EXHIBIT 10.1
SECOND AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
REVOLVING LINE OF CREDIT
OF UP TO $100,000,000.00
AMONG
BANK ONE, NA
As Administrative Agent, LC Issuer and a Bank,
OTHER FINANCIAL
INSTITUTIONS AND BANKS,
As Banks,
ENERGY PARTNERS, LTD.
AND
▇▇▇▇-▇▇▇▇▇▇▇ OIL COMPANY
As Borrower
AND
BANC ONE CAPITAL MARKETS, INC.
As Lead Arranger and Sole Book Manager
January 15, 2002
TABLE OF CONTENTS
PAGE
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ARTICLE I.
DEFINITIONS.........................................................................1
ARTICLE II.
THE LOANS AND LETTERS OF CREDIT................................................19
2.01 The Commitment...................................................19
2.02 Notice and Manner of Borrowing...................................19
2.03 Payment Procedure................................................20
2.04 Payments of Interest under the Notes.............................21
2.05 General Provisions Relating to Interest..........................22
2.06 Borrowing Base Determination.....................................23
2.07 Mandatory Prepayment Due to a Loan Excess........................24
2.08 Other Mandatory Prepayments......................................25
2.09 Prepayment and Conversion........................................25
2.10 Increased Cost of Loans..........................................25
2.11 Change of Law....................................................27
2.12 Mitigation: Mandatory Assignment.................................28
2.13 Pro Rata Treatment and Payments..................................28
2.14 Sharing of Payments and Setoffs..................................28
2.15 Advances to Satisfy Obligations of the Borrower..................29
2.16 Assignment of Production.........................................29
2.17 Commitment Fee...................................................29
2.18 Addition/Deletion of Borrowing Base Oil & Gas Properties.........30
2.19 Adjustment to Aggregate Commitment Amount........................30
2.20 Facility LCs.....................................................30
ARTICLE III.
CONDITIONS.....................................................................35
3.01 General Conditions to Closing and to all Disbursements...........35
3.02 Deliveries at the Closing........................................35
3.03 Documents Required for Subsequent Disbursements Involving
Additional Borrowing Base Oil and Gas Properties................37
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ARTICLE IV.
REPRESENTATIONS AND WARRANTIES.................................................37
4.01 Existence........................................................37
4.02 Due Authorization................................................38
4.03 Valid and Binding Obligations....................................38
4.04 Scope and Accuracy of Financial Statements.......................38
4.05 Title to Borrowing Base Oil and Gas Properties...................39
4.06 Oil and Gas Leases...............................................39
4.07 Interest in the Borrowing Base Oil and Gas Properties............39
4.08 Oil and Gas Contracts............................................39
4.09 Producing ▇▇▇▇▇..................................................40
4.10 Purchasers of Production.........................................40
4.11 Authorizations and Consents......................................40
4.12 Environmental Laws...............................................40
4.13 Compliance with Laws, Rules, Regulations and Orders..............41
4.14 Liabilities, Litigation and Restrictions.........................41
4.15 Existing Indebtedness............................................41
4.16 Material Commitments.............................................42
4.17 Margin Stock.....................................................42
4.18 Proper Filing of Tax Returns and Payment of Taxes Due............42
4.19 ERISA............................................................42
4.20 Investment Company Act Compliance................................43
4.21 Public Utility Holding Company Act Compliance....................43
4.22 Insurance........................................................43
4.23 Transaction Documents............................................43
4.24 Material Misstatements and Omissions.............................43
ARTICLE V.
AFFIRMATIVE COVENANTS..........................................................43
5.01 Use of Funds.....................................................44
5.02 Maintenance and Access to Records................................44
5.03 Quarterly Unaudited Financial Statements.........................44
5.04 Annual Audited Financial Statements..............................44
5.05 Compliance Certificate...........................................44
5.06 Statement of Material Adverse Change.............................44
5.07 Title Defects....................................................44
5.08 Additional Information...........................................45
5.09 Compliance with Laws and Payment of Assessments
and Charges......................................................45
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5.10 Maintenance of Existence and Good Standing.......................45
5.11 Further Assurances...............................................45
5.12 Initial Expenses of the Bank.....................................45
5.13 Subsequent Expenses of the Administrative Agent
and the Arranger.................................................46
5.14 Maintenance of Tangible Property.................................46
5.15 Maintenance of Insurance.........................................46
5.16 Inspection of Tangible Assets/Right of Audit.....................46
5.17 Payment of Note and Performance of Obligations...................47
5.18 Borrowing Base...................................................47
5.19 Compliance with Environmental Laws...............................47
5.20 Hazardous Substances Indemnification.............................47
5.21 Transactions with Affiliates.....................................48
5.22 Leases...........................................................48
5.23 Operation of Borrowing Base Oil and Gas Properties...............48
5.24 Assignments......................................................49
5.25 Change of Purchasers of Production...............................49
5.26 Payment of Taxes, Etc............................................49
5.27 Notice of Litigation.............................................49
5.28 Notice of Events of Default......................................49
5.29 Notice of Change of Principal Offices............................50
5.30 Employee Benefit Plans...........................................50
5.31 Payment of Obligations...........................................50
ARTICLE VI.
NEGATIVE COVENANTS.............................................................50
6.01 Other Indebtedness...............................................50
6.02 Loans or Advances................................................50
6.03 Mortgages or Pledges of Assets...................................50
6.04 Sales of Assets..................................................51
6.05 Dividends........................................................51
6.06 Payment of Accounts Payable......................................51
6.07 Cancellation of Insurance........................................51
6.08 Investments......................................................51
6.09 Changes in Structure or Business.................................51
6.10 Pooling or Unitization...........................................51
6.11 Hedge Agreements.................................................52
6.12 Capital Stock of Borrower........................................52
6.13 Margin Stock.....................................................52
6.14 Minimum Tangible Net Worth.......................................52
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6.15 Current Ratio....................................................52
6.16 EBITDAX to Interest Ratio........................................52
6.17 Performance of Transaction Documents.............................52
6.18 Amendment of Transaction Documents...............................53
ARTICLE VII.
EVENTS OF DEFAULT..............................................................53
7.01 Enumeration of Events of Default.................................53
7.02 Rights Upon Unmatured Event of Default...........................55
7.03 Rights Upon Default..............................................55
7.04 Remedies.........................................................56
7.05 Right of Set-off.................................................57
ARTICLE VIII.
THE ADMINISTRATIVE AGENT.......................................................57
8.01 Authorization and Action.........................................57
8.02 Administrative Agent's Reliance, Etc.............................57
8.03 The Administrative Agent and Affiliates..........................58
8.04 Bank Credit Decision.............................................58
8.05 Administrative Agent's Indemnity.................................59
8.06 Successor Administrative Agent...................................59
8.07 Notice of Default................................................60
ARTICLE IX.
MISCELLANEOUS..................................................................60
9.01 Security Interests in Deposits and Right of Offset or the
Banker's Lien....................................................60
9.02 Survival of Representations, Warranties and Covenants............60
9.03 Notices and Other Communications.................................60
9.04 Parties in Interest..............................................61
9.05 Successors and Assigns; Participation; Purchasing Banks..........61
9.06 Renewals and Extensions..........................................64
9.07 No Waiver by the Administrative Agent, the Banks
or the LC Issuer.................................................64
9.08 Waiver, Release, and Indemnification by the Borrower.............64
9.09 GOVERNING LAW....................................................65
9.10 Incorporation of Exhibits and Schedules..........................65
9.11 Survival Upon Unenforceability...................................65
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9.12 Rights of Third Parties..........................................65
9.13 Amendments or Modifications......................................65
9.14 Agreement Construed as an Entirety...............................67
9.15 Number and Gender................................................67
9.16 AGREEMENT SUPERSEDES ALL PRIOR AGREEMENTS........................67
9.17 Controlling Provision Upon Conflict..............................67
9.18 Time, Place and Method of Payments...............................67
9.19 Termination......................................................67
9.20 Non-Application of Chapter 346 of
Texas Finance Code.............68
9.21 Counterpart Execution............................................68
9.22 Loan Documents Subject to Other Agreements.......................68
9.23 Power of Attorney................................................69
9.24 Subordination of Intercompany Debt...............................69
9.25 Amended and Restated Agreement...................................70
EXHIBITS
EXHIBIT A Borrowing Base Oil and Gas Properties
EXHIBIT A-1 Pipeline
EXHIBIT B Form of Revolving Note
EXHIBIT C Compliance Certificate
EXHIBIT D Security Instruments
EXHIBIT E Request for Advance
SCHEDULES
Schedule 1.01(b) Commitment Amount and Aggregate Commitment
Schedule 1.01(c) Certain Permitted Liens
Schedule 1.01(d) KSC Production Payment Documents
Schedule 4.01 Information Regarding the Borrower and its Subsidiaries
Schedule 4.08 Certain Oil and Gas Contracts
Schedule 4.10 List of Purchasers of Production
Schedule 4.15 Existing Indebtedness
Schedule 4.16 Material Commitments
Schedule 4.22 Insurance Certificates
Schedule 9.05(d) Commitment Transfer Supplement
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SECOND AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT
THIS SECOND AMENDED AND RESTATED REDUCING
REVOLVING CREDIT AGREEMENT
(this "Agreement"), executed January 11, 2002, to be effective as of January 15,
2002, is by and between ENERGY PARTNERS, LTD., a Delaware corporation (the
"Parent Borrower"), ▇▇▇▇-▇▇▇▇▇▇▇ OIL COMPANY, a
Texas corporation (the
"Subsidiary Borrower") (Parent Borrower and Subsidiary Borrower are herein
collectively called "Borrower"), the several banks and financial institutions
from time to time parties to this Credit Agreement (the "Banks," such term to
include all undersigned Banks and all other financial institutions which
subsequently become parties to this Agreement in accordance with Section 9.05
hereof), BANK ONE, NA, a national banking association ("Bank One") as a Bank, as
the LC Issuer (hereinafter defined) and as Administrative Agent for the Banks
(in such latter capacity and together with its successors and permitted assigns
in such capacity, the "Administrative Agent").
WITNESSETH
WHEREAS, Parent Borrower and Bank One entered into that certain Loan
Agreement dated June 23, 1999, as amended (collectively, the "Loan Agreement"),
which was amended and restated by that certain Reducing
Revolving Credit
Agreement dated March 30, 2000, as amended (collectively, the "Original Credit
Agreement"), which was further amended and restated by that certain Amended and
Restated
Revolving Credit Agreement dated August 1, 2001, among Parent Borrower,
Bank One, as Administrative Agent, LC Issuer and a Bank, and the other financial
institutions party thereto as Banks (the "First Amended Credit Agreement").
WHEREAS, Borrower has requested that Bank One and the other Banks amend
and restate the First Amended Credit Agreement, and the Banks are willing to do
so in accordance with the terms set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the Banks, the LC Issuer, the Administrative Agent and the
Borrower agree as follows:
ARTICLE I.
DEFINITIONS
As used in this Agreement, the following terms shall have the meanings
indicated:
"ABR" means a fluctuating rate of interest equal to the higher of (i) a
rate per annum equal to the prime rate of interest announced from time to time
by Bank One or its parent (which is not necessarily the lowest rate charged to
any customer), changing when and as said prime rate changes, and (ii) the sum of
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the Federal Funds Effective Rate most recently determined by the Administrative
Agent plus one-half percent (1/2%) per annum.
"ABR Loan" means any Loan from time to time for which interest thereon
is to be computed on the basis of the ABR plus the ABR Margin, as elected by
Borrower pursuant to Section 2.04 hereof.
"ABR Margin" means the applicable margin set forth in the Pricing Grid
under the caption, "ABR Margin," determined based on the Utilization Percentage
prevailing from time to time.
"Administrative Agent" means Bank One, NA, as Administrative Agent for
the Banks hereunder and under the other Loan Documents, and each successor
Administrative Agent.
"Affiliate" means, as applied to any Person, any other Person, directly
or indirectly, controlling, controlled by, or under common control with, that
Person. For purposes of this definition, "control" (including, with correlative
meanings, the terms "controlling", "controlled by", and "under common control
with"), as applied to any Person, means either: (a) the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of that Person, whether through the ownership of voting securities, by
contract, or otherwise, or (b) the legal or beneficial ownership of or voting
rights with respect to twenty percent (20%) or more of the equity interest in
such Person.
"Aggregate Commitment Amount" means the lesser of: (a) the Borrowing
Base in effect from time to time, or (b) the amount stated as the Aggregate
Commitment Amount on Schedule 1.01(b) attached hereto, as the same may be
amended from time to time as provided in this Agreement.
"Aggregate Outstanding Credit Exposure" means, at any time, the
aggregate of the Outstanding Credit Exposure of all the Banks.
"Agreement" means this Second Amended and Restated
Revolving Credit
Agreement, as the same may be amended or supplemented from time to time.
"Applicable Law" means that law in effect from time to time and
applicable to the Notes which lawfully permits the charging and collection of
the highest permissible lawful, non-usurious rate of interest on the Notes,
including laws of the State of
Texas and laws of the United States of America;
Chapter 303 of the
Texas Finance Code shall be included in the laws of the State
of
Texas in determining Applicable Law; and for the purpose of applying said
Chapter 303 to the Notes, the interest ceiling applicable to the Notes under
said Chapter 303 shall be the indicated weekly rate ceiling from time to time in
effect.
"Applicable Margin" means the applicable LIBOR Margin or ABR Margin
provided for in the Pricing Grid set forth below based upon the Utilization
Percentage.
"Arranger" means Banc One Capital Markets, Inc., in its capacity as
lead arranger and sole book manager.
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"Bank Parties" has the meaning given such term in Section 9.08(B).
"Bank(s)" means any of the banks signatory to this Agreement, their
successors and, upon the effective date after registration with the
Administrative Agent pursuant to Section 9.05 of a Commitment Transfer
Supplement executed by a Purchasing Bank, such Purchasing Bank.
"Borrower" has the meaning stated therefor in the preamble of this
Agreement.
"Borrowing" means a group of Loans made by the Banks to Borrower on a
single date.
"Borrowing Base" means the maximum loan amount with respect to the
Borrowing Base Oil and Gas Properties, as determined by the Administrative Agent
and approved by the Required Banks from time to time in accordance with Section
2.06 of this Agreement.
"Borrowing Base Oil and Gas Properties" means those Oil and Gas
Properties of the Borrower that are subject to the liens created by the Security
Instruments, together with the additional Borrowing Base Oil and Gas Properties
that are described in Exhibit "A" attached hereto and made a part hereof, as
such Exhibit "A" may be amended from time to time.
"Breakage Costs" means all reasonable losses, expenses and liabilities
(including, without limitation, any loss, expense or liability incurred by
reason of the liquidation or reemployment of deposits or other funds required by
any Bank to fund its LIBOR Loans but excluding loss of anticipated profit with
respect to any LIBOR Loans) which such Bank may sustain: (i) if for any reason
(other than a default by such Bank or the Administrative Agent) a borrowing of
LIBOR Loans does not occur on a date specified therefor in a Request for
Advance; (ii) if any repayment or conversion of any LIBOR Loans occurs on a date
which is not the last day of an Interest Period applicable thereto; (iii) if any
prepayment of any LIBOR Loans is not made on any date specified in a notice of
prepayment given by Borrower; or (iv) as a consequence of any default by the
Borrower to repay LIBOR Loans when required by the terms of this Agreement.
"Business Day" means a day other than a Saturday, Sunday or legal
holiday for commercial banks under the laws of the State of
Texas, provided that
with respect to transactions under this Agreement relating to LIBOR Loans, such
day must also be a Eurodollar Business Day.
"Buyer Preferred Stock" has the meaning stated therefor in the Merger
Agreement.
"Buyer Registration Rights Agreement" has the meaning stated therefor
in the Merger Agreement.
"Buyer Senior Subordinated Notes" has the meaning stated therefor in
the Merger Agreement.
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"Change of Control" means any of the following events: (a) any "person"
or "group" (within the meaning of Section 13(d) or 14(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) has become, directly or
indirectly, the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under
the Exchange Act, except that a Person shall be deemed to have "beneficial
ownership" of all such shares that any such Person has the right to acquire,
whether such right is exercisable immediately or only after the passage of
time), by way of merger, consolidation or otherwise, of a majority or more of
the common stock of Borrower on a fully-diluted basis, after giving effect to
the conversion and exercise of all outstanding warrants, options and other
securities of the Borrower (whether or not such securities are then currently
convertible or exercisable) or (b) during any period of two consecutive calendar
years, individuals who at the beginning of such period constituted the board of
directors of the Borrower cease for any reason to constitute a majority of the
directors of the Borrower then in office unless (i) such new directors were
elected by a majority of the directors of the Borrower who constituted the board
of directors of the Borrower at the beginning of such period (or by directors so
elected) or (ii) the reason for such directors failing to constitute a majority
is a result of retirement by directors due to age, death or disability.
"Closing" has the meaning provided in Section 3.01.
"Commitment" means, as to any Bank, the obligation of such Bank to make
Loans to, and participate in Facility LCs issued upon the application of, the
Borrower in an aggregate amount at any one time outstanding not to exceed the
lesser of (i) such Bank's Commitment Amount and (ii) such Bank's Percentage
Share of the Borrowing Base then in effect.
"Commitment Amount" means at any time, for any Bank, the amount set
forth opposite such Bank's name on Schedule 1.01(b) under the heading
"Commitment Amount," as such amount may be changed as provided in this
Agreement.
"Commitment Transfer Supplement" means a Commitment Transfer Supplement
executed by Administrative Agent and a Purchasing Bank substantially in the form
of Schedule 9.05(d) and registered with the Administrative Agent pursuant to
Section 9.05(d) hereof.
"Company Principal Shareholders Agreement" has the meaning stated
therefor in the Merger Agreement.
"Compliance Certificate" means the certificate of the President or
Chief Financial Officer of the Borrower submitted to the Administrative Agent
from time to time pursuant to this Agreement and attesting to the financial
covenants and stating, to such officer's knowledge, whether or not an Event of
Default or an Unmatured Event of Default has occurred and is continuing and, if
such an event has occurred, the actions being taken by the Borrower, to remedy
such situation and that GAAP has been used in the preparation of the Financial
Statements, which certificate shall be in the form attached hereto as Exhibit
"C".
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"Consolidated Tangible Net Worth" means, as of any reporting period,
Stockholders' Equity plus Subordinated Debt, less the sum of:
(A) Goodwill, including any amounts, however designated
on a consolidated balance sheet of the Borrower and
its Subsidiaries, representing the excess of the
purchase price paid for assets or stock acquired over
the value assigned thereto on the books of the
Borrower;
(B) Patents, trademarks, trade names, and copyrights;
(C) Any amount at which shares of capital stock of the
Borrower appear as an asset on the Borrower's balance
sheet;
(D) Loans and advances to stockholders, directors,
officers, or employees; and
(E) Any other amount in respect of an intangible that
should be classified as an asset on a consolidated
balance sheet of the Borrower in accordance with
GAAP.
"▇▇▇▇▇" means the Accounting Procedure Joint Operations Recommended by
the Council of Petroleum Accountants, with respect to onshore and offshore
operations, respectively, including the most current versions thereof and any
other recent versions thereof commonly in use.
"Credit Extension" means the making of a Loan or the issuance of a
Facility LC hereunder.
"Credit Extension Date" means the date on which a Loan is advanced or a
Facility LC is issued.
"Current Assets" means at any time, all assets, that should in
accordance with GAAP, be classified as current assets on a consolidated balance
sheet of Parent Borrower and its Subsidiaries, plus the then current
availability under the aggregate Commitments.
"Current Liabilities" means at any time, all liabilities that should in
accordance with GAAP, be classified as current liabilities on a consolidated
balance sheet of Parent Borrower and its Subsidiaries, minus the amount of
Credit Extensions under this Agreement and the amount of Subordinated Debt that
are deemed to be current in accordance with GAAP.
"Current Ratio" means the ratio derived from dividing Current Assets by
Current Liabilities.
"Debt Exchange Agreement" has the meaning stated therefor in the Merger
Agreement.
"Documentation Agent" means BNP Paribas, and each successor to such
agent position.
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"Earnout Agreement" has the meaning stated therefor in the Merger
Agreement.
"EBITDAX" means, for any reporting period, Parent Borrower's and its
Subsidiaries' net income on a consolidated basis before deductions for interest
expense, taxes, depreciation, depletion, amortization, dry hole costs and
non-cash compensation expense.
"Employee Royalty Trust Purchase Agreement and Debt Exchange" has the
meaning stated therefor in the Merger Agreement.
"Environmental Laws" means (a) the following federal laws as they may
be cited, referenced and amended from time to time: the Clean Air Act, the Clean
Water Act, the Safe Drinking Water Act, the Comprehensive Environmental
Response, Compensation and Liability Act, the Endangered Species Act, the
Resource Conservation and Recovery Act, the Occupational Safety and Health Act,
the Hazardous Materials Transportation Act, the Superfund Amendments and
Reauthorization Act, the Toxic Substances Control Act, and the Oil Pollution Act
of 1990; (b) any and all environmental statutes of any state in which property
of the Borrower is situated, as they may be cited, referenced and amended from
time to time; (c) any rules or regulations promulgated under or adopted pursuant
to the above federal and state laws; and (d) any other federal, state or local
statute or any requirement, rule, regulation, code, ordinance or order adopted
pursuant thereto, including, without limitation, those relating to the
generation, transportation, treatment, storage, recycling, disposal, handling or
release of Hazardous Substances.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations and published interpretations
thereof.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) which together with the Borrower would be treated as a single
employer under Section 4001 of ERISA.
"Eurodollar Business Day" means a day on which dealings are carried on
in the LIBOR Market.
"Event of Default" means any of the events specified in Section 7.01 of
this Agreement.
"Evercore Parties" means Evercore Capital Partners L.P., Evercore
Capital Partners (NQ) L.P., Evercore Capital Offshore Partners L.P. and Evercore
Co-Investment Partnership L.P.
"Evercore Transaction" means that certain transaction among the
Evercore Parties and Borrower, as evidenced by the Evercore Transaction
Documents.
"Evercore Transaction Documents" means (i) that certain Energy
Partners, Ltd. Stock Purchase Agreement dated November 17, 1999, between
Borrower and the Evercore Parties, (ii) that certain Registration Rights
Agreement dated as of November 17, 1999, between Borrower and the Evercore
Parties, (iii) that certain Certificate of Designations of the Series A
Convertible Preferred Stock of Energy
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Partners, Ltd., dated November 17, 1999, executed by Borrower, (iv) that certain
Certificate of Designations of the Series B Convertible Preferred Stock of
Energy Partners, Ltd., dated November 17, 1999, executed by Borrower, (v) that
certain Certificate of Designations of the Series C Convertible Preferred Stock
of Energy Partners, Ltd., dated November 17, 1999, executed by Borrower, and
(vi) that certain Stockholder Agreement dated as of November 17, 1999, by and
among Borrower, the Evercore Parties, EIF, and the individual shareholders of
Borrower.
"Existing Notes" means, collectively, the Notes held by each of the
Banks that are parties to this Agreement as of the Closing, which were issued by
Borrower to each of such Banks pursuant to the First Amended Credit Agreement,
together with all deferrals, renewals, extensions, amendments, modifications or
rearrangements thereof.
"Facility LC" is defined in Section 2.20(A).
"Facility LC Application" is defined in Section 2.20(C).
"Facility Termination Date" means March 30, 2003; provided that if on
or before January 31, 2002, Borrower provides to Administrative Agent a
certificate of the Secretary of Parent Borrower in form satisfactory to the
Administrative Agent attesting to the fact that the Board of Directors of Parent
Borrower has adopted an unconditional resolution (either by unanimous written
consent or at a duly called meeting of such Board) to extend the Facility
Termination Date to March 30, 2005, then from and after the date that such
certificate has been delivered to Administrative Agent, "Facility Termination
Date" shall mean March 30, 2005.
"Federal Funds Effective Rate" means, for any day, the weighted average
of the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published by the Federal
Reserve Bank of New York for such day on the next succeeding Business Day or, if
such rate is not so published for any day which is a Business Day, the average
of the quotations for the day of such transactions received by the
Administrative Agent from three Federal funds brokers of recognized standing
selected by it.
"Financial Statements" means the statements of the financial condition
of the indicated Person, on a consolidated basis, as at the point in time and
for the period indicated and consisting of at least a balance sheet, income
statement and statement of cash flows, and when the foregoing are audited,
accompanied by the certification of such Person's independent certified public
accountants and footnotes to any of the foregoing, all of which shall be
prepared in accordance with GAAP applied on a basis consistent with that of the
preceding year, except for any inconsistency that results from changes in GAAP
from year to year.
"First Amended Credit Agreement" has the meaning stated therefor in the
first recital of this Agreement.
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"Floating Rate" means a per annum interest rate determined by reference
to the following schedule:
o LIBOR + LIBOR Margin at Borrower's option pursuant to
Section 2.04,
or
ABR + ABR Margin
o After the occurrence and during the continuation of
an Event of Default, the Floating Rate determined in
accordance with the forgoing schedule shall, in each
case, be increased by two percent (2%) per annum, not
to exceed the Maximum Rate.
"GAAP" means generally accepted accounting principles, applied on a
consistent basis, as set forth in Opinions of the Accounting Principles Board of
the American Institute of Certified Public Accountants and/or in statements of
the Financial Accounting Standards Board and/or their respective successors and
which are applicable as of the date of Closing, except that solely for purposes
of the definition of Financial Statements herein, changes in GAAP from time to
time (if any) shall be applied and reflected in the Financial Statements.
Accounting principles are applied on a "consistent basis" when the accounting
principles observed in a current period are comparable in all material respects
to those accounting principles applied in a preceding period.
"Hazardous Substances" means flammables, explosives, radioactive
materials, hazardous wastes, asbestos or any material containing asbestos,
polychlorinated biphenyls (PCBs), toxic substances or related materials,
petroleum and petroleum products and associated oil or natural gas exploration,
production and development wastes or any substances defined as "hazardous
substances", "hazardous materials", "hazardous wastes" or "toxic substances"
under the Comprehensive Environmental Response, Compensation and Liability Act,
as amended, the Superfund Amendments and Reauthorization Act, as amended, the
Hazardous Materials Transportation Act, as amended, the Resource Conservation
and Recovery Act, as amended, the Toxic Substances Control Act, as amended, or
any other Environmental Laws now or hereafter enacted or promulgated by any
regulatory authority or governmental body, but only to the extent any such law
is or becomes applicable to the Borrower or any of its property.
"Hedge Agreement" means any swap agreement, cap, collar, floor,
exchange transaction, forward agreement or exchange or protection agreement
related to Hydrocarbons or any option with respect to such transaction, as more
specifically provided in those certain master swap agreements on International
Swap Dealers Association forms and the schedules thereto and any confirmations
thereunder entered into by Borrower with any other Person.
"Hydrocarbons" means crude oil, condensate, natural gas, natural gas
liquids and other hydrocarbons.
"Increased Costs" has the meaning stated therefor in Section 2.10
(A)(3) of this Agreement.
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"Indebtedness" means, as to any Person, (a) all items of indebtedness
or liability for borrowed money which in accordance with GAAP would be included
in determining total liabilities as shown on the liability side of a balance
sheet as at the date as of which Indebtedness is to be determined, (b)
indebtedness secured by (or for which the holder of such indebtedness has a
right, contingent or otherwise, to be secured by) any mortgage, deed of trust,
pledge, lien, security interest, or other charge or encumbrance existing on or
encumbering property owned by the Person whose Indebtedness is being determined,
whether or not the indebtedness secured thereby shall have been assumed, (c) all
indebtedness of others which such Person has directly or indirectly guaranteed,
endorsed (otherwise than for collection or deposit in the ordinary course of
business), discounted with recourse, agreed (contingently or otherwise) to
purchase or repurchase or otherwise acquire, or in respect of which such Person
has agreed to supply or advance funds (whether by way of loan, purchase of
securities or capital contribution, through a commitment to pay for property or
services regardless of the nondelivery of such property or the nonfurnishing of
such services or otherwise), or in respect of which such Person has otherwise
become directly or indirectly liable, contingently or otherwise, whether now
existing or hereafter arising, and (d) all leases (excluding Leases constituting
Oil and Gas Properties) that, in accordance with GAAP, should not be reflected
on the Borrower's balance sheet.
"Interest Period" means as to any LIBOR Loan the period commencing on
and including the date of such Loan (or on the effective date of the election
pursuant to Section 2.04(B) by which such Loan became a LIBOR Loan) and ending
on and including the day preceding the numerically corresponding day (or if
there is no such numerically corresponding day, the last day) in the 1st, 2nd,
3rd or 6th calendar month after the date of such Loan, as selected by the
Borrower in accordance with Section 2.04(B), and after such selected month, such
period commencing on and including the day immediately following the last day of
the then ending Interest Period for such Loan and ending on and including the
day preceding the day numerically corresponding to the first day of such
Interest Period (or if there is no such numerically corresponding day, the last
day), in the 1st, 2nd, 3rd or 6th calendar month after the first day of such
Interest Period, as so selected by the Borrower; provided, however, that if any
Interest Period would otherwise end on a day immediately prior to a day that is
not a Business Day it shall be extended so as to end on the day immediately
prior to the next succeeding Business Day unless the same would fall in a
different calendar month, in which case such Interest Period shall end on the
day immediately preceding the first Business Day immediately preceding such next
succeeding Business Day.
"Investment" in any Person means any stock, bond, note or other
evidence of Indebtedness or any other security (other than current trade and
customer accounts) of, or loan to, such Person.
"KCS Production Payment Documents" means the documents described on
Schedule 1.01(d).
"KCS Production Payment" means that certain volumetric production
payment owned by KCS Energy Services, Inc., created by that certain conveyance
of production payment described under item 2 among the KCS Production Payment
Documents.
-9-
"Laws" means all ordinances, statutes, rules, regulations, orders,
injunctions, writs, or decrees of any government or political subdivision or
agency thereof, or any court or similar entity established by any thereof.
"LC Fee" is defined in Section 2.20(D).
"LC Issuer" means Bank One (or any subsidiary or Affiliate of Bank One
designated by Bank One and reasonably acceptable to Borrower) in its capacity as
issuer of Facility LCs hereunder.
"LC Obligations" means, at any time, the sum, without duplication, of
(i) the aggregate undrawn stated amount under all Facility LCs outstanding at
such time plus (ii) the aggregate unpaid amount at such time of all
Reimbursement Obligations.
"LC Payment Date" is defined in Section 2.20(E).
"Leases" means oil and gas leases and all oil, gas and mineral leases
constituting any part of the Borrowing Base Oil and Gas Properties.
"LIBOR" means, with respect to each Interest Period, the rate of
interest per annum at which deposits of not less than $1,000,000.00 in United
States dollars are offered in the LIBOR Market for a period of time equal or
comparable to such Interest Period and in an amount equal to or comparable to
the principal amount of the LIBOR Loan to which such Interest Period relates as
appearing on Reuters Screen FRBD as of 11:00 AM (London time) two (2) Business
Days before the first day of the applicable Interest Period, as adjusted for
maximum statutory reserves, provided, however, that if such rate is not
available on Reuters Screen FRBD, then within five (5) Business Days of receipt
of notification, the Administrative Agent and the Borrower shall enter into good
faith negotiations for a period of fifteen (15) days (or such shorter period as
is required to agree to the alternative basis) with a view to agreeing on an
alternative basis for determining the rate of interest applicable to LIBOR
Loans, and if no alternative basis is agreed within the fifteen (15) day period,
the LIBOR Loan shall be deemed to have converted to an ABR Loan as of the end of
the last Interest Period.
"LIBOR Loan" means any Loan from time to time for which interest
thereon is to be computed at a Floating Rate based on LIBOR plus the LIBOR
Margin, as elected by Borrower pursuant to Section 2.04 hereof.
"LIBOR Margin" means the applicable margin set forth in the Pricing
Grid under the caption, "LIBOR Margin," determined based on the Utilization
Percentage prevailing from time to time.
"LIBOR Market" means the London interbank offered interest rate market
created by major London clearing banks for deposits in United States dollars.
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"Limitation Period" means any period while any amount remains owing on
the Notes when interest on such amount, calculated at the applicable rate
prescribed on the Notes, plus any fees payable hereunder and deemed to be
interest under applicable Law, would exceed the Maximum Rate.
"Loan" means, singly, any advance by the Banks to the Borrower pursuant
to this Agreement and "Loans" means, cumulatively, the aggregate sum of all
money advanced by the Banks to the Borrower pursuant to this Agreement.
"Loan Agreement" has the meaning stated therefor in the first recital
of this Agreement.
"Loan Documents" means this Agreement, the Notes, the Facility LC
Applications, the Security Instruments, and all other promissory notes, security
agreements, and other instruments, documents, and agreements executed and
delivered pursuant to or in connection with this Agreement, as such instruments,
documents, and agreements may be amended, modified, renewed, extended, or
supplemented from time to time.
"Loan Excess" means, at any point in time, the amount, if any, by which
the outstanding balance on the Aggregate Outstanding Credit Exposure exceeds the
Aggregate Commitment Amount then in effect.
"Marketable Title" means good and indefeasible title, as set forth,
qualified and/or limited on Exhibit "A," free and clear of all mortgages, liens
and encumbrances, except for Permitted Encumbrances.
"Material Adverse Change" means any change in the business, property,
condition (financial or otherwise) or results of operations, or reasonably
foreseeable prospects of the Borrower and its Subsidiaries which has a Material
Adverse Effect.
"Material Adverse Effect" means a material adverse effect on (i) the
business, property, condition (financial or otherwise), results of operations,
or reasonably foreseeable prospects of the Borrower and its Subsidiaries taken
as a whole, (ii) the ability of the Borrower to perform its obligations under
the Loan Documents to which it is a party, or (iii) the validity or
enforceability of any of the Loan Documents or the rights or remedies of the
Administrative Agent, the Banks or the LC Issuer thereunder.
"Maximum Rate" means the maximum rate of non-usurious interest
permitted from day to day by Applicable Law, including Chapter 303 of the
Texas
Finance Code (and as the same may be incorporated by reference in other
Texas
statutes), but otherwise without limitation, that rate based upon the "indicated
weekly rate ceiling."
"Merger Agreement" means that certain Agreement and Plan of Merger
dated as of December 16, 2001, as amended by Amendment No. 1 thereto dated as of
January 11, 2002, by and among Parent Borrower, Saints Acquisition Subsidiary,
Inc. and Subsidiary Borrower.
-11-
"Modify" and "Modification" are defined in Section 2.20(A).
"Multi-employer Plan" means a plan described in Section 4001(a)(3) of
ERISA which covers employees of the Borrower or any ERISA Affiliate.
"Net Income" means, for any period, the net income (or loss) of the
Borrower and its Subsidiaries on a consolidated basis after allowances for taxes
for such period, determined in accordance with GAAP; provided that there shall
be excluded from such net income (to the extent otherwise included therein) the
following: (i) the net income of any Person in which the Borrower has an
interest (which interest does not cause the net income of such other Person to
be consolidated with the net income of the Borrower in accordance with GAAP),
except to the extent of the amount of dividends or distributions actually paid
in such period by such other Person to the Borrower; (ii) any extraordinary
gains or losses, including gains or losses attributable to property sales not in
the ordinary course of business, (iii) the cumulative effect of a change in
accounting principles, and (iv) any gains or losses attributable to writeups or
writedowns of assets.
"Note" and "Notes" means, individually, a promissory note issued by
Borrower payable to the order of a Bank evidencing the Loans made by that Bank
pursuant to Section 2.01 hereof and being substantially in the form of the note
attached as Exhibit B hereto, including the Existing Notes, together with any
and all further renewals, extensions for any period, increases or rearrangements
thereof, and means collectively all of such Notes.
"Obligations" means all obligations, indebtedness, and liabilities of
the Borrower to the Banks and the LC Issuer, now existing or hereafter arising
under this Agreement and the other Loan Documents, including, but not limited
to, the Indebtedness evidenced by the Notes and the Reimbursement Obligations,
and all interest accruing thereon and all attorneys' fees and other expenses
incurred in the administration, enforcement or collection thereof.
"Oil and Gas Properties" means fee, leasehold or other interests in or
under mineral estates or oil, gas and other liquid or gaseous hydrocarbon leases
with respect to properties situated in the United States, including, without
limitation, overriding royalty and royalty interests, leasehold estate
interests, net profits interests, production payment interests and mineral fee
interests, together with contracts executed in connection therewith and all
tenements, hereditaments, appurtenances and properties, real or personal,
appertaining, belonging, affixed or incidental thereto.
"Original Credit Agreement" has the meaning stated therefor in the
first recital of this Agreement.
"Outstanding Credit Exposure" means, as to any Bank at any time, the
sum of (i) the aggregate principal amount of its Loans outstanding at such time,
plus (ii) an amount equal to its Percentage Share of the LC Obligations at such
time.
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"Overriding Royalty Interest Purchase Agreement" has the meaning stated
therefor in the Merger Agreement.
"Parent Borrower" has the meaning stated therefor in the preamble of
this Agreement.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"Percentage Share" means, as to any Bank, a fraction (expressed as a
percentage), the numerator of which shall be such Bank's Commitment Amount, and
the denominator of which shall be the Aggregate Commitment Amount stated on
Schedule 1.01(b) attached hereto.
"Permitted Asset Sales" means (a) sales, leases, assignments, transfers
or disposals of, in one or any series of related transactions, (i) all or any
portion of Borrower's assets (except for items included in clause (ii) of this
definition), whether now owned or hereafter acquired, including transfers to
Subsidiaries, which, in the aggregate, do not exceed $10,000,000.00 in any
rolling four quarter period, and (ii) Borrower's offshore platforms that have
been abandoned or dismantled; and (b) sales of Hydrocarbons in the ordinary
course of business.
"Permitted Encumbrances" means:
(A) Liens for taxes, assessments, or similar charges,
incurred in the ordinary course of business that are
not yet due and payable;
(B) Liens of mechanics, materialmen, warehousemen,
carriers, or other like liens, securing obligations
incurred in the ordinary course of business that are
not yet due and payable;
(C) Pledges or deposits in connection with or to secure
workmen's compensation, unemployment insurance,
pensions or other employee benefits;
(D) Encumbrances consisting of covenants, zoning
restrictions, rights, easements, liens or other
restrictions on the use of real property, none of
which materially impairs the use of such property by
the Borrower in the operation of its business, and
none of which is violated in any material respect by
existing or proposed operations;
(E) Liens of operators and/or co-working interest owners
under joint operating agreements or similar
contractual arrangements with respect to the
Borrower's proportionate share of the expense of
exploration, development and operation of oil, gas
and mineral leasehold or fee interests owned jointly
with others, to the extent that same relate to sums
not yet due;
-13-
(F) Liens securing surety or other bonds required in the
normal course of business not to exceed $2,000,000.00
in the aggregate at any time in effect;
(G) The following, if the validity or amount thereof is
being contested in good faith by appropriate and
lawful proceedings, so long as levy and execution
thereon have been stayed and continue to be stayed
and they do not, in the aggregate, materially detract
from the value of the property of the Borrower or any
Subsidiary, or materially impair the use thereof in
the operation of its business:
(1) Claims or liens for taxes, assessments, or
charges due and payable and subject to
interest or penalty;
(2) Claims, liens, and encumbrances upon, and
defects of title to, real or personal
property, including any attachment of
personal or real property or other legal
process prior to adjudication of a dispute
on the merits;
(3) Claims or liens of mechanics, materialmen,
warehousemen, carriers, or other like liens;
and
(4) Adverse judgments on appeal;
(H) Liens securing payment and performance of the
Obligations;
(I) Liens securing purchase money obligations included in
the definition of Permitted Indebtedness if such
liens encumber only the property for which such
purchase money obligation was incurred;
(J) Inchoate liens in respect of royalty owners; and
(K) Liens and other obligations created by the documents
listed on Schedule 1.01(c) attached hereto.
"Permitted Hedge Agreement" means any Hedge Agreement which Borrower
enters into with or through a counterparty that has a credit rating of at least
"A-" by Standard and Poors or "A3" by ▇▇▇▇▇'▇ Investment Service, together with
the confirmations which Borrower may hereafter enter into with or through such
counterparty covering, in the aggregate, among all such Hedge Agreements, not
more than seventy-five percent (75%) of the Proved Reserves that are (i)
attributable to Borrower's interest in the Borrowing Base Oil and Gas Properties
and (ii) projected to be produced during the term(s) of such Hedge Agreement(s).
-14-
"Permitted Indebtedness" means:
(A) The Loans and Facility LCs;
(B) Unsecured current accounts payable incurred in the
ordinary course of business which are (i) not more
than sixty (60) days overdue, or (ii) being contested
in good faith by appropriate proceedings, or (iii)
the subject of usual and customary review and
evaluation;
(C) Extensions of credit from suppliers or contractors
who are not Affiliates of Borrower for the
performance of labor or services or the provision of
supplies or materials under applicable contracts or
agreements in connection with Borrower's oil and gas
exploration and development activities, which are not
overdue or are being contested in good faith by
appropriate proceedings;
(D) Letters of credit or performance bonds required to be
obtained by the Borrower in the normal course of its
business to assure the proper plugging and
abandonment of oil or gas drilling or production
locations or bonds required by any governmental
agency or instrumentality in the normal course of the
Borrower's business;
(E) Purchase money obligations of the Borrower of up to
$12,000,000 at any time for the purchase of equipment
so long as the purchase money obligations do not
exceed the fair market value of the equipment
purchased therewith;
(F) Lease dated August 12, 1999, as amended, between the
Borrower (as tenant) and ▇▇ ▇▇▇▇▇▇▇ Associates, L.P.
("Landlord") covering the Borrower's office located
at ▇▇▇ ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇-▇▇▇▇;
(G) Income taxes payable that are not overdue;
(H) Accrued abandonment liabilities;
(I) Indebtedness arising out of Permitted Hedge
Agreements;
(J) The Indebtedness evidenced by the Buyer Senior
Subordinated Notes, not to exceed at any time an
outstanding principal balance thereunder of
Thirty-Eight Million, Five Hundred Thousand Dollars
($38,500,000.00);
-15-
(K) Unsecured inter-company Indebtedness that is either
owed by Subsidiary Borrower to Parent Borrower or by
Parent Borrower to Subsidiary Borrower, subject to
the subordination provisions set forth in Section
9.24;
(L) The Indebtedness of Parent Borrower under the Earnout
Agreement, with any obligation of Parent Borrower to
make cash payments thereunder not to exceed Ten
Million Dollars ($10,000,000.00) from the date of
this Agreement through December 31, 2005; and
(M) Other indebtedness incurred by the Borrower not to
exceed, in the aggregate at any time outstanding,
Five Million Dollars ($5,000,000.00).
"Person" means an individual, company, corporation, partnership, joint
venture, limited liability company, trust, association, unincorporated
organization or a government or any agency or political subdivision thereof.
"Pipeline" means that certain Borrowing Base Oil and Gas Property
pipeline described on Exhibit "A-1" attached hereto.
"Plan" means, at any time, any employee benefit plan which is covered
by ERISA and in respect of which the Borrower or any ERISA Affiliate is (or, if
such plan were terminated at such time, would under Section 4069 of ERISA be
deemed to be) an "employer" as defined in Section 3(5) of ERISA.
"Pricing Grid" means the following table:
UTILIZATION COMMITMENT
PERCENTAGE LIBOR MARGIN ABR MARGIN FEE
----------- ------------ ---------- ----------
greater than 90% 2.25% .75% .50%
greater than 75%
less than
or equal to 90% 2.00% .50% .50%
greater than 50%
less than
or equal to 75% 1.75% .25% .50%
less than
or equal to 50% 1.50% 0 .375%
provided, however, that during the six-month period commencing at Closing and
continuing through and including July 15, 2002, the utilization percentage of
"Greater than 50% less than or equal to 75%" listed in the table, above, shall
be deemed modified to read simply "less than or equal to 75%," and during
such six-month period the last row of the above table shall be inapplicable.
"Production Revenue" means revenues of the Borrower from the sale of
its oil and gas production minus any applicable oil and gas production taxes and
royalties.
"Prior Credit Agreement" has the meaning stated therefor in the first
recital of this Agreement.
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"Prohibited Transaction" means any transaction set forth in Section 406
of ERISA or Section 4975 of the Internal Revenue Code of 1954, as amended from
time to time.
"Purchasing Bank" shall have the meaning assigned to that term in
Section 9.05 hereof.
"Proved Reserves" means the estimated quantities of crude oil,
condensate, natural gas liquids and natural gas which geological and engineering
data demonstrate with reasonable certainty to be recoverable by primary
producing mechanisms in future years from known reservoirs underlying lands or
interests therein constituting Oil and Gas Properties, under existing economic
and operating conditions. Reserves which can be produced economically through
application of improved recovery techniques (i.e., fluid injection) will be
included in Proved Reserves when successful testing by a pilot project or the
operation of an installed program in the reservoir provides support for the
engineering analysis on which the pilot project or installed program was based.
In general, the economic productivity of the estimated proved reserves is
supported by actual production or a conclusive formation test; however, in
certain instances proved reserves are assigned to reservoirs on the basis of a
combination of electrical and other type logs and core analyses which indicate
these reservoirs are analogous to similar reservoirs in the same field which are
producing or have demonstrated the ability to produce on a formation test.
"Reimbursement Obligations" means, at any time, the aggregate of all
obligations of the Borrower then outstanding under Section 2.20 to reimburse the
LC Issuer for amounts paid by the LC Issuer in respect of any one or more
drawings under Facility LCs.
"Reportable Event" means any of the events set forth in Section 4043 of
ERISA.
"Request for Advance" means the written or verbal (confirmed in writing
within one (1) Business Day) request by the Borrower to the Administrative Agent
for an advance by the Banks pursuant to this Agreement, which Request for
Advance shall be in substantially the form attached hereto as Exhibit "G",
signed by an authorized officer of the Parent Borrower and which shall include a
statement of the amount requested to be advanced, the date of the requested
advance and such other information as the Administrative Agent in its reasonable
discretion deems necessary.
"Required Banks" means, at any time, Banks holding at least sixty-six
and two-thirds percent (66 2/3%) of the Aggregate Commitment Amount or, if the
Aggregate Commitment Amount has been terminated, Banks having at least sixty-six
and two-thirds percent (66 2/3%) of the Aggregate Outstanding Credit Exposure;
subject to the provisions of Section 9.13.
"Required Number" means: in the case of notices hereunder (i) relative
to borrowings, prepayments, elections of LIBOR Loans, selections of Interest
Periods for, or other transactions in respect of, LIBOR Loans: by 10:00 a.m.,
Central Standard Time on the third Business Day prior to the proposed activity;
or (ii) relative to all transactions in respect of ABR Loans: the same Business
Day by 1:00 p.m., Central Standard Time; it being understood, however, that in
the case of notices involving transactions in
-17-
respect of more than one type of Loan (such as a change in type of Loan in
accordance with Section 2.04(B)), "Required Number" means that number of days,
as indicated above in respect of the Loans involved, which would constitute the
longest applicable period of time.
"Reserve Report" means a report prepared by an independent petroleum
engineer or firm of engineers reasonably satisfactory to the Administrative
Agent regarding the Proved Reserves attributable to the Borrowing Base Oil and
Gas Properties, using the criteria and parameters required by and acceptable to
the Securities and Exchange Commission, and incorporating the present cost of
appropriate plugging and abandonment obligations to be incurred in the future,
taking into account any plugging and abandonment fund required to be accrued or
established by Borrower out of cash flow from the Borrowing Base Oil and Gas
Properties covered by such report with respect to such future obligations.
"Security Instruments" means the security instruments described on
Exhibit "D," in form and substance satisfactory to the Administrative Agent, to
be executed by Borrower pursuant to Section 3.01, the Security Instruments as
defined in the Loan Agreement, in the Original Credit Agreement, and in the
First Amended Credit Agreement, each of which shall continue to secure
Borrower's Obligations, and any and all other instruments or documents hereafter
executed in connection with or as security for the payment of the Notes and
performance of the Obligations.
"Senior Debts" has the meaning stated therefor in Section 9.24.
"Stockholders' Equity" means, at any time, the sum of the following
accounts set forth on a consolidated balance sheet of the Borrower, prepared in
accordance with GAAP: (A) the par or stated value of all outstanding capital
stock (common and preferred); (B) capital surplus including paid in capital; and
(C) retained earnings.
"Subordinated Debt" means Indebtedness of Borrower (or either of them)
that is described in clauses (J), (K) and/or (L) of the definition of Permitted
Indebtedness.
"Subordinated Intercompany Debt" has the meaning stated therefor in
Section 9.24.
"Subsidiary" means, as to any Person, any corporation in which such
Person, directly or indirectly through its Subsidiaries, owns more than fifty
percent (50%) of the stock of any class or classes having by the terms thereof
the ordinary voting power to elect a majority of the directors of such
corporation, and any partnership, association, joint venture, or other entity in
which such Person, directly or indirectly through its Subsidiaries, has more
than a fifty percent (50%) equity interest at the time.
"Subsidiary Borrower" has the meaning stated therefor in the first
recital of this Agreement.
"Syndication Agent" means ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ Bank (formerly known as The
Chase Manhattan Bank), and each successor to such agent position.
-18-
"Transaction Documents" means the Merger Agreement, the Earnout
Agreement, the Debt Exchange Agreement, the Employee Royalty Trust Purchase
Agreement and Debt Exchange, the Working Interest Purchase Agreement, the
Overriding Royalty Interest Purchase Agreement, the Company Principal
Shareholders Agreement and the Buyer Registration Rights Agreement.
"Transfer Order Letters" means the letters in lieu of division or
transfer orders, in form acceptable to the Administrative Agent.
"Unmatured Event of Default" means any event or occurrence which solely
with the lapse of time or the giving of notice or both will ripen into an Event
of Default.
"Utilization Percentage" means the percentage of the Aggregate
Commitment Amount represented by the aggregate principal amount of all Credit
Extensions outstanding from time to time.
"Working Interest Purchase Agreement" has the meaning stated therefor
in the Merger Agreement.
Undefined Terms. Undefined financial accounting terms used in this
Agreement shall be defined according to GAAP.
ARTICLE II.
THE LOANS AND LETTERS OF CREDIT
2.01 The Commitment. From and including the date of this Agreement and
prior to the Facility Termination Date, each Bank severally agrees, on the terms
and conditions set forth in this Agreement, to (i) make Loans to the Borrower
and (ii) participate in Facility LCs issued upon the request of the Borrower,
provided that, after giving effect to the making of each Loan and the issuance
of each Facility LC, such Bank's Outstanding Credit Exposure shall not exceed
its Commitment. The Loans advanced by each Bank to the Borrower shall be
evidenced by the Banks' respective Notes from the Borrower. Subject to the terms
of this Agreement, the Borrower may borrow, repay and reborrow up to the
Aggregate Commitment Amount at any time prior to the Facility Termination Date.
All Commitments to extend credit hereunder shall expire on the Facility
Termination Date.
The LC Issuer will issue Facility LCs hereunder on the terms and
conditions set forth in Section 2.20.
2.02 Notice and Manner of Borrowing.
(a) The amount and date of each Credit Extension shall be designated in
a Request for Advance executed by Parent Borrower on behalf of each Borrower, to
be received by the Administrative Agent at least the Required Number of, but not
more than ten (10), Business Days prior to the date of such
-19-
Credit Extension, which date shall be a Business Day. The Administrative Agent
shall promptly advise the Banks and, if applicable, the LC Issuer, of any
Request for Advance given pursuant to this Section 2.02, of each Bank's
Percentage Share of any requested Borrowing and, if applicable, the amount
requested for any Facility LC by telephone, confirmed promptly in writing, or
telecopier. Upon satisfaction of the applicable conditions set forth in Article
III, each Borrowing shall be made at the office of the Administrative Agent, and
shall be funded prior to 3:00 o'clock p.m., Houston,
Texas time, on the day so
requested in immediately available funds in the amount so requested. Each Loan
funded by the Banks and/or the Administrative Agent pursuant to this Agreement
shall be deemed to have been advanced jointly to each Person defined herein as
Borrower, notwithstanding the Borrower to which, or into whose account, such
Loan advance was delivered or funded. Subsidiary Borrower hereby irrevocably
designates and appoints Parent Borrower as its exclusive agent and
representative under this Agreement and the other Loan Documents for purposes of
all notices and other communications to be given or received by Borrower.
Administrative Agent, LC Issuer and the Bank shall be conclusively entitled to
rely on any communications with Parent Borrower as also constituting
communications with Subsidiary Borrower.
(b) Each Bank shall make each Loan to be made by it hereunder on the
date of the proposed Borrowing by wire transfer of immediately available funds
to the Administrative Agent in Houston,
Texas, not later than 11:00 a.m.,
Houston, Texas time, and upon fulfillment of the applicable conditions set forth
in Article III, the Administrative Agent will make such funds available to
Borrower as Parent Borrower shall direct to the Administrative Agent from time
to time or, if a Borrowing shall not occur on such date because any condition
precedent herein specified shall not have been met, return the amounts so
received to the respective Banks as soon as practicable. Unless the
Administrative Agent shall have received notice from a Bank prior to the date of
any proposed Borrowing that such Bank will not make available to the
Administrative Agent such Bank's Percentage Share of such Borrowing, the
Administrative Agent may assume that such Bank has made its Percentage Share
available to the Administrative Agent on the date of such Borrowing in
accordance with this paragraph (b) and the Administrative Agent may, in reliance
upon such assumption, make available to Borrower on such date a corresponding
amount. If, and to the extent that, such Bank shall not have made its Percentage
Share available to the Administrative Agent, such Bank and Borrower severally
agree to repay to the Administrative Agent forthwith on demand such
corresponding amount together with interest thereon, for each day from the date
such amount is made available to Borrower until the date such amount is repaid
to the Administrative Agent at (i) in the case of Borrower, the interest rate
applicable at the time to the Loans comprising such Borrowing and (ii) in the
case of such Bank, the Federal Funds Effective Rate. If such Bank shall repay to
the Administrative Agent such corresponding amount, such amount shall constitute
such Bank's Loan as part of such Borrowing for purposes of this Agreement.
2.03 Payment Procedure. All payments and prepayments made by Borrower
under this Agreement shall be made to the Administrative Agent at its office
specified in Section 9.03 for the account of the Banks in immediately available
funds before 11:00 a. m., Houston, Texas time, on the date that such payment is
required to be made. The Administrative Agent will promptly thereafter cause to
be distributed like funds relating to such payments or prepayments ratably to
the Banks (and if the payment relates to
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amounts owed to a particular Bank only, in like funds to such Bank), in each
case, to be applied in accordance with the terms of this Agreement. Borrower
hereby authorizes the Administrative Agent, if and to the extent payment or
prepayment (including prepayments required pursuant to Section 2.11 hereof) is
not made when due hereunder or under the Notes or any other Loan Document, to
charge from time to time against Borrower's account with the Administrative
Agent any amount so due. Any payment received and accepted by the Administrative
Agent (or any branch or Affiliate thereof) after such time shall be considered
for all purposes (including the calculation of interest, to the extent permitted
by law) as having been made on the next following Business Day.
2.04 Payments of Interest under the Notes. Subject to the terms and
provisions of this Agreement, interest on the Loan, calculated at the Floating
Rate, shall be due and payable as follows:
(A) Interest on ABR Loans shall be calculated on the basis of
a 365/366-day year, as applicable, and on LIBOR Loans on the basis of a
360-day year, in each case counting the actual number of days elapsed.
Interest on the outstanding principal balance of the Loans shall accrue
for each day at either a Floating Rate based on ABR plus the ABR Margin
for such day for ABR Loans, or a Floating Rate based on LIBOR for the
Interest Period which includes such day plus the LIBOR Margin for such
day for LIBOR Loans, all as elected and specified (including
specification as to length of Interest Period, as permitted by the
definition of that term, with respect to any election of a Floating
Rate based on LIBOR) by the Borrower in accordance with Section
2.04(B); provided that:
(1) In the absence of an election by the Borrower of
a Floating Rate based on LIBOR plus the LIBOR Margin, or,
having made such election, but upon the Required Number of
days prior to the end of the then current Interest Period the
Borrower fails or is not entitled under the terms of this
Agreement to elect to continue a Floating Rate based on LIBOR
plus the LIBOR Margin and specify the applicable Interest
Period therefor, then upon the expiration of such then current
Interest Period, interest on the Loans shall accrue for each
day at a Floating Rate based on ABR plus the ABR Margin for
such day, until the Borrower, pursuant to Section 2.04(B),
elects a different Floating Rate and specifies the Interest
Period for the Loans.
(2) Interest accruing on any LIBOR Loan during any
Interest Period shall be payable on the first Business Day of
the next Interest Period except that: (a) with respect to
LIBOR Loans for which Borrower has selected an Interest Period
of six (6) months, interest will be payable on the first
Business Day following the ninetieth (90th) day after the
commencement of such Interest Period and on the first Business
Day of the next Interest Period, (b) interest will be payable
on the Facility Termination Date on any LIBOR Loan with an
Interest Period ending on the Facility Termination Date; and
provided that (c) all accrued interest on any LIBOR Loan
converted or prepaid pursuant to Section 2.11 shall be paid
immediately upon such prepayment or conversion.
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(B) By at least the Required Number of days prior to the
advance of any Loan hereunder, the Borrower shall select the initial
Floating Rate to be charged on such Loan, and from time to time
thereafter the Borrower may elect, on at least the Required Number of
days irrevocable prior written (or verbal, promptly confirmed by
written) notice to the Administrative Agent, an initial Floating Rate
for any additional Loan, or to change the Floating Rate on any Loan to
any other Floating Rate (including, when applicable, the selection of
the Interest Period); provided that; (i) the Borrower shall not select
an Interest Period that extends beyond the Facility Termination Date;
(ii) except as otherwise provided in Section 2.11 no such change from a
Floating Rate based on LIBOR plus the LIBOR Margin to another Floating
Rate shall become effective on a day other than the day, which must be
a Business Day, next following the last day of the Interest Period last
effective for such LIBOR Loan; (iii) any elections made by the Borrower
pursuant to this Section 2.04(B) shall be in the amount of $1,000,000,
plus any additional increment of $1,000,000, or such lesser amount as
constitutes the balance of all Loans then outstanding hereunder; (iv)
notwithstanding anything herein to the contrary, the Borrower may not
make any election under this Section 2.04(B) that would result in Loans
outstanding based on more than six (6) different LIBORs without the
consent of the Required Banks to do so; and (v) the first day of each
Interest Period as to a LIBOR Loan shall be a Business Day.
(C) Interest on ABR Loans shall be paid quarterly in arrears
on the first Business Day of each calendar quarter (for the immediately
preceding quarter) commencing with the quarter following any quarter
during which interest begins to accrue at a Floating Rate based on ABR
plus the ABR Margin, as elected by Borrower pursuant to Section
2.04(B), and on the date the principal of such Loans shall be due (on
the stated Facility Termination Date, on acceleration, or otherwise).
2.05 General Provisions Relating to Interest. It is the intention of
the parties hereto to comply strictly with the usury Laws of the State of Texas
and the United States of America and, in this connection, there shall never be
collected, charged or received on any sums advanced hereunder interest in excess
of the Maximum Rate. For purposes of Chapter 303 of the Texas Finance Code, as
amended, the Borrower agrees that the maximum rate to be charged shall be the
"indicated (weekly) rate ceiling" as defined in said Chapter, provided that the
Bank may also rely to the extent permitted by applicable Laws of the State of
Texas or the United States of America, on alternative maximum rates of interest
under other applicable Laws of the State of Texas or the United States of
America applicable to the Loans, if greater. Notwithstanding anything herein or
in the Notes to the contrary, during any Limitation Period, the interest rate to
be charged on amounts evidenced by the Notes shall be the Maximum Rate and the
obligation of the Borrower for any fees payable hereunder and deemed to be
interest under applicable Law shall be suspended. During any period or periods
of time following a Limitation Period, to the extent permitted by applicable
Laws of the State of Texas or the United States of America, the interest rate to
be charged hereunder shall remain at the Maximum Rate until such time as there
has been paid to each Bank (a) the amount of interest in excess of the Maximum
Rate that such Bank would have received during the
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Limitation Period had the interest rate remained at the relevant rates specified
in the Note, and (b) all interest and fees otherwise due to such Bank but for
the effect of such Limitation Period.
If under any circumstances the aggregate amounts paid on the Notes or
under this Agreement include amounts which by Law are deemed interest and which
would exceed the amount permitted if the Maximum Rate were in effect, the
Borrower stipulates that such payment and collection will have been and will be
deemed to have been, to the extent permitted by applicable Laws of the State of
Texas or the United States of America, the result of mathematical error on the
part of both the Borrower and the Banks, and each Bank shall promptly refund the
amount of such excess (to the extent only of such interest payments above the
Maximum Rate which could lawfully have been collected and retained) upon
discovery of such error by such Bank or notice thereof from the Borrower.
2.06 Borrowing Base Determination. The Borrowing Base in effect as of
the Closing is One Hundred Million Dollars ($100,000,000.00). The Borrowing Base
shall be re-determined from time to time pursuant to the following provisions of
this Section. On or before April 1, 2002, the Borrower shall furnish to the
Administrative Agent information sufficient to update to an effective date of
January 1, 2002, the most recent petroleum engineering reports provided to the
Administrative Agent prior to Closing relative to the Proved Reserves
attributable to the Borrowing Base Oil and Gas Properties. Upon receipt of such
information, the Administrative Agent shall, in the normal course of business
make a determination of the Borrowing Base, which shall become effective upon
approval by the Required Banks and subsequent written notification from the
Administrative Agent to the Borrower, and which, subject to the other provisions
of this Agreement, shall be the basis on which the Borrowing Base shall
thereafter be calculated until the effective date of the next redetermination of
the Borrowing Base as set forth in this Section. Thereafter, on or before each
April 1 and October 1 until the Facility Termination Date, beginning October 1,
2002, the Borrower shall furnish to the Administrative Agent a report, in form
and substance satisfactory to the Administrative Agent, which report shall set
forth, as of each preceding January 1 or July 1, as applicable, the Proved
Reserves attributable to the Borrowing Base Oil and Gas Properties. Each report
to be provided on or before each April 1 shall be a complete report relating to
the Proved Reserves attributable to the Borrowing Base Oil and Gas Properties
prepared by an independent petroleum engineer or firm of engineers reasonably
satisfactory to the Administrative Agent. Each report to be provided on or
before each October 1 shall simply update the previous complete report, and may
be prepared by the Borrower's own engineers and shall be certified by the
President or Chief Financial Officer of the Borrower. Upon receipt of each such
report, the Administrative Agent shall, in the normal course of business, make a
determination of the Borrowing Base which shall become effective upon approval
by the Required Banks and subsequent written notification from the
Administrative Agent to the Borrower, and which, subject to the other provisions
of this Agreement, shall be the basis on which the Borrowing Base shall
thereafter be calculated until the effective date of the next redetermination of
the Borrowing Base as set forth in this Section 2.06. The Administrative Agent
may, subject to approval of the Required Banks, and must, upon the request of
the Required Banks, redetermine the Borrowing Base at any time, and from time to
time, which redetermination shall become effective upon approval by the Required
Banks and subsequent written notification from the Administrative Agent to the
Borrower and which, subject to the
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other provisions of this Agreement, shall be the basis on which the Borrowing
Base shall thereafter be calculated until the effective date of the next
redetermination of the Borrowing Base, as set forth in this Section. The
Administrative Agent may request in writing that the Borrower provide a Reserve
Report regarding the Proved Reserves attributable to the Borrowing Base Oil and
Gas Properties with an effective date not more than ninety (90) days prior to
Borrower's delivery of such Reserve Report to Administrative Agent, and such
Reserve Report shall be delivered to Administrative Agent within ninety (90)
days after Borrower's receipt of such written request.
The Borrower shall have the right to request, by written notice to
Administrative Agent, one unscheduled redetermination of the Borrowing Base
between any two scheduled redeterminations thereof, subject to contemporaneously
providing to Administrative Agent a Reserve Report with an effective date not
more than ninety (90) days prior to the date of such notice.
If at any time the Required Banks cannot otherwise agree on a
redetermination of the Borrowing Base, then the Borrowing Base, shall be set on
the basis of the Administrative Agent's calculation of the "weighted arithmetic
average" (as hereinafter calculated) of the Borrowing Base, as determined by
each individual Bank and communicated to Administrative Agent in writing.
However, the amount of the Borrowing Base shall never be increased at any time
without the unanimous consent of the Banks, notwithstanding anything else herein
to the contrary. For purposes of this paragraph, the "weighted arithmetic
average" of the Borrowing Base shall be determined by first multiplying the
Borrowing Base proposed in writing to Administrative Agent by each Bank by such
Bank's Percentage Share, and then adding the results of each such calculation,
with the resultant sum being the Borrowing Base.
The Borrowing Base shall represent the Required Banks' approval of the
Administrative Agent's determination, in accordance with its customary lending
practices, of the maximum loan amount with respect to the Borrowing Base Oil and
Gas Properties and the Borrower acknowledges, for purposes of this Agreement,
such determination by the Administrative Agent as being the maximum loan amount
with respect to the Borrowing Base Oil and Gas Properties. In making any
redetermination of the Borrowing Base, the Administrative Agent and the Banks
shall apply the parameters and other credit factors consistently applied then
generally being utilized by the Administrative Agent and each such Bank,
respectively, for Borrowing Base redeterminations for other similarly situated
borrowers. The Borrower, Required Banks and the Administrative Agent acknowledge
that (a) due to the uncertainties of the oil and gas extraction process, the
Borrowing Base Oil and Gas Properties are not subject to evaluation with a high
degree of accuracy and are subject to potential rapid deterioration in value,
and (b) for this reason and the difficulties and expenses involved in
liquidating and collecting against the Borrowing Base Oil and Gas Properties,
the Administrative Agent's determination of the maximum loan amount with respect
to the Borrowing Base Oil and Gas Properties contains an equity cushion, which
equity cushion is acknowledged by the Borrower as essential for the adequate
protection of the Banks.
2.07 Mandatory Prepayment Due to a Loan Excess. Within sixty (60) days
after receipt of written notice from Administrative Agent that a Loan Excess
exists, including, but not limited to, any notice
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establishing a redetermined Borrowing Base that is less than the Aggregate
Outstanding Credit Exposure, Borrower shall either (i) prepay the principal of
the Note in an aggregate amount at least equal to such Loan Excess or (ii) add
to the Borrowing Base Oil and Gas Properties additional Oil and Gas Properties
of the Borrower sufficient in value, as determined pursuant to Section 2.06, to
increase the Borrowing Base to equal the unpaid principal amount of the Notes.
2.08 Other Mandatory Prepayments.
(A) On each date on which the Borrower sells any of its Oil
and Gas Properties, the Borrowing Base will be automatically reduced to
the loan value (determined in accordance with the procedures for
determining the Borrowing Base) of the remaining Borrowing Base Oil and
Gas Properties, and the Borrower shall be required to make the
prepayment, if any, required pursuant to Section 2.07.
(B) Except to the extent otherwise provided in Section
2.08(A), if on any date the Outstanding Credit Exposure exceeds the
amount of the then effective Aggregate Commitment, the Borrower shall
be required to immediately prepay the Loans by the amount of such
excess.
2.09 Prepayment and Conversion. Upon the Required Number of days
written notice to the Administrative Agent, the Borrower may, without the
payment of penalty or premium, prepay the principal of the Loans or voluntarily
convert the applicable Floating Rate of any Loan prior to the termination of the
applicable Interest Period in whole or in part, from time to time. Any partial
payment or conversion of ABR Loans shall be made in the sum of not less than
$1,000,000, and any partial payment or conversion of LIBOR Loans shall be made
in the sum of not less than $1,000,000 or any $1,000,000 increment in addition
thereto. With respect to any such prepayment or conversion of any LIBOR Loan the
Borrower agrees to pay to the Banks upon the request of the Administrative Agent
such amount or amounts as will compensate the Banks for Breakage Costs,
excluding, however, any such Breakage Costs resulting from a payment or
prepayment made more than sixty (60) days prior to the Administrative Agent's
request for payment of Breakage Costs. The payment of any such Breakage Costs to
the Banks shall be made within thirty (30) days of a request therefor from
Administrative Agent. If LIBOR cannot be determined on the date of such
prepayment, the Administrative Agent shall calculate LIBOR by interpolating
LIBOR in effect immediately prior to the prepayment and LIBOR in effect
immediately after the prepayment.
2.10 Increased Cost of Loans.
(A) Notwithstanding any other provisions herein, if as a
result of any regulatory change after the date hereof
(1) the basis of taxation of payments to any Bank of
the principal of, or interest on, any LIBOR Loan or any other
amounts due under this Agreement in respect of any such LIBOR
Loan (except for taxes imposed on the overall net income or
receipts of such
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Bank, and franchise or other taxes imposed generally on such
Bank), by the jurisdiction (or any political subdivision
therein) in which the Bank has its principal office (if such
other taxes do not specifically affect the cost to the Bank of
making the Loans) is changed;
(2) any reserve, special deposit, or similar
requirement (including without limitation any reserve
requirement under regulations of the Board of Governors of the
Federal Reserve System) against assets of, deposits with, or
for the account of, or credit extended by such Bank, is
imposed, increased, modified, or deemed applicable; or
(3) any other condition affecting this Agreement or
any LIBOR Loan is imposed on such Bank or (in the case of
LIBOR Loans) the LIBOR Market; and the result of any of the
foregoing is to increase the actual direct cost to such Bank
of making or maintaining any such LIBOR Loan (and such
increase shall not have been compensated by a corresponding
increase in the interest rate applicable to the respective
Loans) by an amount deemed by such Bank to be material (such
increases in cost and reductions in amounts receivable being
herein called "Increased Costs"), then the Borrower shall pay
such Bank, within thirty (30) days after its written demand,
such additional amount or amounts as will compensate such Bank
for those Increased Costs. No Bank will demand to be
compensated by Borrower for such Increased Costs unless such
Bank generally makes such demands to its other LIBOR Loan
customers who are similarly situated. A certificate of such
Bank setting forth the basis for the determination of such
amount necessary to compensate such Bank as aforesaid
(including a representation by such Bank that it is generally
making demands as required by the preceding sentence),
accompanied by documentation showing reasonable support for
such increased costs or reduced sums received by such Bank,
shall be delivered to the Borrower and shall be conclusive,
save for manifest error, as to such determination and such
amount. The affected Bank shall notify the Borrower, as
promptly as practicable after such Bank obtains knowledge of
any Increased Costs or other sums payable pursuant to this
Section 2.10 and determines to request compensation therefor,
or any event occurring after the Closing which will entitle
such Bank to compensation pursuant to this Section; provided
that, notwithstanding anything herein to the contrary, the
Borrower shall not be obligated for the payment of any
Increased Costs or other sums payable pursuant to this Section
2.10 to the extent such Increased Costs or other sums accrued
more than 90 days prior to the date upon which the Borrower
was given such notice. If the Borrower is required to
indemnify or pay additional amounts pursuant to this Section
2.10, then the Bank will take such action as in the reasonable
judgment of the Bank (i) will eliminate or reduce any such
additional payment which may thereafter accrue and (ii) is not
otherwise commercially unreasonable. The Bank shall use its
reasonable efforts to obtain in a timely fashion any refund,
deduction or credit of any taxes paid or reimbursed by the
Borrower pursuant to this Section 2.10. If the Bank receives a
benefit in the nature of a refund, deduction or credit
(including a refund in the form of a deduction from or credit
against taxes that are otherwise payable
-26-
by the Bank) of any taxes with respect to which the Borrower
has made a payment under Section 2.10, the Bank agrees to
reimburse the Borrower to the extent of the benefit of such
refund, deduction or credit promptly after the Bank reasonably
determines that such refund deduction or credit has become
final; provided, however, that nothing contained in this
paragraph shall require the Bank to make available its tax
returns (or any other information relating to its taxes which
it deems to be confidential) or to attempt to obtain any such
refund, deduction or credit, which attempt would be
inconsistent with any reporting position otherwise taken by
the Bank on its tax returns.
(B) Notwithstanding the foregoing provisions of this Section
2.10, in the event that by reason of any regulatory change any Bank
either (i) incurs Increased Costs based on, or measured by, the excess
above a specified level of the amount of a category of deposits or
other liabilities of such Bank that includes deposits by reference to
which the interest rate on LIBOR Loans is determined as provided in
this Agreement or a category of extensions of credit or other assets of
such Bank that includes LIBOR Loans or (ii) becomes subject to
restrictions on the amount of such a category of liabilities or assets
that it may hold, then, if such Bank so elects by written notice to the
Borrower, the obligation of such Bank to make or convert Loans of any
other type into LIBOR Loans hereunder shall be suspended until the
earlier of the date such regulatory change ceases to be in effect or
the date the Borrower and such Bank agree upon an alternative method of
determining the interest rate payable by the Borrower on LIBOR Loans,
and all LIBOR Loans of such Bank then outstanding shall be converted
into an ABR Loan (if not otherwise prohibited under the terms of this
Agreement) at such Bank's option.
2.11 Change of Law. Notwithstanding any other provision herein, in the
event that any change in any applicable law or in the interpretation or
administration thereof shall make it unlawful for the Banks to (i) honor any
commitment it may have hereunder to make any LIBOR Loan, then such commitment
shall terminate, or (ii) maintain any LIBOR Loan, then all LIBOR Loans of the
Banks then outstanding shall be repaid and converted to ABR Loans (unless the
Banks' obligations to fund Loans hereunder has been suspended by any other
provisions of this Agreement) at the Borrower's option in accordance with the
election procedures set forth in Section 2.04(B); provided, however, that prior
to the effective date of such election, interest shall be calculated at the ABR.
Any remaining commitment of the Banks hereunder to make LIBOR Loans (but not
other Loans) shall be suspended so long as they are prohibited by any applicable
law. Upon the occurrence of any such change, the Administrative Agent shall
promptly notify the Borrower thereof, and shall furnish to the Borrower in
writing evidence thereof certified by the Administrative Agent.
Any repayment or conversion of any LIBOR Loan which is required under
this Section 2.11 or under 2.04(B) shall be effected by payment thereof,
together with accrued interest thereon, on demand, and concurrently there shall
occur the borrowing of the corresponding ABR Loan as provided herein.
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If any repayment to the Banks of any LIBOR Loan (including conversions
thereof) is made under this Section 2.11 on a day other than a day otherwise
scheduled for a payment of principal of or interest on such Loan, the Borrower
shall pay to the Banks upon its request of the Administrative Agent such amount
or amounts as will compensate the Banks for Breakage Costs, excluding, however,
any such Breakage Costs resulting from a prepayment or conversion made more than
sixty (60) days prior to the Administrative Agent's request for payment of
Breakage Costs. The payment of any such Breakage Costs to the Banks shall be
made within thirty (30) days of a request therefor from Administrative Agent.
2.12 Mitigation; Mandatory Assignment. Each Bank shall use reasonable
efforts to avoid or mitigate any Increased Cost or suspension of the
availability of an interest rate under Sections 2.09 through 2.10 above, to the
greatest extent practicable (including transferring the Loans to another lending
office or Affiliate of a Bank) unless, in the opinion of such Bank, such efforts
would be likely to have an adverse effect upon it. In the event a Bank makes a
request to the Borrower for additional payments in accordance with Sections 2.09
or 2.10, then, provided that no Event of Default or Unmatured Event of Default
has occurred and is continuing at such time, the Borrower may, at its own
expense and in its sole discretion, require such Bank to transfer and assign in
whole (but not in part), without recourse, all of its interests, rights and
obligations under this Agreement to an assignee which shall assume such assigned
obligations (which assignee may be another Bank, if a Bank accepts such
assignment); provided that (a) such assignment shall not conflict with any law,
rule or regulation or order of any court or other governmental authority and (b)
the Borrower or such assignee shall have paid to the Administrative Agent for
the account of the assigning Bank in immediately available funds the principal
of and interest accrued to the date of such payment on the portion of the Loans
hereunder held by such assigning Bank and all other amounts owed to such
assigning Bank hereunder, including amounts owed pursuant to Sections 2.09 and
2.10 hereof.
2.13 Pro Rata Treatment and Payments. Each Borrowing by Borrower from
the Banks hereunder, each payment by Borrower on account of any fee hereunder
and any reduction of the Commitments of the Banks shall be made pro rata
according to the respective Percentage Shares of the Banks. Each payment
(including each prepayment) by Borrower on account of principal of and interest
on the Loans shall be made pro rata according to the respective outstanding
principal amounts of the Loans then held by the Banks. The Administrative Agent
shall distribute such payments to the Banks promptly upon receipt in like funds
as received.
2.14 Sharing of Payments and Setoffs. Each Bank agrees that if it
shall, through the exercise of a right of banker's lien, setoff or counterclaim
against Borrower (pursuant to Section 9.01 or otherwise), including, but not
limited to, a secured claim under Section 506 of Title 11 of the United States
Code or other security or interest arising from, or in lieu of, such secured
claim, received by such Bank under any applicable bankruptcy, insolvency or
other similar law or otherwise, or by similar means, obtain payment (voluntary
or involuntary) in respect of any Loan or Loans (other than pursuant to Section
2.10) as a result of which the unpaid principal portion of its Loans shall be
proportionately less than the unpaid principal portion of the Loans of any other
Bank, it shall simultaneously purchase from such other Banks at face value a
participation in the Loans of such other Banks, so that the aggregate unpaid
principal amount of Loans
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and participations in Loans held by each Bank shall be in the same proportion to
the aggregate unpaid principal amount of all Loans then outstanding as the
principal amount of its Loans prior to such exercise of banker's lien, setoff,
counterclaim or other event was to the principal amount of all Loans outstanding
prior to such exercise of banker's lien, setoff, counterclaim or other event;
provided, however, that if any such purchase or purchases or adjustments shall
be made pursuant to this Section 2.14 and the payment giving rise thereto shall
thereafter be recovered, such purchase or purchases or adjustments shall be
rescinded to the extent of such recovery and the purchase price or prices or
adjustment restored without interest.
2.15 Advances to Satisfy Obligations of the Borrower. The
Administrative Agent or any Bank may, but shall not be obligated to, make
advances hereunder for the benefit of the Banks and apply same to the
satisfaction of any condition, warranty, representation or covenant of the
Borrower contained in this Agreement, and the funds so advanced and applied
shall be part of the Loan proceeds advanced under this Agreement and evidenced
by the Notes.
2.16 Assignment of Production. Certain of the Security Instruments
covering the Borrowing Base Oil and Gas Properties contain an assignment unto
and in favor of Administrative Agent for the benefit of the Banks of all oil,
gas and other minerals produced and to be produced from or attributable to the
Borrowing Base Oil and Gas Properties together with all of the revenues and
proceeds attributable to such production, and such Security Instruments further
provide that all such revenues and proceeds which may be so collected by
Administrative Agent for the benefit of the Banks pursuant to the assignment
shall be applied to the payment of the Notes and the satisfaction of all other
Indebtedness to be secured by such Security Instruments. The Borrower hereby
appoints the Administrative Agent as its Administrative Agent and
attorney-in-fact until this Agreement has been terminated in accordance with
Section 9.19 hereof for purposes of completing the Transfer Order Letters
delivered to the Administrative Agent pursuant to Section 3.01 hereof, which
power is coupled with an interest and is not revocable.
2.17 Commitment Fee. As consideration for the commitment of the Banks
to make Credit Extensions to the Borrower through the Facility Termination Date
pursuant to this Agreement, the Borrower agrees to pay to the Administrative
Agent for the account of the Banks within five (5) Business Days of receipt of
the Administrative Agent's statement as to quarterly periods ending March 31,
June 30, September 30 and December 31 of each year (except the first period
shall be for a period of time from the Closing to March 31, 2002) during the
period commencing on the date of this Agreement to and including the Facility
Termination Date and at the Facility Termination Date, a commitment fee equal to
the percentage per annum specified in the Pricing Grid based on the Utilization
Percentage (computed on the basis of a year of 360 days) multiplied by an amount
equal to the daily average excess, if any, of the Aggregate Commitment Amount
over the Outstanding Credit Exposure, throughout the period from the date of
this Agreement or previous calculation date provided above, whichever is later,
to the relevant calculation date or the Facility Termination Date, as the case
may be.
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2.18 Addition/Deletion of Borrowing Base Oil & Gas Properties. The
Borrower may, from time to time upon written notice to the Administrative Agent,
propose to add Oil and Gas Properties of the Borrower to the Borrowing Base Oil
and Gas Properties. Any such proposal to add Oil and Gas Properties of the
Borrower to the Borrowing Base Oil and Gas Properties shall be accompanied by a
Reserve Report applicable to such properties that conforms to the requirements
of Section 2.06, and evidence sufficient to establish that Borrower (or either
of them) has Marketable Title to such Oil and Gas Properties, and any such
addition shall become effective at such time as: (a) the Administrative Agent,
with the approval of the Banks, has made a determination of the amount by which
the Borrowing Base would be increased as the result of such addition and (b) the
conditions set forth in Article III hereof, to the extent they are applicable to
such additional Oil and Gas Properties of the Borrower, have been satisfied. In
determining the increase in the Borrowing Base pursuant to this Section, the
Administrative Agent and the Banks shall apply the parameters and other credit
factors consistently applied then generally being utilized by the Administrative
Agent and each such Bank, respectively, for Borrowing Base determinations for
other similarly situated borrowers.
2.19 Adjustment to Aggregate Commitment Amount. At any time that
Borrower proposes to increase the Borrowing Base by adding additional Oil and
Gas Properties to the Borrowing Base Oil and Gas Properties pursuant to Section
2.18, Borrower may also request that Banks increase the amount of the Aggregate
Commitment Amount. At any time that Borrower makes such a request it shall
promptly provide Administrative Agent with such financial information as
Administrative Agent may request to assist the Administrative Agent in
evaluating such request. Following the receipt of such information from
Borrower, the Administrative Agent shall, with the unanimous approval of the
Banks and in the normal course of its business, make a redetermination of the
Aggregate Commitment Amount, which shall become effective upon written
notification from the Administrative Agent to Borrower of the new Aggregate
Commitment Amount. The Borrower may upon written notice to Administrative Agent,
not sooner than one hundred eighty (180) days subsequent to the last such action
by Borrower, amend the definition of the Aggregate Commitment Amount by reducing
the amount set forth in such definition. Upon such reduction, the Banks shall
not be obligated to make Credit Extensions in excess of such reduced Aggregate
Commitment Amount. If and when the Banks increase the Aggregate Commitment
Amount at Borrower's request, the commitment fee, as determined pursuant to
Section 2.17 of this Agreement, shall be calculated using such increased amount
for all of the calculation period in which such Aggregate Commitment Amount was
increased.
2.20 Facility LCs.
(A) Issuance. The LC Issuer hereby agrees, on the terms and
conditions set forth in this Agreement, to issue standby letters of
credit (each, a "Facility LC") and to renew, extend, increase, decrease
or otherwise modify each Facility LC ("Modify," and each such action a
"Modification"), from time to time from and including the date of this
Agreement and prior to the Facility Termination Date upon the request
of the Borrower; provided that immediately after each such Facility LC
is issued or Modified, (i) the aggregate amount of the outstanding LC
Obligations
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shall not exceed $10,000,000.00 and (ii) the Aggregate Outstanding
Credit Exposure shall not exceed the Aggregate Commitment Amount.
Facility LC's issued pursuant to the Original Credit Agreement or the
First Amended Credit Agreement and outstanding as of the Closing of
this Agreement shall also constitute Facility LCs hereunder. No
Facility LC shall have an expiry date later than the earlier of (x) the
fifth Business Day prior to the Facility Termination Date and (y) one
year after its issuance.
(B) Participations. Upon the issuance or Modification by the
LC Issuer of a Facility LC in accordance with this Section 2.20, the LC
Issuer shall be deemed, without further action by any party hereto, to
have unconditionally and irrevocably sold to each Bank, and each Bank
shall be deemed, without further action by any party hereto, to have
unconditionally and irrevocably purchased from the LC Issuer, a
participation in such Facility LC (and each Modification thereof) and
the related LC Obligations in proportion to its Percentage Share.
(C) Notice. Subject to Section 2.20(A), the Borrower shall
give the LC Issuer notice prior to 10:00 a.m. (Houston, Texas time) at
least five Business Days prior to the proposed date of issuance or
Modification of each Facility LC, specifying the beneficiary, the
proposed date of issuance (or Modification) and the expiry date of such
Facility LC, and describing the proposed terms of such Facility LC and
the nature of the transactions proposed to be supported thereby. Upon
receipt of such notice, the LC Issuer shall promptly notify the
Administrative Agent, and the Administrative Agent shall promptly
notify each Bank, of the contents thereof and of the amount of such
Bank's participation in such proposed Facility LC. The issuance or
Modification by the LC Issuer of any Facility LC shall, in addition to
the conditions precedent set forth in Article III (the satisfaction of
which the LC Issuer shall have no duty to ascertain), be subject to the
conditions precedent that such Facility LC shall be satisfactory to the
LC Issuer and that the Borrower shall have executed and delivered such
application agreement and/or such other instruments and agreements
relating to such Facility LC as the LC Issuer shall have reasonably
requested (each, a "Facility LC Application"). In the event of any
conflict between the terms of this Agreement and the terms of any
Facility LC Application, the terms of this Agreement shall control.
(D) LC Fees. The Borrower shall pay to the Administrative
Agent, for the account of the Banks ratably in accordance with their
respective Percentage Shares, with respect to each Facility LC, a
letter of credit fee at a rate equal to the then otherwise applicable
LIBOR Margin per annum on the average daily undrawn stated amount under
such Facility LC, such fee to be payable in arrears on or before the
first Business Day of each calendar month (each such fee described in
this sentence an "LC Fee"). The Borrower shall also pay to the LC
Issuer for its own account (x) at the time of issuance of each Facility
LC, a fronting fee calculated at the rate of fifteen (15) basis points
per annum, and (y) documentary and processing charges in connection
with the issuance or Modification of and draws under Facility LCs in
accordance with the LC Issuer's standard schedule for such charges as
in effect from time to time.
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(E) Administration; Reimbursement by Banks. Upon receipt from
the beneficiary of any Facility LC of any demand for payment under such
Facility LC, the LC Issuer shall notify the Administrative Agent and
the Administrative Agent shall promptly notify the Borrower and each
other Bank as to the amount to be paid by the LC Issuer as a result of
such demand and the proposed payment date (the "LC Payment Date"). The
responsibility of the LC Issuer to the Borrower and each Bank shall be
only to determine that the documents (including each demand for
payment) delivered under each Facility LC in connection with such
presentment shall be in conformity in all material respects with such
Facility LC. The LC Issuer shall endeavor to exercise the same care in
the issuance and administration of the Facility LCs as it does with
respect to letters of credit in which no participations are granted, it
being understood that in the absence of any gross negligence or willful
misconduct by the LC Issuer, each Bank shall be unconditionally and
irrevocably liable without regard to the occurrence of any Default or
any condition precedent whatsoever, to reimburse the LC Issuer on
demand for (i) such Bank's Percentage Share of the amount of each
payment made by the LC Issuer under each Facility LC to the extent such
amount is not reimbursed by the Borrower pursuant to Section 2.20(F)
below, plus (ii) interest on the foregoing amount to be reimbursed by
such Bank, for each day from the date of the LC Issuer's demand for
such reimbursement (or, if such demand is made after 11:00 a.m.
(Houston, Texas time) on such date, from the next succeeding Business
Day) to the date on which such Bank pays the amount to be reimbursed by
it, at a rate of interest per annum equal to the Federal Funds
Effective Rate for the first three days and, thereafter, at a rate of
interest equal to the Floating Rate based on ABR.
(F) Reimbursement by Borrower. The Borrower shall be
irrevocably and unconditionally obligated to reimburse the LC Issuer on
or before the applicable LC Payment Date for any amounts to be paid by
the LC Issuer upon any drawing under any Facility LC, without
presentment, demand, protest or other formalities of any kind; provided
that neither the Borrower nor any Bank shall hereby be precluded from
asserting any claim for direct (but not consequential) damages suffered
by the Borrower or such Bank to the extent, but only to the extent,
caused by (i) the willful misconduct or gross negligence of the LC
Issuer in determining whether a request presented under any Facility LC
issued by it complied with the terms of such Facility LC or (ii) the LC
Issuer's failure to pay under any Facility LC issued by it after the
presentation to it of a request strictly complying with the terms and
conditions of such Facility LC. All such amounts paid by the LC Issuer
and remaining unpaid by the Borrower shall bear interest, payable on
demand, for each day until paid at a rate per annum equal to (x) the
rate applicable to ABR Loans for such day if such day falls on or
before the applicable LC Payment Date and (y) the sum of 2% plus the
rate applicable to ABR Loans for such day if such day falls after such
LC Payment Date. The LC Issuer will pay to each Bank ratably in
accordance with its Percentage Share all amounts received by it from
the Borrower for application in payment, in whole or in part, of the
Reimbursement Obligation in respect of any Facility LC issued by the LC
Issuer, but only to the extent such Bank has made payment to the LC
Issuer in respect of such Facility LC pursuant to Section 2.20(E).
Subject to the terms and conditions of this Agreement (including
without limitation the submission
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of a Request for Advance in compliance with Section 2.02 and the
satisfaction of the applicable conditions precedent set forth in
Article III), the Borrower may request a Loan hereunder for the purpose
of satisfying any Reimbursement Obligation.
(G) Obligations Absolute. The Borrower's obligations under
this Section 2.20 shall be absolute and unconditional under any and all
circumstances and irrespective of any setoff, counterclaim or defense
to payment which the Borrower may have or have had against the LC
Issuer, any Bank or any beneficiary of a Facility LC. The Borrower
further agrees with the LC Issuer and the Banks that the LC Issuer and
the Banks shall not be responsible for, and the Borrower's
Reimbursement Obligation in respect of any Facility LC shall not be
affected by, among other things, the validity or genuineness of
documents or of any endorsements thereon, even if such documents should
in fact prove to be in any or all respects invalid, fraudulent or
forged, or any dispute between or among the Borrower, any of its
Affiliates, the beneficiary of any Facility LC or any financing
institution or other party to whom any Facility LC may be transferred
or any claims or defenses whatsoever of the Borrower or of any of its
Affiliates against the beneficiary of any Facility LC or any such
transferee. The LC Issuer shall not be liable for any error, omission,
interruption or delay in transmission, dispatch or delivery of any
message or advice, however transmitted, in connection with any Facility
LC. The Borrower agrees that any action taken or omitted by the LC
Issuer or any Bank under or in connection with each Facility LC and the
related drafts and documents, if done without gross negligence or
willful misconduct, shall be binding upon the Borrower and shall not
put the LC Issuer or any Bank under any liability to the Borrower.
Nothing in this Section 2.20(G) is intended to limit the right of the
Borrower to make a claim against the LC Issuer for damages as
contemplated by the proviso to the first sentence of Section 2.20(F).
(H) Actions of LC Issuer. The LC Issuer shall be entitled to
rely, and shall be fully protected in relying, upon any Facility LC,
draft, writing, resolution, notice, consent, certificate, affidavit,
letter, cablegram, telegram, telecopy, telex or teletype message,
statement, order or other document believed by it to be genuine and
correct and to have been signed, sent or made by the proper Person or
Persons, and upon advice and statements of legal counsel, independent
accountants and other experts selected by the LC Issuer. The LC Issuer
shall be fully justified in failing or refusing to take any action
under this Agreement unless it shall first have received such advice or
concurrence of the Required Banks as it reasonably deems appropriate or
it shall first be indemnified to its reasonable satisfaction by the
Banks against any and all liability and expense which may be incurred
by it by reason of taking or continuing to take any such action.
Notwithstanding any other provision of this Section 2.20, the LC Issuer
shall in all cases be fully protected in acting, or in refraining from
acting, under this Agreement in accordance with a request of the
Required Banks, and such request and any action taken or failure to act
pursuant thereto shall be binding upon the Banks and any future holders
of a participation in any Facility LC.
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(I) Indemnification. The Borrower hereby agrees to indemnify
and hold harmless each Bank, the LC Issuer and the Administrative
Agent, and their respective directors, officers, agents and employees
from and against any and all claims and damages, losses, liabilities,
costs or expenses which such Bank, the LC Issuer or the Administrative
Agent may incur (or which may be claimed against such Bank, the LC
Issuer or the Administrative Agent by any Person whatsoever) by reason
of or in connection with the issuance, execution and delivery or
transfer of or payment or failure to pay under any Facility LC or any
actual or proposed use of any Facility LC, including, without
limitation, any claims, damages, losses, liabilities, costs or expenses
which the LC Issuer may incur by reason of or in connection with (i)
the failure of any other Bank to fulfill or comply with its obligations
to the LC Issuer hereunder (but nothing herein contained shall affect
any rights the Borrower may have against any defaulting Bank) or (ii)
by reason of or on account of the LC Issuer issuing any Facility LC
which specifies that the term "Beneficiary" included therein includes
any successor by operation of law of the named Beneficiary, but which
Facility LC does not require that any drawing by any such successor
Beneficiary be accompanied by a copy of a legal document, satisfactory
to the LC Issuer, evidencing the appointment of such successor
Beneficiary; provided that the Borrower shall not be required to
indemnify any Bank, the LC Issuer or the Administrative Agent for any
claims, damages, losses, liabilities, costs or expenses to the extent,
but only to the extent, caused by (x) the willful misconduct or gross
negligence of the LC Issuer in determining whether a request presented
under any Facility LC complied with the terms of such Facility LC or
(y) the LC Issuer's failure to pay under any Facility LC after the
presentation to it of a request strictly complying with the terms and
conditions of such Facility LC. Nothing in this Section 2.20(I) is
intended to limit the obligations of the Borrower under any other
provision of this Agreement.
(J) Banks' Indemnification. Each Bank shall, ratably in
accordance with its Percentage Share, indemnify the LC Issuer, its
affiliates and their respective directors, officers, agents and
employees (to the extent not reimbursed by the Borrower) against any
cost, expense (including reasonable counsel fees and disbursements),
claim, demand, action, loss or liability (except such as result from
such indemnitees' gross negligence or willful misconduct or the LC
Issuer's failure to pay under any Facility LC after the presentation to
it of a request strictly complying with the terms and conditions of the
Facility LC) that such indemnitees may suffer or incur in connection
with this Section 2.20 or any action taken or omitted by such
indemnitees hereunder.
(K) Rights as a Bank. In its capacity as a Bank, the LC Issuer
shall have the same rights and obligations as any other Bank.
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ARTICLE III.
CONDITIONS
The obligation of the Banks to make the Credit Extensions is subject to
the following conditions precedent:
3.01 General Conditions to Closing and to all Disbursements. At the
time of the execution and delivery of this Agreement by all parties who are
designated as signatories on the signature pages of this Agreement (the
"Closing") and at each subsequent Credit Extension:
(A) No Event of Default shall have occurred and be continuing,
and no Unmatured Event of Default shall have occurred;
(B) The representations and warranties contained in Article IV
of this Agreement shall be true and correct in all material respects as
though such representations and warranties had been made on such date,
except such as are expressly limited to a prior date, which shall have
been true and correct in all material respects as of such prior date;
(C) The Administrative Agent and the Banks shall have been,
and shall continue to be, satisfied, in their good faith discretion,
that the Borrower (or either of them) holds Marketable Title to the
Borrowing Base Oil and Gas Properties, and that such ownership includes
record title to an undivided net revenue interest in the production
from each such Borrowing Base Oil and Gas Property that is not less
than, as well as an undivided working interest in each Borrowing Base
Oil and Gas Property that is not greater than (unless there is a
corresponding increase in the net revenue interest attributed to such
party therein), the net revenue interest therein and the working
interest therein, respectively, attributed to the Borrower on Exhibit
"A," subject to the limitations and qualifications on such exhibit (or
attributed to Borrower in any Security Instrument applicable to any Oil
and Gas Property that is added to the Borrowing Base Oil and Gas
Properties in connection with any subsequent funding after the
Closing);
(D) No Material Adverse Change shall have occurred since the
date of the latest audited Financial Statements provided to the
Administrative Agent;
(E) All of the Security Instruments previously delivered with
respect to the Borrowing Base Oil and Gas Properties shall have
remained in full force and effect; and
(F) All legal matters incidental thereto shall be reasonably
satisfactory to each Bank's designated legal counsel.
3.02 Deliveries at the Closing. The Borrower shall have duly delivered
or caused to be delivered to the Administrative Agent, prior to or
contemporaneously with the Closing, the following:
(A) The Notes payable to each respective Bank, along with each
of the Security Instruments covering any Borrowing Base Oil and Gas
Properties not already covered by valid and
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continuing Security Instruments in favor of Administrative Agent,
specifically including, but not limited to, the Borrowing Base Oil and
Gas Properties owned by Subsidiary Borrower; provided, however that so
long as the KCS Production Payment remains in effect, Borrower shall
not be obligated to execute and deliver any Security Instrument
creating liens or security interests on any of the Borrowing Base Oil
and Gas Properties to the extent that the creation of such lien and/or
security interest is prohibited pursuant to the terms of the KSC
Production Payment Documents without the prior consent of KCS Energy
Services, Inc., or its successors or assigns.
(B) Transfer Order Letters applicable to the production of oil
and gas from any Borrowing Base Oil and Gas Properties for which
Transfer Order letters have not previously been delivered to the
Administrative Agent, specifically including, but not limited to, the
Borrowing Base Oil and Gas Properties owned by Subsidiary Borrower;
(C) The results of a Uniform Commercial Code search showing
all financing statements and other documents or instruments on file
against the Borrower in the Offices of the Secretaries of State of the
State of Texas, the State of Delaware, the State of Louisiana and each
State in which any of the Borrowing Base Oil and Gas Properties are
located or deemed to be located, and the counties and/or parishes in
which the Borrower maintains its principal place of business and in
which any of the Borrowing Base Oil and Gas Properties are located,
such search to be as of a date no more than ten (10) days prior to the
date of Closing.
(D) A certified (as of the date of the Closing) copy of
resolutions of each Borrower's Board of Directors authorizing the
execution, delivery, and performance of this Agreement, the Notes, and
each other document to be delivered pursuant hereto;
(E) A certificate (dated the date of the Closing) of each
Borrower's corporate secretary as to the incumbency and signatures of
the officers of the Borrower signing this Agreement, the Notes, and
each other document to be delivered pursuant hereto;
(F) A copy, certified as of the most recent date practicable
by the Secretary of State of the state in which each Borrower is
incorporated, of the Borrower's certificate of incorporation, together
with a certificate (dated the date of the Closing) of the Borrower's
corporate secretary to the effect that such certificate of
incorporation has not been amended since the date of the aforesaid
certification;
(G) Certificates, as of the most recent dates practicable, of
the aforesaid Secretaries of State, the Secretary of State of each
state in which the Borrower is qualified as a foreign corporation, and
the department of revenue or taxation of each of the foregoing states,
as to the good standing of the Borrower;
(H) A Compliance Certificate, dated the date of the Closing;
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(I) Payment of the Administrative Agent's attorneys' fees upon
receipt of a reasonably detailed invoice pursuant to Section 5.12
hereof;
(J) A legal opinion or opinions of outside counsel to the
Borrower, addressed to Administrative Agent, the Banks, the Arranger
and the LC Issuer, in form and substance reasonably satisfactory to the
Administrative Agent, covering, among other matters reasonably
requested by Administrative Agent or its counsel, the matters addressed
in Sections 4.01, 4.02, 4.03, 4.14, 4.17, 4.20 and 4.21 hereof; and
(K) Evidence satisfactory to Administrative Agent, the Banks,
the Arranger, and the LC Issuer, in their respective sole and absolute
discretion, establishing that the transactions contemplated by the
Merger Agreement that are to occur at the "Closing" of the Merger
Agreement, as defined therein, including but not limited to the various
transactions contemplated by each of the Transaction Documents that are
to occur at the "Closing" of the Merger Agreement, are being and will
be unconditionally consummated contemporaneously with the Closing of
this Agreement resulting in, among other things, Subsidiary Borrower
having become a wholly-owned Subsidiary of Parent Borrower, and that
such Closing has occurred or will occur without Parent Borrower having
waived any of the conditions to its obligations to close the Merger
Agreement set forth in Section 6.1 thereof, or any of the conditions to
closing of any of the Transaction Documents, unless Administrative
Agent has given its prior or contemporaneous written consent to any
such waiver by Parent Borrower.
3.03 Documents Required for Subsequent Disbursements Involving
Additional Borrowing Base Oil and Gas Properties. As of the time of funding any
additional advances to Borrower that have been approved by the Banks pursuant to
Section 2.01 and are made in conjunction with the addition of Oil and Gas
Properties owned by the Borrower to the Borrowing Base Oil and Gas Properties,
the Borrower shall have duly delivered to the Administrative Agent: (i) the
Security Instruments that are necessary or appropriate, in the reasonable
opinion of the Administrative Agent, relating to such additional Oil and
Properties, and (ii) Transfer Order Letters applicable to the production of oil
and gas from the such additional Borrowing Base Oil and Gas Properties.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
To induce the Administrative Agent and the Banks to enter into this
Agreement and to make the Credit Extensions hereunder, each Borrower represents
and warrants to the Administrative Agent and the Banks that:
4.01 Existence. The Borrower is a corporation, duly organized, legally
existing, and in good standing under the Laws of the State of Delaware with
respect to Parent Borrower and the State of Texas
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with respect to Subsidiary Borrower; each Subsidiary is a corporation or limited
liability company duly organized, validly existing, and in good standing under
the Laws of its state of incorporation or organization; the Borrower and its
Subsidiaries have the lawful power to own their properties and to engage in the
businesses they conduct, and each is duly qualified and in good standing as a
foreign corporation or limited liability company in the jurisdictions wherein
the nature of the business transacted by it or property owned by it makes such
qualification necessary; the states in which the Borrower and each Subsidiary
are incorporated or organized and qualified to do business are set forth in
Schedule 4.01; the addresses of all places of business of the Borrower and its
Subsidiaries are as set forth in Schedule 4.01; neither the Borrower nor any
Subsidiary has changed its name, been the surviving company in a merger,
acquired any business, or changed its principal executive office within five (5)
years and one (1) month prior to the date hereof, except pursuant to the Merger
Agreement or as disclosed on Schedule 4.01; the Borrower has no Subsidiaries
other than the Subsidiaries named in Schedule 4.01; and all of the authorized,
issued and outstanding shares of capital stock or membership interests of each
Subsidiary is owned by the Borrower. Borrower is qualified under applicable
Minerals Management Service regulations to act as the operator of the Leases
where required.
4.02 Due Authorization. Upon execution of the Loan Documents, the
execution and delivery by the Borrower of this Agreement and the borrowings
hereunder; the execution and delivery by the Borrower of the Notes, the Security
Instruments, and the Transfer Order Letters; and the repayment by the Borrower
of the Indebtedness evidenced by the Notes and interest and fees provided in the
Notes and this Agreement are (a) within the corporate power of the Borrower; (b)
have been duly authorized by all necessary corporate action, and (c) do not and
will not (i) require the consent of any regulatory authority or governmental
body, (ii) contravene or conflict with any provision of Law or of the articles
of incorporation or bylaws of the Borrower, (iii) contravene or conflict with
any indenture, instrument or other agreement to which the Borrower is a party or
by which its property may be presently bound or encumbered, or (iv) result in or
require the creation or imposition of any mortgage, lien, pledge, security
interest, charge or other encumbrance in, upon or of any of the properties or
assets of the Borrower under any such indenture, instrument or other agreement,
other than under any of the Security Instruments.
4.03 Valid and Binding Obligations. This Agreement, the Notes, and the
Security Instruments when duly executed and delivered, will be legal, valid and
binding obligations of and enforceable against the Borrower, in accordance with
their respective terms (subject to any applicable bankruptcy, insolvency or
other Laws of general application affecting creditors' rights, general equitable
principles, whether considered in a proceeding in equity or at law, and judicial
decisions interpreting any of the foregoing).
4.04 Scope and Accuracy of Financial Statements. All Financial
Statements submitted and to be submitted to the Administrative Agent hereunder
are and will be complete and correct in all material respects, are and will be
prepared in accordance with GAAP consistently applied, and do and will fairly
reflect the consolidated financial condition and the results of the operations
of the Parent Borrower and its Subsidiaries in all material respects as of the
dates and for the period stated therein (subject only to normal year-end audit
adjustments with respect to such unaudited interim statements of the Parent
Borrower), and
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no Material Adverse Change has occurred since the effective date of the latest
audited Financial Statements of Parent Borrower delivered to Administrative
Agent.
4.05 Title to Borrowing Base Oil and Gas Properties. The Borrower has
Marketable Title to the working and net revenue interests in the Borrowing Base
Oil and Gas Properties as set forth on Exhibit "A", free and clear of all
mortgages, liens and encumbrances, except for Permitted Encumbrances and any
other exceptions, limitations or qualifications expressly disclosed on Exhibit
"A."
4.06 Oil and Gas Leases. The Leases which constitute any part of the
Borrowing Base Oil and Gas Properties are in full force and effect as to those
portions within the Borrowing Base Oil and Gas Properties, are valid, subsisting
leases as to those portions within the Borrowing Base Oil and Gas Properties to
which they pertain and all rentals, royalties and other amounts due and payable
in accordance with the terms of the Leases as to those portions within the
Borrowing Base Oil and Gas Properties, overriding royalties, net profits or
other production burdens have been duly paid or provided for; the obligations to
be performed under the Leases as to those portions within the Borrowing Base Oil
and Gas Properties have been duly performed; and the Borrower is not aware of
any default by any third party under any of the Leases with respect to such
third party's obligations.
4.07 Interest in the Borrowing Base Oil and Gas Properties. Except as
otherwise set forth on Exhibit "A" hereto, with respect to each of the Borrowing
Base Oil and Gas Properties, the ownership of the Borrower in such property
will, with respect to the ▇▇▇▇▇, units and/or tracts of land described in
Exhibit "A" hereto in connection with such property, (i) entitle the Borrower to
receive (subject to the terms and provisions of this Agreement) a decimal share
of the oil and gas produced from, or allocated to, such ▇▇▇▇▇, units and/or
tracts equal to not less than the decimal share set forth in Exhibit "A" in
connection with such ▇▇▇▇▇, units and/or tracts, and (ii) cause the Borrower to
be obligated to bear a decimal share of the cost of exploration, development and
operation of such ▇▇▇▇▇, units and/or tracts of land not greater than the
decimal share set forth in Exhibit "A" in connection with such ▇▇▇▇▇, units
and/or tracts, unless any increase in the Borrower's share of costs is
accompanied by a pro-rata increase in the Borrower's share of revenue. Except as
set forth in the instrument and agreements, if any, more particularly described
in Exhibit "A" hereto, all such shares of production which the Borrower is
entitled to receive, and shares of expenses which the Borrower is obligated to
bear, are not subject to change, except for changes attributable to future
elections by the Borrower not to participate in operations proposed pursuant to
customary forms of applicable joint operating agreements, and except for changes
attributable to changes in participating areas under any federal units wherein
participating areas may be formed, enlarged or contracted in accordance with the
rules and regulations of the applicable governmental authority.
4.08 Oil and Gas Contracts. Except as set forth on Schedule 4.08
attached hereto, the Borrower is not obligated, by virtue of any prepayment
under any contract providing for the sale by the Borrower of Hydrocarbons which
contains a "take-or-pay" clause or under any similar prepayment agreement or
arrangement, including, without limitation, "gas balancing agreements", to
deliver a material amount of Hydrocarbons produced from the Borrowing Base Oil
and Gas Properties at some future time
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without then or thereafter receiving full payment therefor (i.e., in the case of
oil, not in excess of sixty (60) days, and in the case of gas, not in excess of
ninety (90) days). Except as set forth on Schedule 4.08 attached hereto, the
Borrowing Base Oil and Gas Properties are not subject to any contractual, or
other arrangement for the sale of crude oil which cannot be canceled on ninety
(90) days' (or less) notice, unless the price provided for therein is equal to
or greater than the prevailing market price in the vicinity. The Borrowing Base
Oil and Gas Properties are not subject to any gas sales contract that contains
any material terms which are not customary in the industry within the region in
which the Borrowing Base Oil and Gas Properties affected thereby are located.
The Borrowing Base Oil and Gas Properties are not subject to any regulatory
refund obligation and no facts exist which might cause the same to be imposed.
4.09 Producing ▇▇▇▇▇. All producing ▇▇▇▇▇ located on the Borrowing Base
Oil and Gas Properties have been, during all times that such were under the
direction or control of the Borrower and, to the knowledge of the Borrower, at
all other times, drilled, operated and produced in conformity with all
applicable Laws, rules, regulations and orders of all regulatory authorities
having jurisdiction, are subject to no penalties on account of past production,
and are bottomed under and are producing from, and the well bores are wholly
within, the Borrowing Base Oil and Gas Properties, or on Oil and Gas Properties
which have been pooled, unitized or communitized with the Borrowing Base Oil and
Gas Properties.
4.10 Purchasers of Production. The persons who are purchasing the
Borrower's interests in oil and gas produced from the Borrowing Base Oil and Gas
Properties as of the calendar month during which the initial Loans are made
hereunder are identified on Schedule 4.10 attached hereto.
4.11 Authorizations and Consents. No authorization, consent, approval,
exemption, franchise, permit or license of, or filing with, any governmental or
public authority or any third party is required to authorize, or is otherwise
required in connection with the valid execution and delivery by the Borrower of
this Agreement, the Notes, and the Security Instruments, or any other instrument
contemplated hereby, the repayment by the Borrower of advances against the Notes
and interest and fees provided in the Notes and this Agreement, or the
performance by the Borrower of its obligations under any of the foregoing.
4.12 Environmental Laws. Except to the extent that the failure to do so
would not have and would not be expected to have a Material Adverse Effect, the
Borrower (a) is and has in the past been in compliance with all Environmental
Laws and all permits, requests and notifications relating to health, safety or
the environment applicable to the Borrower or any of its properties, assets,
operations and businesses; (b) has obtained and adhered to and currently
possesses all necessary permits and other approvals, including interim status
under the Federal Resource Conservation and Recovery Act, necessary to store,
dispose of and otherwise handle Hazardous Substances and to operate its
properties, assets and businesses; (c) has reported, to the extent required by
all federal, state and local statutes, Laws, ordinances, regulations, rules,
permits, judgments, orders and decrees, all past and present sites owned and/or
operated by the Borrower where any Hazardous Substance has been released,
treated, stored or disposed of and (d) has not used, stored, or Released any
Hazardous Substance in excess of amounts allowed by Environmental Law. There is
(x) no location on any property currently or previously owned or operated
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by the Borrower where Hazardous Substances are known to have entered or are
likely to enter into the soil or groundwater or such property, other than
immaterial releases of oil or natural gas in the ordinary course of business
none of which releases (i) either individually, or in the aggregate, has had or
may be expected to have a Material Adverse Effect or (ii) has violated or may be
expected to violate any Environmental Laws, except for any such violation that
has not had and would not be expected to have a Material Adverse Effect, and (y)
no on-site or off-site location to which the Borrower has released or
transported Hazardous Substances or arranged for the transportation or disposal
of Hazardous Substances, which is or is likely to be the subject of any federal,
state, local or foreign enforcement action or any investigation which could lead
to any material claims against any such entity for any clean-up cost, remedial
work, damage to natural resources, common law or legal liability, including, but
not limited to, claims under Comprehensive Environmental Response, Compensation,
and Liability Act. For the purposes of this Section, references to "the
Borrower" shall include all predecessors, successors-in-interest of the
Borrower; provided, that with respect to the Borrower's properties or assets,
the foregoing representations as to predecessors and successors-in-interest are
limited to the knowledge of the Borrower.
4.13 Compliance with Laws, Rules, Regulations and Orders. Except to the
extent that the failure to comply would not materially interfere with the
conduct of the business of the Borrower or any Subsidiary, the Borrower and its
Subsidiaries have each complied with all applicable Laws with respect to: (1)
the conduct of its business; and (2) the use, maintenance, and operation of the
Borrowing Base Oil and Gas Properties and personal properties owned or leased by
it in the conduct of its business; except as expressly set forth on Exhibit "A"
hereto, the Borrower and its Subsidiaries possess all licenses, approvals,
registrations, permits and other authorizations necessary to enable it to carry
on its business in all material respects as now conducted, and all such
licenses, approvals, registrations, permits and other authorizations are in full
force and effect; and the Borrower has no reason to believe that the Borrower or
any of its Subsidiaries will be unable to obtain the renewal of any such
licenses, approvals, registrations, permits and other authorizations.
4.14 Liabilities, Litigation and Restrictions. Except as disclosed in
the Financial Statements, the Borrower and its Subsidiaries do not have any
liabilities, direct or contingent, which may materially and adversely affect it,
its business or assets. There is no litigation or other action of any nature
pending before any court, governmental instrumentality, regulatory authority or
arbitral body or, to the knowledge of the Borrower threatened against or
affecting the Borrower or its Subsidiaries which might reasonably be expected to
result in any material, adverse change in the Borrower or its Subsidiaries, or
the business or assets of either. To the best of the Borrower's knowledge, no
unduly burdensome restriction, restraint or hazard exists by contract or Law
that would have a Material Adverse Effect.
4.15 Existing Indebtedness. All Indebtedness of the Borrower and any
Subsidiary consisting of liability to repay borrowed money or to pay money to
become due on capital leases as of the Closing is described in Schedule 4.15;
and neither the Borrower nor any Subsidiary is in default with respect to any of
its existing Indebtedness.
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4.16 Material Commitments. Except as described in Schedule 4.16 hereto
and in filings made by Borrower with the Securities Exchange Commission, (a)
neither the Borrower nor any Subsidiary has any material leases (other than oil
and gas leases), contracts or commitments of any kind (including, without
limitation, employment agreements; collective bargaining agreements; powers of
attorney; distribution arrangements; patent license agreements; contracts for
future purchase or delivery of goods or rendering of services; bonuses, pension
and retirement plans; or accrued vacation pay, insurance and welfare
agreements); (b) to the best of the Borrower's knowledge, all parties to all
such material leases, contracts, and other commitments to which the Borrower or
any Subsidiary is a party have complied with the provisions of such leases,
contracts, and other commitments; and (c) to the best of the Borrower's
knowledge, no party is in default under any thereof and no event has occurred
that but for the giving of notice or the passage of time, or both, would
constitute a default, except for defaults and events that have not had and would
not be expected to have a Material Adverse Effect.
4.17 Margin Stock. The Borrower is not engaged principally, or as one
of its important activities, in the business of extending credit for the purpose
of purchasing or carrying margin stock (within the meaning of Regulations T, U,
or X of the Board of Governors of the Federal Reserve System), and no part of
the proceeds of any extension of credit under this Agreement will be used to
purchase or carry any such margin stock or to extend credit to others for the
purpose of purchasing or carrying margin stock. Neither the Borrower nor any
Person acting on its behalf has taken any action that might cause the
transactions contemplated by this Agreement or the Notes to violate Regulations
T, U, or X or to violate the Securities Exchange Act of 1934, as amended.
4.18 Proper Filing of Tax Returns and Payment of Taxes Due. Except as
otherwise permitted herein, the Borrower has filed all federal, state, and local
tax returns and other reports required by any applicable Laws to have been filed
prior to the date hereof, has paid or caused to be paid all taxes, assessments,
and other governmental charges that are due and payable prior to the date
hereof, and has made adequate provision for the payment of such taxes,
assessments, or other charges accruing but not yet payable; the Borrower has no
knowledge of any material deficiency or additional assessment in connection with
any taxes, assessments, or charges not provided for on its books.
4.19 ERISA. The Borrower is in compliance in all material respects
with all applicable provisions of ERISA. Neither a Reportable Event nor a
Prohibited Transaction has occurred and is continuing with respect to any plan;
no notice of intent to terminate a plan has been filed, nor has any plan been
terminated; no circumstances exist which constitute grounds under Section 4042
of ERISA entitling the PBGC to institute proceedings to terminate, or appoint a
trustee to administrate a plan, nor has the PBGC instituted any such
proceedings; neither the Borrower nor any ERISA Affiliate has completely or
partially withdrawn under Sections 4201 or 4204 of ERISA from a Multi-Employer
Plan; the Borrower and each ERISA Affiliate has met its minimum funding
requirements under ERISA with respect to all of its plans and the present value
of all vested benefits under each plan exceeds the fair market value of all plan
assets allocable to such benefits, as determined on the most recent valuation
date of the plan and in accordance with the provisions of ERISA and the
regulations thereunder for calculating the potential liability
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of the Borrower or any ERISA Affiliate to the PBGC or the plan under Title IV of
ERISA; and neither the Borrower nor any ERISA Affiliate has incurred any
liability to the PBGC under ERISA.
4.20 Investment Company Act Compliance. Neither the Borrower nor any
Subsidiary is directly or indirectly controlled by, or acting on behalf of, any,
Person which is an "Investment Company," within the meaning of the Investment
Company Act of 1940, as amended.
4.21 Public Utility Holding Company Act Compliance. The Borrower is not
a "holding company", or an "affiliate" of a "holding company" or of a
"subsidiary company" of a "holding company", within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
4.22 Insurance. The Borrower maintains insurance with respect to the
properties and business of the Borrower providing coverage for such liabilities,
casualties, risks and contingencies and in such amounts as is customary in the
industry. The insurance coverage reflected on the Certificate of Insurance
attached hereto as Schedule 4.22 is in full force and effect, and all premiums
due thereon have been paid.
4.23 Transaction Documents. Prior to the execution of this Agreement,
Parent Borrower and Subsidiary Borrower have delivered to Administrative Agent
and its special counsel, ▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P., true, correct and complete
copies of all Transaction Documents (inclusive of all exhibits, schedules and
amendments thereto) executed or to be executed by the parties thereto prior to
or contemporaneously with the "Closing" of the Merger Agreement (as defined in
the Merger Agreement). Each Borrower understands that Administrative Agent, the
Banks and the LC Issuer have consented to each Borrower's performance of its
obligations under the Transaction Documents only to the extent expressly set
forth elsewhere herein, and to the extent that such consent is not expressly
granted in this Agreement, performance of Borrower's obligations under the
Transaction Documents is limited by the provisions of Section 6.17 hereof.
4.24 Material Misstatements and Omissions. No representation or
warranty by or with respect to the Borrower or any Subsidiary contained herein
or in any certificate or other document furnished by the Borrower or any
Subsidiary pursuant hereto contains any untrue statement of a material fact or
omits to state a material fact necessary to make such representation or warranty
not misleading in light of the circumstances under which it was made.
ARTICLE V.
AFFIRMATIVE COVENANTS
Each Borrower covenants so long as any Indebtedness of the Borrower to
any Bank remains unpaid under this Agreement, or any Obligations of the Borrower
to any Bank or the LC Issuer remain unsatisfied, or any Bank remains obligated
to make advances hereunder, to:
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5.01 Use of Funds. Use funds advanced hereunder for the purposes of (A)
refinancing existing debt owed to the Banks under the First Amended Credit
Agreement, (B) funding the Closing of the Merger Agreement, (C) funding
acquisitions of Oil and Gas Properties, (D) funding Borrower's working capital
needs, and (E) funding Borrower's other lawful corporate purposes.
5.02 Maintenance and Access to Records. Keep adequate records in
accordance with good accounting practices, of all of the transactions of the
Borrower so that at any time, and from time to time, such records present fairly
the financial condition of the Borrower which may be readily determined and, at
the Administrative Agent's reasonable request, make all financial records and
records relating to the Borrowing Base Oil and Gas Properties available for the
Administrative Agent's inspection and permit the Administrative Agent to make
and take away copies thereof.
5.03 Quarterly Unaudited Financial Statements. Deliver to the
Administrative Agent, on or before the forty-fifth (45th) day after the end of
each calendar quarter, unaudited consolidated and consolidating Financial
Statements of the Parent Borrower, as at the end of such period and from the
beginning of such fiscal year to the end of the respective period, as
applicable, which Financial Statements shall be certified by the president or
chief financial officer of the Parent Borrower, as being true and correct,
subject to changes resulting from year-end audit adjustments.
5.04 Annual Audited Financial Statements. Deliver to the Administrative
Agent, on or before the one hundred twentieth (120th) day after the close of
each fiscal year of the Borrower a copy of annual audited consolidated and
consolidating Financial Statements of the Parent Borrower, together with the
report and opinion thereon of KPMG or such other firm of independent certified
public accountants acceptable to the Administrative Agent at its reasonable
discretion.
5.05 Compliance Certificate. At the time of delivery of the certified
but unaudited Financial Statements pursuant to Section 5.03 above, and the
delivery of the annual audited Financial Statements pursuant to Section 5.04
above, deliver to the Administrative Agent a Compliance Certificate.
5.06 Statement of Material Adverse Change. Deliver to the
Administrative Agent, promptly upon any officer of the Borrower having knowledge
of any Material Adverse Change (or any event or circumstance that would result
in any such Material Adverse Change), a statement of the President, Chief
Financial Officer, or the Treasurer of the Borrower, setting forth the change in
condition or event or circumstance likely to result in any such change and the
steps being taken by the Borrower with respect to such change in condition or
event or circumstance.
5.07 Title Defects. Cure any title defects to the Borrowing Base Oil
and Gas Properties material in value, in the reasonable opinion of the
Administrative Agent, and, in the event any title defects are not cured in a
timely manner, pay all related costs and fees incurred by the Administrative
Agent for the account of the Banks to do so; provided, however, the Borrower may
remove any of its Oil and Gas Properties from the determination of the Borrowing
Base so long as the Indebtedness evidenced by the Revolving
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Notes is less than or equal to the Borrowing Base (determined by the Banks in
accordance with Section 2.06 exclusive of such Oil and Gas Properties).
5.08 Additional Information. Furnish to the Administrative Agent copies
of all information, if any, filed with the Securities Exchange Commission by the
Borrower and all information routinely provided by the Borrower to its
shareholders, generally. Furnish to the Administrative Agent, promptly upon the
Administrative Agent's reasonable request, such additional financial or other
information concerning the assets, liabilities, operations, and transactions of
the Borrower, including, without limitation, information concerning title to any
of the Borrowing Base Oil and Gas Properties.
5.09 Compliance with Laws and Payment of Assessments and Charges.
Materially comply with all applicable statutes and government regulations,
including, without limitation, ERISA, and pay all taxes, assessments,
governmental charges, claims for labor, supplies, rent and other obligations
which, if unpaid, might become a lien other than a Permitted Encumbrance against
its property, except any of the foregoing being contested in good faith and as
to which accruals satisfactory to the Administrative Agent, in its reasonable
discretion, have been provided.
5.10 Maintenance of Existence and Good Standing. Maintain the
Borrower's corporate existence and good standing in the jurisdiction of its
organization, and maintain the Borrower's qualification and good standing in all
other jurisdictions wherein the property now owned or hereafter acquired or
business now or hereafter conducted by Borrower necessitates same, other than
those jurisdictions wherein the failure to so qualify will not have a Material
Adverse Effect on the Borrower.
5.11 Further Assurances. Promptly cure any defects in the execution and
delivery of this Agreement, the Notes, the Security Instruments, the Transfer
Order Letters, or any other instrument referred to herein or executed in
connection with the Notes, and upon the reasonable request of the Administrative
Agent promptly execute and deliver to the Administrative Agent all such other
and further instruments as may be reasonably required or desired by the
Administrative Agent from time to time in compliance with the covenants and
agreements made in this Agreement. Without limiting the generality of the
foregoing, upon the reasonable request of the Administrative Agent, Borrower
shall promptly execute and deliver to the Administrative Agent amendments of the
Security Instruments existing under the Loan Agreement, the Original Credit
Agreement and the First Amended Credit Agreement to provide that references in
any of such Security Instruments to the Loan Agreement, the Original Credit
Agreement and/or the First Amended Credit Agreement shall include references to
this Agreement, as amended from time to time, and references in any such
Security Instrument to any of the Existing Notes shall be amended to include
references to the Notes delivered pursuant to this Agreement, and any further
notes issued in substitution therefor or in renewal, extension, increase or
rearrangement thereof.
5.12 Initial Expenses of the Bank. Pay prior to or at Closing all
documented reasonable fees and expenses of ▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P., the special
legal counsel for the Administrative Agent incurred directly and solely in
connection with the preparation of this Agreement, the Notes, the Security
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Instruments, the Transfer Order Letters, and any other instrument referred to
herein or executed directly and solely in connection with the Notes, the
satisfaction of the conditions precedent set forth in Article III of this
Agreement and the consummation of the transactions contemplated in this
Agreement.
5.13 Subsequent Expenses of the Administrative Agent and the Arranger.
Upon request, promptly reimburse the Administrative Agent and the Arranger and
any Bank for all documented amounts reasonably expended, advanced or incurred by
the Administrative Agent, the Arranger or any such Bank to collect the Notes or
to enforce the rights of the Administrative Agent, the Arranger or such Banks
under this Agreement, the Notes, the Security Instruments, the Transfer Order
Letters, or any other instrument referred to herein or executed in connection
with the Notes, which amounts shall be deemed compensatory in nature and
liquidated as to amount upon notice to the Borrower by the Administrative Agent
and which amounts will include, but not be limited to, (a) all court costs, (b)
reasonable attorneys' fees, (c) fees of auditors and accountants, (d)
investigation expenses, (e) internal fees of the Administrative Agent's in-house
legal counsel, (f) fees and expenses incurred in connection with the
Administrative Agent's and any such Bank's participation as a member of the
creditors committee in a case commenced under Title 11 of the United States Code
or other similar Law of the United States, the State of Texas or any other
jurisdiction, (g) fees and expenses incurred in connection with lifting the
automatic stay prescribed in Section 362 Title 11 of the United States Code, and
(h) fees and expenses incurred in connection with any action pursuant to
Sections 1129 Title 11 of the United States Code, reasonably incurred by the
Administrative Agent and/or any such Bank in connection with the collection of
any sums due under this Agreement, together with interest at the Floating Rate
per annum, calculated on a basis of a year of three hundred sixty (360) days on
each such amount from the date of notification to the Borrower that the same was
expended, advanced or incurred by the Administrative Agent and/or any such Bank
until, but not including, the date it is repaid to the Administrative Agent or
such Bank, with the obligations under this Section 5.13, surviving the
non-assumption of this Agreement in a case commenced under Title 11 of the
United States Code or other similar Law of the United States, the State of Texas
or any other jurisdiction and being binding upon the Borrower or a trustee,
receiver or liquidator of any such party appointed in any such case.
5.14 Maintenance of Tangible Property. Maintain all of its tangible
property relating to the Borrowing Base Oil and Gas Properties in good repair
and condition and make all necessary replacements thereof and operate such
property in a good and workmanlike manner in accordance with standard industry
practices, unless the failure to do so would not have a Material Adverse Effect
on the Borrower or the value of any Borrowing Base Oil and Gas Property.
5.15 Maintenance of Insurance. Continue to maintain, or cause to be
maintained, insurance with respect to the properties and business of the
Borrower against such liabilities, casualties, risks and contingencies and in
such amounts as is customary in the industry and furnish to the Administrative
Agent annually after the execution of this Agreement certificates evidencing
such insurance.
5.16 Inspection of Tangible Assets/Right of Audit. Permit any
authorized representative of the Administrative Agent or any Bank to visit and
inspect (at the risk of the Administrative Agent, such Bank
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and/or such representative) any tangible asset of the Borrower, and/or to audit
the books and records of the Borrower during normal business hours, at the
expense of the Administrative Agent or such Bank and during normal business
hours following reasonable advance notice.
5.17 Payment of Note and Performance of Obligations. Pay the Notes
according to the reading, tenor and effect thereof, as modified hereby, and do
and perform every act and discharge all of the Obligations provided to be
performed and discharged hereunder.
5.18 Borrowing Base. Maintain a Borrowing Base such that the amount of
the Outstanding Credit Exposure will not, at any time other than during
applicable grace periods expressly set forth elsewhere in this Agreement, exceed
the Aggregate Commitment Amount.
5.19 Compliance with Environmental Laws. To the extent necessary to
avoid a Material Adverse Effect, comply with any and all requirements of Law,
including, without limitation, Environmental Laws, (a) applicable to any natural
or environmental resource or media located on, above, within, in the vicinity
of, related to or affected by any Borrowing Base Oil and Gas Properties or any
other property of the Borrower, or (b) applicable to the performance or conduct
of its operations, including, without limitation, all permits, licenses,
registrations, approvals and authorizations, and, in this regard, comply with,
and require all employees, crew members, agents, contractors and subcontractors
(pursuant to appropriate contractual provisions) and future lessees (pursuant to
appropriate lease provisions) of the Borrower while such Persons are acting
within the scope of their relationship with the Borrower, to so comply with, all
applicable requirements of Law, including, without limitation, applicable
Environmental Laws, and other applicable requirements with respect to the
property of the Borrower, and the operation thereof necessary or appropriate to
enable the Borrower to fulfill its obligations under all applicable requirements
of Law, including, without limitation, Environmental Laws, applicable to the
use, generation, handling, storage, treatment, transport and disposal of any
Hazardous Substances now or hereafter located or present on or under any such
property.
5.20 Hazardous Substances Indemnification. INDEMNIFY AND HOLD THE
ADMINISTRATIVE AGENT, THE ARRANGER AND THE BANKS HARMLESS FROM AND AGAINST ANY
AND ALL CLAIMS, LOSSES, DAMAGES, LIABILITIES, FINES, PENALTIES, CHARGES,
ADMINISTRATIVE AND JUDICIAL PROCEEDINGS AND ORDERS, JUDGMENTS, REMEDIAL ACTIONS,
REQUIREMENTS AND ENFORCEMENT ACTIONS OF ANY KIND, AND ALL COSTS AND EXPENSES
INCURRED IN CONNECTION THEREWITH (INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES
AND EXPENSES), ARISING DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, OUT OF (a)
THE PRESENCE OF ANY HAZARDOUS SUBSTANCES ON, UNDER OR FROM ITS PROPERTY, WHETHER
PRIOR TO OR DURING THE TERM HEREOF, OR (b) ANY ACTIVITY CARRIED ON OR UNDERTAKEN
ON OR OFF ITS PROPERTY, WHETHER PRIOR TO OR DURING THE TERM HEREOF, AND WHETHER
BY THE BORROWER, OR ANY PREDECESSOR IN TITLE OR ANY EMPLOYEES, AGENTS,
CONTRACTORS OR SUBCONTRACTORS OF THE BORROWER, OR ANY PREDECESSOR IN TITLE, OR
ANY THIRD PERSONS AT ANY TIME OCCUPYING OR PRESENT ON SUCH PROPERTY, IN
CONNECTION WITH THE HANDLING, TREATMENT, REMOVAL, STORAGE, DECONTAMINATION,
CLEANUP, TRANSPORTATION OR DISPOSAL OF ANY HAZARDOUS SUBSTANCES AT ANY TIME
LOCATED OR PRESENT ON OR UNDER SUCH PROPERTY; WITH THE FOREGOING
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INDEMNITY FURTHER APPLYING TO ANY RESIDUAL CONTAMINATION ON OR UNDER THE
PROPERTY OF THE BORROWER, OR ANY PROPERTY OF ANY OTHER PERSON, OR AFFECTING ANY
NATURAL RESOURCES, AND TO ANY CONTAMINATION OF ANY PROPERTY OR NATURAL RESOURCES
ARISING IN CONNECTION WITH THE GENERATION, USE, HANDLING, STORAGE,
TRANSPORTATION OR DISPOSAL OF ANY HAZARDOUS SUBSTANCES, IRRESPECTIVE OF WHETHER
ANY OF SUCH ACTIVITIES WERE OR WILL BE UNDERTAKEN IN ACCORDANCE WITH APPLICABLE
REQUIREMENTS OF LAW, INCLUDING, WITHOUT LIMITATION, ENVIRONMENTAL LAWS, AND
SURVIVING SATISFACTION OF ALL INDEBTEDNESS OF THE BORROWER TO THE ADMINISTRATIVE
AGENT AND THE BANKS AND THE TERMINATION OF THIS AGREEMENT, UNLESS ALL SUCH
INDEBTEDNESS HAS BEEN SATISFIED WHOLLY IN CASH FROM THE BORROWER AND NOT BY WAY
OF REALIZATION AGAINST ANY PROPERTY OR THE CONVEYANCE OF ANY PROPERTY OF THE
BORROWER IN LIEU THEREOF, PROVIDED THAT THE CLAIMS AND OTHER ACTIONS OF ANY KIND
AGAINST THE ADMINISTRATIVE AGENT, THE ARRANGER OR THE BANKS WHICH GIVE RISE TO
SUCH INDEMNITY ARE NOT BARRED BY THE APPLICABLE STATUTE OF LIMITATIONS AT THE
TIME SUCH CLAIMS OR ACTIONS ARE INSTITUTED AND SUCH INDEMNITY SHALL NOT EXTEND
TO ANY ACT OR OMISSION BY THE ADMINISTRATIVE AGENT, THE ARRANGER OR THE BANKS
WITH RESPECT TO THE RELEVANT PROPERTY SUBSEQUENT TO THE ADMINISTRATIVE AGENT,
THE ARRANGER OR ANY BANK BECOMING THE OWNER OF, TAKING POSSESSION OF TO THE
EXCLUSION OF THE BORROWER OR ASSUMING OPERATIONS OF ANY PROPERTY PREVIOUSLY
OWNED BY THE BORROWER AND WITH RESPECT TO WHICH PROPERTY SUCH CLAIM, LOSS,
DAMAGE, LIABILITY, FINE, PENALTY, CHARGE, PROCEEDING, ORDER, JUDGMENT, ACTION OR
REQUIREMENT ARISES SUBSEQUENT TO THE ACQUISITION OF TITLE THERETO, TAKING
POSSESSION THEREOF OR ASSUMPTION OF OPERATIONS THEREON BY THE ADMINISTRATIVE
AGENT, THE ARRANGER OR ANY BANK.
5.21 Transactions with Affiliates. Conduct all transactions with any
Affiliate of the Borrower on an arm's-length basis (provided that such
transactions are otherwise permitted by the terms of this Agreement).
5.22 Leases. Keep and continue all Leases comprising the Borrowing Base
Oil and Gas Properties and related contracts and agreements relating thereto in
full force and effect in accordance with the terms thereof and not permit the
same to lapse or otherwise become impaired for failure to comply with the
obligations thereof, whether express or implied; provided, however, that this
provision shall not prevent the Borrower from abandoning and releasing any such
Leases upon their termination as the result of cessation of production in paying
quantities that did not result from the Borrower's failure to maintain such
production as a reasonably prudent operator.
5.23 Operation of Borrowing Base Oil and Gas Properties. Operate or, to
the extent that the right of operation is vested in others, exercise all
reasonable efforts to require the operator to operate the Borrowing Base Oil and
Gas Properties and all ▇▇▇▇▇ drilled thereon and that may hereafter be drilled
thereon, continuously and in a good and workmanlike manner in accordance with
the best usage of the field and in accordance with all Laws of the State in
which the Borrowing Base Oil and Gas Properties are situated and the United
States of America, as well as all rules, regulations, and Laws of any
governmental agency having jurisdiction to regulate the manner in which the
operation of the Borrowing Base Oil and Gas Properties shall be carried on, and
comply with all terms and conditions of the Leases it now holds, and
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any assignment or contract obligating the Borrower in any way with respect to
the Borrowing Base Oil and Gas Properties; but nothing herein shall be construed
to empower the Borrower to bind the Administrative Agent or any Bank to any
contract obligation, or render the Administrative Agent or any Bank in any way
responsible or liable for bills or obligations incurred by the Borrower.
5.24 Assignments. Upon request of the Administrative Agent, execute and
deliver written notices of assignments to any persons, corporations or other
entities owing or which may in the future owe to the Borrower monies or accounts
arising in connection with any of the following matters: (a) any oil, gas or
mineral production from the Borrowing Base Oil and Gas Properties; (b) any gas
contracts, processing contracts or other contracts relating to the Borrowing
Base Oil and Gas Properties; or (c) the operation of or production from any part
of the Borrowing Base Oil and Gas Properties.
5.25 Change of Purchasers of Production. On or before each anniversary
of the Closing, and at any other time that the Administrative Agent may so
request in writing, the Borrower shall notify the Administrative Agent in
writing of the identity and address of each then-current purchaser of production
from the Borrowing Base Oil and Gas Properties and, if requested by the
Administrative Agent, shall provide the Administrative Agent with Transfer Order
Letters executed by the Borrower and addressed to such purchasers of production.
5.26 Payment of Taxes, Etc. Pay or cause to be paid when due, all
taxes, assessments, and charges or levies imposed upon it any of its
Subsidiaries, or on any of their respective property, or which it or they are
required to withhold and pay, except where contested in good faith by
appropriate proceedings with adequate reserves therefor having been set aside on
its books, provided, however, that the Borrower and its Subsidiaries shall each
pay or cause to be paid all such taxes, assessments, charges, or levies
forthwith whenever foreclosure on any lien that may have attached (or security
therefor) appears imminent.
5.27 Notice of Litigation. Give immediate notice to the Administrative
Agent of: (1) any litigation or proceeding in which it or any of its
Subsidiaries is a party if an adverse decision therein would require it or any
of its Subsidiaries to pay more than $1,000,000.00 in the aggregate or deliver
assets the value of which exceeds such sum (whether or not the claim is
considered to be covered by insurance); and (2) the institution of any other
suit or proceeding involving the Borrower or any of its Subsidiaries that might
materially and adversely affect its operations, financial condition, property,
or business prospects.
5.28 Notice of Events of Default. Notify the Administrative Agent
immediately if it becomes aware of the occurrence of any Event of Default or of
any fact, condition, or event that only with the giving of notice or passage of
time or both, would become an Event of Default or if it becomes aware of any
Material Adverse Change (including, without limitation, proceedings in
bankruptcy, insolvency, reorganization, or the appointment of a receiver or
trustee), or of the failure of the Borrower to observe any of its undertakings
hereunder or under the Security Instruments.
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5.29 Notice of Change of Principal Offices. Notify the Administrative
Agent thirty (30) days in advance of any change in the location of the principal
offices of Borrower or any of its Subsidiaries.
5.30 Employee Benefit Plans. Fund its Plan(s) in accordance with no
less than the minimum funding standards of 29 U.S.C.A. Sections 1082 (Section
302 of ERISA); furnish the Administrative Agent, promptly after the filing or
receiving of the same, with copies of any reports or other statements filed
with, or notices or other communications received from, the United States
Department of Labor, the PBGC, or the Internal Revenue Service with respect to
any such Plan; promptly advise the Administrative Agent of the occurrence of any
Reportable Event or Prohibited Transaction with respect to any such Plan and the
action the Borrower proposes to take with respect thereto; and promptly advise
the Administrative Agent when the Borrower knows or has reason to believe that
the PBGC or the Borrower has instituted or will institute proceedings under
Title IV of ERISA to terminate any such Plan and the action the Borrower
proposes to take with respect thereto.
5.31 Payment of Obligations. Promptly pay (or renew and extend) all of
its Indebtedness as it becomes due (subject to any restrictions on the payment
of Subordinated Debt in the subordination provisions applicable thereto), unless
such Indebtedness is contested in good faith by appropriate proceedings.
ARTICLE VI.
NEGATIVE COVENANTS
Without the prior written consent of the Administrative Agent and the
Required Banks and so long as any part of the principal or interest on the Notes
shall remain unpaid or any Bank remains obligated to make advances hereunder,
each Borrower covenants that it will not:
6.01 Other Indebtedness. Incur, create, assume or suffer to exist any
Indebtedness, whether by way of loan or the issuance or sale of securities
except Permitted Indebtedness.
6.02 Loans or Advances. Make or agree to make or allow to remain
outstanding any loans or advances to any Person, except: (a) advances or
extensions of credit in the form of accounts receivable incurred in the ordinary
course of business, (b) the intercompany loan from Parent Borrower to EPL
Pipeline L.L.C. in an amount not to exceed $1,300,000.00, (c) the intercompany
Indebtedness owed by either Borrower to the other as described in subsection (K)
of the definition of Permitted Indebtedness set forth in this Agreement, and (d)
other loans or advances not exceeding $1,000,000, in the aggregate, at any time
outstanding.
6.03 Mortgages or Pledges of Assets. Create, incur, assume or permit to
exist, any mortgage, pledge, security interest, lien or encumbrance on any of
its properties or assets (now owned or hereafter acquired), except for Permitted
Encumbrances.
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6.04 Sales of Assets. Except for Permitted Asset Sales, sell, lease,
assign, transfer or otherwise dispose of, in one or any series of related
transactions, all or any portion of its Oil and Gas Properties or other material
assets, whether now owned or hereafter acquired, including transfers to
Subsidiaries, nor enter into any arrangement, directly or indirectly, with any
Person to sell and rent or lease back as lessee such property or any part
thereof which is intended to be used for substantially the same purpose or
purposes as the property sold or transferred.
6.05 Dividends. Declare or pay any distribution on any capital stock of
Borrower, with the exception of dividends coming due pursuant to the terms of
the Buyer Preferred Stock if no Event of Default or Unmatured Event of Default
exists at the time of the payment of such dividends and no Event of Default or
Unmatured Event of Default would occur under any other provision of this
Agreement as the result of the payment of such dividends.
6.06 Payment of Accounts Payable. Allow any account payable to remain
unpaid more than sixty (60) days after due date, except such as are (i) being
contested in good faith and as to which adequate provision or accrual has been
made, or (ii) the subject of usual and customary review and evaluation.
6.07 Cancellation of Insurance. Allow any insurance policy required to
be carried hereunder to be terminated or lapse or expire without provision for
adequate renewal thereof.
6.08 Investments. Make Investments in or purchase or otherwise acquire
all or substantially all of the assets of any Person, or any shares of stock of,
or similar interest in, any other Person, if the result of such action would
impair the ability of the Borrower to perform any of its Obligations pursuant to
this Agreement, including, without limitation, the obligation to repay the
Indebtedness evidenced by the Notes, except that the Borrower may invest in
instruments that are investment grade, short-term commercial paper.
6.09 Changes in Structure or Business. Consolidate or merge with or
purchase (for cash or securities) all or substantially all of the assets or
capital stock of any corporation, firm, association or enterprise, or allow any
such entity to be merged into the Borrower, or change the basic business
operations of the Borrower, unless all of the following conditions are
satisfied: (a) Borrower has provided Administrative Agent complete and detailed
information relating to such merger or purchase at least fifteen (15) days in
advance thereof, (b) Borrower is the survivor of such merger or the acquiror in
any such purchase, and (c) such merger or purchase will not otherwise constitute
or result in an Event of Default or Unmatured Event of Default under any other
provisions of this Agreement.
6.10 Pooling or Unitization. Voluntarily pool or unitize all or any
part of the Borrowing Base Oil and Gas Properties where the pooling or
unitization would result in the diminution of the Borrower's net revenue
interest in production from the pooled or unitized lands, without the Required
Banks' prior consent, which will not be unreasonably withheld. Any unitization,
pooling or communitization or other action or instrument in violation of this
Section 6.11 shall be of no force or effect against any Bank.
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6.11 Hedge Agreements. Except for Permitted Hedge Agreements, enter
into or become obligated under any contract for sale for future delivery of
Hydrocarbons other than normal production contracts entered into in the
Borrower's normal course of business (whether or not the subject Hydrocarbons
are to be delivered), forward contract, Hedging Agreement, futures contract or
any other similar agreement, without the prior written consent of the Required
Banks, acting in their discretion.
6.12 Capital Stock of Borrower. Neither the Borrower nor any Subsidiary
will: (a) issue, redeem, purchase, retire or otherwise acquire for value any of
its capital stock or grant, issue, purchase, retire or otherwise acquire for
value any warrant, right, or option pertaining thereto or other security
convertible into any of the foregoing, or (b) permit any transfer, sale,
redemption, retirement, or other change in the ownership of the outstanding
capital stock of the Borrower or any Subsidiary, without the prior written
consent of the Required Banks, acting in their discretion; except for the
issuance or transfer of the Borrower's or any of its Subsidiaries' capital stock
which does not result in a Change of Control or otherwise constitute or result
in an Event of Default or an Unmatured Event of Default under any other
provisions of this Agreement.
6.13 Margin Stock. Neither the Borrower nor any Subsidiary will
directly or indirectly apply any part of the proceeds of the Loans to the
purchasing or carrying of any "margin stock" within the meaning of Regulation U
of the Board of Governors of the Federal Reserve System, or any regulations,
interpretations or rulings thereunder.
6.14 Minimum Tangible Net Worth. Permit Consolidated Tangible Net Worth
to be less than $137,000,000.00, plus 50% of Borrower's positive consolidated
Net Income, if any, accrued during each calendar quarter subsequent to September
30, 2001, calculated cumulatively as of the end of each fiscal quarter of
Borrower beginning with the quarter ending December 31, 2001, with no reduction
for negative Net Income during any such quarter, and 100% of any increase in
Stockholders Equity resulting from the sale or issuance of stock in Parent
Borrower subsequent to September 30, 2001.
6.15 Current Ratio. Permit as of the end of any fiscal quarter its
Current Ratio to be less than 1.10 to 1.00.
6.16 EBITDAX to Interest Ratio. Permit, as of the end of any fiscal
quarter, the ratio of EBITDAX to Borrower's total interest expense on all
Indebtedness to be lesser than 5.0 to 1.0, calculated on a rolling four-quarter
basis.
6.17 Performance of Transaction Documents. Perform Borrower's
obligations under any of the Transaction Documents at any time if to do so would
cause or result in an Event of Default or an Unmatured Event of Default under
any other provision of this Agreement, or if at the time such performance is to
occur an Event of Default or Unmatured Event of Default has occurred and is
continuing under this Agreement, unless Administrative Agent grants its prior
written consent thereto on behalf of the Banks in accordance with Section 9.13.
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6.18 Amendment of Transaction Documents. Amend any of the Transaction
Documents or waive or seek a waiver of any of the material obligations
thereunder, unless the Administrative Agent grants its prior written consent
thereto on behalf of the Banks in accordance with Section 9.13.
ARTICLE VII.
EVENTS OF DEFAULT
7.01 Enumeration of Events of Default. Any of the following events
shall be considered an Event of Default as that term is used herein:
(a) Default shall be made by the Borrower in the payment
of any installment of principal or interest
(including, without limitation, any mandatory
prepayments payable pursuant to either Section 2.07
or 2.08 of this Agreement) on the Notes, any LC Fee
or any other monetary obligation (other than
Reimbursement Obligations) payable hereunder when
due, including without limitation, any other fee due
to Administrative Agent, LC Issuer or any Bank
hereunder within five (5) days after such payment was
due, or in the payment of any Reimbursement
Obligation within one Business Day after the same
becomes due;
(b) Default shall be made by the Borrower in the due
observance or performance of any affirmative covenant
required in this Agreement, the Notes, the Facility
LC Applications or the Security Instruments and such
default continues for more than thirty (30) days
after the earlier of: (i) Borrower having knowledge
thereof, or (ii) Borrower receiving written notice
thereof from the Administrative Agent;
(c) Default shall be made by the Borrower in the due
observance or performance of any negative covenant
required in this Agreement, the Notes, the Facility
LC Applications or the Security Instruments;
(d) Any representation or warranty herein made by the
Borrower proves to have been untrue in any respect
material to the Borrower, or any representation,
statement (including Financial Statements),
certificate or data furnished or made by the Borrower
to the Administrative Agent in connection herewith
proves to have been untrue in any respect material to
the Borrower as of the date the facts therein set
forth were stated or certified;
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(e) Default shall be made by the Borrower (as principal
or other surety) in payment or performance of any
bond, debenture, note or other evidence of
Indebtedness for borrowed money, or under any credit
agreement, loan agreement, indenture, promissory note
or similar agreement or instrument executed in
connection with any of the forgoing, relating to any
Indebtedness in an aggregate amount of One Million
Dollars ($1,000,000.00) or more, and such default
shall remain unremedied for in excess of the period
of grace, of any, with respect thereto.
(f) The Borrower (i) discontinues its usual business or
applies for or consents to the appointment of a
receiver, trustee or liquidator of it or all or a
substantial part of its assets, or (ii) files a
voluntary petition commencing a case under Title 11
of the United States Code, seeking liquidation,
reorganization or rearrangement or taking advantage
of any bankruptcy, insolvency, debtor's relief or
other similar Law of the United States the State of
Texas or any other jurisdiction, or (iii) makes a
general assignment for the benefit of creditors, or
(iv) is unable, or admits in writing its inability to
pay its debts generally as they become due, or (v)
files an answer admitting the material allegations of
a petition filed against it in any case commenced
under Title 11 of the United States Code or any
reorganization, insolvency, conservatorship or
similar proceeding under any bankruptcy, insolvency,
debtor's relief or other similar Law of the United
States, the State of Texas or any other jurisdiction;
(g) An order, judgment or decree shall be entered against
the Borrower by any court of competent jurisdiction
or by any other duly authorized authority, on the
petition of a creditor or otherwise, granting relief
under Title 11 of the United States Code or under any
bankruptcy, insolvency, debtor's relief or other
similar Law of the United States, the State of Texas
or any other jurisdiction, approving a petition
seeking reorganization or an arrangement of its debts
or appointing a receiver, trustee, conservator,
custodian or liquidator of it or all or any
substantial part of its assets, and the failure to
have such order, judgment or decree dismissed within
thirty (30) days of its entry;
(h) the Borrower has concealed, removed, or permitted to
be concealed or removed, any part of its property,
with intent to hinder, delay or defraud its creditors
or any of them; or has made or suffered a transfer of
any of its property which would be characterized as a
fraudulent conveyance under bankruptcy or similar
Laws; or has made any transfer of its property to or
for the benefit of a creditor at a time when other
creditors similarly
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situated have not been paid; or has suffered or
permitted, while insolvent, any creditor to obtain a
lien upon any of its property through legal
proceedings or distraint which is not vacated within
thirty (30) days from the date thereof;
(i) the Liens under the Security Instruments cease to be
perfected or cease to be first priority Liens subject
to only Permitted Encumbrances; or
(j) Borrower has defaulted in its obligations under any
Transaction Document and any other party to such
Transaction Document under which a default has
occurred initiates any action to pursue its remedies
resulting from such default or gives notice of its
intent to do so.
7.02 Rights Upon Unmatured Event of Default. At any time that there
exists an Unmatured Event of Default, any obligation of the Banks and the LC
Issuer to make Credit Extensions shall be suspended unless and until the
Administrative Agent, with the approval of the Required Banks and the LC Issuer,
shall reinstate the same in writing, the Unmatured Event of Default shall have
been waived by the Administrative Agent, with approval of the Required Banks and
the LC Issuer or the relevant Unmatured Event of Default shall have been
remedied prior to ripening into an Event of Default.
7.03 Rights Upon Default. Upon the happening of an Event of Default
specified in Subsections 7.01 (f) or (g), the obligations of the Banks and the
LC Issuer to make Credit Extensions hereunder shall automatically terminate and
all Obligations then outstanding hereunder and the interest accrued thereon
shall automatically become immediately due and payable without any election or
action on the part of the Administrative Agent, any Bank or the LC Issuer. Upon
the happening and during the continuation of any other Event of Default, the
Administrative Agent may, or upon the request of the Required Banks subject to
Section 9.13, the Administrative Agent shall terminate or suspend the
obligations of the Banks and the LC Issuer to make Credit Extensions hereunder,
or declare the Obligations to be immediately due and payable, or both, and upon
such declaration with respect to the Obligations they shall become immediately
due and payable. In either case, the entire principal and interest shall
thereupon become immediately due and payable, without notice (including, without
limitation, notice of intent to accelerate maturity or notice of acceleration of
maturity) and without presentment, demand, protest, notice of protest or other
notice of default or dishonor of any kind, except as provided to the contrary
elsewhere herein, all of which are hereby expressly waived by the Borrower.
If, within thirty (30) days after acceleration of the maturity of the
Obligations or termination of the obligations of the Banks and LC Issuer to make
Credit Extensions hereunder as the result of any Event of Default (other than
any Event of Default specified in subsections 7.01(f) or (g)) and before any
judgement or decree for the payment of the Obligations due shall have been
obtained or entered, the Required Banks (in their sole discretion) shall direct
with respect to the Obligations relating to the Loans or the LC Issuer
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(in its sole discretion) shall direct with respect to Obligations relating to
Facility LCs, the Administrative Agent shall, by notice to the Borrower, rescind
and annul such acceleration and/or termination.
7.04 Remedies. After any acceleration, as provided for in Section 7.03,
the Administrative Agent, the Banks and the LC Issuer shall have, in addition to
the rights and remedies given them by this Agreement and the Security
Instruments, all those allowed by all applicable Laws, including, but without
limitation, the Uniform Commercial Code as enacted in any jurisdiction in which
any Borrowing Base Oil and Gas Properties may be located. Without limiting the
generality of the foregoing, the Administrative Agent may, or upon the request
of the Required Banks shall, immediately without demand of performance and
without other notice (except as specifically required by this Agreement or the
Security Instruments) or demand whatsoever to the Borrower, all of which are
hereby expressly waived, and without advertisement, sell at public or private
sale or otherwise realize upon, in ▇▇▇▇▇▇ County, Texas, or in any other place
where the Borrowing Base Oil and Gas Properties may be located, or in such other
place or places as the Administrative Agent may designate, the whole or, from
time to time, any part of the Borrowing Base Oil and Gas Properties, or any
interest which the Borrower may have therein. After deducting from the proceeds
of sale or other disposition of the Borrowing Base Oil and Gas Properties all
expenses (including all reasonable expenses for legal services), the Bank shall
apply such proceeds toward the satisfaction of the Obligations. Any remainder of
the proceeds after satisfaction in full of the Obligations shall be distributed
as required by applicable Laws. Notice of any sale or other disposition shall be
given to the Borrower at least five (5) days before the time of any public sale
or of the time after which any intended private sale or other disposition of the
Borrowing Base Oil and Gas Properties is to be made, which the Borrower hereby
agrees shall be reasonable notice of such sale or other disposition. The
Borrower agrees to assemble, or to cause to be assembled, at its own expense,
documents evidencing its ownership of the Borrowing Base Oil and Gas Properties
and such other documents or items as the Administrative Agent may reasonably
request at such place or places as the Administrative Agent shall designate. At
any such sale or other disposition, the Administrative Agent and/or any Bank, to
the extent permissible under applicable Laws, may purchase the whole or any part
of the Borrowing Base Oil and Gas Properties, free from any right of redemption
on the part of the Borrower, which right is hereby waived and released. Without
limiting the generality of any of the rights and remedies conferred upon the
Administrative Agent for the benefit of the Banks under this paragraph, the
Administrative Agent may, to the full extent permitted by the applicable Laws:
(A) Enter upon the premises of the Borrower (and, to the
extent necessary in the judgment of the Administrative Agent, exclude
therefrom the Borrower or any Affiliate thereof) and take immediate
possession of the Borrowing Base Oil and Gas Properties, either
personally or by means of a receiver appointed by a court of competent
jurisdiction, using all necessary force to do so;
(B) At the Administrative Agent's option, use, operate,
manage, and control the Borrowing Base Oil and Gas Properties in any
lawful manner;
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(C) Collect and receive all rents, income, revenue, earnings,
issues, and profits therefrom for the benefit of the Banks; and
(D) Maintain, repair, renovate, alter, or remove the Borrowing
Base Oil and Gas Properties as the Banks may determine in their
discretion.
7.05 Right of Set-off. Upon the occurrence of any Event of Default,
each Bank may, and is hereby authorized by the Borrower, at any time and from
time to time, to the fullest extent permitted by applicable Laws, without
advance notice to the Borrower (any such notice being expressly waived by the
Borrower), set-off and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held and any other indebtedness at any
time owing by such Bank to or for the credit or the account of the Borrower
against any or all of the Obligations of the Borrower now or hereafter existing,
whether or not such Obligations have matured and irrespective of whether such
Bank may have exercised any other rights that they have or may have with respect
to such Obligations, including, without limitation, any acceleration rights.
Each Bank agrees promptly to notify the Borrower after any such set-off and
application, provided that the failure to give such notice shall not affect the
validity of such set-off and application. The rights of each Bank under this
Section 7.05 are in addition to the other rights and remedies (including,
without limitation, other rights of set-off) which the Banks may have.
ARTICLE VIII.
THE ADMINISTRATIVE AGENT
8.01 Authorization and Action. Each Bank hereby irrevocably appoints
and authorizes the Administrative Agent to act on its behalf and to exercise
such powers under this Agreement and the other Loan Documents as are
specifically delegated to or required of the Administrative Agent by the terms
hereof and thereof, together with such powers as are reasonably incidental
thereto. As to any matters not expressly provided for by this Agreement or the
other Loan Documents (including, without limitation, enforcement or collection
of the Notes), the Administrative Agent shall not be required to exercise any
discretion or take any action, but shall be required to act or to refrain from
acting (and, as between the Administrative Agent and the Banks, shall be fully
protected in so acting or refraining from acting) upon the instructions of the
Required Banks, and such instructions shall be binding upon all Banks and all
holders of Notes; provided, however, that the Administrative Agent shall not be
required to take any action which exposes such Administrative Agent to personal
liability or which is contrary to this Agreement, the other Loan Documents or
applicable law.
8.02 Administrative Agent's Reliance, Etc. Neither the Administrative
Agent nor any of its directors, officers, agents or employees shall be liable to
any Bank for any action taken or omitted to be taken by it or them under or in
connection with this Agreement or the other Loan Documents (i) with the consent
or at the request of the Required Banks or (ii) in the absence of its or their
own gross negligence or willful misconduct (it being the express intention of
the parties that the Administrative Agent and its
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directors, officers, agents and employees shall have no liability for actions
and omissions under this Section 8.02 resulting from their sole ordinary or
contributory negligence). Without limitation of the generality of the foregoing,
the Administrative Agent: (i) may treat the payee of each Note as the holder
thereof until the Administrative Agent receives written notice of the assignment
or transfer thereof signed by such payee and in form satisfactory to the
Administrative Agent; (ii) may consult with legal counsel (including counsel for
Borrower or any of its Subsidiaries), independent public accountants and other
experts selected by it and shall not be liable for any action taken or omitted
to be taken in good faith by it in accordance with the advice of such counsel,
accountants or experts; (iii) makes no warranty or representation to any Bank
and shall not be responsible to any Bank for any statements, warranties or
representations made in or in connection with this Agreement or the other Loan
Documents; (iv) except as otherwise expressly provided herein, shall not have
any duty to ascertain or to inquire as to the performance or observance of any
of the terms, covenants or conditions of this Agreement or the other Loan
Documents or to inspect the property (including the books and records) of
Borrower and its Subsidiaries; (v) shall not be responsible to any Bank for the
due execution, legality, validity, enforceability, genuineness, sufficiency or
value of this Agreement or the other Loan Documents or any other instrument or
document furnished pursuant hereto or thereto; and (vi) shall incur no liability
under or in respect of this Agreement or the other Loan Documents by acting upon
any notice, consent, certificate or other instrument or writing (which may be by
telegram, telecopier, cable or telex) reasonably believed by it to be genuine
and signed or sent by the proper party or parties; and (vii) the provisions of
this Section 8.02 shall survive the termination of this Agreement and/or the
payment or assignment of any of the Indebtedness under this Agreement.
8.03 The Administrative Agent and Affiliates. With respect to its
Commitment, the Credit Extensions made by it and the Note issued to it as a
Bank, the Administrative Agent shall have the same rights and powers under this
Agreement or the other Loan Documents as any other Bank and may exercise the
same as though it were not the Administrative Agent. The term "Bank" or "Banks"
shall, unless otherwise expressly indicated, include the Administrative Agent in
its individual capacity. The Administrative Agent and its affiliates may accept
deposits from, lend money to, act as trustee under indentures of, and generally
engage in any kind of business with Borrower, any of its respective Subsidiaries
and any Person who may do business with or own securities of Borrower, any of
its respective Subsidiaries, all as if the Administrative Agent were not the
Administrative Agent and without any duty to account therefor to the Banks.
8.04 Bank Credit Decision. Each Bank acknowledges and agrees that it
has, independently and without reliance upon the Administrative Agent or any
other Bank and based on the Financial Statements referred to in Section 5.04 and
such other documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement. Each Bank also
acknowledges and agrees that it will, independently and without reliance upon
the Administrative Agent or any other Bank and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement and the
other Loan Documents.
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8.05 Administrative Agent's Indemnity. The Administrative Agent shall
not be required to take any action hereunder or to prosecute or defend any suit
in respect of this Agreement or the other Loan Documents unless indemnified to
the Administrative Agent's satisfaction by the Banks against loss, cost,
liability and expense. If any indemnity furnished to the Administrative Agent
shall become impaired, it may call for additional indemnity and cease to do the
acts indemnified against until such additional indemnity is given. In addition,
the Banks agree to indemnify the Administrative Agent (to the extent not
reimbursed by Borrower), ratably according to the respective principal amounts
of the Notes then held by each of them (or if no Notes are at the time
outstanding, ratably according to either (i) the respective amounts of their
Commitments, or (ii) if no Commitments are outstanding, the respective amounts
of the Commitments immediately prior to the time the Commitments ceased to be
outstanding), from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever which may be imposed on, incurred by, or
asserted against the Administrative Agent in any way relating to or arising out
of this Agreement or any action taken or omitted by the Administrative Agent
under this Agreement or the other Loan Documents (including, without limitation,
any action taken or omitted under Article II of this Agreement); provided, that
no Bank shall be liable for any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting from the Administrative Agent's gross negligence or
willful misconduct. Each Bank agrees, however, that it expressly intends, under
this Section 8.05, to indemnify the Administrative Agent ratably as aforesaid
for all such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses and disbursements arising out of or resulting
from the Administrative Agent's ordinary or contributory negligence. Without
limitation of the foregoing, each Bank agrees to reimburse the Administrative
Agent promptly upon demand for its ratable share of any out-of-pocket expenses
(including reasonable counsel fees) incurred by the Administrative Agent in
connection with the preparation, execution, administration, or enforcement of,
or legal advice in respect of rights or responsibilities under, this Agreement
and the other Loan Documents to the extent that the Administrative Agent is not
reimbursed for such expenses by Borrower. The provisions of this Section 8.05
shall survive the termination of this Agreement and/or the payment or assignment
of any of the Indebtedness under this Agreement.
8.06 Successor Administrative Agent. The Administrative Agent may
resign at any time by giving written notice thereof to the Banks and Borrower
and may be removed as Administrative Agent under this Agreement and the other
Loan Documents at any time with or without cause by the Required Banks. Upon any
such resignation or removal, the Required Banks with the concurrence of Borrower
shall have the right to appoint a successor Administrative Agent. If no
successor Administrative Agent shall have been so appointed by the Required
Banks, and shall have accepted such appointment, within 30 calendar days after
the retiring Administrative Agent's giving of notice of resignation or the
Required Banks' removal of the retiring Administrative Agent, then the retiring
Administrative Agent may, on behalf of the Banks and with the concurrence of
Borrower, appoint a successor Administrative Agent. Upon the acceptance of any
appointment as Administrative Agent hereunder and under the other Loan Documents
by a successor Administrative Agent, such successor Administrative Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Administrative Agent, and the retiring
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Administrative Agent shall be discharged from its duties and obligations under
this Agreement and the other Loan Documents. After any retiring Administrative
Agent's resignation or removal as Administrative Agent hereunder and under the
other Loan Documents, the provisions of this Article VIII shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was
Administrative Agent under this Agreement and the other Loan Documents.
8.07 Notice of Default. The Administrative Agent shall not be deemed to
have knowledge or notice of the occurrence of any Unmatured Event of Default or
Event of Default hereunder unless the Administrative Agent shall have received
notice from a Bank or Borrower referring to this Agreement, describing such
Unmatured Event of Default or Event of Default and stating that such notice is a
"notice of default." If the Administrative Agent receives such a notice, the
Administrative Agent shall give notice thereof to the Banks; provided, however,
if such notice is received from a Bank, the Administrative Agent also shall give
notice thereof to Borrower. The Administrative Agent shall be entitled to take
action or refrain from taking action with respect to such Unmatured Event of
Default or Event of Default as provided in Section 8.01 and Section 8.02.
ARTICLE IX.
MISCELLANEOUS
9.01 Security Interests in Deposits and Right of Offset or the Banker's
Lien. The Borrower hereby transfers, assigns, pledges and grants to each Bank a
security interest (as security for the payment and/or performance of the
Obligations of the Borrower, with such interest of each Bank to be
retransferred, reassigned and/or released by such Bank at the expense of the
Borrower upon payment in full and/or complete performance by the Borrower of all
such Obligations) and the right, exercisable at such time as any obligation
hereunder shall mature, whether by acceleration of maturity or otherwise, of
offset or banker's lien against all funds or other property of the Borrower now
or hereafter or from time to time on deposit with or in the possession of such
Bank, including, without limitation, all certificates of deposit and other
depository accounts.
9.02 Survival of Representations, Warranties and Covenants. All
representations and warranties of the Borrower and all covenants and agreements
herein made shall survive the execution and delivery of the Notes and this
Agreement and shall remain in force and effect so long as any debt is
outstanding under the Notes, or any renewal or extension of this Agreement or
the Notes, or the Banks remain obligated to make advances hereunder.
9.03 Notices and Other Communications. Notices, requests and
communications hereunder shall be in writing and shall be sufficient in all
respects if delivered to the relevant address indicated below (including
delivery by registered or certified United States mail, facsimile, telex,
telegram or hand):
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(A) If to the
Borrower: ENERGY PARTNERS, LTD.
▇▇▇ ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: Chief Executive Officer
with a copy
to: Evercore Partners
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
(B) If to the
Administrative Agent or
the Banks: BANK ONE, NA
▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Any party may, by proper written notice hereunder to the other, change
the individuals or addresses to which such notices to it shall thereafter be
sent.
9.04 Parties in Interest. All covenants and agreements herein contained
by or on behalf of the Borrower shall be binding upon the Borrower and its
successors and assigns and inure to the benefit of the Administrative Agent and
the Banks and their respective successors and assigns.
9.05 Successors and Assigns; Participation; Purchasing Banks.
(a) Whenever in this Agreement any of the parties hereto is
referred to, such reference shall be deemed to include the successors
and permitted assigns of such party; and all covenants, promises and
agreements by or on behalf of Borrower, the Administrative Agent or the
Banks that are contained in this Agreement shall bind and inure to the
benefit of their respective successors and permitted assigns. Borrower
may not assign or transfer any of its rights or obligations hereunder
without the written consent of all the Banks.
(b) Each Bank may, without the consent of Borrower, sell
participations to one or more banks or other financial institutions in
all or a portion of its rights and obligations under this Agreement and
the other Loan Documents (including, without limitation, all or a
portion of its Commitment, the Loans owing to it, and the Notes held by
it); provided, however, that (i) the selling Bank's obligations under
this Agreement and the other Loan Documents shall remain unchanged,
(ii) such Bank shall remain solely responsible to the other parties
hereto for the performance of such obligations, (iii) Borrower, the
Administrative Agent, and the other Banks shall
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continue to deal solely and directly with the selling Bank in
connection with such Bank's rights and obligations under this Agreement
and the other Loan Documents, (iv) the selling Bank shall remain the
holder of its Note(s) for all purposes of this Agreement, and (v) no
participant under any such participation shall have any right to
approve any amendment or waiver of any provision of this Agreement or
any Note, or any consent to any departure by the Borrower therefrom,
except to the extent that such amendment, waiver or consent would
reduce to the principal of, or interest on, the Notes or any fees or
other amounts payable hereunder, in each case to the extent subject to
such participation, or postpone any regularly scheduled payment of
principal of, or interest on, the Notes or any fees or other amounts
payable hereunder, in each case to the extent subject to such
participation.
(c) With the prior written consent of Borrower and the
Administrative Agent, each Bank may assign to one or more banks or
other entities (a "Purchasing Bank"), all or a portion of its
interests, rights and obligations under this Agreement and the other
Loan Documents (including, without limitation, all or a portion of its
Commitment and the same portion of the Loans at the time owing to it
and the Notes held by it); provided, however, that (i) each such
assignment shall be of a constant, and not a varying, percentage of all
the assigning Bank's rights and obligations under this Agreement and
the other Loan Documents, (ii) after giving effect to such assignment,
the Purchasing Bank's Commitment must be at least $5,000,000 (either
solely as the result of such assignment or as the result of multiple
assignments from two or more assigning Banks), (iii) the parties to
each such assignment shall execute and deliver to the Administrative
Agent a Commitment Transfer Supplement together with any Notes subject
to such Commitment Transfer Supplement, (iv) the assigning Bank shall
pay to Administrative Agent an assignment fee of $3,500, (v) an
assigning Bank shall not assign a portion of such Bank's Commitment in
an amount less than an amount equal to the lesser of such Bank's
Commitment hereunder and $2,500,000 and (vi) if the assigning Bank has
retained any Commitment hereunder, such assigning Bank's Commitment
shall be at least $5,000,000 after giving effect to such assignment.
Upon such execution and delivery, from and after the effective date
specified in each Commitment Transfer Supplement, which effective date
shall be at least five Business Days after the execution thereof (x)
the Purchasing Bank thereunder shall be a party hereto and, to the
extent herein provided in such, have the rights and obligations of a
Bank hereunder and (y) the assignor Bank thereunder shall, to the
extent provided in such assignment, be released from its obligations
under this Agreement and the other Loan Documents (and, in the case of
a Commitment Transfer Supplement covering all of the remaining portion
of an assigning Bank's rights and obligations under this Agreement and
the other Loan Documents, such Bank shall cease to be a party hereto).
Such Commitment Transfer Supplement shall be deemed to amend this
Agreement to the extent, and only to the extent, necessary to reflect
the addition of such Purchasing Bank and the resulting adjustment of
Percentage Shares arising from the purchase by such Purchasing Bank of
all or a portion of the rights and obligations of such assigning Bank
under this Agreement, the Notes and the other Loan Documents.
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(d) The Administrative Agent shall maintain at its office a
copy of each Commitment Transfer Supplement delivered to it and a
register for the recordation of the names and addresses of the Banks
and the Commitment Amount of, and principal amount of the Loans owing
to, each Bank from time to time (the "Register"). The entries in the
Register shall be conclusive, in the absence of manifest error, and
Borrower, the Administrative Agent, and the Banks may treat each Person
whose name is recorded in the Register as a Bank hereunder for all
purposes of this Agreement. The Register shall be available for
inspection by Borrower or any Bank at any reasonable time and from time
to time upon reasonable prior notice.
(e) Upon its receipt of a Commitment Transfer Supplement
executed by an assigning Bank and a Purchasing Bank together with any
Notes subject to such Commitment Transfer Supplement and the written
consent to such Commitment Transfer Supplement, the Administrative
Agent shall (i) accept such Commitment Transfer Supplement, (ii) record
the information contained therein in the Register and (iii) give prompt
notice thereof to the Banks and Borrower. Within five (5) Business Days
after receipt of such notice, Borrower shall, at its own expense,
execute and deliver to the Administrative Agent, in exchange for the
surrendered Notes, replacement Notes dated as of the effective date of
such surrendered Notes and otherwise substantially in the form of the
Notes replaced thereby payable to the order of such Purchasing Bank in
an amount equal to the Commitment assumed by it pursuant to such
Commitment Transfer Supplement and, if the assigning Bank has retained
any Commitment hereunder, replacement Notes dated as of the effective
date of the surrendered Notes and otherwise substantially in the form
of the Notes replaced thereby payable to the order of the assigning
Bank in an amount equal to the Commitment of such assigning Bank
retained by it hereunder. Such replacement Notes shall be in an
aggregate principal amount equal to the aggregate principal amount of
such surrendered Notes. Contemporaneously with the delivery of the
replacement Notes, the canceled Notes shall be returned to Borrower
marked "Replaced."
(f) Each Bank agrees to hold any confidential information
which it may receive from the Borrower pursuant to this Agreement in
confidence, except for disclosure (i) to its Affiliates and to other
Banks and their respective Affiliates, (ii) to legal counsel,
accountants, and other professional advisors to such Bank, (iii) to
regulatory officials, (iv) to any Person as requested pursuant to or as
required by law, regulation, or legal process, (v) to any Person in
connection with any legal proceeding to which such Bank is a party,
(vi) to such Bank's direct or indirect contractual counterparties in
swap agreements or to legal counsel, accountants and other professional
advisors to such counterparties, and (vii) permitted by this Section.
Notwithstanding any other provision herein, any Bank may, in connection
with any assignment or participation or proposed assignment or
participation pursuant to this Section 9.05, disclose to the assignee
or participant or proposed assignee or participant, any information
relating to Borrower or any other Subsidiary of Borrower furnished to
such Bank by or on behalf of Borrower or any other Subsidiary of
Borrower; provided, that prior to any such disclosure, each such
assignee or participant or proposed assignee or participant shall agree
to preserve the confidentiality of any
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confidential information relating to Borrower and any of its
Subsidiaries received from such Bank to the same extent as required by
this Section.
(g) Assignment to Federal Reserve Bank. Notwithstanding any
other language in this Agreement, any Bank may at any time assign all
or any portion of its rights under this Agreement and the Notes to a
Federal Reserve Bank as collateral in accordance with Regulation A and
the applicable operating circular of such Federal Reserve Bank.
9.06 Renewals and Extensions. All provisions of this Agreement relating
to the Notes shall apply with equal force and effect to each and all promissory
notes hereafter executed which in whole or in part represent a renewal,
extension, amendment, modification or rearrangement of any part of the
Indebtedness originally represented by the Notes.
9.07 No Waiver by the Administrative Agent, the Banks or the LC Issuer.
No course of dealing on the part of the Administrative Agent, the Banks or the
LC Issuer, their officers or employees, nor any failure or delay by the
Administrative Agent, any Bank or the LC Issuer with respect to exercising any
of its rights, powers or privileges under this Agreement, the Notes, the
Facility LC Applications, the Security Instruments, or any other instrument
referred to herein or executed in connection with the Notes shall operate as a
waiver thereof. The rights and remedies of the Administrative Agent, the Banks
and the LC Issuer under this Agreement, the Notes, the Facility LC Applications,
the Security Instruments, or any other instrument referred to herein or executed
in connection with the Notes shall be cumulative and the exercise or partial
exercise of any such right or remedy shall not preclude the exercise of any
other right or remedy.
No Credit Extensions hereunder shall constitute a waiver of any of the
covenants or warranties of the Borrower contained herein or of any of the
conditions to the Banks' or the LC Issuer's obligation to make further Credit
Extensions hereunder. In the event that the Borrower is unable to satisfy any
such covenant, warranty or condition, no such Credit Extension shall have the
effect of precluding the Banks or the LC Issuer from thereafter declaring such
inability to be an Event of Default as hereinabove provided.
9.08 Waiver, Release, and Indemnification by the Borrower. To the
maximum extent permitted by applicable Laws, the Borrower:
(A) Waives (1) protest of all commercial paper at any time
held by any Bank on which the Borrower is in any way liable; (2) except
as the same may herein be specifically granted, notice of acceleration
and intention to accelerate; and (3) notice and opportunity to be
heard, after acceleration in the manner provided in Section 7.03,
before exercise by Administrative Agent, any Bank or the LC Issuer of
the remedies of self-help, set-off, or of other summary procedures
permitted by any applicable Laws or by any agreement with the Borrower,
and, except where required hereby or by any applicable Laws, notice of
any other action taken by Administrative Agent, any Bank or the LC
Issuer;
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(B) Releases Administrative Agent, each Bank and the LC Issuer
and their respective officers, employees, directors, attorneys, and
agents (collectively, the "Bank Parties") from all claims for loss or
damage caused by any act or omission on the part of any of them except
willful misconduct or gross negligence; and
(C) Agrees to indemnify and hold the Bank Parties harmless
from and against all claims, damages, liabilities and expenses, known
or unknown, accrued and unaccrued, unless attributable to the Bank
Parties' own gross negligence or willful misconduct, that may now or
hereafter be asserted against any of the Bank Parties in connection
with or arising out of any investigation, litigation or proceeding
directly or indirectly relating to or arising out of any of the
transactions contemplated by this Agreement.
9.09 GOVERNING LAW. THIS AGREEMENT AND THE NOTE SHALL BE DEEMED TO BE
CONTRACTS MADE UNDER AND SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF THE STATE OF TEXAS.
9.10 Incorporation of Exhibits and Schedules. The Exhibits and
Schedules attached to this Agreement are incorporated herein for all purposes
and shall be considered a part of this Agreement.
9.11 Survival Upon Unenforceability. In the event any one or more of
the provisions contained in this Agreement, the Notes, the Security Instruments,
or in any other instrument referred to herein or executed in connection with the
Notes shall, for any reason, be held to be invalid, illegal or unenforceable in
any respect, such invalidity, illegality or unenforceability shall not affect
any other provision hereof or of any other instrument referred to herein or
executed in connection herewith.
9.12 Rights of Third Parties. All provisions herein are imposed solely
and exclusively for the benefit of the Administrative Agent, the Banks, the LC
Issuer and Borrower and no other Person shall have standing to require
satisfaction of such provisions in accordance with their terms or be entitled to
assume that any Bank will refuse to make advances in the absence of strict
compliance with any or all thereof. Any or all of such provisions may be freely
waived in whole or in part by the Administrative Agent, the Banks and the LC
Issuer at any time if in their discretion they deem it advisable to do so.
9.13 Amendments or Modifications. Subject to the provisions of this
Section, the Required Banks (or the Administrative Agent with the consent in
writing of the Required Banks) and the Borrower may enter into agreements
supplemental hereto for the purpose of adding or modifying any provisions to the
Loan Documents or changing in any manner the rights of the Banks or the Borrower
hereunder or waiving any Event of Default hereunder; provided, however, that:
(a) no such supplemental agreement shall, without the consent of all of
the Banks:
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(i) Extend the final maturity of any Loan, postpone any
regularly scheduled payment of principal of any Loan,
forgive all or any portion of the principal amount
thereof, or reduce the rate or extend the time of
payment of interest or fees thereon.
(ii) Reduce the percentage specified in the definition of
Required Banks.
(iii) Extend the Facility Termination Date, or reduce the
amount or extend the payment date for, the mandatory
payments required under Sections 2.07 or 2.08, or
increase the Aggregate Commitment Amount or the
Commitment of any Bank hereunder, or permit the
Borrower to assign its rights under this Agreement.
(iv) Amend the requirement that the Borrowing Base may be
increased only with the consent of all Banks.
(v) Release any guarantor of any Loan or, except as
provided in the Security Instruments, release all or
substantially all of the Borrowing Base Oil and Gas
Properties.
(vi) Grant consent pursuant to Section 6.18 of this
Agreement to amend the Earnout Agreement, the Buyer
Registration Rights Agreement or the terms of any
Buyer Preferred Stock or Buyer Senior Subordinated
Notes.
(vii) Grant consent pursuant to Section 6.17 of this
Agreement for Borrower to prepay any cash obligation
owed under any of the Transaction Documents, in whole
or in part, or to make any other cash payments
pursuant to the terms of any of the Transaction
Documents, to the extent such cash payments are not
otherwise permitted pursuant to the express terms of
this Agreement.
(viii) Amend this Section 9.13.
(b) So long as any Bank is obligated for a Commitment Amount that
exceeds one-third of the Aggregate Commitment Amount, then solely for purposes
of directing the Administrative Agent to declare the Obligations to be
immediately due and payable pursuant to Section 7.03 of this Agreement,
"Required Banks" shall mean, at any time, Banks holding more than fifty percent
(50%) of the Aggregate Commitment Amount or, if the Aggregate Commitment Amount
has been terminated, Banks having at least fifty percent (50%) of the Aggregate
Outstanding Credit Exposure.
No amendment of any provision of this Agreement relating to the Administrative
Agent shall be effective without the written consent of the Administrative
Agent.
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9.14 Agreement Construed as an Entirety. This Agreement, for
convenience only, has been divided into Articles and Sections and it is
understood that the rights, powers, privileges, duties and other legal relations
of the parties hereto shall be determined from this Agreement as an entirety and
without regard to the aforesaid division into Articles and Sections and without
regard to headings prefixed to said Articles or Sections.
9.15 Number and Gender. Whenever the context requires, reference herein
made to the single number shall be understood to include the plural and likewise
the plural shall be understood to include the singular. Words denoting sex shall
be construed to include the masculine, feminine, and neuter, when such
construction is appropriate, and specific enumeration shall not exclude the
general, but shall be construed as cumulative.
9.16 AGREEMENT SUPERSEDES ALL PRIOR AGREEMENTS. THIS AGREEMENT,
TOGETHER WITH THE NOTES, THE FACILITY LC APPLICATIONS, THE SECURITY INSTRUMENTS,
AND ANY OTHER WRITTEN INSTRUMENTS EXECUTED PURSUANT TO THIS AGREEMENT REPRESENT,
COLLECTIVELY, THE FINAL AGREEMENT BETWEEN THE PARTIES HERETO WITH RESPECT TO THE
SUBJECT HEREOF AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES AND SHALL
SUPERSEDE ANY PRIOR AGREEMENT BETWEEN THE PARTIES HERETO, WHETHER WRITTEN OR
ORAL, RELATING TO THE SUBJECT HEREOF, UNLESS SUCH PRIOR AGREEMENT IS EXPRESSLY
CONTINUED IN EFFECT UNDER THE TERMS HEREOF. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
9.17 Controlling Provision Upon Conflict. In the event of a conflict
between the provisions of this Agreement and those of the Notes, the Facility LC
Applications, the Security Instruments or any other instrument referred to
herein or executed in connection with the Notes, the provisions of this
Agreement shall control; provided if any of the Facility LC Applications or
Security Instruments contain any representations, warranties, or covenants of
the Borrower that are in addition to or are more restrictive on the Borrower
than those set forth in this Agreement, such additional or more restrictive
representations, warranties, and covenants shall control.
9.18 Time, Place and Method of Payments. All payments required pursuant
to this Agreement or the Notes shall be made in immediately available funds;
shall be deemed received by the Administrative Agent on the next Business Day
following receipt if such receipt is after 4:00 p.m., on any Business Day, and
shall be made at the principal banking quarters of the Administrative Agent in
Houston, Texas.
9.19 Termination. This Agreement and the Aggregate Commitment Amount
may be canceled by the Borrower without premium or penalty prior to the Facility
Termination Date upon at least thirty (30) days' prior written notice, provided,
that the Obligations that are then due and payable are paid and
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performed in full to the satisfaction of the Administrative Agent and the Banks;
provided, however that any such cancellation hereunder shall not terminate any
obligations, representations or warranties of the Borrower to the Administrative
Agent and/or the Banks hereunder and under other Loan Documents that survive
beyond the Facility Termination Date. Upon the earlier to occur of the (i) the
Facility Termination Date, and (ii) cancellation of this Agreement and the
Aggregate Commitment Amount prior thereto in accordance with this Section 9.19
and upon payment and performance in full of the Obligations that are due and
payable to the satisfaction of the Banks, the Administrative Agent agrees, at
the Borrower's request and sole cost and expense, to execute and deliver any
such lien release documents and other documentation reasonably requested by the
Borrower to release or terminate the Administrative Agent's liens and security
interests hereunder and under the other Loan Documents.
9.20 Non-Application of Chapter 346 of Texas Finance Code. The
provisions of Chapter 346 of the Texas Finance Code are specifically declared by
the parties hereto not to be applicable to this Agreement or any of the other
Security Instruments or to the transactions contemplated hereby.
9.21 Counterpart Execution. This Agreement may be executed as one
instrument signed by all parties or in separate counterparts hereof, each of
which counterparts shall be considered an original and all of which shall be
deemed to be one instrument, and any signed counterpart shall be deemed
delivered by the party signing it if sent to any other party hereto by
electronic facsimile transmission.
9.22 Loan Documents Subject to Other Agreements. Administrative Agent
and each Bank hereby acknowledge that they are aware of the terms and provisions
of that certain Farmout Agreement and those four certain Partial Assignments of
Operating Rights described in the Consent Letter dated June 9, 1999 from
Borrower to Chevron U.S.A. Inc. and Kewanee Industries, Inc., and executed by
Kewanee Industries, Inc. on June 11, 1999 and by Chevron U.S.A. Inc. on June 17,
1999. In reliance on that certain Officer's Certificate of the president of
Borrower dated June 23, 1999 relating to such Consent Letter, which Borrower
agrees Administrative Agent and each Bank are entitled to rely on,
Administrative Agent and each Bank agree and acknowledge that this Agreement and
all other Loan Documents, insofar as they pertain to the Oil and Gas Properties
covered by the foregoing Farmout Agreement and Assignments, shall be subject and
subordinate to any existing liens, encumbrances or privileges in favor of
Chevron or Kewanee by operation of law or such agreements between Borrower and
such parties. Administrative Agent and each Bank also acknowledge that this
Agreement and all of the Loan Documents are subject to the terms and provisions
of that certain Asset Purchase Agreement (the "Purchase Agreement") dated June
23, 1998, effective April 1, 1998, executed by and between Shell Offshore Inc.,
et al., Borrower and Union Oil Company of California d/b/a Spirit Energy 76
("Spirit"), insofar as this Agreement and the Loan Documents pertain to the Oil
and Gas Properties covered by such Purchase Agreement. Certain of the Borrowing
Base Oil and Gas Properties were assigned to Borrower pursuant to certain
assignments from Ocean Energy, Inc. ("Ocean") to Borrower executed and delivered
on March 31, 2000 and made effective as of 7:00 a.m. Lafayette, Louisiana time
on January 1, 2000. Each of such assignments contains a provision which requires
that each subsequent sale, assignment, sublease, transfer, alienation, mortgage,
security interest and encumbrance be made subject to the covenants, terms,
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conditions, exceptions, obligations, indemnities and reservations contained in
the Purchase and Sale Agreement between Ocean and Borrower dated effective as of
the Effective Time regarding the East Bay Complex (the "Purchase and Sale
Agreement"). This Agreement and all other Loan Documents, insofar as they
pertain to the properties covered by the Purchase and Sale Agreement,
specifically hereby reference and are made subject to said Purchase and Sale
Agreement and the covenants, terms, conditions, exceptions, obligations,
indemnities and reservations contained therein. Any subsequent sales,
assignments, subleases, transfers or other alienations pursuant to this
Agreement or any of the Loan Documents shall specifically provide that such
vendees, assignees, sublessees, transferees, or grantees acquiring under such
instruments expressly assume the Buyer's Assumed Obligations (as defined in the
Purchase and Sale Agreement) and all other obligations of Buyer under the
Purchase and Sale Agreement to the extent of the interest acquired.
9.23 Power of Attorney. To the fullest extent permitted by Law and
until this Agreement is terminated in accordance with Section 9.19 hereof,
Borrower hereby appoints Administrative Agent as its attorney-in-fact (without
requiring the Administrative Agent to act as such) to execute any Security
Instrument in the name of the Borrower, and to perform all other acts that the
Administrative Agent deems appropriate to perfect and continue its liens,
security interests, and other rights in, and to protect and preserve, the
Borrowing Base Oil and Gas Properties and other collateral covered by or
described in (or, as evidenced by this Agreement, intended to have been covered
by) any of the Security Instruments, but only to the extent required of Borrower
under the terms of this Agreement.
9.24 Subordination of Intercompany Debt. The term "SUBORDINATED
INTERCOMPANY DEBT" as used in this Section shall mean and include any and all
indebtedness, liabilities and obligations of either Borrower to the other,
absolute or contingent, direct or indirect, joint, several or independent, now
outstanding or owing or which may hereafter be existing or incurred, arising by
operation of law or otherwise, due or to become due, or held or to be held by
either Borrower, whether created directly or acquired by assignment, as a
participation, conditionally, as collateral security from another or otherwise,
including indebtedness, obligations and liabilities of either Borrower to the
other as a member of any partnership, syndicate, association or other group, and
whether incurred by Borrower as principal, surety, endorser, guarantor,
accommodation party or otherwise, including, without limiting the generality of
the foregoing, all indebtedness, liabilities and obligations of either Borrower
to the other arising out of any operating agreement, management agreement or
similar agreement between Parent Borrower and Subsidiary Borrower. The term
"SENIOR DEBTS" as used in this Section shall mean and include any and all
indebtedness, liabilities and obligations of Borrower to the Banks or LC Issuer,
absolute or contingent, direct or indirect, joint, several or independent, now
outstanding or owing or which may hereafter be existing or incurred, arising by
operation of law or otherwise, due or to become due, or held or to be held by
Banks or LC Issuer, whether created directly or acquired by assignment, as a
participation, conditionally, as collateral security from another or otherwise,
including indebtedness, obligations and liabilities of Borrower to Banks or LC
Issuer as a member of any partnership, syndicate, association or other group,
and whether incurred by Borrower as principal, surety, endorser, guarantor,
accommodation party or otherwise and including, without limitation, all
Obligations, as that term is defined in this Agreement.
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During such time as any Senior Debts remain unpaid and an Event of Default or
Unmatured Event of Default has occurred and is continuing, neither Borrower will
ask for, demand, ▇▇▇ for, take, receive or accept from the other Borrower, by
set off or in any other manner, any payment or distribution on account of the
Subordinated Intercompany Debt, nor present any instrument evidencing the
Subordinated Intercompany Debt for payment (other than such presentment as may
be necessary to prevent discharge of other liable parties on such instrument),
unless the advance written consent or written demand to do so has been received
by such Borrower from Administrative Agent on behalf of the Banks. In the event
either Borrower shall receive any payments, distributions, property, security or
proceeds on account of the Subordinated Intercompany Debt, which such Borrower
is not entitled to receive under the provisions this Section, such Borrower will
hold any amount so received in trust for the Banks and LC Issuer, as applicable,
and will forthwith turn over such payment to Administrative Agent in the form
received by such Borrower (together with any necessary endorsement) to be
applied on the Senior Debts and any such sums paid to Administrative Agent by
such Borrower shall not be deemed to reduce or extinguish the Subordinated
Intercompany Debt of one Borrower to the other. Neither Borrower shall commence
any action or proceeding against the other Borrower to recover all or any part
of the Subordinated Intercompany Debt or join with any other creditor, unless
Banks and LC Issuer shall also join, in bringing any proceedings against such
other Borrower under any bankruptcy, reorganization, readjustment of debt,
arrangement of debt, receivership, liquidation or insolvency law or statute of
the Federal or any state government unless and until all Senior Debts shall have
been paid in full. In the event of any receivership, insolvency, bankruptcy,
assignment for the benefit of creditors, reorganization or arrangement with
creditors, adjustment of debt, whether or not pursuant to bankruptcy laws, the
sale of all or substantially all of the assets, dissolution, liquidation, or any
other marshaling of the assets and liabilities of either Borrower, the other
Borrower will at Bank's request promptly and expeditiously file any claim, proof
of claim, proof of interest or other instrument of similar character necessary
to enforce the obligations of such Borrower in respect of the Subordinated
Intercompany Debt and will hold in trust for Banks and LC Issuer, as applicable,
and pay over to Administrative Agent in the form received (together with any
necessary endorsement), to be applied on the Senior Debts, any and all monies,
dividends or other assets received in any such proceedings on account of the
Subordinated Intercompany Debt unless and until the Senior Debts shall be paid
in full. Neither Borrower will assign or transfer to others any claim such
Borrower has or may have against the other Borrower as long as any of the Senior
Debts remains outstanding.
9.25 Amended and Restated Agreement. This Agreement amends, extends,
rearranges and restates the First Amended Credit Agreement. All Security
Instruments (as defined and executed pursuant to the Loan Agreement, the
Original Credit Agreement and/or the First Amended Credit Agreement) shall also
constitute Security Instruments as defined in this Agreement, and they shall
continue to secure all Obligations of Borrower to the Administrative Agent, the
Banks and the LC Issuer hereunder.
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IN WITNESS WHEREOF, this Agreement is executed as of the date first
above written.
BORROWER
ENERGY PARTNERS, LTD.
By:
----------------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Executive Vice President and Chief Financial Officer
▇▇▇▇-▇▇▇▇▇▇▇ OIL COMPANY
By:
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Executive Vice President and Chief Financial Officer
ADMINISTRATIVE AGENT, LC ISSUER AND BANK:
BANK ONE, NA
By:
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▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Vice President
SYNDICATION AGENT AND BANK:
▇▇ ▇▇▇▇▇▇ CHASE BANK,
FORMERLY KNOWN AS THE CHASE MANHATTAN BANK
By:
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Name:
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Title:
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DOCUMENTATION AGENT AND BANK:
BNP PARIBAS
By:
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Name:
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Title:
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BANK:
WHITNEY NATIONAL BANK
By:
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Name:
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Title:
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EXHIBIT "A"
BORROWING BASE
OIL AND GAS PROPERTIES
This Exhibit A (together with the Borrowing Base Oil and Gas
Properties, as defined in this Agreement) sets forth the description of the
Borrowing Base Oil & Gas Properties covered by the Agreement to which this
Exhibit is attached. All of the terms defined in the Agreement are used in this
Exhibit with the same meanings given therein.
This Exhibit and the Agreement cover and include the following:
(a) All of Borrower's right, title and interest in and to the
oil, gas and mineral leases described herein and/or lands described in
and subject to such oil, gas and mineral leases (regardless, as to such
leases and/or lands, of any surface acreage and/or depth limitations
set forth in any description of any of such oil, gas and mineral
leases), and all of Borrower's right, title and interest in and to any
of the oil, gas and minerals in, on or under the lands, if any,
described on this Exhibit, including, without limitation, all
contractual rights, fee interests, leasehold interests, overriding
royalty interests, non-participating royalty interests, mineral
interests, production payments, net profits interests, or any other
interest measured by or payable out of production of oil, gas or other
minerals from the oil, gas and mineral leases and/or lands described
herein; and
(b) All of the foregoing interests of the Borrower as such
interests may be enlarged by the discharge of any payments out of
production or by the removal of any charges or encumbrances together
with the Borrower's interests in, to and under or derived from all
renewals and extensions of any oil, gas and mineral leases described
herein, it being specifically intended hereby that any new oil and gas
lease (i) in which an interest is acquired by the Borrower after the
termination or expiration of any oil and gas lease, the interests of
the Borrower in, to and under or derived from which are subject to the
lien and security interest hereof, and (ii) that covers all or any part
of the property described in and covered by such terminated or expired
leases, shall, to the extent, and only to the extent such new oil and
gas lease may cover such property, be considered a renewal or extension
of such terminated or expired lease; and
(c) All right, title and interest of Borrower in, to and under
or derived from any operating, farmout, and bidding agreements,
assignments and subleases, whether or not described in this Exhibit, to
the extent, and only to the extent, that such agreements, assignments
and subleases (i) cover or include any of the Borrower's present right,
title and interest in and to the leases and/or lands described in this
Exhibit, or (ii) cover or include any other undivided interests
now or hereafter held by the Borrower in, to and under the described
leases and/or lands, including, without limitation, any future
operating, farmout and bidding agreements, assignments, subleases and
pooling, unitization and communitization agreements and the units
created thereby (including, without limitation all units formed under
orders, regulations, rules or other official acts of any governmental
body or agency having jurisdiction) to the extent and only to the
extent that such agreements, assignments, subleases, or units cover or
include the described leases and/or lands; and
(d) All right, title, and interest of the Borrower in, to and
under or derived from all presently existing and future advance payment
agreements, oil, casinghead gas and gas sales, exchange, and processing
contracts and agreements including, without limitation, those contracts
and agreements that are described on this Exhibit to the extent, and
only to the extent, those contracts and agreements cover or include the
described leases and/or lands herein; and
(e) All right, title and interest of the Borrower in, to and
under or derived from all existing and future permits, licenses,
easements and similar rights and privileges that relate to or are
appurtenant to any of the described leases and/or lands.
Notwithstanding the intention of this Agreement to cover all of the
right, title and interest of Borrower in and to the described leases and/or
lands, except as expressly set forth herein Borrower hereby specifically
warrants and represents that the interests covered by this Exhibit are not
greater than the working interest nor less than the net revenue interest,
overriding royalty interest, net profit interest, production payment interest or
other interest payable out of or measured by production set forth in connection
with each oil and gas well described in this Exhibit. In the event the Borrower
owns any other or greater interest, such additional interest shall also be
covered by and included in this Agreement. The designation "Working Interest" or
"W.I." means an interest owned in an oil, gas, and mineral lease (including
operating rights and/or record title interest in oil and gas leases issued
pursuant to the Outer Continental Shelf Lands Act) that determines the cost
bearing percentage of the owner of such interest. The designation "Net Revenue
Interest" or "NRI" means net revenue interest, or that portion of the production
attributable to the owner of a working interest after deduction for all royalty
burdens, overriding royalty burdens, or other burdens on production, except
severance, production, windfall profits and other similar taxes. The designation
"Overriding Royalty Interest" or "ORRI" means an interest in production which is
free of any obligation for the expense of exploration, development and
production, bearing only its pro rata share of severance, production, windfall
profits and other similar taxes.
-2-
EXHIBIT "A-1"
PIPELINE PROPERTY
PIPELINE
Approximately 9 miles of 6 inch pipe, sometimes referred to as the Bay ▇▇▇▇▇▇▇▇
6" Pipeline, originating at the ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇ "▇" ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇▇ of America, Outer Continental Shelf, Offshore Louisiana, and terminating
at Chevron's Bayou Fourchon Terminal in Section ▇▇, ▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇, ▇▇▇▇▇ 22
East, Lafourche Parish, Louisiana.
RIGHTS-OF WAY
1. Right-of-way, bearing Serial No. OCS G-1463, for the installation,
operation and maintenance of a 6-inch pipeline (Segment No. 3579) but
excluding the accessory structure used as an appurtenance to the
right-of-way 6.06 statute miles in length, from Platform "A" in Block 26,
South Timbalier Area, across South Timbalier Block 23, to the Federal/State
boundary in Block 3, Bay ▇▇▇▇▇▇▇▇ Area.
2. State of Louisiana R/W No. 697, being 100 feet in width for the
construction, maintenance and operation of a 6" pipeline in all portions of
Section ▇▇, ▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇, ▇▇▇▇▇ 22 East, Lafourche Parish, Louisiana,
owned or claimed by the State of Louisiana, and waters therein; Block 4 and
that portion of Block 3 in Zone 1, Bay ▇▇▇▇▇▇▇▇ Area, offshore Louisiana.
3. State of Louisiana R/W No. 698, being 100 feet in width for the
construction, maintenance and operation of a pipeline in that portion of
Block 3, Bay ▇▇▇▇▇▇▇▇ Area, outside Zone 1, and Blocks 23 and 26, South
Timbalier Area, as lie within three marine miles seaward of the coastline
of Louisiana as established by Act 33 of 1954 of the Louisiana Legislature.
4. City of New Orleans Pipeline Permit dated June 27, 1966, for the
construction, maintenance and operation of one electric conduit line, one
suction separator pipeline, one discharge separator pipeline, one single
main pipeline and appurtenances thereto over and across the W/2 SW/4 of
Section 24 and the W/2 of Section 25, Township 23 South, Range 22 East.
5. Ratification Letter dated July 6, 1966, recorded June 15, 1967, Book 369,
Folio 382, Entry No. 278680 in the Office of Clerk and Recorder, Lafourche
Parish, Louisiana, ratifying the June 27, 1966 City of New Orleans Pipeline
Permit.
6. City of New Orleans surface lease agreement dated March 30, 1972, covering
.078 acres of land in ▇▇▇▇▇▇▇ ▇▇, ▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇, ▇▇▇▇▇ 22 East,
recorded in Book 472, Folio 246, Entry No. 354631 in the Office of Clerk
and Recorder, Lafourche Parish, Louisiana.
7. Electric Service Agreement dated February 22, 1972, between Louisiana Power
and Light and Shell Pipe Line Corporation, to provide power for the Bay
▇▇▇▇▇▇▇▇ Pump Station located in Section ▇▇, ▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇, ▇▇▇▇▇ 22
East, Lafourche Parish, Louisiana.
8. Letter Agreement dated August 9, 1978, between Gulf Refining Company and
Shell Pipe Line Corporation covering a 6' X 6' X 8' fiberglass building for
line integrity equipment.
9. Letter Agreement dated August 4, 1997, between Chevron Oil Company and
Shell Pipe Line Corporation covering facilities located on Chevron's
Fourchon Terminal in the W/2 SW/4 Section 24, Township 23 South, Range 22
East, Lafourche Parish, Louisiana.
10. Letter of No Objection dated June 22, 1966, between Louisiana Department of
Public Works and Shell Pipe Line Corporation relative to the installation
of a six inch pipeline.
11. Letter of No Objection dated June 16, 1966, between Louisiana Wildlife and
Fisheries Commission and Shell Pipe Line Corporation relative to the
installation of a pipeline.
12. Letter of No Objection dated July 1, 1966, between Bayou Lafourche Fresh
Water District and Shell Pipe Line Corporation relative to the installation
of a six inch pipeline.
13. Letter of No Objection dated July 5, 1966, between Lafourche Basin Levee
District and Shell Pipe Line Corporation relative to the installation of a
six inch pipeline.
14. Permit No. 379 dated July 6, ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Police Jury and
Shell Pipe Line Corporation authorizing construction of a six inch pipeline
from Offshore Block 26 to an onshore location in Section ▇▇, ▇▇▇▇▇▇▇▇ ▇▇
▇▇▇▇▇, ▇▇▇▇▇ 22 East, Lafourche Parish, Louisiana.
15. Permit No. 645 dated July 12, 1972, between Lafourche Parish Police Jury
and Shell Pipe Line Corporation authorizing the construction, operation,
repair and maintenance of a Booster Pump Station at Bay ▇▇▇▇▇▇▇▇.
16. Department of the Army Permit LMNOD-NP (Gulf of Mexico) 1255 dated July 18,
1966, between the Corps of Engineers, New Orleans District and Shell Pipe
Line Corporation authorizing the installation and maintenance of a six inch
pipe line for gas and/or oil in the Gulf of Mexico central to a point about
15 miles southerly from Leeville Louisiana, in Lafourche Parish.
-2-
EXHIBIT "B"
REVOLVING NOTE
$ Houston, Texas January 15, 2002
----------------
On the dates hereinafter prescribed, for value received, ENERGY
PARTNERS, LTD., a Delaware corporation, and ▇▇▇▇-▇▇▇▇▇▇▇ OIL COMPANY, a Texas
corporation (herein collectively called "Borrower"), each having an address at
▇▇▇ ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, promises
to pay to the order of ___________ (herein called "Bank"), at its principal
offices at __________________________________, (i) the principal amount of U.S.
___________________________________ DOLLARS ($_______________) or the principal
amount advanced pursuant to the terms of the Credit Agreement (defined herein)
as of the date of maturity hereof, whether by acceleration or otherwise,
whichever may be the lesser, and (ii) interest on the principal balance from
time to time advanced and remaining unpaid from the date of the advance until
maturity at a rate of interest equal to lesser of (a) the "Floating Rate" (as
defined and calculated in the Credit Agreement), or (b) the Maximum Rate (as
defined and calculated in the Credit Agreement). Any increase or decrease in
interest rate resulting from a change in the Maximum Rate shall be effective
immediately when such change becomes effective, without notice to the Borrower,
unless Applicable Law (as defined in the Credit Agreement) requires that such
increase or decrease not be effective until a later time, in which event such
increase or decrease shall be effective at the earliest time permitted under the
provisions of such law.
Notwithstanding the foregoing, if during any period the Floating Rate
exceeds the Maximum Rate, the rate of interest in effect on this Note shall be
limited to the Maximum Rate during each such period, but at all times thereafter
the rate of interest in effect on this Note shall be the Maximum Rate or, if
there is no Maximum Rate, the Agreed Maximum Rate (as defined below), until the
total amount of interest accrued on this Note equals the total amount of
interest which would have accrued hereon if the Floating Rate had at all times
been in effect.
This Note is a revolving credit note and it is contemplated that by
reason of prepayments hereon there may be times when no indebtedness is owing
hereunder; but notwithstanding such occurrence, this Note shall remain valid and
in full force and effect as to each principal advance made hereunder subsequent
to each such occurrence. Each principal advance and each payment hereof made
pursuant to this Note shall be reflected by the Bank's records and the aggregate
unpaid amounts reflected by such records shall constitute rebuttably presumptive
evidence of the principal and unpaid, accrued interest remaining outstanding on
this Note.
-------------------------
Borrower's Initials
"Agreed Maximum Rate" means a per annum rate of seven and three-fourths
percent (7.75%) plus the Floating Rate from time to time in effect, which Agreed
Maximum Rate shall apply only during any period while there is no Maximum Rate
applicable to this Note.
Other capitalized terms used herein, that are not defined herein, shall
have the meanings prescribed therefor in the Credit Agreement.
The Borrower and the Bank hereby agree that Chapter 346 of the Texas
Finance Code, shall not apply to this Note or the loan transaction evidenced by,
and referenced in, the Credit Agreement (hereinafter defined) in any manner,
including without limitation, to any account or arrangement evidenced or created
by, or provided for in, this Note.
The principal sum of this Note, after giving credit for unadvanced
principal, if any, remaining at final maturity, shall be due and payable on or
before March 30, 2003; interest to accrue upon the principal sum from time to
time owing and unpaid hereunder shall be due and payable as provided in the
Credit Agreement; provided, however, the final installment of interest hereunder
shall be due and payable not later than the maturity of the principal sum
hereof, howsoever such maturity may be brought about.
In no event shall the aggregate of the interest on this Note, plus any
other amounts paid in connection with the loan evidenced by this Note which
would under Applicable Law be deemed "interest," ever exceed the maximum amount
of interest which, under Applicable Law, could be lawfully charged on this Note.
The Bank and the Borrower specifically intend and agree to limit contractually
the interest payable on this Note to not more than an amount determined at the
Maximum Rate. Therefore, none of the terms of this Note or any other instruments
pertaining to or securing this Note shall ever be construed to create a contract
to pay interest at a rate in excess of the Maximum Rate, and neither the
Borrower nor any other party liable herefor shall ever be liable for interest in
excess of that determined at the Maximum Rate, and the provisions of this
paragraph shall control over all provisions of this Note or of any other
instruments pertaining to or securing this Note. If any amount of interest taken
or received by the Bank shall be in excess of the maximum amount of interest
which, under Applicable Law, could lawfully have been collected on this Note,
then the excess shall be deemed to have been the result of a mathematical error
by the parties hereto and shall be refunded promptly to the Borrower. All
amounts paid or agreed to be paid in connection with the indebtedness evidenced
by this Note which would under Applicable Law be deemed "interest" shall, to the
extent permitted by Applicable Law, be amortized, prorated, allocated and spread
throughout the full term of this Note.
This Note is secured by all security agreements, collateral
assignments, mortgages and lien instruments executed by the Borrower (or by any
other party) in favor of Bank One, NA, as Administrative Agent for the Banks,
including those executed simultaneously herewith, those executed heretofore and
those hereafter executed, and including specifically and without limitation the
Security Instruments described
-2-
-------------------------
Borrower's Initials
and defined in that certain Second Amended and Restated Credit Agreement dated
as of the date first stated above between Borrower and Bank (the "Credit
Agreement").
This Note is the Revolving Note issued pursuant to the Credit
Agreement. Reference is hereby made to the Credit Agreement for a statement of
the rights and obligations of the holder of this Note and the duties and
obligations of the Borrower in relation thereto; but neither this reference to
the Credit Agreement nor any provisions thereof shall affect or impair the
absolute and unconditional obligation of the Borrower to pay any outstanding and
unpaid principal of and interest on this Note when due, in accordance with the
terms of the Credit Agreement. Each advance and each payment made pursuant to
this Note shall be reflected by notations made by the Bank on its records and
the aggregate unpaid amounts reflected by the notations on the records of the
Bank shall be deemed rebuttably presumptive evidence of the principal amount
owing under this Note.
In the event of default in the payment when due of any of the principal
of or any interest on this Note, or in the event of default under the terms of
the Credit Agreement or any of the Security Instruments, or if any event occurs
or condition exists which authorizes the acceleration of the maturity of this
Note under any agreement made by the Borrower, the Bank (or other holder of this
Note) may, at its option, without presentment or demand or any notice to the
Borrower or any other person liable herefor, declare the unpaid principal
balance of and accrued interest on this Note to be immediately due and payable.
If this Note is collected by suit or through the Probate or Bankruptcy
Court, or any judicial proceeding, or if this Note is not paid at maturity,
however such maturity may be brought about, and is placed in the hands of an
attorney for collection, then the Borrower agrees to pay reasonable and
documented attorneys' fees, not to exceed 10% of the full amount of principal
and interest owing hereon at the time this Note is placed in the hands of an
attorney.
The Borrower and all sureties, endorsers and guarantors of this Note
waive demand, presentment for payment, notice of nonpayment, protest, notice of
protest, notice of intent to accelerate maturity, notice of acceleration of
maturity, and all other notices, filing of suit and diligence in collecting this
Note or enforcing any of the security herefor, and agree to any substitution,
exchange or release of any such security or the release of any party primarily
or secondarily liable hereon and further agrees that it will not be necessary
for the Bank, in order to enforce payment of this Note by them, to first
institute suit or exhaust its remedies against any Borrower or others liable
herefor, or to enforce its rights against any security herefor, and consent to
any one or more extensions or postponements of time of payment of this Note on
any terms or any other indulgences with respect hereto, without notice thereof
to any of them. The Bank may transfer this Note, and the rights and privileges
of the Bank under this Note shall inure to the benefit of the Bank's
representatives, successors or assigns.
-3-
-------------------------
Borrower's Initials
This Note amends, extends, rearranges and restates that certain
Reducing Revolving Note executed on August 1, 2001, effective as of March 30,
2000, in the original principal amount of $________________ executed by ENERGY
PARTNERS, LTD. and payable to the order of Bank, which itself amended, extended,
rearranged and restated that certain Reducing Revolving Note dated March 30,
2001, in the face amount of $____________ executed by ENERGY PARTNERS, LTD.,
payable to the order of Bank, which in turn was one of four notes that amended,
rearranged and restated that certain Reducing Revolving Note in the original
principal amount of $200,000,000.00 executed by ENERGY PARTNERS, LTD., and
payable to the order of Bank One, Texas, N.A., which amended, extended,
rearranged and restated that certain Amended and Restated Revolving Note dated
June 23, 1999, in the original principal amount of $50,000,000.00 executed by
ENERGY PARTNERS, LTD. and payable to the order of the Bank One, Texas, N.A. (the
"Prior Notes"). All liens and security interests that exist to secure the
indebtedness evidenced by that Prior Notes shall continue in force and effect to
secure the indebtedness evidenced by this Note.
Executed as of the date and year first set forth above.
ENERGY PARTNERS, LTD.
Attest:
By:
-------------------------- --------------------------------------------
Secretary ▇▇▇▇▇▇▇ ▇▇▇▇
Executive Vice President and Chief Financial
Officer
▇▇▇▇-▇▇▇▇▇▇▇ OIL COMPANY
Attest:
By:
-------------------------- --------------------------------------------
Secretary
-4-
EXHIBIT "C"
Compliance Certificate
I, the President of ENERGY PARTNERS, LTD. (the "Company"), pursuant to
Section 5.05 of the Amended and Restated Credit Agreement dated as of August 1,
2001, by and among the Company, its Subsidiary, ▇▇▇▇-▇▇▇▇▇▇▇ OIL COMPANY, and
BANK ONE, NA, as Administrative Agent, a Bank and the LC Issuer, and the other
Banks that become party thereto (the "Agreement") do hereby certify, as of the
date hereof, that to my knowledge:
(a) No Event of Default (as defined in the Agreement) has occurred and is
continuing, and no Unmatured Event of Default (as defined in the
Agreement) has occurred and is continuing except for the following
events (include actions taken to cure such situations):
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(b) No Material Adverse Change has occurred since the effective date of
the latest audited consolidated Financial Statements of the Company
delivered to the Administrative Agent;
(c) Except as otherwise stated in the Schedule, if any, attached hereto,
each of the representations and warranties of the Company and
▇▇▇▇-▇▇▇▇▇▇▇ Oil Company contained in Article IV of the Agreement is
true and correct in all respects; and
(d) The Company's consolidated financial condition for the quarter ending
__________ is as follows:
ACTUAL
DATE OR TIME REQUIRED RATIO OR RATIO OR
FINANCIAL COVENANT PERIOD AMOUNT AMOUNT
------------------ ------------ ----------------- --------
(a) Consolidated Tangible Term of Loan not less than $137,000,000.00
Net Worth plus 50% of Borrower's positive
consolidated Net Income, if any,
accrued during each calendar
quarter subsequent to 9/30/01,
calculated cumulatively as of the
end of each fiscal quarter of
Borrower beginning with the quarter
ending 12/31/01, with no reduction
for negative Net Income during any
such quarter, and 100% of any
increase in shareholder's equity
resulting from the sale or issuance
of stock in Borrower subsequent to
9/30/01.
(b) Current Ratio for any Term of Loan not less than 1.10 to 1.00
fiscal quarter
(c) Ratio of EBITDAX to Term of Loan not less than 5.00 to 1.00
interest expense on all
Indebtedness as of the
end of each fiscal quarter
This certificate is executed this _____ day of_________,_____.
ENERGY PARTNERS, LTD.
By:
---------------------------------
, President
----------------------
-2-
EXHIBIT "D"
SECURITY INSTRUMENTS
The Security Instruments securing the Borrower's Obligations and
Indebtedness to the Bank shall include the following, each in form and substance
satisfactory to the Bank:
1. ACT(s) OF MORTGAGE, SECURITY AGREEMENT, FIXTURE FILING AND
ASSIGNMENT OF PRODUCTION covering the Borrowing Base Oil and Gas Properties and
the Pipeline situated in the Gulf of Mexico Outer Continental Shelf offshore
Louisiana, the personal property and equipment therein and thereon, the
production of oil, gas, and other minerals therefrom, and all of the products
and proceeds thereof, one or more such Mortgages to be duly executed by Borrower
with respect to all of the Borrowing Base Oil and Gas Properties and one such
Mortgage to be executed by Borrower's Affiliate, EPL Pipeline L.L.C. with
respect to the Pipeline.
2. SECURITY AGREEMENT granting the Bank a first priority security
interest in all of the Borrower's and its Subsidiaries' accounts, equipment,
machinery, fixtures, inventory, chattel paper, documents, instruments and
general intangibles relating to or arising out of the Oil and Borrowing Base Oil
and Gas Properties, the Pipeline and the business of the Borrower, whether now
owned or hereafter acquired, and all products and proceeds thereof.
3. FINANCING STATEMENTS in connection with the Security Instruments
described in the preceding paragraphs, in form and number satisfactory to the
Bank as the Bank, from to time, may specify (including additional or
supplemental financing statements, amendments thereto, and continuation
statements thereof).
4. PRIOR SECURITY INSTRUMENTS. All Security Instruments (as defined in
the Prior Credit Agreement) shall continue to secure Borrower's Obligations
arising under this Agreement.
5. OTHER SECURITY INSTRUMENTS. Such other instruments as are necessary
or appropriate from time to time, in the good faith opinion of the Bank, to
perfect to the satisfaction of the Bank the Bank's liens, security interests,
and other rights in the Borrowing Base Oil and Gas Properties and in any and all
other collateral covered by or described in (or, as evidenced by the Agreement,
intended to have been covered by) any of the other Security Instruments
described above.
EXHIBIT "E"
REQUEST FOR ADVANCE
I, the undersigned officer of ENERGY PARTNERS, LTD. (the "Company"),
pursuant to Section 2.01 of the Amended and Restated Credit Agreement dated as
of August 1, 2001, as amended from time to time (the "Agreement"), by and
between BANK ONE, NA ("Administrative Agent"), the banks and other financial
institutions from time to time parties to the Agreement (the "Banks"), the LC
Issuer, the Company and ▇▇▇▇-▇▇▇▇▇▇▇ Oil Company, do hereby make the requests
indicated below on this ______ day of _______________ , 200_:
[ ] 1. Loans:
(a) Amount of new Loan: $______________
(b) Requested funding date: _______, 200__
(c) $_____________ of such Loan is to be an ABR Loan;
$_____________ of such Loan is to be a LIBOR Loan.
Requested Interest Period for LIBOR Loan:___ months.
[ ] 2. Continuation or conversion of LIBOR Loan maturing on
_______, 200__:
(a) Amount to be continued as a LIBOR Loan is $______________, with
an Interest Period of ___ months;
(b) Amount to be converted to an ABR Loan is $____________.
[ ] 3. Conversion of Prime Rate Loan:
(a) Requested conversion date: _________, 200__.
(b) Amount to be converted to a LIBOR Loan is $_________, with an
Interest Period of ___ months.
4. The undersigned certifies that the funds advanced from the Banks
to the Company pursuant to paragraphs 1 through 3 hereof, as
applicable, shall be used by the Company solely for the purposes
permitted by the Agreement.
5. The undersigned certifies that to my knowledge after reasonable
inquiry into the applicable facts, as of the date hereof, the
Company is in compliance with all of the representations,
warranties, terms, conditions and covenants contained in the
Agreement and no Event of Default or Unmatured Event of Default
has occurred and is continuing under the Agreement.
6. The undersigned certifies that to my knowledge after reasonable
inquiry into the applicable facts, as of the date hereof, no
Material Adverse Change has occurred since the effective date of
the latest audited Financial Statements of the Company delivered
to the Administrative Agent;
This certificate is executed this ____ day of ___________, 200__.
ENERGY PARTNERS, LTD.
By:
--------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇
Executive Vice President and Chief Financial
Officer
-2-