as a Eurodollar Tranche (and any
Interest Election Request that requests the conversion of any Tranche to, or
continuation of any Tranche as, a Eurodollar Tranche shall be ineffective) and
(ii) unless repaid, each Eurodollar Tranche shall be converted to an ABR Tranche
at the end of the Interest Period applicable thereto.
Section 2.05 Funding the Loans.
(a) Funding by Lenders. Each Lender shall make its Loan on the
Effective Date by wire transfer of immediately available funds by 1:00 p.m., New
York, New York time, to the account of the Administrative Agent most recently
designated by it for such purpose by notice to the Lenders. The Administrative
Agent will make such Loans available to the Borrowers by promptly crediting the
amounts so received, in like funds, to accounts of the Borrowers maintained with
Citibank Texas, N.A., Midland, Texas or any Lender and designated by the
Borrowers in the Borrowing Request.
(b) Presumption of Funding by the Lenders. Unless the Administrative
Agent shall have received notice from a Lender prior to the Effective Date that
such Lender will not make available to the Administrative Agent such Lender's
Loan, the Administrative Agent may assume that such Lender has made its Loan
available on such date in accordance with Section 2.05(a) and may, in reliance
upon such assumption, make available to the Borrowers a corresponding amount. In
such event, if a Lender has not in fact made its Loan available to the
Administrative Agent, then the applicable Lender and the Borrowers severally
agree to pay to the Administrative Agent forthwith on demand such corresponding
amount with interest thereon, for each day from and including the date such
amount is made available to the Borrowers to but
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excluding the date of payment to the Administrative Agent, at (i) in the case of
such Lender, the greater of the Federal Funds Effective Rate and a rate
determined by the Administrative Agent in accordance with banking industry rules
on interbank compensation or (ii) in the case of the Borrowers, the interest
rate applicable to ABR Tranches. If such Lender pays such amount to the
Administrative Agent, then such amount shall constitute such Lender's Loan.
Section 2.06 Termination. The Commitments shall terminate at 3:00 p.m., New
York, New York time on the Effective Date.
Section 2.07 Total Reserve Value. Subject to interim adjustment under
Section 8.14 and Section 9.13, the initial Total Reserve Value shall be
$249,019,860. In connection with each semi-annual redetermination, the Borrowers
shall deliver to the Administrative Agent a certificate, in form reasonably
satisfactory to the Administrative Agent, no later than March 1st and September
1st of each year, setting forth in sufficient detail Borrower's calculation of
Total Reserve Value as of the immediately preceding January 1 and July 1,
commencing March 1, 2006. In addition, the Borrowers may, by notifying the
Administrative Agent thereof, and the Administrative Agent may, at the direction
of the Majority Lenders, by notifying the Borrowers thereof, each elect to
require the Total Reserve Value to be determined one additional time on a
specified "as of" date between such regular determinations (which shall be the
first day of a calendar month following the date of such notice), in which event
the Borrowers shall deliver to the Administrative Agent a certificate, in form
reasonably satisfactory to the Administrative Agent, no later than three months
after such specified date reflecting the Total Reserve value as of such
specified date. The Borrowers shall calculate the Total Reserve Value based upon
the applicable definitions of this Agreement, and provide with each such
certificate the Reserve Report and other information used by the Borrowers in
calculating the Total Reserve Value. In addition to the foregoing, the Total
Reserve Value shall be subject to further adjustment from time to time in
accordance with Section 6.01(n), Section 8.13(c) and Section 9.13(d).
Upon receipt of such certificate, the Administrative Agent shall promptly
review such certificate and, within ten (10) Business Days, confirm to the
Borrowers and the Lenders that (i) the calculations used to determine the Total
Reserve Value were based upon the pricing and other requirements set forth in
the definition of Total Reserve Value, (ii) no mathematical or other errors or
omissions have been made in such calculation and (iii) the engineering analysis
used to determine the Total PV was based upon estimated production, pricing and
costs acceptable to Administrative Agent. If facts under (i), (ii) or (iii) are
ascertained to exist, the Administrative Agent and the Borrowers shall cooperate
to promptly calculate the proper amount of the Total Reserve Value. Otherwise,
upon confirmation of such amount as the Total Reserve Value, such amount will be
the Total Reserve Value until next adjusted or redetermined in accordance with
the terms of this Agreement.
Section 2.08 Subordination of Loans. The Loans, the Notes, this Agreement
and the other Loan Documents, the rights and remedies of the Lenders and the
Administrative Agent hereunder and thereunder and the Liens created thereby are
subject to the Intercreditor Agreement. The Lenders hereby agree that the
Administrative Agent is authorized to sign the Intercreditor Agreement on behalf
of all Lenders to this Agreement.
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ARTICLE III
PAYMENTS OF PRINCIPAL AND INTEREST; PREPAYMENTS; FEES
Section 3.01 Repayment of the Loans. On the Termination Date, the Borrowers
shall repay the outstanding principal balance of the Loans in full.
Section 3.02 Interest.
(a) ABR Tranches. Each ABR Tranche shall bear interest at the
Alternate Base Rate plus the Applicable Margin, but in no event to exceed the
Highest Lawful Rate.
(b) Eurodollar Tranches. Each Eurodollar Tranche shall bear interest
at the LIBO Rate for the Interest Period in effect for such Tranche plus the
Applicable Margin, but in no event to exceed the Highest Lawful Rate.
(c) Post-Default Rate. Notwithstanding the foregoing, if any principal
of or interest on any Loan or any fee or other amount payable by any Borrower or
any Guarantor hereunder or under any other Loan Document is not paid when due,
whether at stated maturity, upon acceleration or otherwise, then all Loans
outstanding, shall bear interest, after as well as before judgment, at a rate
per annum equal to two percent (2%) plus the rate applicable to ABR Tranches as
provided in Section 3.02(a), but in no event to exceed the Highest Lawful Rate.
(d) Interest Payment Dates. Accrued interest on the principal amount
of each Tranche shall be payable in arrears on each Interest Payment Date for
such Tranche; provided that (i) interest accrued pursuant to Section 3.02(c)
shall be payable on demand, (ii) in the event of any prepayment of principal of
any Tranche, accrued interest on the principal amount prepaid shall be payable
on the date of such prepayment, and (iii) in the event of any conversion of any
Eurodollar Tranche prior to the end of the current Interest Period therefor,
accrued interest on such Tranche shall be payable on the effective date of such
conversion.
(e) Interest Rate Computations. All interest hereunder shall be
computed on the basis of a year of 360 days, unless such computation would
exceed the Highest Lawful Rate, in which case interest shall be computed on the
basis of a year of 365 days (or 366 days in a leap year), except that interest
computed by reference to the Alternate Base Rate at times when the Alternate
Base Rate is based on the Prime Rate shall be computed on the basis of a year of
365 days (or 366 days in a leap year), and in each case shall be payable for the
actual number of days elapsed (including the first day but excluding the last
day). The applicable Alternate Base Rate or LIBO Rate shall be determined by the
terms of this Agreement, and such determination shall be conclusive absent
manifest error, and be binding upon the parties hereto.
Section 3.03 Alternate Rate of Interest. If prior to the commencement of
any Interest Period for a Eurodollar Tranche:
(a) the Administrative Agent determines pursuant to the terms of this
Agreement (which determination shall be conclusive absent manifest error) that
adequate and reasonable means do not exist for ascertaining the LIBO Rate for
such Interest Period; or
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(b) the Administrative Agent is advised by the Majority Lenders that
the LIBO Rate for such Interest Period will not adequately and fairly reflect
the cost to such Lenders of making or maintaining a portion of their Loans
included in such Tranche for such Interest Period;
then the Administrative Agent shall give prompt written notice thereof,
including the details of its determination, to the Borrowers and the Lenders by
telephone or telecopy as promptly as practicable thereafter and, until the
Administrative Agent notifies the Borrowers and the Lenders that the
circumstances giving rise to such notice no longer exist, (i) any Interest
Election Request that requests the conversion of any Tranche to, or continuation
of any Tranche as, a Eurodollar Tranche shall be ineffective, and (ii) if any
Borrowing Request requests a Eurodollar Tranche, such Tranche shall be made as
an ABR Tranche in accordance with the terms of this Agreement.
Section 3.04 Prepayments.
(a) Optional Prepayments. Subject to any break funding costs payable
pursuant to Section 5.02 and prior notice in accordance with Section 3.04(b),
the Borrowers shall have the right to prepay the Loans, in whole or in part,
(A) at any time during the period commencing on the first
Business Day after the Effective Date to and including the first anniversary of
the Effective Date, with a premium equal to 1% of such amount prepaid;
(B) at any time during the period commencing on the first
Business Day after the first anniversary of the Effective Date to and including
the Maturity Date, without premium or penalty;
provided that, in any event, each prepayment is in an amount that is an
integral multiple of $1,000,000 and not less than $5,000,000, or if such amount
is less than $5,000,000, the outstanding principal amount of the Loans.
(b) Notice and Terms of Optional Prepayment. The Borrowers shall
notify the Administrative Agent by telephone (confirmed by telecopy) of any
prepayment hereunder (i) in the case of prepayment of a Eurodollar Tranche, not
later than 12:00 noon, New York City time, three Business Days before the date
of prepayment, or (ii) in the case of prepayment of an ABR Tranche, not later
than 12:00 noon, New York City time, one Business Day before the date of
prepayment. Each such notice shall be irrevocable and shall specify the
prepayment date and the principal amount of each Tranche or portion thereof to
be prepaid. Promptly following receipt of any such notice, the Administrative
Agent shall advise the Lenders of the contents thereof. Each prepayment of a
Tranche shall be applied ratably to the Loans of all Lenders. Prepayments shall
be accompanied by accrued and unpaid interest to the extent required by Section
3.01.
Section 3.05 Fees.
(a) Administrative Agent Fees. The Borrowers agree to pay to the
Administrative Agent, for its own account, fees payable in the amounts and at
the times separately agreed upon between the Borrowers and the Administrative
Agent.
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(b) Payment of Fees. All fees payable hereunder shall be paid on the
dates due, in immediately available funds, to the Administrative Agent. Fees
paid shall not be refundable under any circumstances.
ARTICLE IV
PAYMENTS; PRO RATA TREATMENT; SHARING OF SET-OFFS
Section 4.01 Payments Generally; Pro Rata Treatment; Sharing of Set-offs.
(a) Payments by the Borrowers. The Borrowers shall make each payment
required to be made by it hereunder (whether of principal, interest or fees, or
of amounts payable under Section 5.01, Section 5.02, Section 5.03 or otherwise)
prior to 12:00 noon, New York City time, on the date when due, in immediately
available funds, without defense, deduction, recoupment, set-off or
counterclaim. Fees, once paid, shall not be refundable under any circumstances.
Any amounts received after such time on any date may, in the discretion of the
Administrative Agent, be deemed to have been received on the next succeeding
Business Day for purposes of calculating interest thereon. All such payments
shall be made to the Administrative Agent at its offices specified in Section
12.01, as expressly provided herein and except that payments pursuant to Section
5.01, Section 5.02, Section 5.03 and Section 12.03 shall be made directly to the
Persons entitled thereto. The Administrative Agent shall distribute any such
payments received by it for the account of any other Person to the appropriate
recipient promptly following receipt thereof. If any payment hereunder shall be
due on a day that is not a Business Day, the date for payment shall be extended
to the next succeeding Business Day, and, in the case of any payment accruing
interest, interest thereon shall be payable for the period of such extension.
All payments hereunder shall be made in dollars.
(b) Application of Insufficient Payments. If at any time insufficient
funds are received by and available to the Administrative Agent to pay fully all
amounts of principal, interest and fees then due hereunder, such funds shall be
applied (i) first, towards payment of interest and fees then due hereunder,
ratably among the parties entitled thereto in accordance with the amounts of
interest and fees then due to such parties, and (ii) second, towards payment of
principal then due hereunder, ratably among the parties entitled thereto in
accordance with the amounts of principal then due to such parties.
(c) Sharing of Payments by Lenders. If any Lender shall, by exercising
any right of set-off or counterclaim or otherwise, obtain payment in respect of
any principal of or interest on its Loan resulting in such Lender receiving
payment of a greater proportion of the aggregate amount of its Loan and accrued
interest thereon than the proportion received by any other Lender, then the
Lender receiving such greater proportion shall purchase (for cash at face value)
participations in the Loans of other Lenders to the extent necessary so that the
benefit of all such payments shall be shared by the Lenders ratably in
accordance with the aggregate amount of principal of and accrued interest on
their respective Loans; provided that (i) if any such participations are
purchased and all or any portion of the payment giving rise thereto is
recovered, such participations shall be rescinded and the purchase price
restored to the extent of such recovery, without interest, and (ii) the
provisions of this Section 4.01(c) shall not be construed to apply to any
payment made by the Borrowers pursuant to and in accordance with the express
terms of this Agreement or any payment obtained by a Lender as consideration for
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the assignment of or sale of a participation in its Loan to any assignee or
participant, other than to any Borrower or any Subsidiary or Affiliate thereof
(as to which the provisions of this Section 4.01(c) shall apply). The Borrowers
consent to the foregoing and agree, to the extent it may effectively do so under
applicable law, that any Lender acquiring a participation pursuant to the
foregoing arrangements may exercise against the Borrowers rights of set-off and
counterclaim with respect to such participation as fully as if such Lender were
a direct creditor of the Borrowers in the amount of such participation.
Section 4.02 Presumption of Payment by the Borrowers. Unless the
Administrative Agent shall have received notice from any Borrower prior to the
date on which any payment is due to the Administrative Agent for the account of
the Lenders that such Borrower will not make such payment, the Administrative
Agent may assume that such Borrower has made such payment on such date in
accordance herewith and may, in reliance upon such assumption, distribute to the
Lenders the amount due. In such event, if such Borrower has not in fact made
such payment, then each of the Lenders severally agrees to repay to the
Administrative Agent forthwith on demand the amount so distributed to such
Lender with interest thereon, for each day from and including the date such
amount is distributed to it to but excluding the date of payment to the
Administrative Agent, at the greater of the Federal Funds Effective Rate and a
rate determined by the Administrative Agent in accordance with banking industry
rules on interbank compensation.
Section 4.03 Certain Deductions by the Administrative Agent. If any Lender
shall fail to make any payment required to be made by it pursuant to Section
2.05(b) or Section 4.02 then the Administrative Agent may, in its discretion
(notwithstanding any contrary provision hereof), apply any amounts thereafter
received by the Administrative Agent for the account of such Lender to satisfy
such Lender's obligations under such Sections until all such unsatisfied
obligations are fully paid.
Section 4.04 Disposition of Proceeds. The Security Instruments contain an
assignment by the Borrowers and/or the Guarantors unto and in favor of the
Administrative Agent for the benefit of the Lenders of all of each of the
Borrower's or each Guarantor's interest in and to production and all proceeds
attributable thereto which may be produced from or allocated to the Mortgaged
Property. The Security Instruments further provide in general for the
application of such proceeds to the satisfaction of the Indebtedness and other
obligations described therein and secured thereby. Notwithstanding the
assignment contained in such Security Instruments, until the occurrence of an
Event of Default, (a) the Administrative Agent and the Lenders agree that they
will neither notify the purchaser or purchasers of such production nor take any
other action to cause such proceeds to be remitted to the Administrative Agent
or the Lenders, but the Lenders will instead permit such proceeds to be paid to
the Borrowers and their Subsidiaries and (b) the Lenders hereby authorize the
Administrative Agent to take such actions as may be necessary to cause such
proceeds to be paid to the Borrowers and/or their Subsidiaries.
ARTICLE V
INCREASED COSTS; BREAK FUNDING PAYMENTS; TAXES; ILLEGALITY
Section 5.01 Increased Costs.
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(a) Eurodollar Changes in Law. If any Change in Law shall:
(i) impose, modify or deem applicable any reserve, special
deposit or similar requirement against assets of, deposits with or for the
account of, or credit extended by, any Lender, including any such amount for
Eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in
Regulation D of the Board); or
(ii) impose on any Lender or the London interbank market any
other condition affecting this Agreement or any Eurodollar Tranche consisting of
any portion of the Loan of such Lender;
and the result of any of the foregoing shall be to increase the cost to such
Lender of making or maintaining any Eurodollar Tranche (or of maintaining its
obligation to make any such Loan) or to reduce the amount of any sum received or
receivable by such Lender (whether of principal, interest or otherwise), then
the Borrowers will pay to such Lender such additional amount or amounts as will
compensate such Lender for such additional costs incurred or reduction suffered.
(b) Capital Requirements. If any Lender determines that any Change in
Law regarding capital requirements has or would have the effect of reducing the
rate of return on such Lender's capital or on the capital of such Lender's
holding company, if any, as a consequence of this Agreement or the Loan made by
such Lender, to a level below that which such Lender or such Lender's holding
company could have achieved but for such Change in Law (taking into
consideration such Lender's policies and the policies of such Lender's holding
company with respect to capital adequacy), then from time to time the Borrowers
will pay to such Lender such additional amount or amounts as will compensate
such Lender or such Lender's holding company for any such reduction suffered.
(c) Certificates. A certificate of a Lender setting forth the amount
or amounts necessary to compensate such Lender or its holding company, as the
case may be, as specified in Section 5.01(a) or (b) shall be delivered to the
Borrowers and shall be conclusive absent manifest error. The Borrowers shall pay
such Lender the amount shown as due on any such certificate within 10 days after
receipt thereof.
(d) Effect of Failure or Delay in Requesting Compensation. Failure or
delay on the part of any Lender to demand compensation pursuant to this Section
5.01 shall not constitute a waiver of such Lender's right to demand such
compensation.
Section 5.02 Break Funding Payments. In the event of (a) the payment of any
principal of any Eurodollar Tranche other than on the last day of an Interest
Period applicable thereto (including as a result of an Event of Default), (b)
the conversion of any Eurodollar Tranche into an ABR Tranche other than on the
last day of the Interest Period applicable thereto or (c) the failure to borrow,
convert, continue or prepay any Eurodollar Tranche on the date specified in any
notice delivered pursuant hereto, then, in any such event, the Borrowers shall
compensate each Lender for the loss, cost and expense attributable to such
event. In the case of a Eurodollar Tranche, such loss, cost or expense to any
Lender shall be deemed to include an amount determined by such Lender to be the
excess, if any, of (i) the amount of interest which would have accrued on the
principal amount of its Loan had such event not occurred, at the LIBO Rate
27
that would have been applicable to such Loan, for the period from the date of
such event to the last day of the then current Interest Period therefor (or, in
the case of a failure to borrow, convert or continue, for the period that would
have been the Interest Period for such Loan), over (ii) the amount of interest
which would accrue on such principal amount for such period at the interest rate
which such Lender would bid were it to bid, at the commencement of such period,
for dollar deposits of a comparable amount and period from other banks in the
eurodollar market.
A certificate of any Lender setting forth any amount or amounts that such Lender
is entitled to receive pursuant to this Section 5.02 shall be delivered to the
Borrowers and shall be conclusive absent manifest error. The Borrowers shall pay
such Lender the amount shown as due on any such certificate within 15 days after
receipt thereof.
Section 5.03 Taxes.
(a) Payments Free of Taxes. Any and all payments by or on account of
any obligation of any Borrower or any Guarantor under any Loan Document shall be
made free and clear of and without deduction for any Indemnified Taxes or Other
Taxes; provided that if any Borrower or any Guarantor shall be required to
deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum
payable shall be increased as necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section 5.03), the Administrative Agent or Lender (as the case may be)
receives an amount equal to the sum it would have received had no such
deductions been made, (ii) such Borrower or such Guarantor shall make such
deductions and (iii) such Borrower or such Guarantor shall pay the full amount
deducted to the relevant Governmental Authority in accordance with applicable
law.
(b) Payment of Other Taxes by the Borrowers. The Borrowers shall pay
any Other Taxes to the relevant Governmental Authority in accordance with
applicable law.
(c) Indemnification by the Borrowers. The Borrowers shall indemnify
the Administrative Agent and each Lender, within 30 days after written demand
therefor, for the full amount of any Indemnified Taxes or Other Taxes paid by
the Administrative Agent or such Lender on or with respect to any payment by or
on account of any obligation of any Borrower hereunder (including Indemnified
Taxes or Other Taxes imposed or asserted on or attributable to amounts payable
under this Section 5.03) and any penalties, interest and reasonable expenses
arising therefrom or with respect thereto, whether or not such Indemnified Taxes
or Other Taxes were correctly or legally imposed or asserted by the relevant
Governmental Authority. A certificate of the Administrative Agent or a Lender as
to the amount of such payment or liability under this Section 5.03 shall be
delivered to the Borrowers and shall be conclusive absent manifest error.
(d) Evidence of Payments. As soon as practicable after any payment of
Indemnified Taxes or Other Taxes by any Borrower or a Guarantor to a
Governmental Authority, the Borrowers shall deliver to the Administrative Agent
the original or a certified copy of a receipt issued by such Governmental
Authority evidencing such payment, a copy of the return reporting such payment
or other evidence of such payment reasonably satisfactory to the Administrative
Agent.
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(e) Foreign Lenders. Any Foreign Lender that is entitled to an
exemption from or reduction of withholding tax under the law of the jurisdiction
in which any Borrower is located, or any treaty to which such jurisdiction is a
party, with respect to payments under this Agreement or any other Loan Document
shall deliver to the Borrowers (with a copy to the Administrative Agent), at the
time or times prescribed by applicable law, such properly completed and executed
documentation prescribed by applicable law or reasonably requested by the
Borrowers as will permit such payments to be made without withholding or at a
reduced rate.
Section 5.04 Designation of Different Lending Office. If any Lender
requests compensation under Section 5.01, or if the Borrowers are required to
pay any additional amount to any Lender or any Governmental Authority for the
account of any Lender pursuant to Section 5.03, then such Lender shall use
reasonable efforts to designate a different lending office for funding or
booking its Loan hereunder or to assign its rights and obligations hereunder to
another of its offices, branches or affiliates, if, in the judgment of such
Lender, such designation or assignment (a) would eliminate or reduce amounts
payable pursuant to Section 5.01 or Section 5.03, as the case may be, in the
future and (b) would not subject such Lender to any unreimbursed cost or expense
and would not otherwise be disadvantageous to such Lender. The Borrowers agrees
to pay such reasonable costs and expenses incurred by any Lender in connection
with any such designation or assignment.
Section 5.05 Illegality. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for any Lender or its
applicable lending office to honor its obligation to make or maintain any
portion of its Loan as part of any Eurodollar Tranche either generally or having
a particular Interest Period hereunder, then (a) such Lender shall promptly
notify the Borrowers and the Administrative Agent thereof and such Lender's
obligation to make such portion of its Loan as part of such Eurodollar Tranche
shall be suspended (the "Affected Portion") until such time as such Lender may
again make and maintain such portion of its Loan as part of such Eurodollar
Tranche and (b) the Affected Portion which would otherwise be made by such
Lender shall be made instead as an ABR Tranche (and, if such Lender so requests
by notice to the Borrowers and the Administrative Agent, the Affected Portion
then outstanding shall be automatically converted into an ABR Tranche on the
date specified by such Lender in such notice) and, to the extent that Affected
Portion is so made as (or converted into) ABR Tranches, all payments of
principal which would otherwise be applied to such Lender's Affected Portion
shall be applied instead to its ABR Tranche.
ARTICLE VI
CONDITIONS PRECEDENT
Section 6.01 Effective Date. The obligations of the Lenders to make Loans
hereunder shall become effective on the date on which each of the following
conditions is satisfied (or waived in accordance with this Agreement):
(a) The Administrative Agent, the Arrangers and the Lenders shall have
received all commitment, facility and agency fees and all other fees and amounts
due and payable on or prior to the Effective Date, including, to the extent
invoiced, reimbursement or payment of all out-of-pocket expenses required to be
reimbursed or paid by the Borrowers hereunder (including,
29
without limitation, the fees and expenses of ▇▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P., counsel to
the Administrative Agent).
(b) The Administrative Agent shall have received a certificate of the
Secretary or an Assistant Secretary of PPC and each Guarantor setting forth (i)
resolutions of its partners or its board of directors with respect to the
authorization of the Borrowers or such Guarantor to execute and deliver the Loan
Documents to which it is a party and to enter into the transactions contemplated
in those documents, (ii) the officers of PPC or such Guarantor (y) who are
authorized to sign the Loan Documents to which the Borrowers or such Guarantor
is a party and (z) who will, until replaced by another officer or officers duly
authorized for that purpose, act as its representative for the purposes of
signing documents and giving notices and other communications in connection with
this Agreement and the transactions contemplated hereby, (iii) specimen
signatures of such authorized officers, and (iv) limited partnership agreement,
the articles or certificate of incorporation and bylaws, as applicable, of the
Borrowers and such Guarantor, certified as being true and complete. The
Administrative Agent and the Lenders may conclusively rely on such certificate
until the Administrative Agent receives notice in writing from the Borrowers to
the contrary.
(c) The Administrative Agent shall have received certificates of the
appropriate State agencies with respect to the existence, qualification and good
standing of each Borrower and each Guarantor.
(d) The Administrative Agent shall have received a compliance
certificate which shall be substantially in the form of Exhibit D, duly and
properly executed by a Responsible Officer and dated as of the date of Effective
Date.
(e) The Administrative Agent shall have received from each party
hereto counterparts (in such number as may be requested by the Administrative
Agent) of this Agreement signed on behalf of such party.
(f) The Administrative Agent shall have received duly executed Notes
payable to the order of each Lender in a principal amount equal to its
Commitment dated as of the date hereof.
(g) The Administrative Agent shall have received from each party
thereto duly executed counterparts (in such number as may be requested by the
Administrative Agent) of the Security Instruments described on Exhibit E. In
connection with the execution and delivery of the Security Instruments, the
Administrative Agent shall be reasonably satisfied that
(i) the Borrowers shall have pledged all of the issued and
outstanding Equity Interests in each Subsidiary of the Borrowers under the
Guaranty Agreement; and
(ii) the Security Instruments create second priority, perfected
Liens (subject to Liens created by the Senior Revolving Credit Documents and to
Excepted Liens identified in clauses (a) to (d) and (f) of the definition
thereof, but subject to the provisos at the end of such definition) on at least
80% of the total value of the Proved Oil and Gas Properties evaluated in the
Initial Reserve Report.
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(h) The Administrative Agent shall have received an opinion of ▇▇▇▇▇,
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, counsel to the Borrowers, in form and substance satisfactory
to the Administrative Agent.
(i) The Administrative Agent shall have received a certificate of
insurance coverage of the Borrowers evidencing that the Borrowers are carrying
insurance in accordance with Section 7.13.
(j) The Administrative Agent shall have received title information as
the Administrative Agent may reasonably require satisfactory to the
Administrative Agent setting forth the status of title to at least 80% of the
total value of the Proved Reserves attributable to Oil and Gas Properties
evaluated in the Initial Reserve Report.
(k) The Administrative Agent shall be reasonably satisfied with the
environmental condition of the Oil and Gas Properties of the Borrowers and their
Domestic Subsidiaries.
(l) The Administrative Agent shall have received a certificate of a
Responsible Officer certifying that the Borrowers have received all consents and
approvals required by Section 7.03.
(m) The Administrative Agent shall have received the financial
statements referred to in Section 7.04(a) and the Initial Reserve Report
accompanied by a certificate covering the matters described in Section 8.12(b).
(n) The Administrative Agent shall have received (i) a certificate of
a Responsible Officer certifying as to that portion of the Acquisition
Properties acquired on the Effective Date: (A) that the Borrowers are
concurrently consummating part of the Acquisition in accordance with the terms
of the Acquisition Documents (with all of the material conditions precedent
thereto having been satisfied in all material respects by the parties thereto)
and acquiring, the specified portion of the Acquisition Properties contemplated
by the Acquisition Documents; (B) as to the purchase price for the portion of
the Acquisition Properties acquired on the Effective Date after giving effect to
all adjustments as of the closing date contemplated by the Acquisition Documents
and specifying, by category, the amount of such adjustment; (C) that attached
thereto is a true and complete list of the Acquisition Properties which have
been excluded from the Acquisition pursuant to the terms of the Acquisition
Documents, specifying with respect thereto the basis of exclusion as (1) title
defect, (2) preferential purchase right, (3) environmental or (4) casualty loss;
(D) that attached thereto is a true and complete list of all Acquisition
Properties for which any seller has elected to cure a title defect, (E) that
attached thereto is a true and complete list of all Acquisition Properties for
which any seller has elected to remediate an adverse environmental condition,
and (F) that attached thereto is a true and complete list of all Acquisition
Properties which are currently pending final decision by a third party regarding
purchase of such property in accordance with any preferential right; (ii) a true
and complete executed copy of each of the Acquisition Documents; (iii) original
counterparts or copies, certified as true and complete, of the assignments,
deeds and leases for all of the Acquisition Properties; and (iv) such other
related documents and information as the Administrative Agent shall have
reasonably requested.
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The Borrowers recognize and agree that (a) they shall have delivered to the
Administrative Agent notice of any price adjustments to the purchase price of
the Acquisition for the items listed in (B) above not less than one (1) day
prior to the Effective Date and (b) if the aggregate net present value of
excluded properties, as reflected in the Initial Reserve Report, is greater than
$5,000,000, then the Total Reserve Value shall be reduced by an amount equal to
the fair market value of such excluded Properties, which shall become the new
Total Reserve Value hereunder as of the Effective Date until the next
redetermination hereunder.
(o) The Administrative Agent shall have received evidence satisfactory
to it that all Liens on the Acquisition Properties associated with any credit
facilities and funded Debt have been released or terminated and that
arrangements satisfactory to the Administrative Agent have been made for
recording and filing of such releases.
(p) The Administrative Agent shall have received a copy of the
amendment to the Senior Revolving Credit Agreement which permits the Borrowers
and the Guarantors to enter into this Agreement and the other Loan Documents,
and to perform their respective obligations hereunder and thereunder.
(q) The Administrative Agent shall have received such other documents
as the Administrative Agent or special counsel to the Administrative Agent may
reasonably request.
The Administrative Agent shall notify the Borrowers and the Lenders of the
Effective Date, and such notice shall be conclusive and binding. Notwithstanding
the foregoing, the obligations of the Lenders to make Loans hereunder shall not
become effective unless each of the foregoing conditions is satisfied (or waived
pursuant to Section 12.02) at or prior to 2:00 p.m., Houston time, on November
30, 2005 (and, in the event such conditions are not so satisfied or waived, the
Commitments shall terminate at such time).
Section 6.02 Additional Conditions Precedent. The obligation of each Lender
to make its Loan is subject to the satisfaction of the following conditions:
(a) At the time of and immediately after giving effect to such Loan,
no Default shall have occurred and be continuing.
(b) At the time of and immediately after giving effect to such Loan,
no Material Adverse Effect shall have occurred.
(c) The representations and warranties of the Borrowers and the
Guarantors, if any, set forth in this Agreement and in the other Loan Documents
shall be true and correct on and as of the date of such Loan, except to the
extent any such representations and warranties are expressly limited to an
earlier date, in which case, on and as of the date of such Loan, such
representations and warranties shall continue to be true and correct as of such
specified earlier date.
(d) The making of such Loan would not conflict with, or cause any
Lender to violate or exceed, any applicable Governmental Requirement, and no
Change in Law adversely affecting this Agreement or the rights or obligations of
the Lenders or the Borrowers hereunder shall have occurred, and no litigation
shall be pending or threatened, which does or, with respect
32
to any threatened litigation, seeks to, enjoin, prohibit or restrain, the making
or repayment of any Loan, or any participations therein or the consummation of
the transactions contemplated by this Agreement or any other Loan Document.
(e) The receipt by the Administrative Agent of the Borrowing Request
in accordance with Section 2.03.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
The Borrowers represent and warrant to the Lenders that:
Section 7.01 Organization; Powers. Each of the Borrowers and its
Subsidiaries is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization, has all requisite power and
authority, and has all material governmental licenses, authorizations, consents
and approvals necessary, to own its assets and to carry on its business as now
conducted, and is qualified to do business in, and is in good standing in, every
jurisdiction where such qualification is required, except where failure to have
such power, authority, licenses, authorizations, consents, approvals and
qualifications could not reasonably be expected to have a Material Adverse
Effect.
Section 7.02 Authority; Enforceability. The Transactions are within each
Borrower's and each Guarantor's powers and have been duly authorized by all
necessary corporate and, if required, stockholder action (including, without
limitation, any action required to be taken by each Borrower, whether interested
or disinterested, in order to ensure the due authorization of the Transactions).
Each Loan Document and Acquisition Document to which the Borrowers and any
Guarantor is a party has been duly executed and delivered by such Borrowers or
such Guarantor and constitutes a legal, valid and binding obligation of such
Borrower or such Guarantor, as applicable, enforceable in accordance with its
terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium
or other laws affecting creditors' rights generally and subject to general
principles of equity, regardless of whether considered in a proceeding in equity
or at law.
Section 7.03 Approvals; No Conflicts. The Transactions (a) do not require
any consent or approval of, registration or filing with, or any other action by,
any Governmental Authority or any other third Person (including shareholders or
any class of directors, whether interested or disinterested, of any Borrower or
any other Person), nor is any such consent, approval, registration, filing or
other action necessary for the validity or enforceability of any Loan Document
or the consummation of the transactions contemplated thereby, except such as
have been obtained or made and are in full force and effect other than (i) the
recording and filing of the Security Instruments as required by this Agreement
and, (ii) release of existing Liens and (iii) those third party approvals or
consents which, if not made or obtained, would not cause a Default hereunder,
could not reasonably be expected to have a Material Adverse Effect or do not
have an adverse effect on the enforceability of the Loan Documents, (b) will not
violate any applicable law or regulation or the charter, by-laws or other
organizational documents of any Borrower or any Subsidiary or any order of any
Governmental Authority, (c) will not violate or result in a default under any
indenture, agreement or other instrument binding upon any
33
Borrower or any Subsidiary or its Properties, or give rise to a right thereunder
to require any payment to be made by any Borrower or such Subsidiary and (d)
will not result in the creation or imposition of any Lien on any Property of any
Borrower or any Subsidiary (other than the Liens created by the Loan Documents).
Section 7.04 Financial Condition; No Material Adverse Change
(a) The Borrowers have heretofore furnished to the Lenders its
consolidated balance sheet and statements of income, stockholders equity and
cash flows (i) as of and for the fiscal year ending December 31, 2004, reported
on by BDO ▇▇▇▇▇▇▇, LLP, independent public accountants and (ii) as of and for
the fiscal quarter and the portion of the fiscal year ended September 30, 2005,
certified by its chief financial officer. Such financial statements present
fairly, in all material respects, the financial position and results of
operations and cash flows of the Borrowers and their Consolidated Subsidiaries
as of such dates and for such periods in accordance with GAAP subject to
year-end audit adjustments and the absence of footnotes in the case of the
unaudited quarterly financial statements.
(b) Since December 31, 2004, (i) there has been no event, development
or circumstance that has had or could reasonably be expected to have a Material
Adverse Effect and (ii) the business of the Borrowers and their Subsidiaries has
been conducted only in the ordinary course consistent with past business
practices.
(c) Neither of the Borrowers nor any of their Subsidiaries have, on
the date hereof any material Debt (including Disqualified Capital Stock), or any
contingent liabilities, off-balance sheet liabilities or partnerships,
liabilities for taxes, unusual forward or long-term commitments or unrealized or
anticipated losses from any unfavorable commitments, except as referred to or
reflected or provided for in the Financial Statements.
Section 7.05 Litigation. Except as set forth on Schedule 7.05, there are no
actions, suits, investigations or proceedings by or before any arbitrator or
Governmental Authority pending against or, to the knowledge of the Borrowers,
threatened against or affecting the Borrowers or any of their Subsidiaries or
involving the Acquisition (a) as to which there is a reasonable possibility of
an adverse determination that, if adversely determined, could reasonably be
expected, individually or in the aggregate, to result in a Material Adverse
Effect or (b) that involve any Loan Document, any Acquisition Document or the
Transactions. Since the date of this Agreement, there has been no change in the
status of the matters disclosed in Schedule 7.05 that, individually or in the
aggregate, has resulted in, or materially increased the likelihood of, a
Material Adverse Effect or (c) that could impair the consummation of the
Acquisition on the time and in the manner contemplated by the Acquisition
Documents.
Section 7.06 Environmental Matters. Except as could not be reasonably
expected to have a Material Adverse Effect (or with respect to (c), (d) and (e)
below, where the failure to take such actions could not be reasonably expected
to have a Material Adverse Effect):
(a) neither any Property of either of the Borrowers or any of their
Subsidiaries nor the operations conducted thereon violate any order or
requirement of any court or Governmental Authority or any Environmental Laws.
34
(b) no Property of either of the Borrowers or any of their
Subsidiaries nor the operations currently conducted thereon or, to the knowledge
of the Borrowers, by any prior owner or operator of such Property or operation,
are in violation of or subject to any existing, pending or threatened action,
suit, investigation, inquiry or proceeding by or before any court or
Governmental Authority or to any remedial obligations under Environmental Laws.
(c) all notices, permits, licenses, exemptions, approvals or similar
authorizations, if any, required to be obtained or filed in connection with the
operation or use of any and all Property of the Borrowers and each of their
Subsidiaries, including, without limitation, past or present treatment, storage,
disposal or release of a hazardous substance, oil and gas waste or solid waste
into the environment, have been duly obtained or filed or requested, and the
Borrowers and each of their Subsidiaries 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 waste, if
any, generated at any and all Property of any Borrower or any of their
Subsidiaries have in the past been transported, treated and disposed of in
accordance with Environmental Laws and so as not to pose an imminent and
substantial endangerment to public health or welfare or the environment, and, to
the knowledge of the Borrowers, all such transport carriers and treatment and
disposal facilities have been and are operating in compliance with Environmental
Laws and so as not to pose an imminent and substantial endangerment to public
health or welfare or the environment, and are not the subject of any existing,
pending or threatened action, investigation or inquiry by any Governmental
Authority in connection with any Environmental Laws.
(e) the Borrowers have taken all steps reasonably necessary to
determine and has determined that no oil, hazardous substances, solid waste or
oil and gas waste, have been disposed of or otherwise released and there has
been no threatened release of any oil, hazardous substances, solid waste or oil
and gas waste on or to any Property of the Borrowers or any of their
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 the Borrowers and each
of their Subsidiaries currently satisfies all design, operation, and equipment
requirements imposed by the OPA, and the Borrowers do not have any reason to
believe that such Property, to the extent subject to the OPA, will not be able
to maintain compliance with the OPA requirements during the term of this
Agreement.
(g) neither of the Borrowers nor any of their Subsidiaries has any
known contingent liability or Remedial Work in connection with any release or
threatened release of any oil, hazardous substance, solid waste or oil and gas
waste into the environment.
Section 7.07 Compliance with the Laws and Agreements; No Defaults.
(a) Each of the Borrowers and their Subsidiaries is in compliance with
all Governmental Requirements applicable to it or its Property and all
agreements and other instruments binding upon it or its Property, and possesses
all licenses, permits, franchises, exemptions, approvals and other
authorizations granted by Governmental Authorities necessary
35
for the ownership of its Property and the present conduct of its business,
except where the failure to do so, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect.
(b) Neither of the Borrowers nor any of their Subsidiaries is in
default nor has any event or circumstance occurred which, but for the expiration
of any applicable grace period or the giving of notice, or both, would
constitute a default or would require either of the Borrowers or any of their
Subsidiaries to Redeem or make any offer to Redeem all or any portion of any
Debt outstanding under any indenture, note, credit agreement or instrument
pursuant to which any Material Indebtedness is outstanding or by which any
Borrower or any of their Subsidiaries or any of their Properties is bound.
(c) No Default has occurred and is continuing.
Section 7.08 Investment Company Act. Neither of the Borrowers nor any of
their Subsidiaries is an "investment company" or a company "controlled" by an
"investment company," within the meaning of, or subject to regulation under, the
Investment Company Act of 1940, as amended.
Section 7.09 Public Utility Holding Company Act. Neither of the Borrowers
nor any of their Subsidiaries is a "holding company," or a "subsidiary company"
of a "holding company," or an "affiliate" of a "holding company" or of a
"subsidiary company" of a "holding company," or a "public utility" within the
meaning of, or subject to regulation under, the Public Utility Holding Company
Act of 1935, as amended.
Section 7.10 Taxes. Each of the Borrowers and their Subsidiaries has timely
filed or caused to be filed, or has obtained necessary extensions in which to
file, all Tax returns and reports required to have been filed and has paid or
caused to be paid all Taxes required to have been paid by it, except (a) Taxes
that are being contested in good faith by appropriate proceedings and for which
the such Borrower or such Subsidiary, as applicable, has set aside on its books
adequate reserves in accordance with GAAP or (b) to the extent that the failure
to do so could not reasonably be expected to result in a Material Adverse
Effect. The charges, accruals and reserves on the books of the Borrowers and
their Subsidiaries in respect of Taxes and other governmental charges are, in
the reasonable opinion of the Borrowers, adequate. No Tax Lien has been filed
and, to the knowledge of the Borrowers, no claim is being asserted with respect
to any such Tax or other such governmental charge.
Section 7.11 ERISA.
(a) The Borrowers, their Subsidiaries and each ERISA Affiliate have
complied in all material respects with ERISA and, where applicable, the Code
regarding each Plan, if any.
(b) Each Plan, if any, is, and has been, maintained in substantial
compliance with ERISA and, where applicable, the Code.
(c) No act, omission or transaction has occurred that could result in
imposition on the Borrowers, any of their Subsidiaries or any ERISA Affiliate
(whether directly or indirectly) of (i) either a civil penalty assessed pursuant
to subsections (c), (i) or (l) of section 502 of ERISA
36
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 (other than for the payment of current premiums which are
not past due) by the Borrowers, any of their Subsidiaries or any ERISA Affiliate
has been or is expected by the Borrowers, any of their Subsidiaries or any ERISA
Affiliate to be incurred with respect to any Plan. No ERISA Event with respect
to any Plan has occurred.
(e) Full payment when due has been made of all amounts which either of
the Borrowers, any of their Subsidiaries or any ERISA Affiliate is required
under the terms of each Plan, if any, or applicable law to have paid as
contributions to such Plan as of the date hereof, and no accumulated funding
deficiency (as defined in section 302 of ERISA and section 412 of the Code),
whether or not waived, exists with respect to any Plan.
(f) The actuarial present value of the benefit liabilities under each
Plan, if any, which is subject to Title IV of ERISA does not, as of the end of
each 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. The term "actuarial
present value of the benefit liabilities" shall have the meaning specified in
section 4041 of ERISA.
(g) Neither of the Borrowers, their Subsidiaries nor 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 Borrowers, any of their Subsidiaries or any
ERISA Affiliate in its sole discretion at any time without any material
liability.
(h) Neither the Borrowers, their Subsidiaries nor any ERISA Affiliate
sponsors, maintains or contributes to, or has at any time in the six-year period
preceding the date hereof sponsored, maintained or contributed to, any
Multiemployer Plan.
(i) Neither the Borrowers, their Subsidiaries nor any ERISA Affiliate
is required to provide security under section 401(a)(29) of the Code due to a
Plan amendment that results in an increase in current liability for the Plan.
Section 7.12 Disclosure; No Material Misstatements. Each Borrower has
disclosed to the Lenders all agreements, instruments and corporate or other
restrictions to which it or any of its Subsidiaries is subject, and all other
matters known to it, that, individually or in the aggregate, could reasonably be
expected to result in a Material Adverse Effect. None of the reports, financial
statements, certificates or other information furnished by or on behalf of
either of the Borrowers or any of their Subsidiaries to the Administrative Agent
or any Lender or any of their Affiliates in connection with the negotiation of
this Agreement or any other Loan Document or delivered hereunder or under any
other Loan Document (as modified or supplemented by other information so
furnished) contains any material misstatement of fact or omits to state any
37
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided that, with
respect to projected financial information, each of the Borrowers represents
only that such information was prepared in good faith based upon assumptions
believed to be reasonable at the time. There is no fact peculiar to any Borrower
or any of their Subsidiaries that could reasonably be expected to have a
Material Adverse Effect or in the future is reasonably likely to have a Material
Adverse Effect and which has not been set forth in this Agreement or the Loan
Documents or the other documents, certificates and statements furnished to the
Administrative Agent or the Lenders by or on behalf of any Borrower or any of
their Subsidiaries prior to, or on, the date hereof in connection with the
transactions contemplated hereby. The Borrowers have not provided the
independent petroleum engineers that prepared the Reserve Reports with any
information that was incorrect or misleading in any material respect at the time
it was delivered.
Section 7.13 Insurance. Each Borrower has, and has caused all of their
Subsidiaries to have, (a) all insurance policies sufficient for the compliance
by each of them with all material Governmental Requirements and all material
agreements and (b) insurance coverage in at least amounts and against such risk
(including, without limitation, public liability) that are usually insured
against by companies similarly situated and engaged in the same or a similar
business for the assets and operations of each of the Borrowers and their
Subsidiaries. The Administrative Agent and the Lenders have been named as
additional insureds in respect of such liability insurance policies and the
Administrative Agent has been named as additional loss payee with respect to
Property loss insurance.
Section 7.14 Restriction on Liens. Neither of the Borrowers nor any of
their Subsidiaries is a party to any material agreement or arrangement, or
subject to any order, judgment, writ or decree, which either restricts or
purports to restrict its ability to grant Liens to the Administrative Agent and
the Lenders on or in respect of their Properties to secure the Indebtedness and
the Loan Documents.
Section 7.15 Subsidiaries. Except as set forth on Schedule 7.15 or as
disclosed in writing to the Administrative Agent (which shall promptly furnish a
copy to the Lenders), which shall be a supplement to Schedule 7.15, the PPC has
no Subsidiaries. PLP has no Subsidiaries. The Borrowers have no Foreign
Subsidiaries.
Section 7.16 Location of Business and Offices. PPC's jurisdiction of
organization is Delaware; the name of PPC as listed in the public records of its
jurisdiction of organization is Parallel Petroleum Corporation; and the
organizational identification number of PPC in its jurisdiction of organization
is 2037319 (or, in each case, as set forth in a notice delivered to the
Administrative Agent pursuant to Section 8.01(l) in accordance with Section
12.01). PLP's jurisdiction of organization is Texas; the name of PLP as listed
in the public records of its jurisdiction of organization is Parallel, L.P.; and
the organizational identification number of PLP in its jurisdiction of
organization is 800065637 (or, in each case, as set forth in a notice delivered
to the Administrative Agent pursuant to Section 8.01(l) in accordance with
Section 12.01). Each Borrower's principal place of business and chief executive
offices are located at the address specified in Section 12.01 (or as set forth
in a notice delivered pursuant to Section 8.01(l) and Section 12.01(c)). Each
Subsidiary's jurisdiction of organization, name as listed in the public records
of its jurisdiction of organization, organizational identification number in its
jurisdiction
38
of organization, and the location of its principal place of business and chief
executive office is stated on Schedule 7.15 (or as set forth in a notice
delivered pursuant to Section 8.01(l)).
Section 7.17 Properties; Titles, Etc.
(a) Each of the Borrowers and their Subsidiaries has good and
defensible title to its Proved Oil and Gas Properties evaluated in the most
recently delivered Reserve Report and good title to all its personal Properties,
in each case, free and clear of all Liens except Liens permitted by Section
9.03. After giving full effect to the Excepted Liens, any Borrower or any of its
Subsidiaries specified as the owner owns the net interests in production
attributable to the Hydrocarbon Interests as reflected in the most recently
delivered Reserve Report, and the ownership of such Properties shall not in any
material respect obligate the Borrowers or any of their Subsidiaries to bear the
costs and expenses relating to the maintenance, development and operations of
each such Property in an amount in excess of the working interest of each
Property set forth in the most recently delivered Reserve Report that is not
offset by a corresponding proportionate increase in any Borrower's or any of
their Subsidiaries' net revenue interest in such Property.
(b) All material leases and agreements necessary for the present
conduct of the business of the Borrowers and their Subsidiaries are valid and
subsisting, in full force and effect, and there exists no default or event or
circumstance which with the giving of notice or the passage of time or both
would give rise to a default under any such lease or leases, which could
reasonably be expected to have a Material Adverse Effect.
(c) The rights and Properties presently owned, leased or licensed by
the Borrowers and their Subsidiaries including, without limitation, all
easements and rights of way, include all rights and Properties necessary to
permit the Borrowers and their Subsidiaries to conduct their business in all
material respects as of the date hereof.
(d) All of the material Properties of the Borrowers and each of their
Subsidiaries that are reasonably necessary for the operation of their businesses
are in good working condition and are maintained in accordance with prudent
business standards.
(e) Each Borrower and each of its Subsidiaries owns, or is licensed to
use, all trademarks, tradenames, copyrights, patents and other intellectual
Property material to its business, and the use thereof by such Borrower and such
Subsidiary does not infringe upon the rights of any other Person, except for any
such infringements that, individually or in the aggregate, could not reasonably
be expected to result in a Material Adverse Effect. The Borrowers and their
Subsidiaries either own or have valid licenses or other rights to use all
databases, geological data, geophysical data, engineering data, seismic data,
maps, interpretations and other technical information used in their businesses
as presently conducted, subject to the limitations contained in the agreements
governing the use of the same, which limitations are customary for companies
engaged in the business of the exploration and production of Hydrocarbons, with
such exceptions as could not reasonably be expected to have a Material Adverse
Effect.
39
Section 7.18 Maintenance of Properties. Except for such acts or failures to
act as could not be reasonably expected to have a Material Adverse Effect, the
Oil and Gas Properties (and Properties unitized therewith), to the Borrowers'
knowledge prior to taking over operations and as to all non-operated Properties,
have been maintained, operated and developed in a good and workmanlike manner
and in conformity with all Government Requirements and in conformity with the
provisions of all leases, subleases or other contracts comprising a part of the
Hydrocarbon Interests and other contracts and agreements forming a part of the
Oil and Gas Properties. Specifically in connection with the foregoing, except as
could not reasonably be expected to have a Material Adverse Effect, (a) 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) and
(b) none of the ▇▇▇▇▇ comprising a part of the Oil and Gas Properties (or
Properties unitized therewith) is deviated from the vertical more than the
maximum permitted by Government Requirements, and such ▇▇▇▇▇ are, in fact,
bottomed under and are producing from, and the well bores are wholly within, the
Oil and Gas Properties (or in the case of ▇▇▇▇▇ located on Properties unitized
therewith, such unitized Properties). All pipelines, ▇▇▇▇▇, gas processing
plants, platforms and other material improvements, fixtures and equipment owned
in whole or in part by the Borrowers or any of their Subsidiaries that are
necessary to conduct normal operations on Properties currently operated by the
Borrowers or, to the Borrowers' knowledge prior to taking over operations and as
to all non-operated Properties, are being maintained in a state adequate to
conduct normal operations, and with respect to such of the foregoing which are
operated by the Borrowers or any of their Subsidiaries, in a manner consistent
with the Borrowers' or their Subsidiaries' past practices (other than those the
failure of which to maintain in accordance with this Section 7.18 could not
reasonably be expect to have a Material Adverse Effect).
Section 7.19 Gas Imbalances, Prepayments. As of the date hereof, except as
set forth on Schedule 7.19 or on the most recent certificate delivered pursuant
to Section 8.12(b), on a net basis there are no gas imbalances, take or pay or
other prepayments which would require the Borrowers or any of their Domestic
Subsidiaries to deliver Hydrocarbons produced from the Oil and Gas Properties at
some future time without then or thereafter receiving full payment therefor
exceeding 100,000 Mcf of gas (on an Mcf equivalent basis) in the aggregate.
Section 7.20 Marketing of Production. Except for contracts listed and in
effect on the date hereof on Schedule 7.20, and thereafter either disclosed in
writing to the Administrative Agent or included in the most recently delivered
Reserve Report (with respect to all of which contracts the Borrowers represent
that they or their Subsidiaries are receiving a price for all production sold
thereunder which is computed substantially in accordance with the terms of the
relevant contract and are not having deliveries curtailed substantially below
the subject Property's delivery capacity), no material agreements exist which
are not cancelable on 60 days notice or less without penalty or detriment for
the sale of production from the Borrowers' or their Subsidiaries' Hydrocarbons
(including, without limitation, calls on or other rights to purchase,
production, whether or not the same are currently being exercised) that (a)
pertain to the sale of production at a fixed price and (b) have a maturity or
expiry date of more than six (6) months from the date hereof.
40
Section 7.21 Swap Agreements. Schedule 7.21, as of the date hereof, and
after the date hereof, each report required to be delivered by the Borrowers
pursuant to Section 8.01(d), sets forth, a true and complete list of all Swap
Agreements of the Borrowers and each of their Subsidiaries, the material terms
thereof (including the type, term, effective date, termination date and notional
amounts or volumes), the net ▇▇▇▇-to-market value thereof, all credit support
agreements relating thereto (including any margin required or supplied) and the
counterparty to each such agreement.
Section 7.22 Use of Loans. The proceeds of the Loans shall be used (a) to
provide working capital, (b) to provide funding in connection with the
Acquisition, (c) to refinance existing indebtedness, if any, (d) for the
acquisition, exploration and development of oil and gas properties, and for
general corporate purposes. The Borrowers and their Subsidiaries are not engaged
principally, or as one of its or their important activities, in the business of
extending credit for the purpose, whether immediate, incidental or ultimate, of
buying or carrying margin stock (within the meaning of Regulation T, U or X of
the Board) or for the purpose which would constitute this transaction a "purpose
credit" within the meaning of Regulation U. No part of the proceeds of any Loan
will be used for any purpose which violates the provisions of Regulations T, U
or X of the Board.
Section 7.23 Solvency. After giving effect to the transactions contemplated
hereby, (a) the aggregate assets (after giving effect to amounts that could
reasonably be received by reason of indemnity, offset, insurance or any similar
arrangement), at a fair valuation, of the Borrowers and the Guarantors, taken as
a whole, will exceed the aggregate Debt of the Borrowers and the Guarantors on a
consolidated basis, as the Debt becomes absolute and matures, (b) each of the
Borrowers and the Guarantors will not have incurred or intended to incur, and
will not believe that it will incur, Debt beyond its ability to pay such Debt
(after taking into account the timing and amounts of cash to be received by each
of the Borrowers and the Guarantors and the amounts to be payable on or in
respect of its liabilities, and giving effect to amounts that could reasonably
be received by reason of indemnity, offset, insurance or any similar
arrangement) as such Debt becomes absolute and matures and (c) each of the
Borrowers and the Guarantors will not have (and will have no reason to believe
that it will have thereafter) unreasonably small capital for the conduct of its
business.
Section 7.24 Acquisition Documents. The copies of the Acquisition Documents
previously delivered by the Borrowers to the Administrative Agent are true,
accurate and complete and have not been amended or modified in any material
manner, other than pursuant to amendments or modifications previously delivered
to the Administrative Agent. No party to any Acquisition Document is in default
in respect of any material term or obligation thereunder. The consideration paid
or to be paid for the assets subject of the Acquisition represents "reasonably
equivalent value" for such assets.
ARTICLE VIII
AFFIRMATIVE COVENANTS
Until the principal of and interest on each Loan and all fees payable
hereunder and all other amounts payable under the Loan Documents shall have been
paid in full, the Borrowers covenant and agree with the Lenders that:
41
Section 8.01 Financial Statements; Ratings Change; Other Information. The
Borrowers will furnish to the Administrative Agent:
(a) Annual Financial Statements. As soon as available, but in any
event not later than 90 days after the end of each fiscal year, PPC's audited
consolidated balance sheet and related statements of operations, members' equity
and cash flows as of the end of and for such year, setting forth in each case in
comparative form the figures for the previous fiscal year, all reported on by
independent public accountants of recognized national standing and reasonably
acceptable to the Administrative Agent (without a "going concern" or like
qualification or exception and without any qualification or exception as to the
scope of such audit) to the effect that such consolidated financial statements
present fairly in all material respects the financial position and results of
operations of the PPC and its Consolidated Subsidiaries on a consolidated basis
in accordance with GAAP consistently applied.
(b) Quarterly Financial Statements. As soon as available, but in any
event in accordance with then applicable law and not later than 60 days after
the end of each of the first three fiscal quarters of each fiscal year of PPC,
its consolidated unaudited balance sheet and related statements of operations,
general and limited partners' equity and cash flows as of the end of and for
such fiscal quarter and the then elapsed portion of the fiscal year, setting
forth in each case in comparative form the figures for the corresponding period
or periods of (or, in the case of the balance sheet, as of the end of) the
previous fiscal year, all certified by one of its Financial Officers as
presenting fairly in all material respects the financial condition and results
of operations of PPC on a consolidated basis in accordance with GAAP
consistently applied, subject to normal year-end audit adjustments and the
absence of footnotes.
(c) Certificate of Financial Officer - Compliance. Concurrently with
any delivery of financial statements under Section 8.01(a) or Section 8.01(b), a
certificate of a Financial Officer in substantially the form of Exhibit D hereto
(i) certifying as to whether a Default has occurred and, if a Default has
occurred, specifying the details thereof and any action taken or proposed to be
taken with respect thereto, (ii) setting forth reasonably detailed calculations
demonstrating compliance with Section 8.13(b) and Section 9.01 and (iii) stating
whether any change in GAAP or in the application thereof has occurred since the
date of the audited financial statements referred to in Section 7.04 and, if any
such change has occurred, specifying the effect of such change on the financial
statements accompanying such certificate.
(d) Certificate of Financial Officer - Swap Agreements. Concurrently
with any delivery of financial statements under Section 8.01(a) and Section
8.01(b), a certificate of a Financial Officer, in form and substance
satisfactory to the Administrative Agent, setting forth as of the last Business
Day of such fiscal quarter or fiscal year, a true and complete list of all Swap
Agreements of the Borrowers and each of their Subsidiaries, the material terms
thereof (including the type, term, effective date, termination date and notional
amounts or volumes), the net ▇▇▇▇-to-market value therefor, any new credit
support agreements relating thereto not listed on Schedule 7.19, any margin
required or supplied under any credit support document, and the counterparty to
each such agreement.
(e) Certificate of Insurer - Insurance Coverage. At the request of the
Administrative Agent, a certificate of insurance coverage from each insurer with
respect to the
42
insurance required by Section 8.07, in form and substance satisfactory to the
Administrative Agent, and, if requested, all copies of the applicable policies.
(f) Other Accounting Reports. Promptly upon receipt thereof, a copy of
each other report or letter submitted to either of the Borrowers or any of their
Subsidiaries by independent accountants in connection with any annual, interim
or special audit made by them of the books of such Borrower or any such
Subsidiary, and a copy of any response by such Borrower, or any such Subsidiary,
to such letter or report.
(g) Filings with the SEC. As soon as practicable and in any event
within five (5) days after the sending or filing thereof, copies of all filings
by PPC with the Securities and Exchange Commission.
(h) Notices Under Material Instruments. Promptly after the furnishing
thereof, copies of any financial statement, report or notice furnished to or by
any Person pursuant to the terms of any preferred stock designation, indenture,
loan or credit or other similar agreement, other than this Agreement and not
otherwise required to be furnished to the Lenders pursuant to any other
provision of this Section 8.01.
(i) Lists of Purchasers. Concurrently with the delivery of any Reserve
Report to the Administrative Agent pursuant to Section 8.12, or after an Event
of Default, upon request, a list of all Persons purchasing Hydrocarbons from the
Borrowers or any of their Subsidiaries.
(j) Notice of Sales of Oil and Gas Properties. In the event any
Borrower or any of their Subsidiaries intends to sell, transfer, assign or
otherwise dispose of any Oil or Gas Properties included in the most recently
delivered Reserve Report (or any Equity Interests in any Subsidiary owning
interests in such Oil and Gas Properties) during any period between two
successive scheduled redetermination dates having a fair market value,
individually or in the aggregate (of all sales, dispositions or other transfers
of the Borrowers and Subsidiaries taken as a whole), in excess of $5,000,000,
prior written notice of such disposition, the price thereof, the anticipated
date of closing, and any other details thereof requested by the Administrative
Agent.
(k) Notice of Casualty Events. Prompt written notice, and in any event
within three Business Days, of the occurrence of any Casualty Event or the
commencement of any action or proceeding that could reasonably be expected to
result in a Casualty Event.
(l) Information Regarding the Borrowers and Guarantors. Prompt written
notice (and in any event within thirty (30) days prior thereto) of any change
(i) in any Borrowers' or any Guarantor's corporate name or in any trade name
used to identify such Person in the conduct of its business or in the ownership
of its Properties, (ii) in the location of any Borrower or any Guarantor's chief
executive office or principal place of business, (iii) in any Borrower or any
Guarantor's identity or corporate structure or in the jurisdiction in which such
Person is incorporated or formed, (iv) in any Borrower or any Guarantor's
jurisdiction of organization or such Person's organizational identification
number in such jurisdiction of organization, and (v) in any Borrower or any
Guarantor's federal taxpayer identification number, if any.
(m) Production Report and Lease Operating Statements. Within 60 days
after the end of each fiscal quarter, a report setting forth, for each calendar
month during the then-current
43
fiscal year to date, the volume of production and sales attributable to
production (and the prices at which such sales were made and the revenues
derived from such sales) for each such calendar month from the Oil and Gas
Properties, and setting forth the related ad valorem, severance and production
taxes and lease operating expenses attributable thereto and incurred for each
such calendar month.
(n) Notices of Certain Changes. Promptly, but in any event within
thirty (30) Business Days after the execution thereof, copies of any amendment,
modification or supplement to any partnership agreements, by-laws or articles of
incorporation of either of the Borrowers or any other constitutional or organic
document of either of the Borrowers.
(o) Notices Relating to Acquisition. In the event that after the
Effective Date: (i) the Borrowers are required or elects to purchase any of the
Acquisition Properties which had been excluded from, or return any of the
Acquisition Properties which had been included in, the Acquisition Properties in
accordance with the terms of the Acquisition Documents, (ii) the Borrowers are
required to honor any preferential purchase right in respect of any Acquisition
Property which has not been waived, (iii) any matter being disputed in
accordance with the terms of the Acquisition Documents is resolved or (iv) the
Borrowers and the seller(s) calculate and agree upon the "Final Settlement
Statement" as contemplated by Section 3.3 of the Purchase and Sale Agreement,
then, in each such case, the Borrowers shall promptly give the Administrative
Agent notice in reasonable detail and copies of such documents, as applicable,
of such circumstances.
(p) Other Requested Information. Promptly following any request
therefor, such other information regarding the operations, business affairs and
financial condition of the Borrowers or any of their Subsidiaries (including,
without limitation, any Plan or Multiemployer Plan and any reports or other
information required to be filed under ERISA), or compliance with the terms of
this Agreement or any other Loan Document, as the Administrative Agent or any
Lender may reasonably request.
Section 8.02 Notices of Material Events. The Borrowers will furnish to the
Administrative Agent, promptly after the Borrowers obtain knowledge thereof,
written notice of the following:
(a) the occurrence of any Default;
(b) the filing or commencement of, or the threat in writing of, any
action, suit, investigation, arbitration or proceeding by or before any
arbitrator or Governmental Authority against or affecting any Borrower or any
Subsidiary thereof, or any material adverse development in any action, suit,
proceeding, investigation or arbitration (whether or not previously disclosed to
the Lenders), that, in either case, if adversely determined, could reasonably be
expected to result in liability in excess of $250,000;
(c) the occurrence of any ERISA Event that, alone or together with any
other ERISA Events that have occurred, could reasonably be expected to result in
liability of the Borrowers and their Subsidiaries in an aggregate amount
exceeding $250,000; and
44
(d) any other development that results in, or could reasonably be
expected to result in, a Material Adverse Effect.
Each notice delivered under this Section 8.02 shall be accompanied by a
statement of a Responsible Officer setting forth the details of the event or
development requiring such notice and any action taken or proposed to be taken
with respect thereto.
Section 8.03 Existence; Conduct of Business. Each Borrower will, and will
cause each of its Subsidiaries to, do or cause to be done all things necessary
to preserve, renew and keep in full force and effect its legal existence and the
rights, licenses, permits, privileges and franchises material to the conduct of
its business and maintain, if necessary, its qualification to do business in
each other jurisdiction in which any of its Oil and Gas Properties is located or
the ownership of its Properties requires such qualification, except where the
failure to so qualify could not reasonably be expected to have a Material
Adverse Effect; provided that the foregoing shall not prohibit any merger,
consolidation, liquidation or dissolution permitted under Section 9.12.
Section 8.04 Payment of Obligations. Each Borrower will, and will cause
each of its Subsidiaries to, pay its obligations, including Tax liabilities of
the Borrowers and all of their Subsidiaries before the same shall become
delinquent or in default, except where (a) the validity or amount thereof is
being contested in good faith by appropriate proceedings, (b) such Borrower or
such Subsidiary has set aside on its books adequate reserves with respect
thereto in accordance with GAAP and (c) the failure to make payment pending such
contest could not reasonably be expected to result in a Material Adverse Effect
or result in the seizure or levy of any Property of the Borrowers or any of
their Subsidiaries.
Section 8.05 Performance of Obligations under Loan Documents. Each Borrower
will pay the Notes according to the reading, tenor and effect thereof, and the
Borrowers will, and each Borrower will cause each of its Subsidiaries to, do and
perform every act and discharge all of the obligations to be performed and
discharged by them under the Loan Documents, including, without limitation, this
Agreement, at the time or times and in the manner specified.
Section 8.06 Operation and Maintenance of Properties. Each Borrower will,
and will cause each of its Subsidiaries to:
(a) operate its Oil and Gas Properties and other material Properties
or use reasonable commercial efforts to cause such Oil and Gas Properties and
other material Properties to be operated in a careful and efficient manner in
accordance with the practices of the industry and in compliance with all
applicable contracts and agreements and in compliance with all Governmental
Requirements, including, without limitation, applicable proration requirements
and Environmental Laws, and all applicable laws, rules and regulations of every
other Governmental Authority from time to time constituted to regulate the
development and operation of its Oil and Gas Properties and the production and
sale of Hydrocarbons and other minerals therefrom, except, in each case, where
the failure to comply could not reasonably be expected to have a Material
Adverse Effect.
(b) keep and maintain all Property material to the conduct of its
business in good working order and condition, ordinary wear and tear excepted,
preserve, maintain and keep in
45
good repair, working order and efficiency (ordinary wear and tear excepted) all
of its material Oil and Gas Properties and other material Properties, including,
without limitation, all material equipment, machinery and facilities.
(c) promptly pay and discharge, or make reasonable and customary
efforts to cause to be paid and discharged, all delay rentals, royalties,
expenses and indebtedness accruing under the leases or other agreements
affecting or pertaining to its Oil and Gas Properties and will do all other
things necessary to keep unimpaired their rights with respect thereto and
prevent any forfeiture thereof or default thereunder.
(d) promptly 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.
(e) to the extent any Borrower or one of their Subsidiaries is not the
operator of any Property, the Borrowers shall use reasonable efforts to cause
the operator to comply with this Section 8.06.
Section 8.07 Insurance. Each Borrower will, and will cause each of its
Subsidiaries to, maintain, with financially sound and reputable insurance
companies, insurance in such amounts and against such risks as are customarily
maintained by companies engaged in the same or similar businesses operating in
the same or similar locations. The loss payable clauses or provisions in said
insurance policy or policies insuring any of the collateral for the Loans shall
be endorsed in favor of and made jointly payable to the Administrative Agent and
to the administrative agent under the Senior Revolving Credit Documents as its
interests may appear and such policies shall name the Administrative Agent and
the Lenders as "additional insureds" and provide that the insurer will give at
least 30 days prior notice of any cancellation to the Administrative Agent.
Section 8.08 Books and Records; Inspection Rights. Each Borrower will, and
will cause each of its Subsidiaries to, keep proper books of record and account
in which full, true and correct entries are made of all dealings and
transactions in relation to its business and activities. Each Borrower will, and
will cause each of its Subsidiaries to, permit any representatives designated by
the Administrative Agent or any Lender, upon reasonable prior notice, to visit
and inspect its Properties, to examine and make extracts from its books and
records, and to discuss its affairs, finances and condition with its officers
and independent accountants, all at such reasonable times and as often as
reasonably requested.
Section 8.09 Compliance with Laws. Each Borrower will, and will cause each
of its Subsidiaries to, comply with all laws, rules, regulations and orders of
any Governmental Authority applicable to them or their Property, except where
the failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect.
Section 8.10 Environmental Matters.
(a) Each Borrower shall, and shall cause each of its Subsidiaries to:
(i) comply, and shall cause its Properties and operations and each of its
Subsidiaries and each Subsidiary's
46
Properties and operations to comply, with all applicable Environmental Laws, the
breach of which could be reasonably expected to have a Material Adverse Effect;
(ii) not dispose of or otherwise release, and shall cause each Subsidiary not to
dispose of or otherwise release, any oil, oil and gas waste, hazardous
substance, or solid waste on, under, about or from any of the Borrowers' or
their Subsidiaries' Properties or any other Property to the extent caused by the
Borrowers' or any of their Subsidiaries' operations except in compliance with
applicable Environmental Laws, the disposal or release of which could reasonably
be expected to have a Material Adverse Effect; (iii) timely obtain or file, and
shall cause each of its Subsidiaries to timely obtain or file, all notices,
permits, licenses, exemptions, approvals, registrations or other authorizations,
if any, required under applicable Environmental Laws to be obtained or filed in
connection with the operation or use of the Borrowers' or their Subsidiaries'
Properties, which failure to obtain or file could reasonably be expected to have
a Material Adverse Effect; (iv) promptly commence and diligently prosecute to
completion, and shall cause each of its Subsidiaries to promptly commence and
diligently prosecute to completion, any assessment, evaluation, investigation,
monitoring, containment, cleanup, removal, repair, restoration, remediation or
other remedial obligations (collectively, the "Remedial Work") in the event any
Remedial Work is required or reasonably necessary under applicable Environmental
Laws because of or in connection with the actual or suspected past, present or
future disposal or other release of any oil, oil and gas waste, hazardous
substance or solid waste on, under, about or from any of the Borrowers' or their
Subsidiaries' Properties, which failure to commence and diligently prosecute to
completion could reasonably be expected to have a Material Adverse Effect; and
(v) establish and implement, and shall cause each of its Subsidiaries to
establish and implement, such procedures as may be reasonably necessary to
continuously determine and assure that the Borrowers' and their Subsidiaries'
obligations under this Section 8.10(a) are timely and fully satisfied, which
failure to establish and implement could reasonably be expected to have a
Material Adverse Effect.
(b) Each Borrower will promptly, but in no event later than five days
after the occurrence thereof, notify the Administrative Agent and the Lenders in
writing of any threatened action, investigation or inquiry by any Governmental
Authority or any threatened demand or lawsuit by any landowner or other third
party against the Borrowers or their Subsidiaries or their Properties of which
the Borrowers have knowledge in connection with any Environmental Laws
(excluding routine testing and corrective action) if the Borrowers reasonably
anticipate that such action will result in liability (whether individually or in
the aggregate) in excess of $250,000, not fully covered by insurance, subject to
normal deductibles.
(c) Each Borrower will, and will cause each of its Subsidiaries to,
provide environmental audits and tests in accordance with standards reasonably
requested by the Administrative Agent and the Lenders (or as otherwise required
to be obtained by the Administrative Agent or the Lenders by any Governmental
Authority), in connection with any future acquisitions of United States Oil and
Gas Properties.
Section 8.11 Further Assurances.
(a) Each Borrower at its sole expense will, and will cause each of its
Subsidiaries to, promptly execute and deliver to the Administrative Agent all
such other documents, agreements and instruments reasonably requested by the
Administrative Agent to comply with,
47
cure any defects or accomplish the conditions precedent, covenants and
agreements of the Borrowers or any of their Subsidiaries, as the case may be, in
the Loan Documents, including the Notes, or to further evidence and more fully
describe the collateral intended as security for the Indebtedness, or to correct
any omissions in this Agreement or the Security Instruments, or to state more
fully the obligations secured therein, or to perfect, protect or preserve any
Liens created pursuant to this Agreement or any of the Security Instruments or
the priority thereof, or to make any recordings, file any notices or obtain any
consents, all as may be reasonably necessary or appropriate, in the sole
discretion of the Administrative Agent, in connection therewith.
(b) Each Borrower hereby authorizes the Administrative Agent to file
one or more financing or continuation statements, and amendments thereto,
relative to all or any part of the Mortgaged Property without the signature of
the Borrowers or any other Guarantor where permitted by law. A carbon,
photographic or other reproduction of the Security Instruments or any financing
statement covering the Mortgaged Property or any part thereof shall be
sufficient as a financing statement where permitted by law. The Administrative
Agent will promptly send the Borrowers any financing or continuation statements
it files without the signature of the Borrowers or any other Guarantor and the
Administrative Agent will promptly send the Borrowers the filing or recordation
information with respect thereto.
Section 8.12 Reserve Reports.
(a) On or before March 1st and September 1st of each year, commencing
March 1, 2006, the Borrowers shall furnish to the Administrative Agent and the
Lenders a Reserve Report as of the immediately preceding January 1 or July 1, as
applicable. The Reserve Report as of January 1 of each year shall be prepared by
one or more independent petroleum engineers reasonably acceptable to the
Administrative Agent and the Reserve Report as of July 1 of each year shall be
prepared by or under the supervision of the chief engineer of the Borrowers who
shall certify such Reserve Report to be true and accurate and to have been
prepared in accordance with the procedures used in the immediately preceding
January 1 Reserve Report.
(b) With the delivery of each Reserve Report, the Borrowers shall
provide to the Administrative Agent and the Lenders a certificate from a
Responsible Officer certifying that in all material respects: (i) the
information contained in the Reserve Report and any other information delivered
in connection therewith is true and correct, (ii) the Borrowers or their
Subsidiaries owns good and defensible title to the Proved Oil and Gas Properties
evaluated in such Reserve Report and such Properties are free of all Liens
except for Liens permitted by Section 9.03, (iii) except as set forth on an
exhibit to the certificate, on a net basis there are no gas imbalances, take or
pay or other prepayments in excess of the volume specified in Section 7.19 with
respect to their Oil and Gas Properties evaluated in such Reserve Report that
would require any Borrower or any of their Subsidiaries to deliver Hydrocarbons
either generally or produced from such Oil and Gas Properties at some future
time without then or thereafter receiving full payment therefor, (iv) none of
their Proved Oil and Gas Properties have been sold since the date of the last
Total Reserve Value determination except as set forth on an exhibit to the
certificate, which certificate shall list all of its Proved Oil and Gas
Properties sold and in such detail as reasonably required by the Administrative
Agent and (v) attached to the certificate is a list of all marketing agreements
entered into subsequent to the later of the date hereof or the most
48
recently delivered Reserve Report that the Borrowers could reasonably be
expected to have been obligated to list on Schedule 7.20 had such agreement been
in effect on the date hereof.
Section 8.13 Title Information.
(a) On or before the delivery to the Administrative Agent and the
Lenders of each Reserve Report required by Section 8.12(a), the Borrowers will
deliver title information in form and substance acceptable to the Administrative
Agent covering enough of the Oil and Gas Properties evaluated by such Reserve
Report that were not included in the immediately preceding Reserve Report, so
that the Administrative Agent shall have received together with title
information previously delivered to the Administrative Agent, satisfactory title
information on at least 80% of the total value of the Proved Oil and Gas
Properties evaluated by such Reserve Report.
(b) If the Borrowers have provided title information for additional
Properties under Section 8.13(a), the Borrowers shall, within 60 days of notice
from the Administrative Agent that title defects or exceptions exist with
respect to such additional Properties, either (i) cure any such title defects or
exceptions (including defects or exceptions as to priority) which are not
permitted by Section 9.03 raised by such information, (ii) substitute acceptable
Mortgaged Properties with no title defects or exceptions except for Excepted
Liens (other than Excepted Liens described in clauses (e), (g) and (h) of such
definition) having an equivalent value or (iii) deliver title information in
form and substance reasonably acceptable to the Administrative Agent so that the
Administrative Agent shall have received, together with title information
previously delivered to the Administrative Agent, satisfactory title information
on at least 80% of the value of the Oil and Gas Properties evaluated by such
Reserve Report.
(c) If the Borrowers are unable to cure any title defect requested by
the Administrative Agent or the Lenders to be cured within the 60-day period or
the Borrowers do not comply with the requirements to provide acceptable title
information covering 80% of the value of the Oil and Gas Properties evaluated in
the most recent Reserve Report, such default shall not be a Default, but instead
the Administrative Agent and/or the Majority Lenders shall have the right to
exercise the following remedy in their sole discretion from time to time, and
any failure to so exercise this remedy at any time shall not be a waiver as to
future exercise of the remedy by the Administrative Agent or the Lenders. To the
extent that the Administrative Agent or the Majority Lenders are not reasonably
satisfied with title to any Mortgaged Property after the 60-day period has
elapsed, such unacceptable Mortgaged Property shall not count towards "the 80%
requirement", and the Administrative Agent may send a notice to the Borrowers
and the Lenders that the Total Reserve Value shall be reduced by an amount as
determined by the Majority Lenders to cause the Borrowers to be in compliance
with the requirement to provide acceptable title information on 80% of the value
of the Proved Oil and Gas Properties. This new Total Reserve Value shall become
effective immediately after receipt of such notice.
Section 8.14 Additional Collateral; Additional Guarantors.
(a) In connection with each redetermination, the Borrowers shall
review the Reserve Report and the list of current Mortgaged Properties (as
described in Section 8.12) to ascertain whether the Mortgaged Properties
represent at least 80% of the total value of the Oil
49
and Gas Properties evaluated in the most recently completed Reserve Report after
giving effect to exploration and production activities, acquisitions,
dispositions and production. In the event that the Mortgaged Properties do not
represent at least 80% of such total value, then the Borrowers shall, and shall
cause its Subsidiaries to, grant, within thirty (30) days of delivery of the
certificate required under Section 8.12(b), to the Administrative Agent or its
designee as security for the Indebtedness a second-priority Lien interest
(subject to a Lien under the Senior Revolving Credit Documents and provided that
Excepted Liens of the type described in clauses (a) to (d) and (f) of the
definition thereof may exist, but subject to the provisos at the end of such
definition) on additional Oil and Gas Properties not already subject to a Lien
of the Security Instruments such that after giving effect thereto, the Mortgaged
Properties will represent at least 80% of such total value. All such Liens will
be created and perfected by and in accordance with the provisions of deeds of
trust, security agreements and financing statements or other Security
Instruments, all in form and substance reasonably satisfactory to the
Administrative Agent or its designee and in sufficient executed (and
acknowledged where necessary or appropriate) counterparts for recording
purposes. In order to comply with the foregoing, if any Subsidiary places a Lien
on its Oil and Gas Properties and such Subsidiary is not a Guarantor, then it
shall become a Guarantor and comply with Section 8.14(b).
(b) In the event that (i) the Borrowers determine that any Subsidiary
is a Material Domestic Subsidiary or (ii) any Domestic Subsidiary incurs or
guarantees any Debt, then the Borrowers shall promptly cause such Subsidiary to
guarantee the Indebtedness pursuant to the Guaranty Agreement. In connection
with any such guaranty, the Borrowers shall, or shall cause such Subsidiary to,
(A) execute and deliver a supplement to the Guaranty Agreement executed by such
Subsidiary, (B) pledge all of its Equity Interests of such Subsidiary and (C)
execute and deliver such other additional closing documents, certificates and
legal opinions as shall reasonably be requested by the Administrative Agent or
its designee.
Section 8.15 ERISA Compliance. The Borrowers will promptly furnish, and
will cause its Subsidiaries and any ERISA Affiliate to promptly furnish, to the
Administrative Agent (a) 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, if any, or any trust
created thereunder, (b) 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 the President or the principal
Financial Officer of the Borrowers, their Subsidiaries or the ERISA Affiliate,
as the case may be, specifying the nature thereof, what action the Borrowers,
their Subsidiaries 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
(c) 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, if any (other than a Multiemployer Plan), the
Borrowers will, and the Borrowers will cause each of its Subsidiaries and ERISA
Affiliates 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
50
incurring any late payment or underpayment charge or penalty, all premiums
required pursuant to sections 4006 and 4007 of ERISA.
Section 8.16 Acquisition. The Borrowers will, on or before January 20,
2006, complete all stages of the Acquisition and furnish the Administrative
Agent with notice thereof and any other information the Administrative Agent
reasonably requests in connection therewith.
ARTICLE IX
NEGATIVE COVENANTS
Until the principal of and interest on each Loan and all fees payable
hereunder and all other amounts payable under the Loan Documents have been paid
in full, the Borrowers covenant and agree with the Lenders that:
Section 9.01 Financial Covenants.
(a) Ratio of Total Debt to EBITDAX. PPC will not, as of any date of
determination, permit its consolidated ratio of Total Debt as of such day to
EBITDAX to be greater than 4.0 to 1.0.
(b) Asset Coverage Ratio. PPC will not, as of any date of
determination, permit its ratio of Total Reserve Value to Total Debt as of such
date to be less than 1.5 to 1.0.
Section 9.02 Debt. Neither Borrower will, and will not permit any
Subsidiary to, 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) accounts payable and other accrued expenses, liabilities or other
obligations to pay (for the deferred purchase price of Property or services)
from time to time incurred in the ordinary course of business which are not
greater than sixty (60) days past the date of invoice or delinquent or which are
being contested in good faith by appropriate action and for which adequate
reserves have been maintained in accordance with GAAP.
(c) endorsements of negotiable instruments for collection in the
ordinary course of business.
(d) Debt now or hereafter outstanding under the Senior Revolving
Credit Agreement (and any guaranties thereof by the Guarantors), provided that
(i) the aggregate principal amount of the Senior Revolving Credit Agreement
shall not exceed $350,000,000; (ii) no part of the Debt for principal owing
under the Senior Revolving Credit Agreement is subordinated in right of payment
to any other Debt for principal owing under the Senior Revolving Credit
Agreement, (iii) such Debt is comprised of a single facility with no
differentiation among lenders in the revolving character, pricing or maturity
thereof and (iv) after giving effect to the incurrence of such Debt, no Default
or Event of Default then exists under Section 9.01.
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(e) Debt under any Swap Agreement required by this Agreement or by the
Senior Revolving Credit Agreement.
(f) other Debt not to exceed $2,500,000 in the aggregate at any one
time outstanding.
Section 9.03 Liens. Neither Borrower will, and will not permit any
Subsidiary to, create, incur, assume or permit to exist any Lien on any of its
Properties (now owned or hereafter acquired), except:
(a) Liens securing the payment of any Indebtedness.
(b) Excepted Liens.
(c) Liens on Property not constituting collateral for the Indebtedness
and not otherwise permitted by the foregoing clauses of this Section 9.03;
provided that the aggregate principal or face amount of all Debt secured under
this Section 9.03(c) shall not exceed $1,000,000 at any time.
(d) Liens on Property securing the Senior Revolving Credit Agreement
and any guaranties thereof as permitted by Section 9.02(d); provided, however,
that such Property is subject to a Lien in favor of the Administrative Agent
which secures the Indebtedness, this Agreement and the other Loan Documents
pursuant to Security Instruments satisfactory to the Administrative Agent.
Section 9.04 Dividends, Distributions and Redemptions. Neither Borrower
will declare or make, or agree to pay or make, directly or indirectly, any
Restricted Payment, return any capital or make any distribution of its Property
to its Equity Interest holders, except (a) any Subsidiary of any Borrower may
declare, pay or make dividends or distributions to such Borrower, and (b) PLP
may make distributions to Parallel, L.L.C., provided that Parallel, L.L.C.
immediately redistributes such distributions to PPC.
Section 9.05 Investments, Loans and Advances. Neither Borrower will, and
will not permit any Subsidiary to, make or permit to remain outstanding any
Investments in or to any Person, except that the foregoing restriction shall not
apply to:
(a) Investments reflected in the Financial Statements or which are
disclosed to the Lenders in Schedule 9.05.
(b) accounts receivable arising in the ordinary course of business.
(c) direct obligations of the United States or any agency thereof, or
obligations guaranteed by the United States or any agency thereof, in each case
maturing within 180 days from the date of creation thereof.
(d) commercial paper maturing within one year from the date of
creation thereof rated in the highest grade by S&P or ▇▇▇▇▇'▇.
52
(e) deposits maturing within one year from the date of creation
thereof with, including certificates of deposit issued by, any Lender or any
Affiliate of any Lender, or any office located in the United States of any other
bank or trust company which is organized under the laws of the United States or
any state thereof, has capital, surplus and undivided profits aggregating at
least $100,000,000 (as of the date of such bank or trust company's most recent
financial reports) and has a short term deposit rating of no lower than A2 or
P2, as such rating is set forth from time to time, by S&P or ▇▇▇▇▇'▇,
respectively or, in the case of any Foreign Subsidiary, a bank organized in a
jurisdiction in which the Foreign Subsidiary conducts operations having assets
in excess of $500,000,000 (or its equivalent in another currency).
(f) deposits in money market funds investing exclusively in
Investments described in Section 9.05(c), Section 9.05(d) or Section 9.05(e) and
deposits in an aggregate amount not to exceed $3,000,000 maintained in money
market funds with RBC ▇▇▇▇ ▇▇▇▇▇▇▇▇, Inc., Midland, Texas.
(g) Investments (including, without limitation, capital contributions)
in general or limited partnerships or other types of entities (each a "venture")
entered into by any Borrower or any of their Subsidiaries with others in the
ordinary course of business; provided that (i) any such venture is engaged
exclusively in oil and gas exploration, development, production, processing and
related activities, including transportation, (ii) the interest in such venture
is acquired in the ordinary course of business and on fair and reasonable terms
and (iii) such venture interests acquired and capital contributions made (valued
as of the date such interest was acquired or the contribution made) do not
exceed, in the aggregate at any time outstanding an amount equal to $10,000,000.
(h) subject to the limits in Section 9.06, Investments in direct
ownership interests in additional Oil and Gas Properties and gas gathering
systems related thereto or related to farm-out, farm-in, joint operating, joint
venture or area of mutual interest agreements, gathering systems, pipelines or
other similar arrangements which are usual and customary in the oil and gas
exploration and production business located within the geographic boundaries of
the United States of America.
(i) Investments (i) made by the Borrowers in or to one another or to
Wholly-Owned Subsidiaries which are Guarantors and (ii) made by any Subsidiary
in or to either of the Borrowers or any Wholly-Owned Subsidiary which is a
Guarantor.
(j) Investments in stock, obligations or securities received in
settlement of debts arising from Investments permitted under this Section 9.05
owing to the Borrowers or any of their Subsidiaries as a result of a bankruptcy
or other insolvency proceeding of the obligor in respect of such debts or upon
the enforcement of any Lien in favor of the Borrowers or any of their
Subsidiaries; provided that the Borrowers shall give the Administrative Agent
prompt written notice in the event that the aggregate amount of all investments
held at any one time under this Section 9.05(j) exceeds $2,500,000.
(k) other Investments not to exceed $15,000,000 in the aggregate at
any one time outstanding, provided that immediately following any such
Investment and anytime thereafter, at
53
least 10% of the Borrowing Base (as defined in the Senior Revolving Credit
Agreement) is available.
Section 9.06 Nature of Business. Neither of the Borrowers nor any of their
Subsidiaries will allow any material change to be made in the character of its
business as an independent oil and gas exploration and production company. Each
Borrower will not, and will not permit any of its Subsidiaries to, operate its
business outside the geographical boundaries of the United States.
Section 9.07 Foreign Subsidiaries or International Operations. Neither of
the Borrowers nor any of their Subsidiaries shall have any Foreign Subsidiaries
or directly participate in any international operations.
Section 9.08 Limitation on Leases. Neither of the Borrowers nor any of
their Subsidiaries will create, incur, assume or suffer to exist any obligation
for the payment of rent or hire of Property of any kind whatsoever (real or
personal but excluding leases of Hydrocarbon Interests), under leases or lease
agreements which would cause the aggregate amount of all payments made by the
Borrowers and their Subsidiaries pursuant to all such leases or lease
agreements, including, without limitation, any residual payments at the end of
any lease, to exceed $1,000,000 in any period of twelve consecutive calendar
months during the life of such leases.
Section 9.09 Proceeds of Notes. Neither Borrower will permit the proceeds
of the Notes to be used for any purpose other than those permitted by Section
7.22. Neither of the Borrowers nor any Person acting on behalf of the Borrowers
has taken or will take any action which might cause any of the Loan Documents to
violate Regulations T, U or X or any other regulation of the Board or to violate
Section 7 of the Securities Exchange Act of 1934 or any rule or regulation
thereunder, in each case as now in effect or as the same may hereinafter be in
effect. If requested by the Administrative Agent, the Borrowers will furnish to
the Administrative Agent and each Lender a statement to the foregoing effect in
conformity with the requirements of FR Form U-1 or such other form referred to
in Regulation U, Regulation T or Regulation X of the Board, as the case may be.
Section 9.10 ERISA Compliance. Neither Borrower will, and will not permit
any Subsidiary to, at any time:
(a) engage in, or permit any ERISA Affiliate to engage in, any
transaction in connection with which the Borrowers any of their Subsidiaries or
any ERISA Affiliate could be subjected to either a civil penalty assessed
pursuant to subsections (c), (i) or (l) of section 502 of ERISA or a tax imposed
by Chapter 43 of Subtitle D of the Code.
(b) terminate, or permit any ERISA Affiliate to terminate, any Plan in
a manner, or take any other action with respect to any Plan, which could result
in any liability of the Borrowers, any of their Subsidiaries or any ERISA
Affiliate to the PBGC.
(c) fail to make, or permit any ERISA Affiliate to fail to make, full
payment when due of all amounts which, under the provisions of any Plan,
agreement relating thereto or
54
applicable law, the Borrowers, any of their Subsidiaries or any ERISA Affiliate
is required to pay as contributions thereto.
(d) permit to exist, or allow any ERISA Affiliate to permit to exist,
any accumulated funding deficiency within the meaning of section 302 of ERISA or
section 412 of the Code, whether or not waived, with respect to any Plan.
(e) permit, or allow any ERISA Affiliate to permit, the actuarial
present value of the benefit liabilities under any Plan maintained by the
Borrowers, any of their Subsidiaries or any ERISA Affiliate which is regulated
under Title IV of ERISA to exceed the current value of the assets (computed on a
plan termination basis in accordance with Title IV of ERISA) of such Plan
allocable to such benefit liabilities. The term "actuarial present value of the
benefit liabilities" shall have the meaning specified in section 4041 of ERISA.
(f) contribute to or assume an obligation to contribute to, or permit
any ERISA Affiliate to contribute to or assume an obligation to contribute to,
any Multiemployer Plan.
(g) acquire, or permit any ERISA Affiliate to acquire, an interest in
any Person that causes such Person to become an ERISA Affiliate with respect to
the Borrowers or any of their Subsidiaries or with respect to any ERISA
Affiliate of the Borrowers or any of their Subsidiaries 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, (i) any
Multiemployer Plan, or (ii) any other Plan that is subject to Title IV of ERISA
under which the actuarial present value of the benefit liabilities under such
Plan exceeds the current value of the assets (computed on a plan termination
basis in accordance with Title IV of ERISA) of such Plan allocable to such
benefit liabilities.
(h) incur, or permit any ERISA Affiliate to incur, a liability to or
on account of a Plan under sections 515, 4062, 4063, 4064, 4201 or 4204 of
ERISA.
(i) contribute to or assume an obligation to contribute to, or permit
any ERISA Affiliate to contribute to or assume an obligation to contribute to,
any employee welfare benefit plan, as defined in section 3(1) of ERISA,
including, without limitation, any such plan maintained to provide benefits to
former employees of such entities, that may not be terminated by such entities
in their sole discretion at any time without any material liability.
(j) amend, or permit any ERISA Affiliate to amend, a Plan resulting in
an increase in current liability such that the Borrowers, any of their
Subsidiaries or any ERISA Affiliate is required to provide security to such Plan
under section 401(a)(29) of the Code.
Section 9.11 Sale or Discount of Receivables. Except for receivables
obtained by the Borrowers or any of their Subsidiaries out of the ordinary
course of business or the settlement of joint interest billing accounts in the
ordinary course of business or discounts granted to settle collection of
accounts receivable or the sale of defaulted accounts arising in the ordinary
course of business in connection with the compromise or collection thereof and
not in connection with any financing transaction, neither of the Borrowers nor
any of their Subsidiaries will discount or sell (with or without recourse) any
of its notes receivable or accounts receivable.
55
Section 9.12 Mergers, Etc. Neither of the Borrowers nor any of their
Subsidiaries will 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 to any other Person,
except that any Wholly-Owned Subsidiary may merge with any other Wholly-Owned
Subsidiary and that any Borrower may merge with any Wholly-Owned Subsidiary so
long as such Borrower is the survivor.
Section 9.13 Sale of Properties. The Borrowers will not, and will not
permit any of their Subsidiaries to, sell, assign, farm-out, convey or otherwise
transfer any Property except for (a) the sale of Hydrocarbons in the ordinary
course of business; (b) farmouts of undeveloped acreage and assignments in
connection with such farmouts; (c) the sale or transfer of equipment that is no
longer necessary for the business of the Borrower or such Subsidiary or is
replaced by equipment of at least comparable value and use; the sale or other
dispositions (including Casualty Events) of Oil and Gas Properties or any
interest therein or any Subsidiaries owning Oil and Gas Properties; provided
that (i) 100% of the consideration received in respect of such sale or other
disposition shall be cash or like kind exchange, (ii) the consideration received
in respect of such sale or other disposition shall be equal to or greater than
the fair market value of the Oil and Gas Property, interest therein or
Subsidiary subject of such sale or other disposition; (iii) at such time and
after giving effect to such sale, lease or other disposition, no Borrowing Base
deficiency under the Senior Revolving Credit Agreement shall exist, provided,
that the condition that no Borrowing Base deficiency under the Senior Revolving
Credit Agreement shall exist at the time of any such sale, lease or other
disposition shall not apply if the Borrower notifies the Administrative Agent
that proceeds of such sale, lease or other disposition shall be used to remedy a
Borrowing Base deficiency under the Senior Revolving Credit Agreement and the
Borrower in fact uses such proceeds to remedy such Borrowing Base Deficiency, to
the extent thereof, with any surplus proceeds being used for one or more of the
purposes permitted by clause (v) of this Section 9.13(d), (iv) if such sale or
other disposition of Oil and Gas Property or Subsidiary owning Oil and Gas
Properties included in the most recently delivered Reserve Report during any
period between two successive scheduled redeterminations is sold for a price in
excess of $10,000,000, individually or in the aggregate, then the Total Reserve
Value shall be reduced, effective immediately upon such sale or disposition, by
an amount equal to the value as determined by the Majority Lenders, (v) an
amount equal to 100% of the net proceeds received from such sale, lease or other
disposition shall be used within 90 days of such disposition: (1) to acquire
Property, plant and equipment or any business entity used or useful in carrying
on the business of the Borrower and its Subsidiaries and having a fair market
value at least equal to the fair market value of the Properties sold, leased or
otherwise disposed of or to improve or replace any existing Property of the
Borrower and its Subsidiaries used or useful in carrying on the business of the
Borrower and its Subsidiaries, (2) to repay or retire Debt under the Senior
Revolving Credit Agreement or (3) to Redeem the Notes; and sales and other
dispositions of Properties not regulated by Section 9.13(a) to (e) having a fair
market value not to exceed $2,500,000 during any 12-month period.
Section 9.14 Environmental Matters. Neither Borrower will, and will not
permit any Subsidiary to, violate or permit any of its Property to be in
violation of, or do anything or permit anything to be done which will subject
any such Property to any Remedial Work under any Environmental Laws, assuming
disclosure to the applicable Governmental Authority of all relevant facts,
conditions and circumstances, if any, pertaining to such Property where such
56
violations or remedial obligations could reasonably be expected to have a
Material Adverse Effect.
Section 9.15 Transactions with Affiliates. Neither Borrower will, and will
not permit any Subsidiary to, enter into any transaction, including, without
limitation, any purchase, sale, lease or exchange of Property or the rendering
of any service, with any Affiliate (other than the Guarantors and Wholly-Owned
Subsidiaries of the Borrowers) unless such transactions are not otherwise
prohibited by this Agreement and are upon fair and reasonable terms no less
favorable to it than it would obtain in a comparable arm's length transaction
with a Person not an Affiliate.
Section 9.16 Subsidiaries. Each Borrower shall have no Subsidiaries other
than Wholly-Owned Subsidiaries. Each Borrower shall not, and shall not permit
its Subsidiaries to, create or acquire any additional Subsidiary unless such
Borrower gives written notice to the Administrative Agent of such creation or
acquisition and complies with Section 8.14(b).
Section 9.17 Negative Pledge Agreements; Dividend Restrictions. Neither of
the Borrowers nor any of their Subsidiaries will create, incur, assume or suffer
to exist any contract, agreement or understanding (other than this Agreement,
the Security Instruments or the Senior Revolving Credit Documents) that in any
way prohibits or restricts the granting, conveying, creation or imposition of
any Lien on any of its Property in favor of the Administrative Agent and the
Lenders or restricts any Subsidiary from paying dividends or making
distributions to any Borrower or any Guarantor, or which requires the consent of
or notice to other Persons in connection therewith, other than Liens permitted
under (g) of the definition of Excepted Liens or Section 9.03(c), but only with
respect to the property subject to such Lien.
Section 9.18 Gas Imbalances, Take-or-Pay or Other Prepayments. Neither
Borrower will, and will not permit any of its Subsidiaries to, allow gas
imbalances, take-or-pay or other prepayments with respect to the Oil and Gas
Properties of the Borrowers or any of their Subsidiaries that would require such
Borrower or such Subsidiary to deliver Hydrocarbons at some future time without
then or thereafter receiving full payment therefor to exceed 100,000 Mcf of gas
(on an Mcfe equivalent basis) in the aggregate.
Section 9.19 Swap Agreements. Neither Borrower will, and will not permit
any Subsidiary to, enter into any Swap Agreements with any Person other than
Swap Agreements in respect of commodities (i) with an Approved Counterparty and
(ii) the notional volumes for which (when aggregated with other commodity Swap
Agreements then in effect other than basis differential swaps on volumes already
hedged pursuant to other Swap Agreements) do not exceed, as of the date such
Swap Agreement is executed, 85% of the reasonably anticipated projected
production from Proved Developed Producing Reserves for each month during the
period during which such Swap Agreement is in effect for each of crude oil and
natural gas, calculated separately, for terms not extending beyond November 15,
2010, (b) Swap Agreements in respect of interest rates with an Approved
Counterparty, as follows: (i) Swap Agreements effectively converting interest
rates from floating to fixed, the notional amounts of which (when aggregated
with all other Swap Agreements of the Borrowers and their Subsidiaries then in
effect effectively converting interest rates from floating to fixed) do not
exceed 75% of the then outstanding principal amount of the Borrowers' Debt for
borrowed money which bears interest at a floating rate and (c) Swap Agreements
listed on Schedule 7.21 hereto. In no event shall any
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Swap Agreement contain any requirement, agreement or covenant for any Borrower
or any Subsidiary to post collateral or margin to secure their obligations under
such Swap Agreement or to cover market exposures except to the extent permitted
by the Senior Revolving Credit Agreement.
Section 9.20 Acquisition Documents. Neither Borrower will, and will not
permit any of its Subsidiaries to, amend, modify or supplement any of the
Acquisition Documents if the effect thereof could reasonably be expected to have
a Material Adverse Effect (and provided that the Borrowers promptly furnishes to
the Administrative Agent a copy of such amendment, modification or supplement).
Section 9.21 Anti-Layering. Notwithstanding anything to the contrary
contained herein, neither Borrower will, and neither Borrower will permit any
Subsidiary to, incur, create, assume or suffer to exist any Debt if such Debt is
subordinate or junior in ranking in right of payment to the Senior Revolving
Credit Agreement, unless such Debt is expressly subordinated in right of payment
to the obligations under this Agreement.
ARTICLE X
EVENTS OF DEFAULT; REMEDIES
Section 10.01 Events of Default. One or more of the following events shall
constitute an "Event of Default":
(a) the Borrowers shall fail to pay any principal of any Loan when and
as the same shall become due and payable, whether at the due date thereof or at
a date fixed for prepayment thereof or otherwise.
(b) the Borrowers shall fail to pay any interest on any Loan or any
fee or any other amount (other than an amount referred to in Section 10.01(a))
payable under any Loan Document, when and as the same shall become due and
payable, and such failure shall continue unremedied for a period of three
Business Days.
(c) any representation or warranty made by or on behalf of the
Borrowers or any of their Subsidiaries in or in connection with any Loan
Document or any amendment or modification of any Loan Document or waiver under
such Loan Document, or in any report, certificate, financial statement or other
document furnished pursuant to or in connection with any Loan Document or any
amendment or modification thereof or waiver thereunder, shall prove to have been
incorrect or misleading in any material respect when made or deemed made.
(d) any Borrower or any of their Subsidiaries shall fail to observe or
perform any covenant, condition or agreement contained in Section 8.02, Section
8.14 or in ARTICLE IX.
(e) any Borrower or any of their Subsidiaries shall fail to observe or
perform any covenant, condition or agreement contained in this Agreement (other
than those specified in Section 10.01(a), Section 10.01(b) or Section 10.01(d))
or any other Loan Document, and such failure shall continue unremedied for a
period of 30 days after the notice thereof from the Administrative Agent to the
Borrowers (which notice will be given at the request of any Lender).
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(f) any Borrower or any of their Subsidiaries shall fail to make any
payment (whether of principal or interest and regardless of amount) in respect
of any Material Indebtedness, when and as the same shall become due and payable
after expiration of any applicable grace period.
(g) any event or condition occurs that results in any Material
Indebtedness becoming due prior to its scheduled maturity or that enables or
permits (with or without the giving of notice, the lapse of time or both) the
holder or holders of any Material Indebtedness or any trustee or agent on its or
their behalf to cause any Material Indebtedness to become due, or to require the
Redemption thereof or any offer to Redeem to be made in respect thereof, prior
to its scheduled maturity or require the Borrowers or any of their Subsidiaries
to make an offer in respect thereof after expiration of any applicable grace
period.
(h) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed seeking (i) liquidation, reorganization or other relief
in respect of any Borrower or any Subsidiary or its debts, or of a substantial
part of its assets, under any Federal, state or foreign bankruptcy, insolvency,
receivership or similar law now or hereafter in effect or (ii) the appointment
of a receiver, trustee, custodian, sequestrator, conservator or similar official
for any Borrower or for a substantial part of its assets, and, in any such case,
such proceeding or petition shall continue undismissed for sixty (60) days or an
order or decree approving or ordering any of the foregoing shall be entered.
(i) any Borrower or any of their Subsidiaries shall (i) voluntarily
commence any proceeding or file any petition seeking liquidation, reorganization
or other relief under any Federal, state or foreign bankruptcy, insolvency,
receivership or similar law now or hereafter in effect, (ii) consent to the
institution of, or fail to contest in a timely and appropriate manner, any
proceeding or petition described in Section 10.01(h), (iii) apply for or consent
to the appointment of a receiver, trustee, custodian, sequestrator, conservator
or similar official for any Borrower or any of their Subsidiaries or for a
substantial part of its assets, (iv) file an answer admitting the material
allegations of a petition filed against it in any such proceeding, (v) make a
general assignment for the benefit of creditors or (vi) take any action for the
purpose of effecting any of the foregoing.
(j) any Borrower or any of their Subsidiaries shall become unable,
admit in writing its inability or fail generally to pay its debts as they become
due.
(k) one or more judgments for the payment of money in an aggregate
amount in excess of $2,500,000 shall be rendered against any Borrower, any of
their Subsidiaries or any combination thereof and the same shall remain
undischarged for a period of 60 consecutive days during which execution shall
not be effectively stayed, or any action shall be legally taken by a judgment
creditor to attach or levy upon any assets of any Borrower or any of their
Subsidiaries to enforce any such judgment.
(l) the Loan Documents after delivery thereof shall for any reason,
except to the extent permitted by the terms thereof, cease to be in full force
and effect and valid, binding and enforceable in accordance with their terms
against the Borrowers or a Guarantor party thereto or shall be repudiated by any
of them, or cease to create a valid and perfected Lien of the priority
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required thereby on any of the collateral purported to be covered thereby and
not cured by them at the Administrative Agent's request, except to the extent
permitted by the terms of this Agreement, or any Borrower or any of their
Subsidiaries shall so state in writing.
(m) an ERISA Event shall have occurred that, when taken together with
all other ERISA Events that have occurred, could reasonably be expected to
result in liability of the Borrowers and their Subsidiaries in an aggregate
amount exceeding $1,000,000 in any year.
(n) a Change in Control shall occur.
(o) the Intercreditor Agreement, after delivery thereof shall for any
reason, except to the extent permitted by the terms thereof, ceases to be in
full force and effect and valid, binding and enforceable in accordance with its
terms against the Borrowers or any party thereto or holder of the Debt
subordinated thereby or shall be repudiated by any of them.
Section 10.02 Remedies.
(a) In the case of an Event of Default other than one described in
Section 10.01(h), Section 10.01(i) or Section 10.01(j), at any time thereafter
during the continuance of such Event of Default, the Administrative Agent may
(and at the request of the Majority Lenders), shall, by notice to the Borrowers,
declare the Notes and the Loans then outstanding to be due and payable in whole
(or in part, in which case any principal not so declared to be due and payable
may thereafter be declared to be due and payable), and thereupon the principal
of the Loans so declared to be due and payable, together with accrued interest
thereon and all fees and other obligations of the Borrowers and the Guarantors
accrued hereunder and under the Notes and the other Loan Documents shall become
due and payable immediately, without presentment, demand, protest, notice of
intent to accelerate, notice of acceleration or other notice of any kind, all of
which are hereby waived by each Borrower and each Guarantor; and in case of an
Event of Default described in Section 10.01(h), Section 10.01(i) or Section
10.01(j), the Notes and the principal of the Loans then outstanding, together
with accrued interest thereon and all fees and the other obligations of the
Borrowers and the Guarantors accrued hereunder and under the Notes and the other
Loan Documents, shall automatically become due and payable, without presentment,
demand, protest or other notice of any kind, all of which are hereby waived by
each Borrower and each Guarantor.
(b) In the case of the occurrence of an Event of Default, the
Administrative Agent and the Lenders will have all other rights and remedies
available at law and equity, subject, however, to the terms of this Agreement
and the Intercreditor Agreement.
(c) All proceeds realized from the liquidation or other disposition of
collateral or otherwise received after maturity of the Notes, whether by
acceleration or otherwise, shall be applied:
(i) first, to reimbursement of expenses and indemnities provided
for in this Agreement and the Security Instruments;
(ii) second, to fees owed to the Administrative Agent or any
Lender;
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(iii) third, to accrued interest on the Notes;
(iv) fourth, pro rata to principal outstanding on the Notes;
(v) fifth, to any other Indebtedness;
(vi) sixth, any excess shall be paid to the Borrowers or as
otherwise required by any Governmental Requirement.
ARTICLE XI
THE ADMINISTRATIVE AGENT
Section 11.01 Appointment; Powers. Each of the Lenders hereby irrevocably
appoints the Administrative Agent as its agent and authorizes the Administrative
Agent to take such actions on its behalf and to exercise such powers as are
delegated to the Administrative Agent by the terms hereof and the other Loan
Documents, together with such actions and powers as are reasonably incidental
thereto.
Section 11.02 Duties and Obligations of Administrative Agent. The
Administrative Agent shall not have any duties or obligations except those
expressly set forth in the Loan Documents. Without limiting the generality of
the foregoing, (a) the Administrative Agent shall not be subject to any
fiduciary or other implied duties, regardless of whether a Default has occurred
and is continuing (the use of the term "agent" herein and in the other Loan
Documents with reference to the Administrative Agent is not intended to connote
any fiduciary or other implied (or express) obligations arising under agency
doctrine of any applicable law; rather, such term is used merely as a matter of
market custom, and is intended to create or reflect only an administrative
relationship between independent contracting parties), (b) the Administrative
Agent shall not have any duty to take any discretionary action or exercise any
discretionary powers, except as provided in Section 11.03, and (c) except as
expressly set forth herein, the Administrative Agent shall have no duty to
disclose, and shall not be liable for the failure to disclose, any information
relating to the Borrowers or any of their Subsidiaries that is communicated to
or obtained by the bank serving as Administrative Agent or any of its Affiliates
in any capacity. The Administrative Agent shall be deemed not to have knowledge
of any Default unless and until written notice thereof is given to the
Administrative Agent by the Borrowers or a Lender, and shall not be responsible
for or have any duty to ascertain or inquire into (i) any statement, warranty or
representation made in or in connection with this Agreement or any other Loan
Document, (ii) the contents of any certificate, report or other document
delivered hereunder or under any other Loan Document or in connection herewith
or therewith, (iii) the performance or observance of any of the covenants,
agreements or other terms or conditions set forth herein or in any other Loan
Document, (iv) the validity, enforceability, effectiveness or genuineness of
this Agreement, any other Loan Document or any other agreement, instrument or
document, (v) the satisfaction of any condition set forth in ARTICLE VI or
elsewhere herein, other than to confirm receipt of items expressly required to
be delivered to the Administrative Agent or as to those conditions precedent
expressly required to be to the Administrative Agent's satisfaction, (vi) the
existence, value, perfection or priority of any collateral security or the
financial or other condition of the Borrowers and their Subsidiaries or any
other obligor or guarantor, or (vii) any failure by the Borrowers or any other
Person (other
61
than itself) to perform any of its obligations hereunder or under any other Loan
Document or the performance or observance of any covenants, agreements or other
terms or conditions set forth herein or therein.
Section 11.03 Action by Administrative Agent. The Administrative Agent
shall not have any duty to take any discretionary action or exercise any
discretionary powers, except discretionary rights and powers expressly
contemplated hereby that the Administrative Agent is required to exercise in
writing as directed by the Majority Lenders (or such other number or percentage
of the Lenders as shall be necessary under the circumstances as provided in
Section 12.02) and in all cases the Administrative Agent shall be fully
justified in failing or refusing to act hereunder or under any other Loan
Documents unless it shall (a) receive written instructions from the Majority
Lenders or the Lenders, as applicable, (or such other number or percentage of
the Lenders as shall be necessary under the circumstances as provided in Section
12.02) specifying the action to be taken and (b) be indemnified to its
satisfaction by the Lenders against any and all liability and expenses which may
be incurred by it by reason of taking or continuing to take any such action. The
instructions as aforesaid and any action taken or failure to act pursuant
thereto by the Administrative Agent shall be binding on all of the Lenders. If a
Default has occurred and is continuing, then the Administrative Agent shall take
such action with respect to such Default as shall be directed by the requisite
Lenders in the written instructions (with indemnities) described in this Section
11.03, provided that, unless and until the Administrative Agent shall have
received such directions, the Administrative Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Default as it shall deem advisable in the best interests of the Lenders.
In no event, however, shall the Administrative Agent be required to take any
action which exposes the Administrative Agent to personal liability or which is
contrary to this Agreement, the Loan Documents or applicable law. The
Administrative Agent shall not be liable for any action taken or not taken by it
with the consent or at the request of the Majority Lenders or the Lenders (or
such other number or percentage of the Lenders as shall be necessary under the
circumstances as provided in Section 12.02), and otherwise the Administrative
Agent shall not be liable for any action taken or not taken by it hereunder or
under any other Loan Document or under any other document or instrument referred
to or provided for herein or therein or in connection herewith or therewith
INCLUDING ITS OWN ORDINARY NEGLIGENCE, except for its own gross negligence or
willful misconduct.
Section 11.04 Reliance by Administrative Agent. The Administrative Agent
shall be entitled to rely upon, and shall not incur any liability for relying
upon, any notice, request, certificate, consent, statement, instrument, document
or other writing believed by it to be genuine and to have been signed or sent by
the proper Person. The Administrative Agent also may rely upon any statement
made to it orally or by telephone and believed by it to be made by the proper
Person, and shall not incur any liability for relying thereon and the Borrowers
and the Lenders hereby waive the right to dispute the Administrative Agent's
record of such statement, except in the case of gross negligence or willful
misconduct by the Administrative Agent. The Administrative Agent may consult
with legal counsel (who may be counsel for the Borrowers), independent
accountants and other experts selected by it, and shall not be liable for any
action taken or not taken by it in accordance with the advice of any such
counsel, accountants or experts. The Administrative Agent may deem and treat the
payee of any Note as the holder
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thereof for all purposes hereof unless and until a written notice of the
assignment or transfer thereof permitted hereunder shall have been filed with
the Administrative Agent.
Section 11.05 Subagents. The Administrative Agent may perform any and all
its duties and exercise its rights and powers by or through any one or more
sub-agents appointed by the Administrative Agent. The Administrative Agent and
any such sub-agent may perform any and all its duties and exercise its rights
and powers through their respective Related Parties. The exculpatory provisions
of the preceding Sections of this ARTICLE XI shall apply to any such sub-agent
and to the Related Parties of the Administrative Agent and any such sub-agent,
and shall apply to their respective activities in connection with the
syndication of the credit facilities provided for herein as well as activities
as Administrative Agent.
Section 11.06 Resignation or Removal of the Administrative Agent. Subject
to the appointment and acceptance of a successor Administrative Agent as
provided in this Section 11.06, the Administrative Agent may resign at any time
by notifying the Lenders and the Borrowers, and the Administrative Agent may be
removed at any time with or without cause by the Majority Lenders. Upon any such
resignation or removal, the Majority Lenders shall have the right, in
consultation with the Borrowers, to appoint a successor. If no successor shall
have been so appointed by the Majority Lenders and shall have accepted such
appointment within 30 days after the retiring Administrative Agent gives notice
of its resignation or removal of the retiring Administrative Agent, then the
retiring Administrative Agent may, on behalf of the Lenders, appoint a successor
Administrative Agent which shall be a bank with an office in Houston, Texas, or
an Affiliate of any such bank. Upon the acceptance of its appointment as
Administrative Agent hereunder by a successor, such successor shall succeed to
and become vested with all the rights, powers, privileges and duties of the
retiring Administrative Agent, and the retiring Administrative Agent shall be
discharged from its duties and obligations hereunder. The fees payable by the
Borrowers to a successor Administrative Agent shall be the same as those payable
to its predecessor unless otherwise agreed between the Borrowers and such
successor. After the Administrative Agent's resignation hereunder, the
provisions of this ARTICLE XI and Section 12.03 shall continue in effect for the
benefit of such retiring Administrative Agent, its sub-agents and their
respective Related Parties in respect of any actions taken or omitted to be
taken by any of them while it was acting as Administrative Agent.
Section 11.07 Administrative Agent as Lender. Each bank serving as an
Administrative Agent hereunder shall have the same rights and powers in its
capacity as a Lender as any other Lender and may exercise the same as though it
were not an agent, and such bank and its Affiliates may accept deposits from,
lend money to and generally engage in any kind of business with the Borrowers or
any Subsidiary or other Affiliate thereof as if it were not an agent hereunder.
Section 11.08 No Reliance. Each Lender acknowledges that it has,
independently and without reliance upon the Administrative Agent or any other
Lender and based on such documents and information as it has deemed appropriate,
made its own credit analysis and decision to enter into this Agreement and each
other Loan Document to which it is a party. Each Lender also acknowledges that
it will, independently and without reliance upon the Administrative Agent or any
other Lender and based on such documents and information as it shall from time
to time deem appropriate, continue to make its own decisions in taking or not
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taking action under or based upon this Agreement, any other Loan Document, any
related agreement or any document furnished hereunder or thereunder. The
Administrative Agent shall not be required to keep itself informed as to the
performance or observance by the Borrowers or any of their Subsidiaries of this
Agreement, the Loan Documents or any other document referred to or provided for
herein or to inspect the Properties or books of the Borrowers or their
Subsidiaries. Except for notices, reports and other documents and information
expressly required to be furnished to the Lenders by the Administrative Agent
hereunder, the Administrative Agent shall have no duty or responsibility to
provide any Lender with any credit or other information concerning the affairs,
financial condition or business of the Borrowers (or any of its Affiliates)
which may come into the possession of the Administrative Agent or any of its
Affiliates. In this regard, each Lender acknowledges that ▇▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P.
is acting in this transaction as special counsel to BNP Paribas only in respect
of this Agreement, except to the extent otherwise expressly stated in any legal
opinion or any Loan Document. Each other party hereto will consult with its own
legal counsel to the extent that it deems necessary in connection with the Loan
Documents and the matters contemplated therein.
Section 11.09 Administrative Agent May File Proofs of Claim. In case of the
pendency of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other judicial
proceeding relative to the Borrowers or any of their Subsidiaries, the
Administrative Agent (irrespective of whether the principal of any Loan shall
then be due and payable as herein expressed or by declaration or otherwise and
irrespective of whether the Administrative Agent shall have made any demand on
the Borrowers) shall be entitled and empowered, by intervention in such
proceeding or otherwise:
(a) to file and prove a claim for the whole amount of the principal
and interest owing and unpaid in respect of the Loans and all other Indebtedness
that are owing and unpaid and to file such other documents as may be necessary
or advisable in order to have the claims of the Lenders and the Administrative
Agent (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Lenders and the Administrative Agent and their
respective agents and counsel and all other amounts due the Lenders and the
Administrative Agent under Section 12.03) allowed in such judicial proceeding;
and
(b) to collect and receive any monies or other property payable or
deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Lender to make such payments to the Administrative Agent and, in the event
that the Administrative Agent shall consent to the making of such payments
directly to the Lenders, to pay to the Administrative Agent any amount due for
the reasonable compensation, expenses, disbursements and advances of the
Administrative Agent and its agents and counsel, and any other amounts due the
Administrative Agent under Section 12.03.
Nothing contained herein shall be deemed to authorize the Administrative Agent
to authorize or consent to or accept or adopt on behalf of any Lender any plan
of reorganization, arrangement, adjustment or composition affecting the
Indebtedness or the rights of any Lender or to authorize the Administrative
Agent to vote in respect of the claim of any Lender in any such proceeding.
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Section 11.10 Authority of Administrative Agent to Release Collateral and
Liens. Each Lender hereby authorizes the Administrative Agent to release any
collateral that is permitted to be sold or released pursuant to the terms of the
Loan Documents. Each Lender hereby authorizes the Administrative Agent to
execute and deliver to the Borrowers, at the Borrowers' sole cost and expense,
any and all releases of Liens, termination statements, assignments or other
documents reasonably requested by the Borrowers in connection with any sale or
other disposition of Property to the extent such sale or other disposition is
permitted by the terms of Section 9.12 or is otherwise authorized by the terms
of the Loan Documents.
Section 11.11 The Arrangers. The Arrangers shall have no duties,
responsibilities or liabilities under this Agreement and the other Loan
Documents other than their duties, responsibilities and liabilities in their
capacities as Lenders hereunder.
ARTICLE XII
MISCELLANEOUS
Section 12.01 Notices.
(a) Except in the case of notices and other communications expressly
permitted to be given in writing (and subject to Section 12.01(b)), all notices
and other communications provided for herein shall be in writing and shall be
delivered by hand or overnight courier service, mailed by certified or
registered mail and also sent by telecopy, as follows:
(i) if to the Borrowers, to it ▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, Facsimile (▇▇▇) ▇▇▇-▇▇▇▇, Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
President.
(ii) if to the Administrative Agent, to it at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, Attention of ▇▇▇▇▇ ▇▇▇▇▇▇ (Telecopy No.
713-659-6915); with a copy to ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇,
Attention of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Loan Assistant (Telecopy No. 212-841-2683); and
(iii) if to any other Lender, to it at its address (or telecopy
number) set forth in its Administrative Questionnaire.
(b) Notices and other communications to the Lenders hereunder may be
delivered or furnished by electronic communications pursuant to procedures
approved by the Administrative Agent; provided that the foregoing shall not
apply to notices pursuant to ARTICLE II, ARTICLE III, ARTICLE IV and ARTICLE V
unless otherwise agreed by the Administrative Agent and the applicable Lender.
The Administrative Agent or the Borrowers may, in their discretion, agree to
accept notices and other communications to it hereunder by electronic
communications pursuant to procedures approved by it; provided that approval of
such procedures may be limited to particular notices or communications.
(c) Any party hereto may change its address or telecopy number for
notices and other communications hereunder by notice to the other parties
hereto. All notices and other communications given to any party hereto in
accordance with the provisions of this Agreement shall be deemed to have been
given on the date of receipt.
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Section 12.02 Waivers; Amendments.
(a) No failure on the part of the Administrative Agent or any Lender
to exercise and no delay in exercising, and no course of dealing with respect
to, any right, power or privilege, or any abandonment or discontinuance of steps
to enforce such right, power or privilege, under any of the Loan Documents shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, power or privilege under any of the Loan Documents preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
The rights and remedies of the Administrative Agent and the Lenders hereunder
and under the other Loan Documents are cumulative and are not exclusive of any
rights or remedies that they would otherwise have. No waiver of any provision of
this Agreement or any other Loan Document or consent to any departure by the
Borrowers therefrom shall in any event be effective unless the same shall be
permitted by Section 12.02(b), and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given.
Without limiting the generality of the foregoing, the making of a Loan shall not
be construed as a waiver of any Default, regardless of whether the
Administrative Agent or any Lender may have had notice or knowledge of such
Default at the time.
(b) Neither this Agreement nor any provision hereof nor any Security
Instrument nor any provision thereof may be waived, amended or modified except
pursuant to an agreement or agreements in writing entered into by the Borrowers
and the Majority Lenders or by the Borrowers and the Administrative Agent with
the consent of the Majority Lenders; provided that no such agreement shall (i)
modify Section 2.07 without the consent of each Lender, (ii) reduce the
principal amount of any Loan or reduce the rate of interest thereon, or reduce
any fees payable hereunder, or reduce any other Indebtedness hereunder or under
any other Loan Document, without the written consent of each Lender affected
thereby, (iii) postpone the scheduled date of payment or prepayment of the
principal amount of any Loan, or any interest thereon, or any fees payable
hereunder, or any other Indebtedness hereunder or under any other Loan Document,
or reduce the amount of, waive or excuse any such payment, or postpone or extend
the Maturity Date without the written consent of each Lender affected thereby,
(iv) change Section 4.01(b) or Section 4.01(c) in a manner that would alter the
pro rata sharing of payments required thereby, without the written consent of
each Lender affected thereby, (v) waive or amend Section 8.14 or change the
definition of the terms "Domestic Subsidiary", "Foreign Subsidiary", "Material
Domestic Subsidiary" or "Subsidiary" without the written consent of each Lender,
(vi) release any Guarantor (except as set forth in the Guaranty Agreement), or
the collateral (other than as provided in Section 11.10), or reduce the
percentage set forth in Section 8.14 to less than 80%, without the written
consent of each Lender, or (vii) change any of the provisions of this Section
12.02(b) or the definition of "Majority Lenders" or any other provision hereof
specifying the number or percentage of Lenders required to waive, amend or
modify any rights hereunder or under any other Loan Documents or make any
determination or grant any consent hereunder or any other Loan Documents,
without the written consent of each Lender; provided further that no such
agreement shall amend, modify or otherwise affect the rights or duties of the
Administrative Agent hereunder or under any other Loan Document without the
prior written consent of the Administrative Agent. Notwithstanding the
foregoing, any supplement to Schedule 7.15 (Subsidiaries) shall be effective
simply by delivering to the Administrative Agent a supplemental schedule clearly
marked as such and, upon receipt, the Administrative Agent will promptly deliver
a copy thereof to the Lenders.
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Section 12.03 Expenses, Indemnity; Damage Waiver.
(a) The Borrowers shall pay (i) all reasonable out-of-pocket expenses
incurred by the Administrative Agent and its Affiliates, including, without
limitation, the reasonable fees, charges and disbursements of counsel and other
outside consultants for the Administrative Agent, the reasonable travel,
photocopy, mailing, courier, telephone and other similar expenses in connection
with the syndication of the credit facilities provided for herein, the
preparation, negotiation, execution, delivery and administration (both before
and after the execution hereof and including advice of counsel to the
Administrative Agent as to the rights and duties of the Administrative Agent and
the Lenders with respect thereto) of this Agreement and the other Loan Documents
and any amendments, modifications or waivers of or consents related to the
provisions hereof or thereof (whether or not the transactions contemplated
hereby or thereby shall be consummated), (ii) all reasonable costs, expenses,
Taxes, assessments and other charges incurred by the Administrative Agent or any
Lender in connection with any filing, registration, recording or perfection of
any security interest contemplated by this Agreement or any Security Instrument
or any other document referred to therein, (iii) all out-of-pocket expenses
incurred by the Administrative Agent or any Lender, including the fees, charges
and disbursements of any counsel for the Administrative Agent or any Lender, in
connection with the enforcement or protection of its rights in connection with
this Agreement or any other Loan Document, including its rights under this
Section 12.03, or in connection with the Loans made hereunder, including,
without limitation, all such out-of-pocket expenses incurred during any workout,
restructuring or negotiations in respect of such Loans.
(b) THE BORROWERS SHALL INDEMNIFY THE ADMINISTRATIVE AGENT, EACH
ARRANGER AND EACH LENDER, AND EACH RELATED PARTY OF ANY OF THE FOREGOING PERSONS
(EACH SUCH PERSON BEING CALLED AN "INDEMNITEE") AGAINST, AND HOLD EACH
INDEMNITEE HARMLESS FROM, ANY AND ALL LOSSES, CLAIMS, DAMAGES, LIABILITIES AND
RELATED EXPENSES, INCLUDING THE FEES, CHARGES AND DISBURSEMENTS OF ANY COUNSEL
FOR ANY INDEMNITEE, INCURRED BY OR ASSERTED AGAINST ANY INDEMNITEE ARISING OUT
OF, IN CONNECTION WITH, OR AS A RESULT OF (i) THE EXECUTION OR DELIVERY OF THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY AGREEMENT OR INSTRUMENT CONTEMPLATED
HEREBY OR THEREBY, THE PERFORMANCE BY THE PARTIES HERETO OR THE PARTIES TO ANY
OTHER LOAN DOCUMENT OF THEIR RESPECTIVE OBLIGATIONS HEREUNDER OR THEREUNDER OR
THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED HEREBY OR BY ANY OTHER LOAN
DOCUMENT, (ii) THE FAILURE OF THE BORROWERS OR ANY OF THEIR SUBSIDIARIES TO
COMPLY WITH THE TERMS OF ANY LOAN DOCUMENT, INCLUDING THIS AGREEMENT, OR WITH
ANY GOVERNMENTAL REQUIREMENT, (iii) ANY INACCURACY OF ANY REPRESENTATION OR ANY
BREACH OF ANY WARRANTY OR COVENANT OF THE BORROWERS SET FORTH IN ANY OF THE LOAN
DOCUMENTS OR ANY INSTRUMENTS, DOCUMENTS OR CERTIFICATIONS DELIVERED IN
CONNECTION THEREWITH, (iv) ANY LOAN OR THE USE OF THE PROCEEDS THEREFROM, (v)
ANY OTHER ASPECT OF THE LOAN DOCUMENTS, (vi) THE OPERATIONS OF THE BUSINESS OF
THE BORROWERS AND THEIR SUBSIDIARIES BY THE BORROWERS AND THEIR SUBSIDIARIES,
(vii) ANY ASSERTION THAT THE LENDERS WERE NOT ENTITLED TO RECEIVE THE
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PROCEEDS RECEIVED PURSUANT TO THE SECURITY INSTRUMENTS, (viii) ANY ENVIRONMENTAL
LAW APPLICABLE TO THE BORROWERS OR THEIR SUBSIDIARIES OR ANY OF THEIR
PROPERTIES, INCLUDING WITHOUT LIMITATION, THE PRESENCE, GENERATION, STORAGE,
RELEASE, THREATENED RELEASE, USE, TRANSPORT, DISPOSAL, ARRANGEMENT OF DISPOSAL
OR TREATMENT OF OIL, OIL AND GAS WASTES, SOLID WASTES OR HAZARDOUS SUBSTANCES ON
ANY OF THEIR PROPERTIES, (ix) THE BREACH OR NON-COMPLIANCE BY THE BORROWERS OR
ANY OF THEIR SUBSIDIARIES WITH ANY ENVIRONMENTAL LAW APPLICABLE TO THE BORROWERS
OR ANY OF THEIR SUBSIDIARIES, (x) THE PAST OWNERSHIP BY THE BORROWERS OR ANY OF
THEIR SUBSIDIARIES OF ANY OF THEIR PROPERTIES OR PAST ACTIVITY ON ANY OF THEIR
PROPERTIES WHICH, THOUGH LAWFUL AND FULLY PERMISSIBLE AT THE TIME, COULD RESULT
IN PRESENT LIABILITY, (xi) THE PRESENCE, USE, RELEASE, STORAGE, TREATMENT,
DISPOSAL, GENERATION, THREATENED RELEASE, TRANSPORT, ARRANGEMENT FOR TRANSPORT
OR ARRANGEMENT FOR DISPOSAL OF OIL, OIL AND GAS WASTES, SOLID WASTES OR
HAZARDOUS SUBSTANCES ON OR AT ANY OF THE PROPERTIES OWNED OR OPERATED BY THE
BORROWERS OR ANY OF THEIR SUBSIDIARIES OR ANY ACTUAL OR ALLEGED PRESENCE OR
RELEASE OF HAZARDOUS MATERIALS ON OR FROM ANY PROPERTY OWNED OR OPERATED BY THE
BORROWERS OR ANY OF THEIR SUBSIDIARIES, (xii) ANY ENVIRONMENTAL LIABILITY
RELATED IN ANY WAY TO THE BORROWERS OR ANY OF THEIR SUBSIDIARIES, OR (xiii) ANY
OTHER ENVIRONMENTAL, HEALTH OR SAFETY CONDITION IN CONNECTION WITH THE LOAN
DOCUMENTS, OR (xiv) ANY ACTUAL OR PROSPECTIVE CLAIM, LITIGATION, INVESTIGATION
OR PROCEEDING RELATING TO ANY OF THE FOREGOING, WHETHER BASED ON CONTRACT, TORT
OR ANY OTHER THEORY AND REGARDLESS OF WHETHER ANY INDEMNITEE IS A PARTY THERETO,
AND SUCH INDEMNITY SHALL EXTEND TO EACH INDEMNITEE NOTWITHSTANDING THE SOLE OR
CONCURRENT NEGLIGENCE OF EVERY KIND OR CHARACTER WHATSOEVER, WHETHER ACTIVE OR
PASSIVE, WHETHER AN AFFIRMATIVE ACT OR AN OMISSION, INCLUDING WITHOUT
LIMITATION, ALL TYPES OF NEGLIGENT CONDUCT IDENTIFIED IN THE RESTATEMENT
(SECOND) OF TORTS OF ONE OR MORE OF THE INDEMNITEES OR BY REASON OF STRICT
LIABILITY IMPOSED WITHOUT FAULT ON ANY ONE OR MORE OF THE INDEMNITEES; PROVIDED
THAT SUCH INDEMNITY SHALL NOT, AS TO ANY INDEMNITEE, BE AVAILABLE TO THE EXTENT
THAT SUCH LOSSES, CLAIMS, DAMAGES, LIABILITIES OR RELATED EXPENSES ARE
DETERMINED BY A COURT OF COMPETENT JURISDICTION BY FINAL AND NONAPPEALABLE
JUDGMENT TO HAVE RESULTED FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF
SUCH INDEMNITEE.
(c) To the extent that any Borrower fails to pay any amount required
to be paid by it to the Administrative Agent under Section 12.03(a) or (b), each
Lender severally agrees to pay to Administrative Agent, such Lender's ratable
share (determined as of the time that the applicable unreimbursed expense or
indemnity payment is sought) of such unpaid amount; provided that the
unreimbursed expense or indemnified loss, claim, damage, liability or related
expense, as the case may be, was incurred by or asserted against the
Administrative Agent in its capacity as such.
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(d) To the extent permitted by applicable law, the Borrowers shall not
assert, and the Borrowers hereby waive, any claim against any Indemnitee, on any
theory of liability, for special, indirect, consequential or punitive damages
(as opposed to direct or actual damages) arising out of, in connection with, or
as a result of, this Agreement, any other Loan Document or any agreement or
instrument contemplated hereby or thereby, the Transactions, any Loan or the use
of the proceeds thereof.
(e) All amounts due under this Section 12.03 shall be payable promptly
after written demand therefor.
Section 12.04 Successors and Assigns.
The provisions of this Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns
permitted hereby, except that (i) the Borrowers may not assign or otherwise
transfer any of its rights or obligations hereunder without the prior written
consent of each Lender (and any attempted assignment or transfer by the
Borrowers without such consent shall be null and void) and (ii) no Lender may
assign or otherwise transfer its rights or obligations hereunder except in
accordance with this Section 12.04. Nothing in this Agreement, expressed or
implied, shall be construed to confer upon any Person (other than the parties
hereto, their respective successors and assigns permitted hereby, Participants
(to the extent provided in Section 12.04(d)) and, (to the extent expressly
contemplated hereby, the Related Parties of each of the Administrative Agent and
the Lenders) any legal or equitable right, remedy or claim under or by reason of
this Agreement.
(b) (i) Subject to the conditions set forth in Section 12.04(b)(ii),
any Lender may assign to one or more assignees all or a portion of its rights
and obligations under this Agreement (including all or a portion of its
Commitment and the Loans at the time owing to it) with the prior written consent
(such consent not to be unreasonably withheld) of:
(A) the Borrowers, provided that no consent of the Borrowers
shall be required for an assignment to a Lender or an Affiliate of a Lender if
an Event of Default has occurred and is continuing; and
(B) the Administrative Agent, provided that no consent of
the Administrative Agent shall be required for an assignment to an assignee that
is a Lender immediately prior to giving effect to such assignment.
(ii) Assignments shall be subject to the following additional
conditions:
(A) except in the case of an assignment to a Lender or an
Affiliate of a Lender or an assignment of the entire remaining amount of the
assigning Lender's Commitment or Loans, the amount of the Commitment or Loans of
the assigning Lender subject to each such assignment (determined as of the date
the Assignment and Assumption with respect to such assignment is delivered to
the Administrative Agent) shall not be less than $5,000,000 unless each of the
Borrowers and the Administrative Agent otherwise consent, provided that no such
consent of the Borrowers shall be required if an Event of Default has occurred
and is continuing;
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(B) each partial assignment shall be made as an assignment
of a proportionate part of all the assigning Lender's rights and obligations
under this Agreement;
(C) the parties to each assignment shall execute and deliver
to the Administrative Agent an Assignment and Assumption, together with a
processing and recordation fee of $3,500;
(D) the assignee, if it shall not be a Lender, shall deliver
to the Administrative Agent an Administrative Questionnaire; and
(iii) Subject to Section 12.04(b)(iv) and the acceptance and
recording thereof, from and after the effective date specified in each
Assignment and Assumption the assignee thereunder shall be a party hereto and,
to the extent of the interest assigned by such Assignment and Assumption, have
the rights and obligations of a Lender under this Agreement, and the assigning
Lender thereunder shall, to the extent of the interest assigned by such
Assignment and Assumption, be released from its obligations under this Agreement
(and, in the case of an Assignment and Assumption covering all of the assigning
Lender's rights and obligations under this Agreement, such Lender shall cease to
be a party hereto but shall continue to be entitled to the benefits of Section
5.01, Section 5.02, Section 5.03 and Section 12.03). Any assignment or transfer
by a Lender of rights or obligations under this Agreement that does not comply
with this Section 12.04 shall be treated for purposes of this Agreement as a
sale by such Lender of a participation in such rights and obligations in
accordance with Section 12.04(d).
(iv) The Administrative Agent, acting for this purpose as an
agent of the Borrowers, shall maintain at one of its offices a copy of each
Assignment and Assumption delivered to it and a register for the recordation of
the names and addresses of the Lenders, and the Commitments and principal
amounts of the Loans, each Lender pursuant to the terms hereof from time to time
(the "Register"). The entries in the Register shall be conclusive, and the
Borrowers, the Administrative Agent and the Lenders may treat each Person whose
name is recorded in the Register pursuant to the terms hereof as a Lender
hereunder for all purposes of this Agreement, notwithstanding notice to the
contrary. The Register shall be available for inspection by the Borrowers and
any Lender, at any reasonable time and from time to time upon reasonable prior
notice. In connection with any changes to the Register, if necessary, the
Administrative Agent will reflect the revisions on Annex I and forward a copy of
such revised Annex I to the Borrowers and each Lender.
(v) Upon its receipt of a duly completed Assignment and
Assumption executed by an assigning Lender and an assignee, the assignee's
completed Administrative Questionnaire (unless the assignee shall already be a
Lender hereunder), the processing and recordation fee referred to in Section
12.04(b) and any written consent to such assignment required by Section
12.04(b), the Administrative Agent shall accept such Assignment and Assumption
and record the information contained therein in the Register. No assignment
shall be effective for purposes of this Agreement unless it has been recorded in
the Register as provided in this Section 12.04(b).
(c) (i) Any Lender may, without the consent of the Borrowers or the
Administrative Agent, sell participations to one or more banks or other entities
(a "Participant")
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in all or a portion of such Lender's rights and obligations under this Agreement
(including all or a portion of its Commitment and the Loans owing to it);
provided that (A) such Lender's obligations under this Agreement shall remain
unchanged, (B) such Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations and (C) the Borrowers, the
Administrative Agent and the other Lenders shall continue to deal solely and
directly with such Lender in connection with such Lender's rights and
obligations under this Agreement. Any agreement or instrument pursuant to which
a Lender sells such a participation shall provide that such Lender shall retain
the sole right to enforce this Agreement and to approve any amendment,
modification or waiver of any provision of this Agreement; provided that such
agreement or instrument may provide that such Lender will not, without the
consent of the Participant, agree to any amendment, modification or waiver
described in the proviso to Section 12.02 that affects such Participant. In
addition such agreement must provide that the Participant be bound by the
provisions of Section 12.03. Subject to Section 12.04(c)(ii), the Borrowers
agree that each Participant shall be entitled to the benefits of Section 5.01,
Section 5.02 and Section 5.03 to the same extent as if it were a Lender and had
acquired its interest by assignment pursuant to Section 12.04(b). To the extent
permitted by law, each Participant also shall be entitled to the benefits of
Section 12.08 as though it were a Lender, provided such Participant agrees to be
subject to Section 4.01(c) as though it were a Lender.
(ii) A Participant shall not be entitled to receive any greater
payment under Section 5.01 or Section 5.03 than the applicable Lender would
have been entitled to receive with respect to the participation sold to
such Participant, unless the sale of the participation to such Participant
is made with the Borrowers' prior written consent. A Participant that would
be a Foreign Lender if it were a Lender shall not be entitled to the
benefits of Section 5.03 unless the Borrowers are notified of the
participation sold to such Participant and such Participant agrees, for the
benefit of the Borrowers, to comply with Section 5.03(e) as though it were
a Lender.
(d) Any Lender may at any time pledge or assign a security interest in
all or any portion of its rights under this Agreement to secure obligations of
such Lender, including any pledge or assignment to secure obligations to a
Federal Reserve Bank, and this Section 12.04(d) shall not apply to any such
pledge or assignment of a security interest; provided that no such pledge or
assignment of a security interest shall release a Lender from any of its
obligations hereunder or substitute any such pledgee or assignee for such Lender
as a party hereto.
(e) Notwithstanding any other provisions of this Section 12.04, no
transfer or assignment of the interests or obligations of any Lender or any
grant of participations therein shall be permitted if such transfer, assignment
or grant would require the Borrowers and the Guarantors to file a registration
statement with the SEC or to qualify the Loans under the "Blue Sky" laws of any
state.
Section 12.05 Survival; Revival; Reinstatement.
(a) All covenants, agreements, representations and warranties made by
the Borrowers herein and in the certificates or other instruments delivered in
connection with or pursuant to this Agreement or any other Loan Document shall
be considered to have been relied upon by the other parties hereto and shall
survive the execution and delivery of this Agreement
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and the making of any Loans, regardless of any investigation made by any such
other party or on its behalf and notwithstanding that the Administrative Agent
or any Lender may have had notice or knowledge of any Default or incorrect
representation or warranty at the time any credit is extended hereunder, and
shall continue in full force and effect as long as the principal of or any
accrued interest on any Loan or any fee or any other amount payable under this
Agreement is outstanding and unpaid and so long as the Maturity Date in respect
of the Loans has not occurred. The provisions of Section 5.01, Section 5.02,
Section 5.03 and Section 12.03 and ARTICLE XI shall survive and remain in full
force and effect regardless of the consummation of the transactions contemplated
hereby, the repayment of the Loans, the expiration or termination of the
Commitments or the termination of this Agreement, any other Loan Document or any
provision hereof or thereof.
(b) To the extent that any payments on the Indebtedness or proceeds of
any collateral are subsequently invalidated, declared to be fraudulent or
preferential, set aside or required to be repaid to a trustee, debtor in
possession, receiver or other Person under any bankruptcy law, common law or
equitable cause, then to such extent, the Indebtedness so satisfied shall be
revived and continue as if such payment or proceeds had not been received and
the Administrative Agent's and the Lenders' Liens, security interests, rights,
powers and remedies under this Agreement and each Loan Document shall continue
in full force and effect. In such event, each Loan Document shall be
automatically reinstated and the Borrowers shall take such action as may be
reasonably requested by the Administrative Agent and the Lenders to effect such
reinstatement.
Section 12.06 Counterparts; Integration; Effectiveness.
(a) This Agreement may be executed in counterparts (and by different
parties hereto on different counterparts), each of which shall constitute an
original, but all of which when taken together shall constitute a single
contract.
(b) This Agreement, the other Loan Documents and any separate letter
agreements with respect to fees payable to the Administrative Agent constitute
the entire contract among the parties relating to the subject matter hereof and
thereof and supersede any and all previous agreements and understandings, oral
or written, relating to the subject matter hereof and thereof. THIS AGREEMENT
AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES
HERETO AND THERETO AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
(c) Except as provided in Section 6.01, this Agreement shall become
effective when it shall have been executed by the Administrative Agent and when
the Administrative Agent shall have received counterparts hereof which, when
taken together, bear the signatures of each of the other parties hereto, and
thereafter shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns. Delivery of an executed counterpart
of a signature page of this Agreement by telecopy shall be effective as delivery
of a manually executed counterpart of this Agreement.
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Section 12.07 Severability. Any provision of this Agreement or any other
Loan Document held to be invalid, illegal or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such invalidity,
illegality or unenforceability without affecting the validity, legality and
enforceability of the remaining provisions hereof or thereof; and the invalidity
of a particular provision in a particular jurisdiction shall not invalidate such
provision in any other jurisdiction.
Section 12.08 Right of Setoff. If an Event of Default shall have occurred
and be continuing, each Lender and each of its Affiliates is hereby authorized
at any time and from time to time, to the fullest extent permitted by law, to
set off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other obligations (of whatsoever
kind, including, without limitations obligations under Swap Agreements) at any
time owing by such Lender or Affiliate to or for the credit or the account of
any Borrower or any of their Subsidiaries against any of and all the obligations
of such Borrower owed to such Lender now or hereafter existing under this
Agreement or any other Loan Document, irrespective of whether or not such Lender
shall have made any demand under this Agreement or any other Loan Document and
although such obligations may be unmatured. The rights of each Lender under this
Section 12.08 are in addition to other rights and remedies (including other
rights of setoff) which such Lender or its Affiliates may have.
Section 12.09 GOVERNING LAW; JURISDICTION.
(a) THIS AGREEMENT 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 CONTRACT FOR, CHARGE, RECEIVE,
RESERVE OR TAKE 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 LOAN ACCOUNTS AND REVOLVING TRI-PARTY ACCOUNTS) SHALL NOT APPLY TO THIS
AGREEMENT 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 (HOUSTON DIVISION), AND, BY EXECUTION
AND DELIVERY OF THIS AGREEMENT, EACH PARTY HEREBY ACCEPTS FOR ITSELF AND (TO THE
EXTENT PERMITTED BY LAW) IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. EACH PARTY HEREBY
IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION
TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT
MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN
SUCH RESPECTIVE JURISDICTIONS. THIS SUBMISSION TO JURISDICTION IS NON-EXCLUSIVE
AND DOES NOT PRECLUDE A PARTY FROM OBTAINING JURISDICTION OVER ANOTHER PARTY IN
ANY COURT OTHERWISE HAVING JURISDICTION.
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(c) EACH PARTY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY
OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF
COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO IT AT THE
ADDRESS SPECIFIED IN SECTION 12.01 OR SUCH OTHER ADDRESS AS IS SPECIFIED
PURSUANT TO SECTION 12.01 (OR ITS ASSIGNMENT AND ASSUMPTION), SUCH SERVICE TO
BECOME EFFECTIVE WHEN RECEIVED BY SUCH PARTY. NOTHING HEREIN SHALL AFFECT THE
RIGHT OF A PARTY OR ANY HOLDER OF A NOTE TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST
ANOTHER PARTY IN ANY OTHER JURISDICTION.
(d) EACH PARTY HEREBY (i) IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY LAW, TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY
COUNTERCLAIM THEREIN; (ii) IRREVOCABLY WAIVES, TO THE MAXIMUM EXTENT NOT
PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH
LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES, OR DAMAGES
OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES; (iii) CERTIFIES THAT NO PARTY
HERETO NOR ANY REPRESENTATIVE OR AGENT OF COUNSEL FOR ANY PARTY HERETO HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD NOT, IN
THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS, AND (iv)
ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT, THE LOAN
DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION 12.09.
Section 12.10 Headings. Article and Section headings and the Table of
Contents used herein are for convenience of reference only, are not part of this
Agreement and shall not affect the construction of, or be taken into
consideration in interpreting, this Agreement.
Section 12.11 Confidentiality. Each of the Administrative Agent and the
Lenders agrees to maintain the confidentiality of the Information (as defined
below), except that Information may be disclosed (a) to its and its Affiliates'
directors, officers, employees and agents, including accountants, legal counsel
and other advisors (it being understood that the Persons to whom such disclosure
is made will be informed of the confidential nature of such Information and
instructed to keep such Information confidential), (b) to the extent requested
by any regulatory authority, (c) to the extent required by applicable laws or
regulations or by any subpoena or similar legal process, (d) to any other party
to this Agreement or any other Loan Document, (e) in connection with the
exercise of any remedies hereunder or under any other Loan Document or any suit,
action or proceeding relating to this Agreement or any other Loan Document or
the enforcement of rights hereunder or thereunder, (f) subject to an agreement
containing provisions substantially the same as those of this Section 12.11, to
(i) any assignee of or Participant in, or any prospective assignee of or
Participant in, any of its rights or obligations under this Agreement or (ii)
any actual or prospective counterparty (or its advisors) to any Swap
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Agreement relating to the Borrowers and their obligations, (g) with the consent
of the Borrowers or (h) to the extent such Information (i) becomes publicly
available other than as a result of a breach of this Section 12.11 or (ii)
becomes available to the Administrative Agent or any Lender on a nonconfidential
basis from a source other than the Borrowers. For the purposes of this Section
12.11, "Information" means all information received from the Borrowers or any
Subsidiary relating to the Borrowers or any Subsidiary and their businesses,
other than any such information that is available to the Administrative Agent or
any Lender on a nonconfidential basis prior to disclosure by the Borrowers or a
Subsidiary; provided that, in the case of information received from the
Borrowers or any Subsidiary after the date hereof, such information is clearly
identified at the time of delivery as confidential. Any Person required to
maintain the confidentiality of Information as provided in this Section 12.11
shall be considered to have complied with its obligation to do so if such Person
has exercised the same degree of care to maintain the confidentiality of such
Information as such Person would accord to its own confidential information.
Section 12.12 Interest Rate Limitation. It is the intention of the parties
hereto that each Lender shall conform strictly to usury laws applicable to it.
Accordingly, if the transactions contemplated hereby would be usurious as to any
Lender under laws applicable to it (including the laws of the United States of
America and the State of 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 Notes, 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 Notes
shall under no circumstances exceed the maximum amount allowed by such
applicable law, and any excess shall be canceled automatically and if
theretofore paid shall be credited by such Lender on the principal amount of the
Indebtedness (or, to the extent that the principal amount of the Indebtedness
shall have been or would thereby be paid in full, refunded by such Lender to the
Borrowers); and (ii) in the event that the maturity of the Notes is accelerated
by reason of an election of the holder thereof resulting from any Event of
Default under this Agreement or otherwise, or in the event of any required or
permitted prepayment, then such consideration that constitutes interest under
law applicable to any Lender may never include more than the maximum amount
allowed by such applicable law, and excess interest, if any, provided for in
this Agreement or otherwise shall be canceled automatically by such Lender as of
the date of such acceleration or prepayment and, if theretofore paid, shall be
credited by such Lender on the principal amount of the Indebtedness (or, to the
extent that the principal amount of the Indebtedness shall have been or would
thereby be paid in full, refunded by such Lender to the Borrowers). All sums
paid or agreed to be paid to any Lender for the use, forbearance or detention of
sums due hereunder shall, to the extent permitted by law applicable to such
Lender, be amortized, prorated, allocated and spread throughout the stated term
of the Loans 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 12.12
and (ii) in respect of any subsequent interest computation period the amount of
interest otherwise payable to such Lender would be less than the amount of
interest payable to such Lender
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computed at the Highest Lawful Rate applicable to such Lender, then the amount
of interest payable to such Lender in respect of such subsequent interest
computation period shall continue to be computed at the Highest Lawful Rate
applicable to such Lender until the total amount of interest payable to such
Lender shall equal the total amount of interest which would have been payable to
such Lender if the total amount of interest had been computed without giving
effect to this Section 12.12. To the extent that Chapter 303 of the Texas
Finance Code is relevant for the purpose of determining the Highest Lawful Rate
applicable to a Lender, such Lender elects to determine the applicable rate
ceiling under such Chapter by the weekly ceiling from time to time in effect.
Chapter 346 of the Texas Finance Code does not apply to the Borrowers'
obligations hereunder.
Section 12.13 EXCULPATION PROVISIONS. EACH OF THE PARTIES HERETO
SPECIFICALLY AGREES THAT IT HAS A DUTY TO READ THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS AND AGREES THAT IT IS CHARGED WITH NOTICE AND KNOWLEDGE OF THE TERMS
OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS; THAT IT HAS IN FACT READ THIS
AGREEMENT AND IS FULLY INFORMED AND HAS FULL NOTICE AND KNOWLEDGE OF THE TERMS,
CONDITIONS AND EFFECTS OF THIS AGREEMENT; THAT IT HAS BEEN REPRESENTED BY
INDEPENDENT LEGAL COUNSEL OF ITS CHOICE THROUGHOUT THE NEGOTIATIONS PRECEDING
ITS EXECUTION OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS; AND HAS RECEIVED
THE ADVICE OF ITS ATTORNEY IN ENTERING INTO THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS; AND THAT IT RECOGNIZES THAT CERTAIN OF THE TERMS OF THIS AGREEMENT
AND THE OTHER LOAN DOCUMENTS RESULT IN ONE PARTY ASSUMING THE LIABILITY INHERENT
IN SOME ASPECTS OF THE TRANSACTION AND RELIEVING THE OTHER PARTY OF ITS
RESPONSIBILITY FOR SUCH LIABILITY. EACH PARTY HERETO AGREES AND COVENANTS THAT
IT WILL NOT CONTEST THE VALIDITY OR ENFORCEABILITY OF ANY EXCULPATORY PROVISION
OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS ON THE BASIS THAT THE PARTY HAD
NO NOTICE OR KNOWLEDGE OF SUCH PROVISION OR THAT THE PROVISION IS NOT
"CONSPICUOUS."
Section 12.14 No Third Party Beneficiaries. Except as expressly provided in
Section 1.16 of the Intercreditor Agreement, this Agreement, the other Loan
Documents, and the agreement of the Lenders to make Loans hereunder are solely
for the benefit of the Borrowers, and no other Person (including, without
limitation, any Subsidiary of the Borrowers, any obligor, contractor,
subcontractor, supplier or materialsman) shall have any rights, claims, remedies
or privileges hereunder or under any other Loan Document against the
Administrative Agent or any Lender for any reason whatsoever. Except as
expressly provided in Section 1.16 of the Intercreditor Agreement, there are no
third party beneficiaries.
Section 12.15 USA Patriot Act Notice. Each Lender hereby notifies the
Borrowers that pursuant to the requirements of the USA Patriot Act (Title III of
Pub. L. 107-56 (signed into law October 26, 2001)) (the "Act"), it is required
to obtain, verify and record information that identifies the Borrowers, which
information includes the name and address of the Borrowers and other information
that will allow such Lender to identify the Borrowers, insofar as it is needed
to comply with the Act, in accordance with the Act.
76
Section 12.16 Waiver. Each Borrower shall remain obligated hereunder, and
such Borrower's obligations hereunder shall not be released, discharged or
otherwise affected, notwithstanding that, without any reservation of rights
against any other party and without notice to, demand upon or further assent by
any Borrower (which notice, demand and assent requirements are hereby expressly
waived by such Borrower), (a) any demand for payment of any of the Indebtedness
made by any Lender may be rescinded by such Lender or otherwise and any of the
Indebtedness continued; (b) the Indebtedness, the liability of any other Person
upon or for any part thereof or any collateral security or guarantee therefor or
right of offset with respect thereto, may, from time to time, in whole or in
part, be renewed, extended, amended, modified, accelerated, compromised, waived,
surrendered or released by, or any indulgence or forbearance in respect thereof
granted by, any Lender; (c) any collateral security, guarantee or right of
offset at any time held by any Lender for the payment of the Indebtedness may be
sold, exchanged, waived, surrendered or released; (d) any additional guarantors,
makers or endorsers of the either Borrower's Indebtedness may from time to time
be obligated on the Indebtedness or any additional security or collateral for
the payment and performance of the Indebtedness may from time to time secure the
Indebtedness; or (e) any other event shall occur which constitutes a defense or
release of sureties generally, including but not limited to any event which
constitutes, or might be construed to constitute, an equitable or legal
discharge of either Borrower for the Indebtedness, in bankruptcy or in any other
instance.
Section 12.17 Joint and Several Nature of Obligation. Notwithstanding
anything in the Loan Documents to the contrary, each Borrower agrees that it (a)
is a primary obligor hereunder and (b) is jointly and severally liable for the
prompt and complete payment and performance when due of all obligations,
liabilities, covenants and undertakings of the Borrowers hereunder (including,
without limitation, all Loans and other Indebtedness now in existence or
hereafter incurred (whether for interest, premium, fees, taxes, break funding
costs, expenses, indemnities or other amounts)).
[SIGNATURES BEGIN NEXT PAGE]
77
The parties hereto have caused this Agreement to be duly executed as of the
day and year first above written.
BORROWERS: PARALLEL PETROLEUM CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Chief Financial
Officer
PARALLEL, L.P.
By: Parallel Petroleum Corporation, its
general partner
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Chief Financial
Officer
1
ADMINISTRATIVE AGENT: BNP Paribas,
as Administrative Agent and Lender
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Managing Director
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇
Title: Vice President
2
LENDER: CITIBANK TEXAS, N.A.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Senior Vice President
3
ANNEX I
COMMITMENTS
NAME OF LENDER PERCENTAGE COMMITMENT AMOUNT
-------------- ---------- -----------------
BNP Paribas 50.00% $25,000,000
Citibank Texas, N.A. 50.00% $25,000,000
------ -----------
TOTAL 100.00% $50,000,000
====== ===========
4
EXHIBIT A
FORM OF
NOTE
PAYMENT OF THIS SECOND LIEN TERM NOTE SHALL, TO THE EXTENT SET FORTH IN THE
INTERCREDITOR AND SUBORDINATION AGREEMENT DATED NOVEMBER 15, 2005 BY AND AMONG
PARALLEL PETROLEUM CORPORATION, PARALLEL, L.P., BNP PARIBAS, AS ADMINISTRATIVE
AGENT AND THE TERM LENDERS PARTIES THERETO, BE SUBORDINATE AND JUNIOR IN RIGHT
OF PAYMENT TO THE PRIOR PAYMENT IN FULL OF ALL SENIOR INDEBTEDNESS, THE
PROVISIONS OF WHICH AGREEMENT BEING INCORPORATED HEREIN AND BY THIS REFERENCE
BEING MADE A PART HEREOF.
$[______] November [__], 2005
FOR VALUE RECEIVED, Parallel Petroleum Corporation, a Delaware corporation,
and Parallel, L.P., a Texas limited partnership (collectively, the "Borrowers")
hereby each jointly and severally promise to pay to the order of [______] (the
"Lender"), at the principal office of BNP Paribas, as administrative agent (the
"Administrative Agent"), at [______], the principal sum of [______] Dollars
($[______]), 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
Second Lien Term Loan Agreement, and to pay interest on the unpaid principal
amount of each the 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 Second Lien Term Loan
Agreement.
The date, amount, Type, interest rate, Interest Period and maturity of the
Loan made by the Lender to the Borrowers, 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. Failure to make any such notation or to attach a schedule shall
not affect any Lender's or the Borrowers' rights or obligations in respect of
such Loan or affect the validity of such transfer by any Lender of this Note.
This Note is one of the Notes referred to in the Second Lien Term Loan
Agreement dated as of November 15, 2005 among the Borrowers, the Administrative
Agent, and the lenders signatory thereto (including the Lender), and evidences
the Loan made by the Lender thereunder (such Second Lien Term Loan Agreement as
the same may be amended, supplemented or restated from time to time, the "Second
Lien Term Loan Agreement"). Capitalized terms used in this Note have the
respective meanings assigned to them in the Second Lien Term Loan Agreement.
Exhibit A-1
This Note is issued pursuant to the Second Lien Term Loan Agreement and is
entitled to the benefits provided for in the Second Lien Term Loan Agreement and
the other Loan Documents. The Second Lien Term Loan 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.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF TEXAS.
PARALLEL PETROLEUM CORPORATION
By:
------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Chief Financial
Officer
PARALLEL, L.P.
By: Parallel Petroleum Corporation, its
general partner
By:
------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Chief Financial
Officer
2
EXHIBIT B
FORM OF BORROWING REQUEST
November 15, 2005
Parallel Petroleum Corporation, a Delaware corporation, and Parallel, L.P.,
a Texas limited partnership (collectively, the "Borrowers"), pursuant to Section
2.03 of the Second Lien Term Loan Agreement dated as of November 15, 2005
(together with all amendments, restatements, supplements or other modifications
thereto, the "Agreement") among the Borrowers, BNP Paribas, as Administrative
Agent and lenders (the "Lenders") which are or become parties thereto (unless
otherwise defined herein, each capitalized term used herein is defined in the
Second Lien Term Loan Agreement), hereby requests the Loans as follows:
(i) Aggregate amount of the requested Loan is $50,000,000;
(ii) Date of such Loan is November 15, 2005
(iii) Requested Loan is to be a ABR Tranche;
(iv) In the case of a Eurodollar Tranche, the initial Interest Period
applicable thereto is [__]; and
(v) Location and number of the Borrowers' accounts to which funds are to be
disbursed, which shall comply with the requirements of Section 2.05 of the
Agreement, is as follows:
Parallel, L.P.
Operating Account
▇▇▇▇ ▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
CitiBank, Texas, N.A.
▇▇▇▇ ▇. ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
ABA: ▇▇▇▇▇▇▇▇▇
Acct: 0330300205
Exhibit B-1
The undersigned certifies that he is the Chief Financial Officer of the
Parallel Petroleum Corporation, and that as such he is authorized to execute
this certificate on behalf of the Borrowers. The undersigned further certifies,
represents and warrants on behalf of the Borrowers that the Borrowers are
entitled to receive the requested Loan under the terms and conditions of the
Agreement.
PARALLEL PETROLEUM CORPORATION
By:
------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Chief Financial
Officer
PARALLEL, L.P.
By: Parallel Petroleum Corporation, its
general partner
By:
------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Chief Financial
Officer
Exhibit B-2
EXHIBIT C
FORM OF INTEREST ELECTION REQUEST
________________, 2005
Parallel Petroleum Corporation, a Delaware corporation, and Parallel, L.P.,
a Texas limited partnership (collectively, the "Borrowers"), pursuant to Section
2.04 of the Second Lien Term Loan Agreement dated as November 15, 2005 (together
will all amendments, restatements, supplements or other modifications thereto,
the "Agreement") among the Borrowers, BNP Paribas, as Administrative Agent and
the lenders (the "Lenders") which are or become parties thereto (unless
otherwise defined herein, each capitalized term used herein is defined in the
Agreement), hereby makes an Interest Election Request as follows:
(i) The Tranche to which this Interest Election Request applies, and if
different options are being elected with respect to different portions thereof,
the portions thereof to be allocated to each resulting Tranche (in which case
the information specified pursuant to (iii) and (iv) below shall be specified
for each resulting Tranche) is [______];
(ii) The effective date of the election made pursuant to this Interest
Election Request is [______], 200[___];[and]
(iii) The resulting Tranche is to be [an ABR Tranche] [a Eurodollar
Tranche][; and]
[(iv) [If the resulting Tranche is a Eurodollar Tranche] The Interest
Period applicable to the resulting Tranche after giving effect to such election
is [______]].
Exhibit C-1
The undersigned certifies that he/she is the [______] of the general
partner of the Parallel Petroleum Corporation, and that as such he/she is
authorized to execute this certificate on behalf of the Borrowers. The
undersigned further certifies, represents and warrants on behalf of the
Borrowers that the Borrowers are entitled to receive the requested continuation
or conversion under the terms and conditions of the Agreement.
PARALLEL PETROLEUM CORPORATION
By:
------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Chief Financial
Officer
PARALLEL, L.P.
By: Parallel Petroleum Corporation, its
general partner
By:
------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Chief Financial
Officer
Exhibit B-2
EXHIBIT D
FORM OF
COMPLIANCE CERTIFICATE
The undersigned hereby certifies that he/she is the [______] of Parallel
Petroleum Corporation, a Delaware Corporation, which is the general partner of
Parallel, L.P., a Texas limited partnership (collectively, the "Borrowers"), and
that as such he/she is authorized to execute this certificate on behalf of the
Borrowers. With reference to the Second Lien Term Loan Agreement dated as of
November 15, 2005 (together with all amendments, restatements, supplements or
other modifications thereto being the "Agreement") among the Borrowers, BNP
Paribas, as Administrative Agent, and 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 Borrowers contained in
Article VII of the Agreement and in the Loan Documents and otherwise made in
writing by or on behalf of the Borrowers pursuant to the Agreement and the 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 in all material respects 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 Borrowers have performed and complied with all agreements and
conditions contained in the Agreement and in the Loan Documents required to be
performed or complied with by it prior to or at the time of delivery hereof [or
specify default and describe].
(c) Since December 31, 2004, no change has occurred, either in any case or
in the aggregate, in the condition, financial or otherwise, of the Borrowers or
any Subsidiary which could reasonably be expected to have a Material Adverse
Effect [or specify event].
(d) There exists no Default or Event of Default [or specify Default and
describe].
(e) Attached hereto are the detailed computations necessary to determine
whether the Borrowers is in compliance with Section 9.01 and Section 8.14 as of
the end of the [fiscal quarter][fiscal year] ending [______].
Exhibit D-1
EXECUTED AND DELIVERED this [______] day of [______].
PARALLEL PETROLEUM CORPORATION
By:
------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Chief Financial
Officer
PARALLEL, L.P.
By: Parallel Petroleum Corporation, its
general partner
By:
------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Chief Financial
Officer
Exhibit D-2
EXHIBIT E
SECURITY INSTRUMENTS
1) Second Lien Guarantee and Collateral Agreement dated as of November 15,
2005 by the Borrowers and the Obligors (as defined therein) in favor the
Administrative Agent.
2) UCC-1s with respect to #1.
3) Second Lien Deed of Trust, Fixture Filing, Assignment of As-Extracted
Collateral, Security Agreement and Financing Statement from PPC in favor of
the Administrative Agent. (NM)
4) UCC-1 with respect to #3
5) Second Lien Deed of Trust, Fixture Filing, Assignment of As-Extracted
Collateral, Security Agreement and Financing Statement from PPC in favor of
the Administrative Agent. (TX)
6) UCC-1 with respect to #5
7) Second Lien Deed of Trust, Fixture Filing, Assignment of As-Extracted
Collateral, Security Agreement and Financing Statement from PLP in favor of
the Administrative Agent. (TX)
8) UCC-1 with respect to #7
Exhibit E-1
EXHIBIT F
FORM OF ASSIGNMENT AND ASSUMPTION
This Assignment and Assumption (the "Assignment and Assumption") is
dated as of the Effective Date set forth below and is entered into by and
between [Insert name of Assignor] (the "Assignor") and [Insert name of Assignee]
(the "Assignee"). Capitalized terms used but not defined herein shall have the
meanings given to them in the Second Lien Term Loan Agreement identified below
(as amended, the "Agreement"), receipt of a copy of which is hereby acknowledged
by the Assignee. The Standard Terms and Conditions set forth in Annex 1 attached
hereto are hereby agreed to and incorporated herein by reference and made a part
of this Assignment and Assumption as if set forth herein in full.
For an agreed consideration, the Assignor hereby irrevocably sells and
assigns to the Assignee, and the Assignee hereby irrevocably purchases and
assumes from the Assignor, subject to and in accordance with the Standard Terms
and Conditions and the Agreement, as of the Effective Date inserted by the
Administrative Agent as contemplated below (i) all of the Assignor's rights and
obligations in its capacity as a Lender under the Agreement and any other
documents or instruments delivered pursuant thereto to the extent related to the
amount and percentage interest identified below of all of such outstanding
rights and obligations of the Assignor under the respective facilities
identified below (including any guarantees included in such facilities) and (ii)
to the extent permitted to be assigned under applicable law, all claims, suits,
causes of action and any other right of the Assignor (in its capacity as a
Lender) against any Person, whether known or unknown, arising under or in
connection with the Agreement, any other documents or instruments delivered
pursuant thereto or the loan transactions governed thereby or in any way based
on or related to any of the foregoing, including contract claims, tort claims,
malpractice claims, statutory claims and all other claims at law or in equity
related to the rights and obligations sold and assigned pursuant to clause (i)
above (the rights and obligations sold and assigned pursuant to clauses (i) and
(ii) above being referred to herein collectively as the "Assigned Interest").
Such sale and assignment is without recourse to the Assignor and, except as
expressly provided in this Assignment and Assumption, without representation or
warranty by the Assignor.
1. Assignor: ______________________________
2. Assignee: ______________________________
[and is an Affiliate/Approved Fund of [identify Lender]]
3. Borrower: Parallel Petroleum Corporation and Parallel, L.P.
4. Administrative Agent: BNP Paribas, as the administrative agent under the
Agreement
5. Agreement: The Second Lien Term Loan Agreement dated as of November 15,
2005 among Parallel Petroleum Corporation, Parallel, L.P., the Lenders
parties thereto, and BNP Paribas, as Administrative Agent.
Exhibit F-1
6. Assigned Interest:
Aggregate Amount of Amount of
Commitment/Loans for Commitment/Loans Percentage Assigned of
Commitment Assigned all Lenders Assigned Commitment/Loans(1)
------------------- -------------------- ---------------- ----------------------
$_____________ $_____________ _____%
$_____________ $_____________ _____%
$_____________ $_____________ _____%
Effective Date: _____________ ___, 20___ [TO BE INSERTED BY ADMINISTRATIVE AGENT
AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE REGISTER
THEREFOR.]
The terms set forth in this Assignment and Assumption are hereby agreed to:
ASSIGNOR
[NAME OF ASSIGNOR]
By:
------------------------------------
Title:
---------------------------------
ASSIGNEE
[NAME OF ASSIGNEE]
By:
------------------------------------
Title:
---------------------------------
Exhibit F-2
Consented to and Accepted:
BNP PARIBAS, as Administrative Agent
By
----------------------------------
Title:
------------------------------
By
----------------------------------
Title:
------------------------------
[Consented to:]
PARALLEL PETROLEUM CORPORATION
By:
---------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Chief Financial
Officer
PARALLEL, L.P.
By: Parallel Petroleum Corporation,
its general partner
By:
---------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Chief Financial
Officer
Title:
Exhibit F-3
ANNEX 1
PARALLEL PETROLEUM CORPORATION AND PARALLEL, L.P.
SECOND LIEN TERM LOAN AGREEMENT
STANDARD TERMS AND CONDITIONS FOR
ASSIGNMENT AND ASSUMPTION
1. Representations and Warranties.
1.1 Assignor. The Assignor (a) represents and warrants that (i) it is
the legal and beneficial owner of the Assigned Interest, (ii) the Assigned
Interest is free and clear of any lien, encumbrance or other adverse claim and
(iii) it has full power and authority, and has taken all action necessary, to
execute and deliver this Assignment and Assumption and to consummate the
transactions contemplated hereby; and (b) assumes no responsibility with respect
to (i) any statements, warranties or representations made in or in connection
with the Agreement or any other Loan Document, (ii) the execution, legality,
validity, enforceability, genuineness, sufficiency or value of the Loan
Documents or any collateral thereunder, (iii) the financial condition of the
Borrowers, any of their Subsidiaries or Affiliates or any other Person obligated
in respect of any Loan Document or (iv) the performance or observance by the
Borrowers, any of their Subsidiaries or Affiliates or any other Person of any of
their respective obligations under any Loan Document.
1.2. Assignee. The Assignee (a) represents and warrants that (i) it
has full power and authority, and has taken all action necessary, to execute and
deliver this Assignment and Assumption and to consummate the transactions
contemplated hereby and to become a Lender under the Agreement, (ii) it
satisfies the requirements, if any, specified in the Agreement that are required
to be satisfied by it in order to acquire the Assigned Interest and become a
Lender, (iii) from and after the Effective Date, it shall be bound by the
provisions of the Agreement as a Lender thereunder and, to the extent of the
Assigned Interest, shall have the obligations of a Lender thereunder, (iv) it
has received a copy of the Agreement, together with copies of the most recent
financial statements delivered pursuant to Section 8.01 thereof, as applicable,
and such other documents and information as it has deemed appropriate to make
its own credit analysis and decision to enter into this Assignment and
Assumption and to purchase the Assigned Interest on the basis of which it has
made such analysis and decision independently and without reliance on the
Administrative Agent or any other Lender, and (v) if it is a Foreign Lender,
attached to the Assignment and Assumption is any documentation required to be
delivered by it pursuant to the terms of the Agreement, duly completed and
executed by the Assignee; and (b) agrees that (i) it will, independently and
without reliance on the Administrative Agent, the Assignor or any other Lender,
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under the Loan Documents, and (ii) it will perform in accordance with their
terms all of the obligations which by the terms of the Loan Documents are
required to be performed by it as a Lender.
2. Payments. From and after the Effective Date, the Administrative
Agent shall make all payments in respect of the Assigned Interest (including
payments of principal, interest, fees and other amounts) to the Assignor for
amounts which have accrued to but excluding the Effective Date and to the
Assignee for amounts which have accrued from and after the Effective Date.
3. General Provisions. This Assignment and Assumption shall be binding
upon, and inure to the benefit of, the parties hereto and their respective
successors and assigns. This Assignment and Assumption may be executed in any
number of counterparts, which together shall constitute one instrument. Delivery
of an executed counterpart of a signature page of this Assignment and Assumption
by telecopy shall be effective as delivery of a
Exhibit F-4
manually executed counterpart of this Assignment and Assumption. This Assignment
and Assumption shall be governed by, and construed in accordance with, the law
of the State of Texas.
Exhibit F-5
SCHEDULE 7.05
LITIGATION
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ v. Parallel Petroleum Corporation, Cause No. ▇▇-▇▇▇▇▇▇▇,
In the 106th Judicial District Court of ▇▇▇▇▇▇ County, Texas
This is a dispute over irrigation ▇▇▇▇▇ allegedly damaged by Defendant
Parallel Petroleum Corporation's ("Parallel") oil well drilling activities.
Specifically, Plaintiff ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇") filed suit against Parallel
in the ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ of ▇▇▇▇▇▇ County, Texas alleging that Parallel -- in
drilling and completing the ▇▇▇▇▇▇▇▇▇-▇▇▇▇▇▇ # ▇ and # 6 oil ▇▇▇▇▇ -- damaged
▇▇▇▇▇▇▇'▇ #20-1 water well. Furthermore, ▇▇▇▇▇▇▇ alleges that Parallel -- in
drilling and completing the PKC "A" #8 oil well -- damaged ▇▇▇▇▇▇▇'▇ #20-2 water
well. Based on ▇▇▇▇▇▇▇'▇ First Amended Original Petition, the rationale behind
Plaintiff's case is that Parallel's activities have reduced the production
capacities of said water ▇▇▇▇▇. As this case is still in the initial phases of
discovery, Plaintiff has yet to produce any firm evidence supporting his claims.
Plaintiff brings suit on the following causes of action: negligence, gross
negligence, negligence per se, and breach of contract. Plaintiff seeks an award
of economic damages, exemplary damages, costs of court, attorneys' fees, and
such other relief that he may be entitled to at law. To date, no discovery
requests have been served on Defendant. Parallel's first combined set of
discovery is expected to be served on ▇▇▇▇▇▇▇ within the next few weeks.
Schedule 7.05-1
SCHEDULE 7.15
SUBSIDIARIES AND PARTNERSHIPS
1. Parallel, L.L.C. (100% owned by PPC)
2. Parallel, L.P.
a. 99% owned by Parallel, L.L.C.
b. 1% owned by PPC
Schedule 7.15-1
SCHEDULE 7.19
GAS IMBALANCES
None
Schedule 7.20-1
SCHEDULE 7.20
MARKETING CONTRACTS
1. Life of lease contract covering natural gas produced from the "Diamond M"
properties, ▇▇▇▇▇▇ County, Texas. Current purchaser is Elk Horn who has
recently been purchased by ▇▇▇▇▇▇ ▇▇▇▇▇▇.
2. *Gas purchase contract, dated October 17, 2002, between Lynx Operating Co.,
Inc. and Duke Energy Field Services, LP covering sections ▇▇, ▇▇, ▇▇, ▇▇▇
▇▇▇, ▇▇▇, ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ Counties, Texas (casinghead gas).
----------
* This contract is included as an exhibit to the Lynx Production Company,
Inc. Purchase and Sale Agreement which relates to the properties to be
acquired by the Borrowers.
Schedule 7.21-1
SCHEDULE 7.21
SWAP AGREEMENTS
Position Quantity Commodity Price Commodity Type
-------- -------- --------------- --------------
Crude Oil: BBLS
Nov & Dec 2005
11/27/2002 - BNP 48,800 $ 22.71 Swap
11/5/2003 - BNP 12,200 $ 25.67 Swap
8/17/2004 - BNP 12,200 $36.00 - $49.60 Collar
9/17/2004 - BNP 42,700 $ 39.96 Swap
Calendar 2006
1/24/2003 - BNP 265,500 $ 23.04 Swap
08/18//2004 - BNP 70,800 $35.00 - $44.00 Collar
9/16/2004 - BNP 182,500 $ 36.35 Swap
7/28/2005 - BNP 109,500 $50.00 - $89.75 Collar
10/17/2005 - CITI 109,500 $55.00 - $82.50 Collar
Calendar 2007
9/16/2004 - BNP 474,500 $ 34.36 Swap
7/28/2005 - BNP 109,500 $50.00 - $86.50 Collar
10/17/2005 - CITI 109,500 $55.00 - $79.50 Collar
Calendar 2008
9/16/2004 - BNP 439,200 $ 33.37 Swap
10/17/2005 - CITI 109,800 $55.00 - $76.50 Collar
Calendar 2009
10/17/2005 - CITI 91,250 $55.00 - $73.00 Collar
Calendar 2010
10/17/2005 - CITI 76,000 $55.00 - $71.00 Collar
Position Quantity Commodity Price Commodity Type
-------- -------- --------------- --------------
Natural Gas: MMBTU
Calendar 2006
4/7/2005 - BNP 214,000 $ 5.50 Put
7/28/2005 - BNP 214,000 $6.00 - $12.40 Collar
6/21/2005 - BNP 428,000 $ 8.00 Put
Calendar 2007
7/28/2005 - BNP 214,000 $6.00 - $11.05 Collar
Schedule 7.21-1
SCHEDULE 9.05
INVESTMENTS
1. PLP's existing investments in (a) First Permian GP, L.L.C. and (b) First
Permian, L.P.
2. PPC's existing investments in (a) West Fork Pipeline Company GP, LLC and (b)
West Fork Pipeline Company LP.
Schedule 7.21-1