CREDIT AGREEMENT
AMONG
PETROQUEST ENERGY, L.L.C.,
AS BORROWER
PETROQUEST ENERGY, INC.,
AS GUARANTOR
BANK ONE, NA
AS AGENT
BANC ONE CAPITAL MARKETS, INC.
AS LEAD ARRANGER AND SOLE BOOK RUNNER
AND
CERTAIN FINANCIAL INSTITUTIONS,
AS LENDERS
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$75,000,000 CREDIT FACILITY
MAY 14, 2003
TABLE OF CONTENTS
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ARTICLE I DEFINITIONS................................................ 1
ARTICLE II THE CREDITS................................................ 19
2.1. Commitment.......................................................... 19
2.2. Borrowing Base...................................................... 19
2.3. Termination......................................................... 21
2.4. Ratable Loans....................................................... 21
2.5. Types of Advances................................................... 21
2.6. Commitment Fee; Reductions in Borrowing Base........................ 21
2.7. Minimum Amount of Each Advance...................................... 21
2.8. Optional Principal Payments......................................... 22
2.9. Method of Selecting Types and Interest Periods for New Advances..... 22
2.10. Conversion and Continuation of Outstanding Advances................. 22
2.11. Changes in Interest Rate, etc....................................... 23
2.12. Rates Applicable After Default...................................... 23
2.13. Method of Payment................................................... 24
2.14. Noteless Agreement; Evidence of Indebtedness........................ 24
2.15. Telephonic Notices.................................................. 25
2.16. Interest Payment Dates; Interest and Fee Basis...................... 25
2.17. Notification of Advances, Interest Rates, Facility LCs, Prepayments
and Commitment Reductions........................................... 25
2.18. Lending Installations............................................... 25
2.19. Non-Receipt of Funds by the Agent................................... 26
2.20. Replacement of Lender............................................... 26
2.21. Facility LCs........................................................ 27
2.22. Collateral.......................................................... 31
ARTICLE III YIELD PROTECTION; TAXES.................................... 33
3.1. Yield Protection.................................................... 33
3.2. Changes in Capital Adequacy Regulations............................. 34
3.3. Availability of Types of Advances................................... 34
3.4. Funding Indemnification............................................. 34
3.5. Taxes ........................................................... 34
3.6. Lender Statements; Survival of Indemnity............................ 36
ARTICLE IV CONDITIONS PRECEDENT....................................... 38
4.1. Initial Credit Extension............................................ 38
4.2. Each Credit Extension............................................... 41
ARTICLE V REPRESENTATIONS AND WARRANTIES............................. 43
5.1. Existence and Standing.............................................. 43
5.2. Authorization and Validity.......................................... 43
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5.3. No Conflict; Government Consent..................................... 43
5.4. Financial Statements................................................ 44
5.5. Material Adverse Change............................................. 44
5.6. Taxes .............................................................. 44
5.7. Litigation and Contingent Obligations............................... 44
5.8. Subsidiaries........................................................ 45
5.9. ERISA .............................................................. 45
5.10. Accuracy of Information............................................. 45
5.11. Regulation U........................................................ 45
5.12. Material Agreements................................................. 45
5.13. Compliance With Laws................................................ 45
5.14. Ownership/Title to the Properties; Licenses; Liens.................. 46
5.15. Plan Assets; Prohibited Transactions................................ 47
5.16. Environmental Matters............................................... 47
5.17. Investment Company Act.............................................. 49
5.18. Public Utility Holding Company Act.................................. 49
5.19. Subordinated Indebtedness........................................... 49
5.20. Insurance........................................................... 49
5.21. Solvency............................................................ 49
5.22. Burdensome Provisions............................................... 50
5.23. Relationship with the Lenders....................................... 50
5.24. Jurisdiction of Organization........................................ 50
5.25. Full Disclosure..................................................... 50
5.26. Gas Imbalances...................................................... 51
5.27. No Default.......................................................... 51
ARTICLE VI COVENANTS.................................................. 52
6.1. Financial Reporting................................................. 52
6.2. Use of Proceeds..................................................... 55
6.3. Notice of Default................................................... 55
6.4. Conduct of Business................................................. 55
6.5. Taxes ........................................................... 55
6.6. Insurance........................................................... 55
6.7. Compliance with Laws................................................ 55
6.8. Maintenance of Properties........................................... 55
6.9. Inspection.......................................................... 56
6.10. Dividends and Payments on Indebtedness.............................. 56
6.11. Indebtedness........................................................ 57
6.12. Acquisitions and Merger............................................. 58
6.13. Sale of Assets...................................................... 58
6.14. Investments and Acquisitions........................................ 58
6.15. Liens ........................................................... 59
6.16. [Intentionally Omitted]............................................. 60
6.17. Operating Leases.................................................... 60
6.18. Trade Liabilities................................................... 60
6.19. Affiliates.......................................................... 60
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6.20. Agreement to Deliver Collateral Documents........................... 61
6.21. Maintenance of Liens................................................ 61
6.22. Title Information................................................... 61
6.23. Deposit of Production Proceeds...................................... 62
6.24. General and Administrative Expense Limitation....................... 62
6.25. Rate Management Transactions........................................ 62
6.26. Dry Hole Costs...................................................... 64
6.27. Sale of Accounts.................................................... 64
6.28. Sale and Leaseback Transactions and Other Off-Balance Sheet
Liabilities ........................................................ 64
6.29. Contingent Obligations.............................................. 64
6.30. Financial Contracts................................................. 64
6.31. Financial Covenants................................................. 64
ARTICLE VII DEFAULTS................................................... 66
ARTICLE VIII ACCELERATIONS, WAIVERS, AMENDMENTS AND REMEDIES............ 70
8.1. Acceleration........................................................ 70
8.2. Amendments.......................................................... 71
8.3. Preservation of Rights.............................................. 72
ARTICLE IX GENERAL PROVISIONS......................................... 73
9.1. Survival of Representations......................................... 73
9.2. Governmental Regulation............................................. 73
9.3. Headings............................................................ 73
9.4. ENTIRE AGREEMENT.................................................... 73
9.5. Several Obligations; Benefits of this Agreement..................... 73
9.6. Expenses; Indemnification........................................... 73
9.7. Numbers of Documents................................................ 74
9.8. Accounting.......................................................... 74
9.9. Severability of Provisions.......................................... 74
9.10. Nonliability of Lenders............................................. 74
9.11. Confidentiality..................................................... 75
9.12. Nonreliance......................................................... 75
9.13. Disclosure.......................................................... 75
9.14. Interest ........................................................... 76
9.15. NO ORAL AGREEMENTS.................................................. 76
9.16. Survival of Representations......................................... 76
9.17. Amendment and Restatement........................................... 76
ARTICLE X THE AGENT.................................................. 78
10.1. Appointment; Nature of Relationship................................. 78
10.2. Powers ........................................................... 78
10.3. General Immunity.................................................... 78
10.4. No Responsibility for Loans, Recitals, etc.......................... 78
10.5. Action on Instructions of Lenders................................... 79
10.6. Employment of Agents and Counsel.................................... 79
10.7. Reliance on Documents; Counsel...................................... 79
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10.8. Agent's Reimbursement and Indemnification........................... 79
10.9. Notice of Default................................................... 80
10.10. Rights as a Lender.................................................. 80
10.11. Lender Credit Decision.............................................. 80
10.12. Successor Agent..................................................... 80
10.13. Agent's Fee......................................................... 81
10.14. Delegation to Affiliates............................................ 81
10.15. Execution of Collateral Documents................................... 81
10.16. Collateral Releases................................................. 82
ARTICLE XI SETOFF; RATABLE PAYMENTS................................... 83
11.1. Setoff ........................................................... 83
11.2. Ratable Payments.................................................... 83
11.3 Application of Collateral........................................... 83
ARTICLE XII BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS.......... 85
12.1. Successors and Assigns.............................................. 85
12.2. Participations...................................................... 85
12.3. Assignments......................................................... 86
12.4. Dissemination of Information........................................ 87
12.5. Tax Treatment....................................................... 87
ARTICLE XIII NOTICES.................................................... 88
13.1. Notices ............................................................ 88
13.2. Change of Address................................................... 88
ARTICLE XIV COUNTERPARTS............................................... 88
14.1. Counterparts........................................................ 88
14.2. Facsimile Documents and Signatures.................................. 88
ARTICLE XV CHOICE OF LAW; CONSENT TO JURISDICTION; WAIVER OF
JURY TRIAL ................................................ 89
15.1. CHOICE OF LAW....................................................... 89
15.2. CONSENT TO JURISDICTION............................................. 89
15.3. WAIVER OF JURY TRIAL................................................ 89
PRICING SCHEDULE
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SCHEDULES AND EXHIBITS
SCHEDULES
Schedule 5.1 - Other Names
Schedule 5.7 - Litigation and Contingent Obligations
Schedule 5.8 - Subsidiaries
Schedule 5.14 - Ownership/Title to the Properties; Licenses; Liens
Schedule 5.16 - Environmental Matters
Schedule 5.24 - Jurisdiction of Organization
Schedule 5.26 - Gas Imbalances
Schedule 6.11 - Indebtedness
Schedule 6.14 - Investments and Acquisitions
Schedule 6.25 - Existing Rate Management Transaction
EXHIBITS
EXHIBIT A - Promissory Note
EXHIBIT B - Borrowing Notice
EXHIBIT C - Assignment Agreement
SCHEDULE 1 TO Assignment Agreement
EXHIBIT D - Form of Opinion of ▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P.
EXHIBIT E - Loan/Credit Related Money Transfer Instruction
EXHIBIT F - Compliance Certificate
SCHEDULE 1 to Compliance Certificate
SCHEDULE II to Compliance Certificate
EXHIBIT G - Form of Title Opinion
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Execution Copy
AMENDED AND RESTATED CREDIT AGREEMENT
This Amended and Restated Credit Agreement, dated as of May 14, 2003,
is among PETROQUEST ENERGY, L.L.C., a Louisiana limited liability company;
PETROQUEST ENERGY, INC. a Delaware corporation; BANK ONE, NA, a national banking
association, individually and as agent (in its agent capacity herein "Agent")
and as issuer of Letters of Credit (in such capacity the "LC Issuer"); BANC ONE
CAPITAL MARKETS, INC., as Sole Lead Arranger and Sole Book Runner; and the
LENDERS. The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement:
"Acquisition" means any transaction, or any series of related
transactions, consummated on or after the date of this Agreement, by which the
Borrower or any of its Subsidiaries (i) acquires any going business or all or
substantially all of the assets of any firm, corporation or limited liability
company, or division thereof, whether through purchase of assets, merger or
otherwise or (ii) directly or indirectly acquires (in one transaction or as the
most recent transaction in a series of transactions) at least a majority (in
number of votes) of the securities of a corporation which have ordinary voting
power for the election of directors (other than securities having such power
only by reason of the happening of a contingency) or a majority (by percentage
or voting power) of the outstanding ownership interests of a partnership or
limited liability company.
"Advance" means a borrowing hereunder, (i) made by the Lenders on the
same Borrowing Date, or (ii) converted or continued by the Lenders on the same
date of conversion or continuation, consisting, in either case, of the aggregate
amount of the several Loans of the same Type and, in the case of Eurodollar
Loans, for the same Interest Period.
"Affiliate" of any Person means any other Person directly or indirectly
controlling, controlled by or under common control with such Person. A Person
shall be deemed to control another Person if the controlling Person owns 10% or
more of any class of voting securities (or other ownership interests) of the
controlled Person or possesses, directly or indirectly, the power to direct or
cause the direction of the management or policies of the controlled Person,
whether through ownership of stock, by contract or otherwise.
"Agent" means Bank One in its capacity as contractual representative of
the Lenders pursuant to Article X, and not in its individual capacity as a
Lender, and any successor Agent appointed pursuant to Article X.
"Aggregate Commitment" means the aggregate of the Commitments of all
the Lenders, as reduced from time to time pursuant to the terms hereof.
"Aggregate Outstanding Credit Exposure" means, at any time, the
aggregate of the Outstanding Credit Exposure of all the Lenders.
"Agreement" means this credit agreement, as it may be amended or
modified and in effect from time to time.
"Agreement Accounting Principles" means generally accepted accounting
principles as in effect from time to time in the United States, applied in a
manner consistent with that used in preparing the financial statements referred
to in Section 5.4.
"Alternate Base Rate" means, for any day, a rate of interest per annum
equal to the higher of (i) the Corporate Base Rate for such day and (ii) the sum
of the Federal Funds Effective Rate for such day plus 1/2% per annum.
"Applicable Environmental Laws" means any and all federal, state, local
and foreign Laws, judicial decisions, rules, judgments, plans, permits,
concessions, grants, franchises, licenses, agreements and other governmental
restrictions relating to (i) the protection of the environment (including,
without limitation, CERCLA, CERCLIS and RCRA), (ii) the effect of the
environment on human health, (iii) emissions, discharges or releases of
pollutants, contaminants, Hazardous Substances or wastes into surface water,
ground water or land, or (iv) the manufacture, processing, distribution, use,
treatment, storage, Disposal, transport or handling of pollutants, contaminants,
Hazardous Substances or wastes or the clean-up or other remediation thereof, as
such Laws now exist or are hereafter enacted and/or amended.
"Applicable Fee Rate" means, at any time, the percentage rate per annum
at which commitment fees are accruing on the unused portion of the Aggregate
Commitment at such time as set forth in the Pricing Schedule.
"Applicable Margin" means, with respect to Advances of any Type at any
time, the percentage rate per annum which is applicable at such time with
respect to Advances of such Type as set forth in the Pricing Schedule.
"Arranger" means Banc One Capital Markets, Inc., a Delaware
corporation, and its successors, in its capacity as Lead Arranger and Sole Book
Runner.
"Article" means an article of this Agreement unless another document is
specifically referenced.
"Assignment Agreement" is defined in Section 12.3.1.
"Assignment of Notes, Liens and Security Interests" means the
Assignment of Notes, Liens and Security Interests executed by Hibernia National
Bank, as agent under the Prior Credit
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Agreement and each of the current lenders thereto, as it may be amended or
modified and in effect from time to time.
"Associated Property" means any and all interests in and to (and/or
carved out of) the lands which are described or referred to in the Deeds of
Trust, or which are otherwise described in any of the oil, gas and/or mineral
leases or other instruments described in or referred to therein, whether or not
such property interests are owned by Borrower or its Subsidiaries.
"Authorized Officer" means any of the Chairman of the Board, President,
Chief Financial Officer, Treasurer, or any Vice President of the Borrower or the
Guarantor, acting singly.
"Available Borrowing Base" means, at any time, the Borrowing Base then
in effect (after reduction for each applicable Borrowing Base Reduction Amount)
minus the Aggregate Outstanding Credit Exposure.
"Bank One" means Bank One, NA, a national banking association having
offices in Houston, Texas, in its individual capacity, and its successors.
"Borrower" means PetroQuest Energy, L.L.C., a Louisiana limited
liability company, and its successors and assigns.
"Borrowing Base" shall mean the amount of indebtedness which can be
adequately supported by the value of oil and gas reserves attributable to the
Collateral, which value shall be determined by the Lenders, in the exercise of
their sole discretion, in accordance with the Lenders' customary practices and
standards for oil and gas loans, all as more particularly set forth in Section
2.2.
"Borrowing Base Reduction Amount" means (a) for each month commencing
June 1, 2003 until the next semi-annual Borrowing Base redetermination pursuant
to Section 2.2.2, $1,250,000, and (b) for each month thereafter, such amount as
designated by 100% of the Lenders from time to time in connection with each
successive scheduled semi-annual Borrowing Base redetermination pursuant to
Section 2.2.2 or successive unscheduled Borrowing Base redetermination pursuant
to Section 2.2.3.; provided however, if the Required Lenders fail to timely
designate a new Borrowing Base Reduction Amount, then the Borrowing Base
Reduction Amount most recently in effect will continue in effect until the
Required Lenders designate a new Borrowing Base Reduction Amount.
"Borrowing Date" means a date on which an Advance is made hereunder.
"Borrowing Notice" is defined in Section 2.9.
"Business Day" means (i) with respect to any borrowing, payment or rate
selection of Eurodollar Advances, a day (other than a Saturday or Sunday) on
which banks generally are
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open in Houston, Chicago and New York for the conduct of substantially all of
their commercial lending activities, interbank wire transfers can be made on the
Fedwire system and dealings in United States dollars are carried on in the
London interbank market and (ii) for all other purposes, a day (other than a
Saturday or Sunday) on which banks generally are open in Houston, Chicago and
New York for the conduct of substantially all of their commercial lending
activities and interbank wire transfers can be made on the Fedwire system.
"Capitalized Lease" of a Person means at any date any lease of Property
by such Person as lessee which would be capitalized on a balance sheet as of
such date of such Person prepared in accordance with Agreement Accounting
Principles.
"Capitalized Lease Obligations" of a Person means the amount of the
obligations of such Person under Capitalized Leases which would be shown as a
liability on a balance sheet of such Person prepared in accordance with
Agreement Accounting Principles.
"Cash Equivalent Investments" means (i) obligations of, or fully
guaranteed by, the United States of America or any agency thereof and backed by
the full faith and credit of the United States of America, in each case which
matures within twelve months from the date of acquisition, (ii) commercial paper
rated A-1 or better by S&P or P-1 or better by ▇▇▇▇▇'▇, (iii) demand deposit
accounts maintained in the ordinary course of business, (iv) certificates of
deposit issued by and time deposits with commercial banks (whether domestic or
foreign) having capital and surplus in excess of $100,000,000, and (v) money
market funds, the assets of which consist primarily of obligations of the types
referred to in clause (i) through (iv) above; provided in each case that the
same provides for payment of both principal and interest (and not principal
alone or interest alone) and is not subject to any contingency (other than the
passage of time) regarding the payment of principal or interest.
"CERCLA" means the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, as amended by the Superfund Amendments and
Reauthorization Act of 1986, as from time to time in effect and any successor
thereto.
"CERCLIS" means the Comprehensive Environmental Response, Compensation
and Liability Information System List of the Environmental Protection Agency, as
from time to time in effect and any successor thereto.
"Change" is defined in Section 3.2.
"Change in Control" means the acquisition by any Person, or two or more
Persons acting in concert, of beneficial ownership (within the meaning of Rule
13d-3 of the Securities and Exchange Commission under the Securities Exchange
Act of 1934) of 40% or more of the outstanding shares of voting stock of the
Guarantor.
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"Code" means the Internal Revenue Code of 1986, as amended, reformed or
otherwise modified from time to time.
"Collateral" means any Property or asset of the Borrower or any
Subsidiary, now or hereafter acquired, which is subject to a Lender Lien in
favor of the Lenders (or in favor of the Agent for the benefit of the Lenders)
or which, under the terms of any Collateral Document or otherwise, is purported
to be subject to such a Lien, as described in Section 2.22.
"Collateral Documents" means, collectively, the Deed of Trust executed
by Borrower, the Pledge Agreement, the Guaranty, any Security Agreements and all
financing statements, notices, and other documents executed in connection
therewith.
"Collateral Shortfall Amount" is defined in Section 8.1.
"Commitment" means, for each Lender, the obligation of such Lender to
make Advances to, and participate in Facility LCs issued upon the application
of, the Borrower in an aggregate amount not exceeding the amount set forth
opposite its signature below or as set forth in any Assignment Agreement
relating to any assignment that has become effective pursuant to Section 12.3.2,
as such amount may be modified from time to time pursuant to the terms hereof.
"Consolidated Current Assets" shall mean the total of the consolidated
current assets of the Guarantor, including the amounts available for borrowing
under the Borrowing Base Amount; provided, however, in determining consolidated
current assets, such determination shall not include non-cash gains, losses or
charges required (a) under SFAS 133 or (b) under SFAS 143.
"Consolidated EBITDDA" means for any period Consolidated Net Income for
such period plus, to the extent deducted from revenues in determining
Consolidated Net Income, (i) consolidated interest expense, (ii) expense for
taxes paid or accrued, (iii) depreciation, depletion, amortization, and any
other non-cash charges, (iv) extraordinary or non-recurring expenses or losses
incurred other than in the ordinary course of business and (v) unrealized loss
from Rate Management Obligations, if any, minus, to the extent included in
Consolidated Net Income, extraordinary or non-recurring income or gains realized
other than in the ordinary course of business, and non-cash credits, all
calculated for the Guarantor, Borrower and their Subsidiaries on a consolidated
basis.
"Consolidated G&A" means, with reference to any period, the aggregate
of all general and administrative expenses (excluding non-cash expenses for
deferred compensation and similar non-cash items) of the Guarantor, Borrower and
their Subsidiaries calculated on a consolidated basis for such period.
"Consolidated Current Liabilities" shall mean the total of the
consolidated current liabilities of the Guarantor, provided, however, in
determining consolidated current liabilities,
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such determination shall not include non-cash gains, losses or charges required
(a) under SFAS 133 or (b) under SFAS 143.
"Consolidated Net Income" means, with reference to any period, the net
income (or loss) of the Guarantor, Borrower and their Subsidiaries calculated on
a consolidated basis for such period; provided, however, in determining
Consolidated Net Income, such determination shall not include (i) non-cash
gains, losses or charges required (a) under SFAS 133 or (b) under SFAS 143; (ii)
full cost ceiling limit write downs; and (iii) amortization of deferred
compensation expense.
"Consolidated Tangible Net Worth" means at any time the remainder of
all assets of the Guarantor, Borrower and their Subsidiaries calculated on a
consolidated basis at such time, other than intangible assets (including without
limitation as intangible assets such assets as patents, copyrights, licenses,
franchises, goodwill, trade names, trade secrets and leases other than oil, gas
or mineral leases required to be capitalized under Agreement Accounting
Principles), minus all liabilities of the Guarantor, Borrower and their
Subsidiaries calculated on a consolidated basis at such time provided, however,
in determining Consolidated Tangible Net Worth, such determination shall not
include (i) non-cash gains, losses or charges required (a) under SFAS 133 or (b)
under SFAS 143; (ii) full cost ceiling limit write downs; and (iii) amortization
of deferred compensation expense.
"Contingent Obligation" of a Person means any agreement, undertaking or
arrangement by which such Person assumes, guarantees, endorses, contingently
agrees to purchase or provide funds for the payment of, or otherwise becomes or
is contingently liable upon, the obligation or liability of any other Person, or
agrees to maintain the net worth or working capital or other financial condition
of any other Person, or otherwise assures any creditor of such other Person
against loss, including, without limitation, any comfort letter, operating
agreement, take-or-pay contract or the obligations of any such Person as general
partner of a partnership with respect to the liabilities of the partnership,
other than endorsements of instruments in the ordinary course of business in
connection with collection of the instruments.
"Conversion/Continuation Notice" is defined in Section 2.10.
"Controlled Group" means all members of a controlled group of
corporations or other business entities and all trades or businesses (whether or
not incorporated) under common control which, together with the Borrower or any
of its Subsidiaries, are treated as a single employer under Section 414 of the
Code.
"Corporate Base Rate" means a rate per annum equal to the corporate
base rate or prime rate of interest announced by Bank One or by its parent, BANK
ONE CORPORATION, from time to time, changing when and as said corporate base
rate or prime rate changes.
Page 6
"Credit Extension" means the making of an Advance or the issuance of a
Facility LC hereunder.
"Credit Extension Date" means the Borrowing Date for an Advance or the
issuance date for a Facility LC.
"Deed of Trust" means the Amended and Restated Deed of Trust, Mortgage,
Assignment, Security Agreement and Financing Statement executed by the Borrower
in favor of the Agent, for the ratable benefit of the Lenders, as it may be
amended or modified and in effect from time to time.
"Default" means an event described in Article VII.
"Disposal" and "Disposed" shall have the meanings specified in RCRA;
provided, in the event RCRA is amended so as to broaden the meaning of
"Disposal" or "Disposed", such broader meaning shall apply subsequent to the
effective date of such amendment; and provided further, to the extent that the
laws of the states in which the Borrower's or any Subsidiary's Oil and Gas
Properties are located establish a meaning for "Disposal" or "Disposed" which is
broader than that specified in RCRA, such broader meaning shall apply.
"Eligible Assignee" is defined in Section 12.3.1.
"Enforcement Action" means any action or proceeding by the Agent for
the enforcement of the Lender Liens created under any or all of the Collateral
Documents and any other exercise of any right or remedy with respect to the
Collateral.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any rule or regulation issued thereunder.
"Eurodollar Advance" means an Advance which, except as otherwise
provided in Section 2.11, bears interest at the applicable Eurodollar Rate.
"Eurodollar Base Rate" means, with respect to a Eurodollar Advance for
the relevant Interest Period, the applicable British Bankers' Association
Interest Settlement Rate for deposits in U.S. dollars appearing on Reuters
Screen FRBD as of 11:00 a.m. (London time) two Business Days prior to the first
day of such Interest Period, and having a maturity equal to such Interest
Period; provided that, (i) if Reuters Screen FRBD is not available to the Agent
for any reason, the applicable Eurodollar Base Rate for the relevant Interest
Period shall instead be the applicable British Bankers' Association Interest
Settlement Rate for deposits in U.S. dollars as reported by any other generally
recognized financial information service as of 11:00 a.m. (London time) two
Business Days prior to the first day of such Interest Period, and having a
maturity equal to such Interest Period, and (ii) if no such British Bankers'
Association Interest Settlement Rate is available to the Agent, the applicable
Eurodollar Base Rate for the relevant
Page 7
Interest Period shall instead be the rate determined by the Agent to be the rate
at which Bank One or one of its Affiliate banks offers to place deposits in U.S.
dollars with first-class banks in the London interbank market at approximately
11:00 a.m. (London time) two Business Days prior to the first day of such
Interest Period, in the approximate amount of Bank One's relevant Eurodollar
Loan and having a maturity equal to such Interest Period.
"Eurodollar Loan" means a Loan which, except as otherwise provided in
Section 2.11, bears interest at the applicable Eurodollar Rate.
"Eurodollar Rate" means, with respect to a Eurodollar Advance for the
relevant Interest Period, the sum of (i) the quotient of (a) the Eurodollar Base
Rate applicable to such Interest Period, divided by (b) one minus the Reserve
Requirement (expressed as a decimal) applicable to such Interest Period, plus
(ii) the Applicable Margin.
"Excluded Taxes" means, in the case of each Lender or applicable
Lending Installation and the Agent, taxes imposed on its overall net income, and
franchise taxes imposed on it, by any jurisdiction under the Laws, other than
those imposed solely as a result of transactions contemplated by this Agreement.
"Existing Rate Management Transaction" means those certain ISDA Master
Agreements or Trade Confirmations thereunder all as more particularly described
on Schedule 6.25.
"Exhibit" refers to an exhibit to this Agreement, unless another
document is specifically referenced.
"Facility LC" is defined in Section 2.21.1.
"Facility LC Application" is defined in Section 2.21.3.
"Facility LC Collateral Account" is defined in Section 2.21.11.
"Facility Termination Date" means May 14, 2006 or any earlier date on
which the Aggregate Commitment is reduced to zero or otherwise terminated
pursuant to the terms hereof.
"Fee Letter" means that certain letter dated April 21, 2003 between
Arranger and the Borrower.
"Federal Funds Effective Rate" means, for any day, an interest rate per
annum equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers on such day, as published for such day (or, if such day is not a
Business Day, for the immediately preceding Business Day) by the Federal Reserve
Bank of New York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations at approximately 10:00 a.m. (Houston
time) on such
Page 8
day on such transactions received by the Agent from three Federal funds brokers
of recognized standing selected by the Agent in its sole discretion.
"Financial Contract" of a Person means (i) any exchange-traded or
over-the-counter futures, forward, swap or option contract or other financial
instrument with similar characteristics, or (ii) any Rate Management
Transaction.
"Floating Rate" means, for any day, a rate per annum equal to (i) the
Alternate Base Rate for such day plus (ii) the Applicable Margin, in each case
changing when and as the Alternate Base Rate changes.
"Floating Rate Advance" means an Advance which, except as otherwise
provided in Section 2.11, bears interest at the Floating Rate.
"Floating Rate Loan" means a Loan which, except as otherwise provided
in Section 2.11, bears interest at the Floating Rate.
"Guarantor" means PetroQuest Energy, Inc., a Delaware corporation and
its successors and assigns.
"Guaranty" means that certain Guaranty dated of even date herewith,
executed by the Guarantor in favor of the Agent, for the ratable benefit of the
Lenders, as it may be amended or modified and in effect from time to time.
"Hazardous Substance" shall have the meaning specified in CERCLA;
provided, in the event CERCLA is amended so as to broaden the meaning of
"Hazardous Substance", such broader meaning shall apply subsequent to the
effective date of such amendment; and provided further, to the extent that the
laws of the states in which the Borrower's or any Subsidiary's Oil and Gas
Properties are located establish a meaning for "Hazardous Substance" which is
broader than that specified in CERCLA, such broader meaning shall apply.
"Highest Lawful Rate" means the maximum rate (or, if the context so
permits, an amount calculated at such rate) of interest which, at the time in
question, would not cause the interest charged to exceed the maximum amount
which the Lenders would be allowed to contract for, charge, take, reserve or
receive under applicable Law after taking into account, to the extent required
by applicable Law, any and all relevant payments or charges under the Loan
Documents.
"Hydrocarbons" means oil, gas, casinghead gas, coalbed methane, drip
gasoline, natural gasoline, condensate, distillate, liquid hydrocarbons, gaseous
hydrocarbons and all products refined or separated therefrom and all other
minerals.
Page 9
"Hydrocarbons Interests" means all rights, titles, interests and
estates in and to oil and gas leases, oil, gas and mineral leases, or other
liquid or gaseous hydrocarbon leases, mineral fee interests, overriding royalty
and royalty interests, net profit interests and production payment interests,
including any reserved or residual interest of whatever nature.
"Indebtedness" of a Person means such Person's (i) obligations for
borrowed money, (ii) obligations representing the deferred purchase price of
Property or services (other than accounts payable arising in the ordinary course
of such Person's business payable on terms customary in the trade), (iii)
obligations, whether or not assumed, secured by Liens or payable out of the
proceeds or production from Property now or hereafter owned or acquired by such
Person; provided that if not assumed, the amount of such debt will be the lesser
of the amount of the debt or the value of the Property owned by such Person
which secures the debt, (iv) obligations which are evidenced by notes,
acceptances, or other instruments, (v) obligations of such Person to purchase
securities or other Property arising out of or in connection with the sale of
the same or substantially similar securities or Property, (vi) Capitalized Lease
Obligations, (vii) Contingent Obligations, (viii) Letters of Credit, (x) Rate
Management Obligations, (xi) Sale and Leaseback Transactions, and (xii) any
other obligation for borrowed money or other financial accommodation which in
accordance with Agreement Accounting Principles would be shown as a liability on
the consolidated balance sheet of such Person.
"Independent Engineer" is defined in Section 6.1(x).
"Initial Reserve Report" means the reserve report dated January 1,
2003, prepared by ▇▇▇▇▇ ▇▇▇▇▇ Company, L.P., an independent petroleum engineer,
concerning the Oil & Gas Properties based on reasonable assumptions specified by
the Agent (including discount rates and projected hydrocarbon price
assumptions), a copy of which has been delivered to each Lender.
"Interest Period" means, with respect to a Eurodollar Advance, a period
of one, two, three or six months commencing on a Business Day selected by the
Borrower pursuant to this Agreement. Such Interest Period shall end on the day
which corresponds numerically to such date one, two, three or six months
thereafter, provided, however, that if there is no such numerically
corresponding day in such next, second, third or sixth succeeding month, such
Interest Period shall end on the last Business Day of such next, second, third
or sixth succeeding month. If an Interest Period would otherwise end on a day
which is not a Business Day, such Interest Period shall end on the next
succeeding Business Day, provided, however, that if said next succeeding
Business Day falls in a new calendar month, such Interest Period shall end on
the immediately preceding Business Day.
"Investment" of a Person means any loan, advance (other than
commission, travel and similar advances to officers and employees made in the
ordinary course of business), extension of credit (other than accounts
receivable arising in the ordinary course of business on terms customary in the
trade) or contribution of capital by such Person; stocks, bonds, mutual funds,
partnership interests, notes, debentures or other securities owned by such
Person; any deposit
Page 10
accounts and certificate of deposit owned by such Person; and structured notes,
derivative financial instruments and other similar instruments or contracts
owned by such Person.
"Law" means all applicable statutes, laws, ordinances, regulations,
orders, writs, injunctions or decrees of any state, commonwealth, nation,
country, territory, possession, county, parish, municipality or Tribunal.
"LC Fee" is defined in Section 2.21.4.
"LC Issuer" means Bank One (or any Subsidiary or Affiliate of Bank One
designated by Bank One) 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 2.21.5.
"Lenders" means the lending institutions listed on the signature pages
of this Agreement and their respective successors and assigns.
"Lender Liens" means the Liens granted in the Collateral in favor of
the Agent for the ratable benefit of the Lenders or directly for the benefit of
any Lender pursuant to the Loan Documents.
"Lending Installation" means, with respect to a Lender or the Agent,
the office, branch, Subsidiary or Affiliate of such Lender or the Agent listed
on the signature pages hereof or on a Schedule or otherwise selected by such
Lender or the Agent pursuant to Section 2.18.
"Letter of Credit" of a Person means a letter of credit or similar
instrument which is issued upon the application of such Person or upon which
such Person is an account party or for which such Person is in any way liable.
"Lien" means any lien (statutory or other), security interest,
mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance or
preference, priority or other security agreement or preferential arrangement of
any kind or nature whatsoever (including, without limitation, the interest of a
vendor or lessor under any conditional sale, Capitalized Lease or other title
retention agreement).
"Loan" means, with respect to a Lender, such Lender's loan made
pursuant to Article II (or any conversion or continuation thereof).
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"Loan Documents" means this Agreement, the Notes, the Facility LC
Applications, and the Collateral Documents.
"Material Adverse Effect" means a material adverse effect on (i) the
business, Property, condition (financial or otherwise), results of operations,
or prospects of the Guarantor, the Borrower and their 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, (iii) the validity or enforceability of
any of the Loan Documents or the rights or remedies of the Agent or the Lenders
thereunder, or (iv) the Collateral or Lender Liens on the Collateral or the
perfection or priority of such Lender Liens, which significantly increases the
risk that any of the Obligations will not be repaid as and when due.
"Material Indebtedness" is defined in Section 7.5.
"Modify" and "Modification" are defined in Section 2.21.1.
"Moody's" means ▇▇▇▇▇'▇ Investors Service, Inc.
"Multiemployer Plan" means a Plan maintained pursuant to a collective
bargaining agreement or any other arrangement to which the Borrower or any
member of the Controlled Group is a party to which more than one employer is
obligated to make contributions.
"Non-Recourse Indebtedness" means Indebtedness of a Person which is not
classified as a liability on the balance sheet of the Guarantor, the Borrower or
any Subsidiary and which is not secured by any Lien upon any property or assets
of any such Person, provided that no such Indebtedness shall be considered
"Non-Recourse Indebtedness" if any default with respect to such Indebtedness
would allow or require any of such Indebtedness to be accelerated or otherwise
made payable in advance of its stated maturity.
"Non-U.S. Lender" is defined in Section 3.5.4.
"Note" means, with respect to any Lender, the promissory note issued at
the request of such Lender pursuant to Section 2.14 in the form of Exhibit A.
"Notice of Assignment" is defined in Section 12.3.2.
"Obligations" means all unpaid principal of and accrued and unpaid
interest on the Loans, all accrued and unpaid fees and all expenses,
reimbursements, indemnities and other obligations of the Borrower to the Lenders
or to any Lender, the Agent, the LC Issuer or any indemnified party arising
under the Loan Documents.
"Off-Balance Sheet Liability" of a Person means (i) any repurchase
obligation or liability of such Person with respect to accounts or notes
receivable sold by such Person, (ii) any liability
Page 12
under any Sale and Leaseback Transaction which is not a Capitalized Lease, (iii)
any liability under any so-called "synthetic lease" transaction entered into by
such Person, or (iv) any obligation arising with respect to any other
transaction which is the functional equivalent of or takes the place of
borrowing but which does not constitute a liability on the balance sheets of
such Person, but excluding from this clause (iv) Operating Leases.
"Oil and Gas Properties" means Hydrocarbon Interests; the properties
now or hereafter pooled or unitized with Hydrocarbon Interests; all presently
existing or future unitization, pooling agreements and declarations of pooled
units and the units created thereby (including without limitation all units
created under orders, regulations and rules of any governmental body or agency
having jurisdiction) which may affect all or any portion of the Hydrocarbon
Interests; all operating agreements, contracts and other agreements which relate
to any of the Hydrocarbon Interests or the production, sale, purchase, exchange
or processing of Hydrocarbons from or attributable to such Hydrocarbon
Interests; all Hydrocarbons in and under and which may be produced and saved or
attributable to the Hydrocarbon Interests, the lands covered thereby and all oil
in tanks and all rents, issues, profits, proceeds, products, revenues and other
incomes from or attributable to the Hydrocarbon Interests; all tenements,
hereditaments, appurtenances and properties in anywise appertaining, belonging,
affixed or incidental to the Hydrocarbon Interests, properties, rights, titles,
interests and estates described or referred to above, including any and all
Property, real or personal, now owned or hereafter acquired and situated upon,
used, held for use or useful in connection with the operating, working or
development of any of such Hydrocarbon Interests or Property (excluding drilling
rigs, automotive equipment or other personal property which may be on such
premises for the purpose of drilling a well or for other similar temporary uses)
and including any and all oil ▇▇▇▇▇, gas ▇▇▇▇▇, injection ▇▇▇▇▇ or other ▇▇▇▇▇,
buildings, structures, fuel separators, liquid extraction plants, plant
compressors, pumps, pumping units, field gathering systems, tanks and tank
batteries, fixtures, valves, fittings, machinery and parts, engines, boilers,
meters, apparatus, equipment, appliances, tools, implements, cables, wires,
towers, casing, tubing and rods, surface leases, rights-of-way, easements and
servitudes together with all additions, substitutions, replacements, accessions
and attachments to any and all of the foregoing.
"Operating Lease" of a Person means any lease of Property (other than a
Capitalized Lease) by such Person as lessee which has an original term
(including any required renewals and any renewals effective at the option of the
lessor) of one year or more.
"Operating Lease Obligations" means, as at any date of determination,
the amount obtained by aggregating the present values, determined in the case of
each particular Operating Lease by applying a discount rate (which discount rate
shall equal the discount rate which would be applied under Agreement Accounting
Principles if such Operating Lease were a Capitalized Lease) from the date on
which each fixed lease payment is due under such Operating Lease to such date of
determination, of all fixed lease payments due under all Operating Leases of the
Guarantor, the Borrower and their Subsidiaries.
Page 13
"Other Taxes" is defined in Section 3.5.2.
"Outstanding Credit Exposure" means, as to any Lender 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 Pro Rata Share of the LC Obligations at such
time.
"Participant" is defined in Section 12.2.1.
"Payment Date" means the first day of each January, April, July and
October, commencing July 1, 2003.
"PBGC" means the Pension Benefit Guaranty Corporation, or any successor
thereto.
"Person" means any natural person, corporation, firm, joint venture,
partnership, limited liability company, association, enterprise, trust or other
entity or organization, or any government or political subdivision or any
agency, department or instrumentality thereof.
"PetroQuest Oil & Gas" shall mean PetroQuest Oil & Gas, L.L.C., a
Louisiana limited liability company the sole member of which is the Guarantor.
"Plan" means an employee pension benefit plan which is covered by Title
IV of ERISA or subject to the minimum funding standards under Section 412 of the
Code as to which the Borrower or any member of the Controlled Group may have any
liability.
"Pledge Agreement" means that certain Pledge and Security Agreement of
even date herewith executed by the Guarantor in favor of the Agent, for the
ratable benefit of the Lenders, as it may be amended or modified and in effect
from time to time.
"Pricing Schedule" means the Schedule attached hereto identified as
such.
"Prior Credit Agreement" means the Amended and Restated Credit
Agreement dated May 11, 2001 among Borrower, Guarantor, Hibernia National Bank,
as Agent, and the financial institutions party thereto, as amended from time to
time.
"Property" of a Person means any and all property, whether real,
personal, tangible, intangible, or mixed, of such Person, or other assets owned,
leased or operated by such Person.
"Pro Rata Share" means, with respect to a Lender, a portion equal to a
fraction the numerator of which is such Lender's Commitment and the denominator
of which is the Aggregate Commitment.
"Rate Management Obligations" of a Person means any and all obligations
of such Person, whether absolute or contingent, realized or unrealized (in which
case netted against one
Page 14
another) and howsoever and whensoever created, arising, evidenced or acquired
(including all renewals, extensions and modifications thereof and substitutions
therefor), under (i) any and all Rate Management Transactions, and (ii) any and
all cancellations, buy backs, reversals, terminations or assignments of any Rate
Management Transactions.
"Rate Management Transaction" means any transaction (including an
agreement with respect thereto) now existing or hereafter entered into between
the Borrower and any Lender or Affiliate thereof which is a rate swap, basis
swap, forward rate transaction, commodity swap, commodity option, equity or
equity index swap, equity or equity index option, bond option, interest rate
option, foreign exchange transaction, cap transaction, floor transaction, collar
transaction, forward transaction, currency swap transaction, cross-currency rate
swap transaction, currency option or any other similar transaction (including
any option with respect to any of these transactions) or any combination
thereof, whether linked to one or more interest rates, foreign currencies,
commodity prices, equity prices or other financial measures including, without
limitation, the Existing Rate Management Transaction.
"RCRA" means the Resource Conservation and Recovery Act of 1976, as
amended by the Used Oil Recycling Act of 1980, the Solid Waste Disposal Act
Amendments of 1980, and the Hazardous and Solid Waste Amendments of 1984, as
from time to time in effect and any successor thereto.
"Regulation D" means Regulation D of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor thereto
or other regulation or official interpretation of said Board of Governors
relating to reserve requirements applicable to member banks of the Federal
Reserve System.
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor or other
regulation or official interpretation of said Board of Governors relating to the
extension of credit by banks for the purpose of purchasing or carrying margin
stocks applicable to member banks of the Federal Reserve System.
"Reimbursement Obligations" means, at any time, the aggregate of all
obligations of the Borrower then outstanding under Section 2.21 to reimburse the
LC Issuer for amounts paid by the LC Issuer in respect of any one or more
drawings under Facility LCs.
"Release" shall have the meaning specified in CERCLA; provided, in the
event CERCLA is amended so as to broaden the meaning of "Release", such broader
meaning shall apply subsequent to the effective date of such amendment; and
provided further, to the extent that the laws of the states in which the
Borrower's or any Subsidiary's Oil and Gas Properties are located establish a
meaning for "Release" which is broader than that specified in CERCLA, such
broader meaning shall apply.
Page 15
"Release Price" means in connection with the sale of any of the
Borrower's or any Subsidiary's Oil and Gas Properties permitted by Section 6.13,
the price determined by the Required Lenders in their discretion based upon the
loan value of such Oil and Gas Properties being sold that the Required Lenders
in their discretion (using such methodology, assumptions and discount rates as
such Required Lenders customarily use in assigning loan value to oil and gas
properties) assign to such Oil and Gas Properties as of the time of their sale.
"Reportable Event" means a reportable event as defined in Section 4043
of ERISA and the regulations issued under such section, with respect to a Plan,
excluding, however, such events as to which the PBGC has by regulation waived
the requirement of Section 4043(a) of ERISA that it be notified within 30 days
of the occurrence of such event, provided, however, that a failure to meet the
minimum funding standard of Section 412 of the Code and of Section 302 of ERISA
shall be a Reportable Event regardless of the issuance of any such waiver of the
notice requirement in accordance with either Section 4043(a) of ERISA or Section
412(d) of the Code.
"Reports" is defined in Section 9.6.
"Required Lenders" means Lenders in the aggregate having at least
66 2/3% of the Aggregate Commitment or, if the Aggregate Commitment has been
terminated, Lenders in the aggregate holding at least 66 2/3% of the aggregate
unpaid principal amount of the outstanding Advances.
"Reserve Report" means the Initial Reserve Report and each reserve
report delivered pursuant to Section 6.1(x) or (xi).
"Reserve Requirement" means, with respect to an Interest Period, the
maximum aggregate reserve requirement (including all basic, supplemental,
marginal and other reserves) which is imposed under Regulation D on Eurocurrency
liabilities.
"Rights" means rights, remedies, powers, and privileges.
"Risk-Based Capital Guidelines" is defined in Section 3.2.
"S&P" means Standard and Poor's Ratings Services, a division of The
McGraw Hill Companies, Inc.
"Sale and Leaseback Transaction" means any sale or other transfer of
Property by any Person with the intent to lease such Property as lessee.
"Schedule" refers to a specific schedule to this Agreement, unless
another document is specifically referenced.
Page 16
"Section" means a numbered section of this Agreement, unless another
document is specifically referenced.
"Secured Obligations" means, collectively, (i) the Obligations and (ii)
all Rate Management Obligations owing to one or more Lenders.
"Security Agreements" means any and all security agreements now or
hereafter executed by the Guarantor, the Borrower or any of their Subsidiaries
in favor of the Agent, for the ratable benefit of the Lenders, as they may be
amended or modified and in effect from time to time.
"Single Employer Plan" means a Plan maintained by the Borrower or any
member of the Controlled Group for employees of the Borrower or any member of
the Controlled Group.
"Solid Waste" shall have the meaning specified in RCRA; provided, in
the event RCRA is amended so as to broaden the meaning of "Solid Waste", such
broader meaning shall apply subsequent to the effective date of such amendment;
and provided further, to the extent that the laws of the states in which the
Borrower's or any Subsidiary's Oil and Gas Properties are located establish a
meaning for "Solid Waste" which is broader than that specified in RCRA, such
broader meaning shall apply.
"Subsidiary" of a Person means (i) any corporation more than 50% of the
outstanding securities having ordinary voting power of which shall at the time
be owned or controlled, directly or indirectly, by such Person or by one or more
of its Subsidiaries or by such Person and one or more of its Subsidiaries, or
(ii) any partnership, limited liability company, association, joint venture or
similar business organization more than 50% of the ownership interests having
ordinary voting power of which shall at the time be so owned or controlled.
Unless otherwise expressly provided, all references herein to a "Subsidiary"
shall mean a Subsidiary of the Borrower.
"Substantial Portion" means, ten percent 10% of the present value
discounted at ten percent 10% per annum of the proved developed reserves of the
Borrower and its Subsidiaries as reflected in the most recent Reserve Report.
"Taxes" means any and all present or future taxes, duties, levies,
imposts, deductions, charges or withholdings, and any and all liabilities with
respect to the foregoing, but excluding Excluded Taxes and Other Taxes.
"Transferee" is defined in Section 12.4.
"Tribunal" means any government, any arbitration panel, any court or
any governmental department, central bank or comparable agency, commission,
board, bureau, agency or instrumentality of the United States or any state,
province, commonwealth, nation, territory,
Page 17
possession, county, parish, town, township, village or municipality, whether now
or hereafter constituted or existing.
"Type" means, with respect to any Advance, its nature as a Floating
Rate Advance or a Eurodollar Advance.
"Unfunded Liabilities" means the amount (if any) by which the present
value of all vested and unvested accrued benefits under all Single Employer
Plans exceeds the fair market value of all such Plan assets allocable to such
benefits, all determined as of the then most recent valuation date for such
Plans using PBGC actuarial assumptions for single employer plan terminations.
"Unmatured Default" means an event which but for the lapse of time or
the giving of notice, or both, would constitute a Default.
"Utilization Percentage" means as of any day, the quotient obtained by
dividing the Aggregate Outstanding Credit Exposure on such day by the Borrowing
Base (after reduction for each applicable Borrowing Base Reduction Amount) as of
such day.
"Wholly-Owned Subsidiary" of a Person means (i) any Subsidiary all of
the outstanding voting securities of which shall at the time be owned or
controlled, directly or indirectly, by such Person or one or more Wholly-Owned
Subsidiaries of such Person, or by such Person and one or more Wholly-Owned
Subsidiaries of such Person, or (ii) any partnership, limited liability company,
association, joint venture or similar business organization 100% of the
ownership interests having ordinary voting power of which shall at the time be
so owned or controlled.
The foregoing definitions shall be equally applicable to both the
singular and plural forms of the defined terms.
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Page 18
ARTICLE II
THE CREDITS
2.1. Commitment. From and including the date of this Agreement and
prior to the Facility Termination Date, each Lender severally agrees, on the
terms and conditions set forth in this Agreement to (i) make Advances 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 such Advance
and the issuance of each such Facility LC, such Lender's Outstanding Credit
Exposure shall not exceed its Commitment. Subject to the terms of this
Agreement, the Borrower may borrow, repay and reborrow at any time prior to the
Facility Termination Date provided, that the Aggregate Outstanding Credit
Exposure shall not exceed the lesser of (a) the Aggregate Commitment and (b) the
Borrowing Base. The 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 2.21.
2.2. Borrowing Base.
2.2.1 During the period from the date of this Agreement to the
date as of which the Borrowing Base is first redetermined pursuant to Section
2.2.2, the Borrowing Base shall be $15,500,000.00, as reduced pursuant to
Section 2.2.5.
2.2.2 On or before March 1 and September 1 of each year the
Borrower shall furnish to each Lender all information, reports, and data which
the Agent has then requested concerning the Borrower's and its Subsidiaries'
businesses and properties (including their Oil and Gas Properties and interests
and the reserves and production relating thereto), together with the Reserve
Report described in Section 6.1(x) or (xi), as appropriate. By April 1, in the
case of the Reserve Report delivered by March 1, and by October 1, in the case
of the Reserve Report delivered by September 1, or as promptly thereafter as
practicable, in either case, (i) the Agent shall determine and the Required
Lenders shall approve an amount for the Borrowing Base (provided that all
Lenders must agree to any increase in the Borrowing Base) and (ii) the Agent
shall by notice to the Borrower designate such amount as the new Borrowing Base
available to the Borrower hereunder, which designation shall take effect
immediately on the date such notice is sent and shall remain in effect (subject
to reduction pursuant to Sections 2.2.5 and 2.2.6.) until, but not including,
the next date as of which the Borrowing Base is redetermined. If the Borrower
does not furnish all such information, reports, and data by the date specified
in the first sentence of this section, the Agent may nonetheless designate the
Borrowing Base at any amount which the Required Lenders have approved and may
redesignate the Borrowing Base from time to time thereafter until each Lender
receives all such information, reports, and data, whereupon the Required Lenders
shall designate a new Borrowing Base as described above. Any redetermination of
the Borrowing Base shall not be effective until written notice is sent to the
Borrower.
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2.2.3 In addition to the foregoing, the Required Lenders or
the Borrower may initiate a redetermination of the Borrowing Base at any other
time as they or it, as the case may be, so elect; provided, however, that the
Borrower may initiate only one (1) such unscheduled redetermination between each
scheduled redetermination by specifying in writing to the Lenders the date on
which the Borrower will furnish the information required by Section 2.2.2 and
the date on which it desires such redetermination to occur. The Lenders shall
have at least forty-five (45) days after the delivery of the information
required by Section 2.2.2 to make any unscheduled redetermination of the
Borrowing Base requested by the Borrower. The Required Lenders may, at any time,
initiate an unscheduled redetermination of the Borrowing Base by specifying in
writing to the Borrower the date by which the Borrower is to furnish the
information required by Section 2.2.2 and the projected date on which such
redetermination is to occur. The Agent shall promptly notify the Borrower, in
writing, of the new Borrowing Base.
2.2.4 The Agent shall determine and 100% of the Lenders shall
approve the amount of the Borrowing Base and Borrowing Base Reduction Amount
based upon the loan collateral value which they in their discretion assign to
the various Oil and Gas Properties of the Guarantor, the Borrower and their
Subsidiaries at the time in question and based upon such other credit factors
(including, without limitation, the assets, senior and subordinate liabilities,
cash flow, hedged and unhedged exposure to oil and gas prices, foreign exchange
rate, and interest rate changes, business, properties, prospects, management,
and ownership of the Guarantor, the Borrower and their Subsidiaries) as they in
their sole discretion deem significant. It is expressly understood that the
Lenders and the Agent have no obligation to agree upon or designate the
Borrowing Base at any particular amount, whether in relation to the Aggregate
Commitment or otherwise, and that the Lenders' Commitments to advance funds
hereunder is determined by reference to the Borrowing Base from time to time in
effect, and, to the extent permitted by Law and regulatory authorities, for the
purposes of capital adequacy determination and reimbursements under Section 3.2.
If the Required Lenders cannot agree on the Borrowing Base or the Borrowing Base
Reduction Amount, the Borrowing Base and the Borrowing Base Reduction Amount
shall be set on the basis of the weighted arithmetic average of the Borrowing
Bases or Borrowing Base Reduction Amounts, as the case may be, determined by the
individual Lenders. Notwithstanding anything to the contrary herein, the amount
of the Borrowing Base may not be increased and the amount of the Borrowing Base
Reduction Amount may not be reduced at any time without the consent of 100% of
the Lenders. In connection with the initial determination of the Borrowing Base,
the Borrower has paid the Agent for the pro rata benefit of the Lenders, a
one-time fee equal to .75% of the Borrowing Base. Borrower agrees to pay the
Agent for the pro rata benefit of the Lenders, upon the first incremental
increase of the Borrowing Base above the original amount of the Borrowing Base
(being $15,500,000), a one-time fee equal to .75% of such incremental increase
in the Borrowing Base above the original amount and, thereafter, upon each
subsequent increase in the Borrowing Base, a fee of .75% of the increase, if
any, over the previous highest amount of the Borrowing Base.
Page 20
2.2.5 The Borrowing Base shall automatically reduce by the
applicable Borrowing Base Reduction Amount on the first day of each month as
specified in the definition of the term "Borrowing Base Reduction Amount."
2.2.6. Upon the sale of any of the Oil and Gas Properties of
the Borrower or any Subsidiary other than those permitted to be sold under
Section 6.13(i) through (iv), the Borrower will immediately make a prepayment of
principal on the Loans equal to, and the Borrowing Base will automatically
reduce by, an amount equal to 100% of the Release Price.
2.2.7. In the event the Aggregate Outstanding Credit Exposure
shall, at any time, be in excess of the amount of the Borrowing Base in effect
at such time, then the Borrower shall immediately prepay Credit Extensions in an
amount at least equal to such excess.
2.3. Termination. The Aggregate Outstanding Credit Exposure and all other
unpaid Obligations shall be paid in full by the Borrower on the
Facility Termination Date.
2.4. Ratable Loans. Each Advance hereunder shall consist of Loans made from
the several Lenders ratably according to their Pro Rata Shares.
2.5. Types of Advances. The Advances may be Floating Rate Advances or
Eurodollar Advances, or a combination thereof, selected by the
Borrower in accordance with Sections 2.9 and 2.10.
2.6. Commitment Fee; Reductions in Borrowing Base. The Borrower agrees to
pay to the Agent for the account of each Lender, according to its Pro Rata
Share, a commitment fee at a per annum rate equal to the Applicable Fee Rate on
the average daily Available Borrowing Base from the date hereof to and including
the Facility Termination Date, payable in arrears for the immediately preceding
three (3) calendar month period on each Payment Date hereafter and on the
Facility Termination Date. The Borrower may permanently reduce the Borrowing
Base in whole, or in part ratably among the Lenders in integral multiples of
$1,000,000, upon at least five Business Days' written notice to the Agent, which
notice shall specify the amount of any such reduction, provided, however, that
the amount of the Borrowing Base may not be reduced below the Aggregate
Outstanding Credit Exposure. All accrued commitment fees shall be payable on the
effective date of any termination of the obligations of the Lenders to make
Credit Extensions hereunder.
2.7. Minimum Amount of Each Advance. Each Eurodollar Advance shall be in
the minimum amount of $1,000,000 (and in multiples of $100,000 if in excess
thereof), and each Floating Rate Advance shall be in the minimum amount of
$200,000 (and in multiples of $100,000 if in excess thereof), provided, however,
that any Floating Rate Advance may be in the amount of the Available Borrowing
Base.
Page 21
2.8. Optional Principal Payments. The Borrower may from time to time pay,
without penalty or premium, all outstanding Floating Rate Advances, or, in a
minimum aggregate amount of $500,000 or any integral multiple of $100,000 in
excess thereof, any portion of the outstanding Floating Rate Advances upon one
Business Day's prior notice to the Agent. The Borrower may from time to time
pay, subject to the payment of any funding indemnification amounts required by
Section 3.4 but without penalty or premium, all outstanding Eurodollar Advances,
or, in a minimum aggregate amount of $500,000 or any integral multiple of
$100,000 in excess thereof, any portion of the outstanding Eurodollar Advances
upon three Business Days' prior notice to the Agent.
2.9. Method of Selecting Types and Interest Periods for New Advances. The
Borrower shall select the Type of Advance and, in the case of each Eurodollar
Advance, the Interest Period applicable thereto from time to time. The Borrower
shall give the Agent irrevocable notice (a "Borrowing Notice") not later than
10:00 a.m. (Houston time) at least one Business Day before the Borrowing Date of
each Floating Rate Advance and three Business Days before the Borrowing Date for
each Eurodollar Advance, specifying:
(i) the Borrowing Date, which shall be a Business Day, of such Advance,
(ii) the aggregate amount of such Advance,
(iii) the Type of Advance selected, and
(iv) in the case of each Eurodollar Advance, the Interest Period applicable
thereto.
Not later than noon (Houston time) on each Borrowing Date, each Lender shall
make available its Loan or Loans in funds immediately available in Houston to
the Agent at its address specified pursuant to Article XIII. The Agent will make
the funds so received from the Lenders available to the Borrower at the Agent's
aforesaid address.
2.10. Conversion and Continuation of Outstanding Advances. Floating Rate
Advances shall continue as Floating Rate Advances unless and until such Floating
Rate Advances are converted into Eurodollar Advances pursuant to this Section
2.10 or are repaid in accordance with Section 2.8. Each Eurodollar Advance shall
continue as a Eurodollar Advance until the end of the then applicable Interest
Period therefor, at which time such Eurodollar Advance shall be automatically
converted into a Floating Rate Advance unless (x) such Eurodollar Advance is or
was repaid in accordance with Section 2.8 or (y) the Borrower shall have given
the Agent a Conversion/Continuation Notice (as defined below) requesting that,
at the end of such Interest Period, such Eurodollar Advance continue as a
Eurodollar Advance for the same or another Interest Period. Subject to the terms
of Section 2.7, the Borrower may elect from time to time to convert all or any
part of a Floating Rate Advance into a Eurodollar Advance. The Borrower shall
give the Agent irrevocable notice (a "Conversion/Continuation Notice") of each
conversion of a Floating Rate Advance into a Eurodollar Advance or continuation
of a Eurodollar Advance
Page 22
not later than 10:00 a.m. (Houston time) at least three Business Days prior to
the date of the requested conversion or continuation, specifying:
(i) the requested date, which shall be a Business Day, of such conversion
or continuation,
(ii) the aggregate amount and Type of the Advance which is to be converted
or continued, and
(iii) the amount of such Advance which is to be converted into or continued
as a Eurodollar Advance and the duration of the Interest Period
applicable thereto.
2.11. Changes in Interest Rate, etc. Each Floating Rate Advance shall bear
interest on the outstanding principal amount thereof, for each day from and
including the date such Advance is made or is automatically converted from a
Eurodollar Advance into a Floating Rate Advance pursuant to Section 2.10, to but
excluding the date it is paid or is converted into a Eurodollar Advance pursuant
to Section 2.10 hereof, at a rate per annum equal to the Floating Rate for such
day. Changes in the rate of interest on that portion of any Advance maintained
as a Floating Rate Advance will take effect simultaneously with each change in
the Alternate Base Rate. Each Eurodollar Advance shall bear interest on the
outstanding principal amount thereof from and including the first day of the
Interest Period applicable thereto to (but not including) the last day of such
Interest Period at the interest rate determined by the Agent as applicable to
such Eurodollar Advance based upon the Borrower's selections under Sections 2.8
and 2.9 and otherwise in accordance with the terms hereof. No Interest Period
may end after the Facility Termination Date.
2.12. Rates Applicable After Default. Notwithstanding anything to the
contrary contained in Section 2.9 or 2.10, during the continuance of a Default
the Required Lenders may, at their option, by notice to the Borrower (which
notice may be revoked at the option of the Required Lenders notwithstanding any
provision of Section 8.2 requiring unanimous consent of the Lenders to changes
in interest rates), declare that no Advance may be made as, converted into or
continued as a Eurodollar Advance. During the continuance of a Default the
Required Lenders may, at their option, by notice to the Borrower (which notice
may be revoked at the option of the Required Lenders notwithstanding any
provision of Section 8.2 requiring unanimous consent of the Lenders to changes
in interest rates), declare that (i) each Eurodollar Advance shall bear interest
for the remainder of the applicable Interest Period at the rate otherwise
applicable to such Interest Period plus 2% per annum and (ii) each Floating Rate
Advance shall bear interest at a rate per annum equal to the Floating Rate in
effect from time to time plus 2% per annum, provided that, during the
continuance of a Default under Section 7.6 or 7.7, the interest rates set forth
in clauses (i) and (ii) above shall be applicable to all Credit Extensions
without any election or action on the part of the Agent or any Lender.
Page 23
2.13. Method of Payment. All payments of the Obligations hereunder shall be
made, without setoff, deduction, or counterclaim, in immediately available funds
to the Agent at the Agent's address specified pursuant to Article XIII, or at
any other Lending Installation of the Agent specified in writing by the Agent to
the Borrower, by noon (local time) on the date when due and shall (except in the
case of Reimbursement Obligations for which the LC Issuer has not been fully
indemnified by Lenders, or as otherwise specifically required hereunder) be
applied ratably by the Agent among the Lenders. Each payment delivered to the
Agent for the account of any Lender shall be delivered promptly by the Agent to
such Lender in the same type of funds that the Agent received at its address
specified pursuant to Article XIII or at any Lending Installation specified in a
notice received by the Agent from such Lender. Each reference to the Agent in
this Section 2.13 shall also be deemed to refer, and shall apply equally, to the
LC Issuer, in the case of payments required to be made by the Borrower to the LC
Issuer pursuant to Section 2.21.6. The Agent is hereby authorized to charge the
account of the Borrower maintained with Bank One for each payment of principal,
interest and fees as it becomes due hereunder.
2.14. Noteless Agreement; Evidence of Indebtedness. (i) Each Lender shall
maintain in accordance with its usual practice an account or accounts evidencing
the indebtedness of the Borrower to such Lender resulting from each Loan made by
such Lender from time to time, including the amounts of principal and interest
payable and paid to such Lender from time to time hereunder.
(ii) The Agent shall also maintain accounts in which it will
record (a) the amount of each Loan made hereunder, the Type thereof and the
Interest Period with respect thereto, (b) the amount of any principal or
interest due and payable or to become due and payable from the Borrower to each
Lender hereunder, (c) the original stated amount of each Facility LC and the
amount of LC Obligations outstanding at any time, and (d) the amount of any sum
received by the Agent hereunder from the Borrower and each Lender's share
thereof.
(iii) The entries maintained in the accounts maintained
pursuant to paragraphs (i) and (ii) above shall be prima facie evidence of the
existence and amounts of the Obligations therein recorded; provided, however,
that the failure of the Agent or any Lender to maintain such accounts or any
error therein shall not in any manner affect the obligation of the Borrower to
repay the Obligations in accordance with their terms.
(iv) Any Lender may request that its Loans be evidenced by a
promissory note (a "Note"). In such event, the Borrower shall prepare, execute
and deliver to such Lender a Note payable to the order of such Lender in a form
supplied by the Agent. Thereafter, the Loans evidenced by such Note and interest
thereon shall at all times (including after any assignment pursuant to Section
12.3) be represented by one or more Notes payable to the order of the payee
named therein or any assignee pursuant to Section 12.3, except to the extent
that any such Lender or assignee subsequently returns any such Note for
cancellation and requests that such Loans once again be evidenced as described
in paragraphs (i) and (ii) above.
Page 24
2.15. Telephonic Notices. The Borrower hereby authorizes the Lenders and
the Agent to extend, convert or continue Advances, effect selections of Types of
Advances and to transfer funds based on telephonic notices made by any person or
persons designated in writing by the Borrower from time to time, it being
understood that the foregoing authorization is specifically intended to allow
Borrowing Notices and Conversion/Continuation Notices to be given
telephonically. The Borrower agrees to deliver promptly to the Agent a written
confirmation, if such confirmation is requested by the Agent or any Lender, of
each telephonic notice signed by an Authorized Officer. If the written
confirmation differs in any material respect from the action taken by the Agent
and the Lenders, the records of the Agent and the Lenders shall govern absent
manifest error.
2.16. Interest Payment Dates; Interest and Fee Basis. Interest accrued on
each Floating Rate Advance shall be payable on each Payment Date, commencing
with the first such date to occur after the date hereof, on any date on which
the Floating Rate Advance is prepaid, whether due to acceleration or otherwise,
and at maturity. Interest accrued on that portion of the outstanding principal
amount of any Floating Rate Advance converted into a Eurodollar Advance on a day
other than a Payment Date shall be payable on the date of conversion. Interest
on Floating Rate Advances, commitment fees and LC Fees shall be calculated for
actual days elapsed on a basis of a 365, or when appropriate 366, day per year.
Interest accrued on each Eurodollar Advance shall be payable on the last day of
its applicable Interest Period, on any date on which the Eurodollar Advance is
prepaid, whether by acceleration or otherwise, and at maturity. Interest accrued
on each Eurodollar Advance having an Interest Period longer than three months
shall also be payable on the last day of each three-month interval during such
Interest Period. Interest on Eurodollar Advances shall be calculated for actual
days elapsed on the basis of a 360-day year. Interest shall be payable for the
day an Advance is made but not for the day of any payment on the amount paid if
payment is received prior to noon (local time) at the place of payment. If any
payment of principal of or interest on a Floating Rate Advance shall become due
on a day which is not a Business Day, such payment shall be made on the next
succeeding Business Day and, in the case of a principal payment, such extension
of time shall be included in computing interest in connection with such payment.
2.17. Notification of Advances, Interest Rates, Facility LCs, Prepayments
and Commitment Reductions. Promptly after receipt thereof, the Agent will notify
each Lender of the contents of each Aggregate Commitment reduction notice,
Borrowing Notice, Conversion/Continuation Notice, and repayment notice received
by it hereunder. Promptly after notice from the LC Issuer, the Agent will notify
each Lender of the contents of each request for issuance of a Facility LC
hereunder. The Agent will notify each Lender of the interest rate applicable to
each Eurodollar Advance promptly upon determination of such interest rate and
will give each Lender prompt notice of each change in the Alternate Base Rate.
2.18. Lending Installations. Each Lender may book its Loans and its
participation in any LC Obligations and the LC Issuer may book the Facility LCs
at any Lending Installation
Page 25
selected by such Lender or the LC Issuer, as the case may be, and may change its
Lending Installation from time to time. All terms of this Agreement shall apply
to any such Lending Installation and the Loans, Facility LCs, participations in
LC Obligations and any Notes issued hereunder shall be deemed held by each
Lender or the LC Issuer, as the case may be, for the benefit of any such Lending
Installation. Each Lender and the LC Issuer may, by written notice to the Agent
and the Borrower in accordance with Article XIII, designate replacement or
additional Lending Installations through which Loans will be made by it or
Facility LCs will be issued by it and for whose account Loan payments or
payments with respect to Facility LCs are to be made.
2.19. Non-Receipt of Funds by the Agent. Unless the Borrower or a Lender,
as the case may be, notifies the Agent prior to the date on which it is
scheduled to make payment to the Agent of (i) in the case of a Lender, the
proceeds of a Loan or (ii) in the case of the Borrower, a payment of principal,
interest or fees to the Agent for the account of the Lenders, that it does not
intend to make such payment, the Agent may assume that such payment has been
made. The Agent may, but shall not be obligated to, make the amount of such
payment available to the intended recipient in reliance upon such assumption. If
such Lender or the Borrower, as the case may be, has not in fact made such
payment to the Agent, the recipient of such payment shall, on demand by the
Agent, repay to the Agent the amount so made available together with interest
thereon in respect of each day during the period commencing on the date such
amount was so made available by the Agent until the date the Agent recovers such
amount at a rate per annum equal to (x) in the case of payment by a Lender, the
Federal Funds Effective Rate for such day for the first three days and,
thereafter, the interest rate applicable to the relevant Loan or (y) in the case
of payment by the Borrower, the interest rate applicable to the relevant Loan.
2.20. Replacement of Lender. If the Borrower is required pursuant to
Section 3.1, 3.2 or 3.5 to make any additional payment to any Lender or if any
Lender's obligation to make or continue, or to convert Floating Rate Advances
into, Eurodollar Advances shall be suspended pursuant to Section 3.3 (any Lender
so affected an "Affected Lender"), the Borrower may elect, if such amounts
continue to be charged or such suspension is still effective, to replace such
Affected Lender as a Lender party to this Agreement, provided that no Default or
Unmatured Default shall have occurred and be continuing at the time of such
replacement, and provided further that, concurrently with such replacement, (i)
another bank or other entity which is reasonably satisfactory to the Borrower
and the Agent shall agree, as of such date, to purchase for cash the Advances
and other Obligations due to the Affected Lender pursuant to an assignment
substantially in the form of Exhibit C and to become a Lender for all purposes
under this Agreement and to assume all obligations of the Affected Lender to be
terminated as of such date and to comply with the requirements of Section 12.3
applicable to assignments, and (ii) the Borrower shall pay to such Affected
Lender in same day funds on the day of such replacement (A) all interest, fees
and other amounts then accrued but unpaid to such Affected Lender by the
Borrower hereunder to and including the date of termination, including without
limitation payments due to such Affected Lender under Sections 3.1, 3.2 and 3.5,
and (B) an amount, if any, equal to the payment which would have been due to
such Lender on the day of such
Page 26
replacement under Section 3.4 had the Loans of such Affected Lender been prepaid
on such date rather than sold to the replacement Lender.
2.21. Facility LCs.
2.21.1. Issuance. The LC Issuer hereby agrees, on the terms
and conditions set forth in this Agreement, to issue standby and commercial
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 shall not exceed
$5,000,000 and (ii) the Aggregate Outstanding Credit Exposure shall not exceed
the lesser of (a) the Aggregate Commitment and (b) the Borrowing Base. 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; provided, however, that any Facility LC with a one-year tenor may
provide for the renewal thereof for additional one-year periods (which shall in
no event extend beyond the fifth Business Day prior to the Facility Termination
Date) unless the LC Issuer provides prior notice of non-renewal to the
beneficiary of such Facility LC.
2.21.2. Participations. Upon the issuance or Modification by
the LC Issuer of a Facility LC in accordance with this Section 2.21, the LC
Issuer shall be deemed, without further action by any party hereto, to have
unconditionally and irrevocably sold to each Lender, and each Lender 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 Pro Rata Share.
2.21.3. Notice. Subject to Section 2.21.1, the Borrower shall
give the LC Issuer notice prior to 10:00 a.m. (Houston 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 Agent, and the Agent shall promptly notify each Lender, of
the contents thereof and of the amount of such Lender'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
IV (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.
Page 27
2.21.4. LC Fees. The Borrower shall pay to the Agent, for the
account of the Lenders ratably in accordance with their respective Pro Rata
Shares, with respect to each Facility LC, a letter of credit fee at a per annum
rate equal to the Applicable Margin for Eurodollar Rate Loans per annum on the
average daily undrawn stated amount under such standby Facility LC, such fee to
be payable in arrears on each Payment Date (such fee described in this sentence
an "LC Fee"); provided, that during the continuance of a Default the LC Fee
shall be the sum of 2% plus the Applicable Margin for Eurodollar Rate Loans per
annum. The Borrower shall also pay to the LC Issuer for its own account (x) in
arrears on each Payment Date, a fronting fee of .25% per annum of the face
amount of each Facility LC, 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.
2.21.5. Administration; Reimbursement by Lenders. Upon receipt
from the beneficiary of any Facility LC of any demand for payment under such
Facility LC, the LC Issuer shall notify the Agent and the Agent shall promptly
notify the Borrower and each other Lender 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 Lender
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 Lender
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 Lender's Pro Rata 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 pursuant to Section 2.21.6 below, plus (ii) interest on the
foregoing amount to be reimbursed by such Lender, 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 time) on such date, from the next succeeding Business Day)
to the date on which such Lender 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 rate
applicable to Floating Rate Advances.
2.21.6. 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 Lender shall hereby be precluded from asserting any claim for direct
(but not consequential) damages suffered by the Borrower or such Lender to the
extent, but only to the extent, caused by (i) the willful misconduct or gross
negligence of the LC Issuer in
Page 28
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 Floating Rate Advances 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 Floating Rate Advances for such day if such day falls after
such LC Payment Date. The LC Issuer will pay to each Lender ratably in
accordance with its Pro Rata 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 Lender has made payment to the LC Issuer in respect of such Facility LC
pursuant to Section 2.21.5. Subject to the terms and conditions of this
Agreement (including without limitation the submission of a Borrowing Notice in
compliance with Section 2.9 and the satisfaction of the applicable conditions
precedent set forth in Article IV), the Borrower may request an Advance
hereunder for the purpose of satisfying any Reimbursement Obligation.
2.21.7. Obligations Absolute. The Borrower's obligations under
this Section 2.21 shall be absolute and unconditional under any and all
circumstances and irrespective of any setoff, counterclaim or defense to payment
that the Borrower may have or have had against the LC Issuer, any Lender or any
beneficiary of a Facility LC. The Borrower further agrees with the LC Issuer and
the Lenders that the LC Issuer and the Lenders 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 Lender 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 Lender under any liability to
the Borrower. Nothing in this Section 2.21.7 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 2.21.6.
2.21.8. 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
Page 29
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 Lenders as it reasonably deems appropriate or it
shall first be indemnified to its reasonable satisfaction by the Lenders 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 2.21, 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 Lenders, and such request and any
action taken or failure to act pursuant thereto shall be binding upon the
Lenders and any future holders of a participation in any Facility LC.
2.21.9. Indemnification. The Borrower hereby agrees to
indemnify and hold harmless each Lender, the LC Issuer and the 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
Lender, the LC Issuer or the Agent may incur (or which may be claimed against
such Lender, the LC Issuer or the 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 Lender 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 Lender) 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 Lender, the LC Issuer or the 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
2.21.9 is intended to limit the obligations of the Borrower under any other
provision of this Agreement.
2.21.9. Lenders' Indemnification. Each Lender shall, ratably
in accordance with its Pro Rata 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
Page 30
indemnitees may suffer or incur in connection with this Section 2.21 or any
action taken or omitted by such indemnitees hereunder.
2.21.11. Rights as a Lender. In its capacity as a Lender, the
LC Issuer shall have the same rights and obligations as any other Lender.
2.22. Collateral
2.22.1 First Lien. The full and complete payment and
performance of the Secured Obligations shall be secured under the Collateral
Documents ratably and pari passu with any Liens securing Rate Management
Transactions by first and prior Lender Liens in, to and on all of the following
Rights, titles, and interests in and to (but none of the Borrower's obligations
with respect to) the following items and types of Property, all as more
particularly set forth in the Collateral Documents:
(i) all present and future Rights, titles and interests that the
Borrower and any Guarantor now own or hereafter acquire in and to
their respective Oil and Gas Properties including, but not
limited to, oil and gas and/or oil, gas and mineral leases and
interests, royalty and overriding royalty interests, production
payment and net profits interests, mineral fee interests, and
Rights therein, including, without limitation, all reversionary
or carried interests relating to the foregoing, together with all
present and future Rights, titles and interests in and to all
present and future unitization, communitization and pooling
agreements (and all properties covered and units created
thereby), whether arising by contract or operation of Law, which
now or hereafter include all or any part of the foregoing and
together with all lands now or hereafter subject to any of the
foregoing, and all tenements, hereditaments, appurtenances, and
properties in anywise appertaining, belonging, affixed or
incidental to any of the foregoing; and
(ii) all present and future oil, gas or other liquid and gaseous
hydrocarbons, and other minerals now or hereafter accruing to or
produced from mineral interests described in (i) preceding and/or
to which the Borrower and any Guarantor now or hereafter may be
entitled as a result of ownership thereof; and
(iii) whether now owned or hereafter acquired, all present and future
Rights, titles and interests of the Borrower and any Guarantor
(including without limitation, the Rights to receive payments due
thereunder) in and to any and all gas sales contracts, oil, gas
or other condensates or other products sales contracts now or
hereafter existing in connection with the Collateral described
hereinabove; and
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(iv) all present and future increases, profits, combinations and
reclassifications of, and substitutions and replacements for, all
or part of the Collateral heretofore described; and
(v) a pledge of all of the membership interest of the Borrower, and
of all of the outstanding securities of any Subsidiary of the
Borrower;
provided, Agent may elect, in its sole discretion, to not record Collateral
Documents with respect to certain minor value Property not to exceed ten percent
(10%) of the total value of the Borrower's producing Oil and Gas Property.
2.22.2 Lender Liens. The Lender Liens in the Collateral shall be
further evidenced and governed by the Collateral Documents.
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Page 32
ARTICLE III
YIELD PROTECTION; TAXES
3.1. Yield Protection. If, on or after the date of this Agreement, the
adoption of any Law or any governmental or quasi-governmental rule, regulation,
policy, guideline or directive (whether or not having the force of Law), or any
change in the interpretation or administration thereof by any governmental or
quasi-governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Lender or
applicable Lending Installation or the LC Issuer with any request or directive
(whether or not having the force of Law) of any such authority, central bank or
comparable agency:
(i) subjects any Lender or any applicable Lending Installation or
the LC Issuer to any Taxes, or changes the basis of taxation
of payments (other than with respect to Excluded Taxes) to any
Lender or the LC Issuer in respect of its Eurodollar Loans or
Facility LCs or participations therein, or
(ii) imposes or increases or deems applicable any reserve,
assessment, insurance charge, special deposit or similar
requirement against assets of, deposits with or for the
account of, or credit extended by, any Lender or any
applicable Lending Installation or the LC Issuer (other than
reserves and assessments taken into account in determining the
interest rate applicable to Eurodollar Advances), or
(iii) imposes any other condition the result of which is to increase
the cost to any Lender or any applicable Lending Installation
or the LC Issuer of making, funding or maintaining its
Eurodollar Loans or issuing or participating in Facility LCs,
or reduces any amount receivable by any Lender or any
applicable Lending Installation or the LC Issuer in connection
with its Eurodollar Loans or Facility LCs or participations
therein, or requires any Lender or any applicable Lending
Installation or the LC Issuer to make any payment calculated
by reference to the amount of Eurodollar Loans held or
interest or LC Fees received by it, by an amount deemed
material by such Lender or the LC Issuer, as the case may be,
and the result of any of the foregoing is to increase the cost to such Lender or
applicable Lending Installation or the LC Issuer, as the case may be, of making
or maintaining its Eurodollar Loans or Commitment or issuing or participating in
Facility LCs, or to reduce the return received by such Lender or applicable
Lending Installation or the LC Issuer, as the case may be, in connection with
such Eurodollar Loans or Commitment or Facility LCs or participations therein,
then, within 15 days of demand by such Lender or the LC Issuer, the Borrower
shall pay such Lender or the LC Issuer such additional amount or amounts as will
compensate such Lender or the LC Issuer for such increased cost or reduction in
amount received.
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3.2. Changes in Capital Adequacy Regulations. If a Lender or the LC
Issuer determines the amount of capital required or expected to be maintained by
such Lender or the LC Issuer, any Lending Installation of such Lender or the LC
Issuer, or any corporation controlling such Lender or the LC Issuer is increased
as a result of a Change, then, within 30 days of demand by such Lender or the LC
Issuer, the Borrower shall pay such Lender or the LC Issuer the amount necessary
to compensate for any shortfall in the rate of return on the portion of such
increased capital which such Lender or the LC Issuer determines is attributable
to this Agreement, its Outstanding Credit Exposure, or its Commitment to make
Loans and issue or participate in Facility LCs, as the case may be, hereunder
(after taking into account such Lender's or the LC Issuer's policies as to
capital adequacy). "Change" means (i) any change after the date of this
Agreement in the Risk-Based Capital Guidelines or (ii) any adoption of or change
in any other Law, governmental or quasi-governmental rule, regulation, policy,
guideline, interpretation, or directive (whether or not having the force of Law)
after the date of this Agreement which affects the amount of capital required or
expected to be maintained by any Lender, the LC Issuer or any Lending
Installation or any corporation controlling any Lender or the LC Issuer.
"Risk-Based Capital Guidelines" means (i) the risk-based capital guidelines in
effect in the United States on the date of this Agreement, including transition
rules, and (ii) the corresponding capital regulations promulgated by regulatory
authorities outside the United States implementing the July 1988 report of the
Basle Committee on Banking Regulation and Supervisory Practices Entitled
"International Convergence of Capital Measurements and Capital Standards,"
including transition rules, and any amendments to such regulations adopted prior
to the date of this Agreement.
3.3. Availability of Types of Advances. If any Lender determines that
maintenance of its Eurodollar Loans at a suitable Lending Installation would
violate any applicable Law, rule, regulation, or directive, whether or not
having the force of Law, or if the Required Lenders determine that (i) deposits
of a type and maturity appropriate to match fund Eurodollar Advances are not
available or (ii) the interest rate applicable to Eurodollar Advances does not
accurately reflect the cost of making or maintaining Eurodollar Advances, then
the Agent shall suspend the availability of Eurodollar Advances and require any
affected Eurodollar Advances to be repaid or converted to Floating Rate
Advances, subject to the payment of any funding indemnification amounts required
by Section 3.4.
3.4. Funding Indemnification. If any payment of a Eurodollar Advance
occurs on a date which is not the last day of the applicable Interest Period,
whether because of acceleration, prepayment or otherwise, or a Eurodollar
Advance is not made on the date specified by the Borrower for any reason other
than default by the Lenders, the Borrower will indemnify each Lender for any
loss or cost incurred by it resulting therefrom, including, without limitation,
any loss or cost in liquidating or employing deposits acquired to fund or
maintain such Eurodollar Advance.
3.5. Taxes.
Page 34
3.5.1 All payments by the Borrower to or for the account of
any Lender, the LC Issuer or the Agent hereunder or under any Note or Facility
LC Application shall be made free and clear of and without deduction for any and
all Taxes. If the Borrower shall be required by Law to deduct any Taxes from or
in respect of any sum payable hereunder to any Lender, the LC Issuer or the
Agent, (i) the sum payable shall be increased as necessary so that after making
all required deductions (including deductions applicable to additional sums
payable under this Section 3.5) such Lender, the LC Issuer or the Agent (as the
case may be) receives an amount equal to the sum it would have received had no
such deductions been made, (ii) the Borrower shall make such deductions, (iii)
the Borrower shall pay the full amount deducted to the relevant authority in
accordance with applicable Law and (d) the Borrower shall furnish to the Agent
the original copy of a receipt evidencing payment thereof within 30 days after
such payment is made.
3.5.2 In addition, the Borrower hereby agrees to pay any
present or future stamp or documentary taxes and any other excise or property
taxes, charges or similar levies which arise from any payment made hereunder or
under any Note or Facility LC Application or from the execution or delivery of,
or otherwise with respect to, this Agreement or any Note or Facility LC
Application ("Other Taxes").
3.5.3 The Borrower hereby agrees to indemnify the Agent, the
LC Issuer and each Lender for the full amount of Taxes or Other Taxes
(including, without limitation, any Taxes or Other Taxes imposed on amounts
payable under this Section 3.5) paid by the Agent, the LC Issuer or such Lender
and any liability (including penalties, interest and expenses) arising therefrom
or with respect thereto. Payments due under this indemnification shall be made
within 30 days of the date the Agent, the LC Issuer or such Lender makes demand
therefor pursuant to Section 3.6.
3.5.4 Each Lender that is not incorporated under the Laws of
the United States of America or a state thereof (each a "Non-U.S. Lender")
agrees that it will, not less than ten Business Days after the date of this
Agreement, (i) deliver to each of the Borrower and the Agent two duly completed
copies of United States Internal Revenue Service Form W-8BEN or W-8ECI,
certifying in either case that such Lender is entitled to receive payments under
this Agreement without deduction or withholding of any United States federal
income taxes, and (ii) deliver to each of the Borrower and the Agent a United
States Internal Revenue Form W-8 or W-9, as the case may be, and certify that it
is entitled to an exemption from United States backup withholding tax. Each
Non-U.S. Lender further undertakes to deliver to each of the Borrower and the
Agent (x) renewals or additional copies of such form (or any successor form) on
or before the date that such form expires or becomes obsolete, and (y) after the
occurrence of any event requiring a change in the most recent forms so delivered
by it, such additional forms or amendments thereto as may be reasonably
requested by the Borrower or the Agent. All forms or amendments described in the
preceding sentence shall certify that such Lender is entitled to receive
payments under this Agreement without deduction or withholding of any United
States federal income taxes, unless an event (including without limitation any
change in treaty, Law or
Page 35
regulation) has occurred prior to the date on which any such delivery would
otherwise be required which renders all such forms inapplicable or which would
prevent such Lender from duly completing and delivering any such form or
amendment with respect to it and such Lender advises the Borrower and the Agent
that it is not capable of receiving payments without any deduction or
withholding of United States federal income tax.
3.5.5 For any period during which a Non-U.S. Lender has failed
to provide the Borrower with an appropriate form pursuant to Section 3.5.4 above
(unless such failure is due to a change in treaty, Law or regulation, or any
change in the interpretation or administration thereof by any governmental
authority, occurring subsequent to the date on which a form originally was
required to be provided), such Non-U.S. Lender shall not be entitled to
indemnification under this Section 3.5 with respect to Taxes imposed by the
United States; provided that, should a Non-U.S. Lender which is otherwise exempt
from or subject to a reduced rate of withholding tax become subject to Taxes
because of its failure to deliver a form required under Section 3.5.4, the
Borrower shall take such steps as such Non-U.S. Lender shall reasonably request
to assist such Non-U.S. Lender to recover such Taxes.
3.5.6 Any Lender that is entitled to an exemption from or
reduction of withholding tax with respect to payments under this Agreement or
any Note pursuant to the Law of any relevant jurisdiction or any treaty shall
deliver to the Borrower (with a copy to the Agent), at the time or times
prescribed by applicable Law, such properly completed and executed documentation
prescribed by applicable Law as will permit such payments to be made without
withholding or at a reduced rate.
3.5.7 If the U.S. Internal Revenue Service or any other
governmental authority of the United States or any other country or any
political subdivision thereof asserts a claim that the Agent did not properly
withhold tax from amounts paid to or for the account of any Lender (because the
appropriate form was not delivered or properly completed, because such Lender
failed to notify the Agent of a change in circumstances which rendered its
exemption from withholding ineffective, or for any other reason), such Lender
shall indemnify the Agent fully for all amounts paid, directly or indirectly, by
the Agent as tax, withholding therefor, or otherwise, including penalties and
interest, and including taxes imposed by any jurisdiction on amounts payable to
the Agent, under this Section 3.5.7, together with all costs and expenses
related thereto (including attorneys' fees and time charges of attorneys for the
Agent, which attorneys may be employees of the Agent). The obligations of the
Lenders under this Section 3.5.7 shall survive the payment of the Obligations
and termination of this Agreement.
3.6. Lender Statements; Survival of Indemnity. To the extent
reasonably possible, each Lender shall designate an alternate Lending
Installation with respect to its Eurodollar Loans to reduce any liability of the
Borrower to such Lender under Sections 3.1, 3.2 and 3.5 or to avoid the
unavailability of Eurodollar Advances under Section 3.3, so long as such
designation is not, in the judgment of such Lender, disadvantageous to such
Lender. Each Lender shall deliver a written statement of such Lender to the
Borrower (with a copy to the
Page 36
Agent) as to the amount due, if any, under Section 3.1, 3.2, 3.4 or 3.5. Such
written statement shall set forth in reasonable detail the calculations upon
which such Lender determined such amount and shall be final, conclusive and
binding on the Borrower in the absence of manifest error. Determination of
amounts payable under such Sections in connection with a Eurodollar Loan shall
be calculated as though each Lender funded its Eurodollar Loan through the
purchase of a deposit of the type and maturity corresponding to the deposit used
as a reference in determining the Eurodollar Rate applicable to such Loan,
whether in fact that is the case or not. Unless otherwise provided herein, the
amount specified in the written statement of any Lender shall be payable on
demand after receipt by the Borrower of such written statement. The obligations
of the Borrower under Sections 3.1, 3.2, 3.4 and 3.5 shall survive payment of
the Obligations and termination of this Agreement.
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Page 37
ARTICLE IV
CONDITIONS PRECEDENT
4.1. Initial Credit Extension.
4.1.1 The Lenders shall not be required to make the initial
Credit Extension hereunder unless the Borrower has furnished the following to
the Agent with sufficient copies for the Lenders:
(i) this Agreement;
(ii) copies of the certificate of formation or other
applicable document of the Borrower, together with
all amendments thereto, and certificates of good
standing, each certified by the appropriate
governmental officer in each such company's
jurisdiction of formation;
(iii) a copy of the articles or certificate of
incorporation of the Guarantor together with all
amendments thereto, and a certificate of good
standing, each certified by the appropriate
governmental officer in its jurisdiction of
incorporation;
(iv) a copy certified by the Secretary or Assistant
Secretary of Borrower of (i) its limited liability
company agreement, and (ii) resolutions from its
managers authorizing the execution of the Loan
Documents to which it is a party;
(v) copies certified by the Secretary or Assistant
Secretary of the Guarantor of (i) its by-laws and
(ii) resolutions of its Board of Directors
authorizing the execution of the Loan Documents to
which it is a party;
(vi) incumbency certificates, executed by the respective
Secretary or Assistant Secretary of the Borrower and
the Guarantor which shall identify by name and title
and bear the signatures of the Authorized Officers
and any other officers authorized to sign the Loan
Documents to which the Borrower and the Guarantor,
respectively is a party, upon which certificate the
Agent and the Lenders shall be entitled to rely until
informed of any change in writing by the Borrower;
(vii) a certificate, signed by the chief financial officer
of the Borrower, stating that on the initial Credit
Extension Date no Default or Unmatured Default has
occurred and is continuing;
Page 38
(viii) written opinions of counsel to the Borrower and the
Guarantor addressed to the Agent and Lenders and
their counsel in substantially the form of Exhibit D;
(ix) the Notes issued pursuant to Section 2.14 payable to
the order of each Lender, and, if the initial Credit
Extension will be the issuance of a Facility LC, a
properly completed Facility LC Application;
(x) the Deed of Trust, executed by Borrower, in a form
satisfactory to the Agent, the Lenders and their
counsel with respect to the Properties therein
described, which are part of the Collateral, and such
other agreements, documents and instruments as may be
necessary and appropriate, in form and substance
satisfactory to the Agent and the Lenders, executed
and delivered by Borrower, as mortgagor or assignor,
in favor of the Agent, ratably for the benefit of the
Lenders, in order to create and perfect the Lender
Liens in and to all Collateral described therein;
(xi) the Pledge Agreement, executed by the Guarantor, in a
form satisfactory to the Agent, the Lenders and their
counsel with respect to the Properties therein
described, which are a part of the Collateral;
(xii) the Guaranty, executed by Guarantor, in a form
satisfactory to the Agent, the Lenders, and their
counsel;
(xiii) written money transfer instructions, in substantially
the form of Exhibit E, addressed to the Agent and
signed by an Authorized Officer of the Borrower, on
behalf of the Borrower, together with such other
related money transfer authorizations as the Agent
may have reasonably requested;
(xiv) title opinions from counsel acceptable to the Agent,
or title review satisfactory to the Agent, with
respect to the Oil and Gas Properties included in the
Collateral and in a form acceptable to the Agent and
the Lenders, covering at least ninety percent (90%)
of the aggregate value of such Oil and Gas
Properties;
(xv) the Initial Reserve Report upon which the initial
Borrowing Base has been determined acceptable to all
the Lenders;
(xvi) copies of any environmental reports regarding any
environmental assessment of the Oil and Gas
Properties included in the Collateral, which shall be
acceptable to all Lenders;
Page 39
(xvii) the insurance certificate(s) described in Section
5.20;
(xviii) detailed monthly projections (including balance
sheets, income and cash flow statements) for the
Guarantor, the Borrower and their Subsidiaries as of
and for the period ending December 31, 2003, which
projections shall be acceptable to the Lenders in
their sole discretion;
(xix) ISDA documents entered into between Borrower and any
of the Lenders evidencing Rate Management
Transactions with respect to the Oil and Gas
Properties of the Borrower and Guarantor with
confirmations of the transactions thereunder
providing satisfactory hedging of natural gas sales
in amounts and at prices satisfactory to the Lenders
from the date hereof through October, 2003;
(xx) the Financial Statements described in Section 5.4;
(xxi) an Assignment of Notes, Liens and Security Interests
in form an substance satisfactory to the Agent in its
sole discretion, executed by each of the lenders
currently party to the Prior Credit Agreement and
(xxii) Such other documents as any Lender or its counsel
may have reasonably requested.
4.1.2 The Lenders shall not be required to make the initial
Credit Extension hereunder unless the following conditions precedent are
satisfied, to the satisfaction of the Agent and the Lenders:
(i) the Agent and the Lenders shall have satisfactorily
completed their normal and customary due diligence in
connection with loans of the type contemplated by
this Agreement;
(ii) any Existing Rate Management Transactions with the
Lenders under the Prior Credit Agreement shall be
assigned to Bank One by the counter-parties thereto;
(iii) this Agreement and any Rate Management Transaction
(including, without limitation, the Existing Rate
Management Transaction) shall each be (or upon the
execution, delivery and filing of the Loan Documents
creating the Lenders' Liens each shall be) secured by
a pari passu first lien on substantially all of the
Oil and Gas Properties of the Borrower and
Guarantor;
Page 40
(iv) the Agent and the Lenders shall have reviewed and
become satisfied with any changes in the composition
of the Borrower's Board of Directors and executive
management occurring prior to the date of the initial
Credit Extension;
(v) there shall not have been, in the sole judgment of
the Agent, any material adverse change in the
financial condition, business, or operations of the
Borrower or any of the Borrower's Subsidiaries, or a
material adverse change with respect to their Oil and
Gas Properties; and
(vi) payment of all facility and administrative fees
required to be paid pursuant to any Loan Document and
the Fee Letter and legal fees and disbursements of
Agent's counsel.
4.2. Each Credit Extension.
(i) There exists no Default or Unmatured Default.
(ii) The representations and warranties contained in
Article V are true and correct as of such Credit
Extension Date except to the extent any such
representation or warranty is stated to relate solely
to an earlier date, in which case such representation
or warranty shall have been true and correct on and
as of such earlier date.
(iii) There exists no litigation, arbitration, governmental
investigation, proceeding or inquiry pending or
threatened against the Borrower or any of its
Subsidiaries which, if adversely determined, could
reasonably be expected to have a Material Adverse
Effect.
(iv) All legal matters incident to the making of such
Credit Extension shall be satisfactory to the Lenders
and their counsel.
(v) There shall not have been, in the sole judgment of
the Lenders, any change from the Guarantor's
financial condition as reflected in the Guarantor's
consolidated financial statements dated December 31.
2002, that would have a Material Adverse Effect on
the financial condition, business or operations of
the Guarantor, the Borrower and their Subsidiaries
taken as a whole.
Each Borrowing Notice or request for issuance of a Facility LC with
respect to each such Credit Extension shall constitute a representation and
warranty by the Borrower that the conditions contained in Sections 4.2(i), (ii)
and (iii) have been satisfied. Any Lender may
Page 41
require a duly completed compliance certificate in substantially the form of
Exhibit F as a condition to making a Credit Extension.
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Page 42
ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Guarantor and the Borrower, jointly and severally, represent and
warrant to the Lenders that:
5.1. Existence and Standing. The Borrower is a limited liability
company duly formed and organized, validly existing and in good standing under
the Laws of Louisiana. The Guarantor is a corporation duly organized validly
existing and in good standing under the Laws of Delaware. Each of the Guarantor,
the Borrower and their Subsidiaries is a corporation, partnership or limited
liability company duly and properly incorporated or organized, as the case may
be, validly existing and (to the extent such concept applies to such entity) in
good standing under the Laws of its jurisdiction of incorporation or
organization. Each of the Guarantor, the Borrower and their Subsidiaries has all
requisite authority to conduct its business in each jurisdiction in which its
business is conducted. Except as set forth in Schedule 5.1, neither the
Guarantor, the Borrower nor any of their Subsidiaries has used or transacted
business under any other name in the five (5) year period preceding the date
hereof. The Borrower is a Wholly-Owned Subsidiary of the Guarantor.
5.2. Authorization and Validity. The Guarantor, the Borrower and their
Subsidiaries have the power and authority and legal right to execute and deliver
the Loan Documents to which they respectively are a party and to perform their
respective obligations thereunder. The execution and delivery by the Guarantor,
the Borrower and their Subsidiaries of the Loan Documents to which they
respectively are a party and the performance of their respective obligations
thereunder have been duly authorized by proper corporate, partnership or limited
liability company proceedings, and the Loan Documents to which they respectively
are a party constitute their legal, valid and binding obligations enforceable
against them in accordance with their terms, except as enforceability may be
limited by bankruptcy, insolvency or similar Laws affecting the enforcement of
creditors' rights generally.
5.3. No Conflict; Government Consent. Neither the execution and
delivery by the Guarantor, the Borrower or any of their Subsidiaries of the Loan
Documents to which they respectively are a party, nor the consummation of the
transactions therein contemplated, nor compliance with the provisions thereof
will violate (i) any Law, rule, regulation, order, writ, judgment, injunction,
decree or award binding on them or (ii) the Guarantor's, the Borrower's or any
Subsidiaries's articles or certificate of incorporation, partnership agreement,
certificate of partnership, articles or certificate of organization, by-laws, or
operating or other management agreement, as the case may be, or (iii) the
provisions of any indenture, instrument or agreement to which the Guarantor, the
Borrower or any of their Subsidiaries is a party or is subject, or by which it,
or its Property, is bound, or conflict with or constitute a default thereunder,
or result in, or require, the creation or imposition of any Lien in, of or on
the Property of the Guarantor, the Borrower or a Subsidiary pursuant to the
terms of any such indenture, instrument or agreement.
Page 43
No order, consent, adjudication, approval, license, authorization, or validation
of, or filing, recording or registration with, or exemption by, or other action
in respect of any governmental or public body or authority, or any subdivision
thereof, which has not been obtained by the Guarantor, the Borrower or any of
their Subsidiaries, is required to be obtained by the Guarantor, the Borrower or
any of their Subsidiaries in connection with the execution and delivery of the
Loan Documents, the borrowings under this Agreement, the payment and performance
by the Borrower of the Obligations or the legality, validity, binding effect or
enforceability of any of the Loan Documents.
5.4. Financial Statements. The December 31, 2002 consolidated financial
statements of the Guarantor, the Borrower and their Subsidiaries heretofore
delivered to the Lenders were prepared in accordance with Agreement Accounting
Principles in effect on the date such statements were prepared and fairly
present the consolidated financial condition and operations of the Guarantor,
the Borrower and their Subsidiaries at such date and the consolidated results of
their operations for the period then ended.
5.5. Material Adverse Change. Since the date of the financial
statements delivered pursuant to Section 5.4, there has been no change in the
business, Property, prospects, condition (financial or otherwise) or results of
operations of the Guarantor, the Borrower and their Subsidiaries which could
reasonably be expected to have a Material Adverse Effect.
5.6. Taxes. The Guarantor, the Borrower and their Subsidiaries have
filed all United States federal tax returns and all other tax returns which are
required to be filed and have paid all Taxes due pursuant to said returns or
pursuant to any assessment received by the Guarantor, the Borrower or any of
their Subsidiaries, except such taxes, if any, as are being contested in good
faith and as to which adequate reserves have been provided in accordance with
Agreement Accounting Principles and as to which no Lien exists. The United
States income tax returns of the Guarantor, the Borrower and their Subsidiaries
have not been audited by the Internal Revenue Service during the time period
between September, 1998 and the date of this Agreement. No tax liens have been
filed and no claims are being asserted with respect to any such Taxes. The
charges, accruals and reserves on the books of the Guarantor, the Borrower and
their Subsidiaries in respect of any taxes or other governmental charges are
adequate.
5.7. Litigation and Contingent Obligations. Except as set forth on
Schedule 5.7, there is no litigation, arbitration, governmental investigation,
proceeding or inquiry pending or, to the knowledge of any of their officers,
threatened against or affecting the Borrower or any of its Subsidiaries which
could reasonably be expected to have a Material Adverse Effect or which seeks to
prevent, enjoin or delay the making of any Credit Extension. Other than any
liability incident to any litigation, arbitration or proceeding which (i) could
not reasonably be expected to have a Material Adverse Effect or (ii) is set
forth on Schedule 5.7, the Borrower has no material contingent obligations not
provided for or disclosed in the financial statements referred to in Section
5.4.
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5.8. Subsidiaries. Schedule 5.8 contains an accurate list of all
Subsidiaries of the Borrower as of the date of this Agreement, setting forth
their respective jurisdictions of organization, the percentage of their
respective capital stock or other ownership interests owned by the Borrower or
other Subsidiaries, their taxpayer identification number and organizational
number, if any. All of the issued and outstanding shares of capital stock or
other ownership interests of such Subsidiaries have been (to the extent such
concepts are relevant with respect to such ownership interests) duly authorized
and issued and are fully paid and non-assessable.
5.9. ERISA. The Unfunded Liabilities of all Single Employer Plans do
not in the aggregate exceed $ 100,000. Neither the Borrower nor any other member
of the Controlled Group has incurred, or is reasonably expected to incur, any
withdrawal liability to Multiemployer Plans in excess of $100,000 in the
aggregate. Each Plan complies in all material respects with all applicable
requirements of Law and regulations, no Reportable Event has occurred with
respect to any Plan, neither the Borrower nor any other member of the Controlled
Group has withdrawn from any Plan or initiated steps to do so, and no steps have
been taken to reorganize or terminate any Plan.
5.10. Accuracy of Information. Neither the Loan Documents nor any other
agreement, document, certificate, statement, information, exhibit or report
(other than projections and review reports) furnished to the Agent or any Lender
by or on behalf of the Borrower or any Subsidiary in connection with the
transactions contemplated in any of the Loan Documents contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained herein or therein not misleading. All
writings heretofore or hereafter exhibited or delivered to the Agent or any
Lender by or on behalf of the Borrower or any Subsidiary are and will be genuine
and in all respects what they purport to be.
5.11. Regulation U. Margin stock (as defined in Regulation U)
constitutes less than 25% of the value of those assets of the Guarantor, the
Borrower and their Subsidiaries which are subject to any limitation on sale,
pledge, or other restriction hereunder.
5.12. Material Agreements. Neither the Guarantor, the Borrower nor any
Subsidiary is a party to any agreement or instrument or subject to any charter
or other corporate restriction which could reasonably be expected to have a
Material Adverse Effect. Neither the Guarantor, the Borrower nor any Subsidiary
is in default in the performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in (i) any agreement to which it
is a party, which default could reasonably be expected to have a Material
Adverse Effect or (ii) any agreement or instrument evidencing or governing
Indebtedness.
5.13. Compliance With Laws.
5.13.1. The Guarantor, the Borrower and their Subsidiaries
have complied with all applicable statutes, rules, regulations, orders and
restrictions of any domestic or foreign government or any instrumentality or
agency thereof having jurisdiction over the conduct of their
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respective businesses or the ownership of their respective Property except for
any failure to comply with any of the foregoing which could not reasonably be
expected to have a Material Adverse Effect.
5.13.2. The Guarantor, the Borrower and their Subsidiaries
have all material licenses, permits, franchises, or other governmental
authorizations necessary for the ownership and, if it is the operator, operation
of their Oil and Gas Properties and the conduct of their respective businesses,
and are in compliance in all material respects with the terms and conditions of
all such licenses, permits, franchises, or other governmental authorizations.
Their Oil and Gas Properties (and properties unitized therewith) operated by
Borrower or its Subsidiaries have been maintained, operated and developed in a
good and ▇▇▇▇▇▇▇ like manner and in conformity with all applicable Laws and all
rules, regulations and orders of all duly constituted Tribunals having
jurisdiction and in conformity with the provisions of all leases, subleases or
other contracts comprising a part of the Hydrocarbon Interests and other
contracts and agreements forming a part of the Oil and Gas Properties;
specifically in this connection, (i) after the date of this Agreement, no Oil
and Gas Property is subject to having allowable production reduced below the
full and regular allowable (including the maximum permissible tolerance) because
of any overproduction (whether or not the same was permissible at the time)
prior to the date of this Agreement; and (ii) none of the ▇▇▇▇▇ comprising a
part of the Oil and Gas Properties (or properties unitized therewith) are
deviated from the vertical more than the maximum permitted by applicable Laws
and regulations, rules and orders of any Tribunal having appropriate
jurisdiction, and such ▇▇▇▇▇ are, in fact, bottomed under and are producing
from, and the wellbores are wholly within, the Oil and Gas Properties (or in the
case of ▇▇▇▇▇ located on properties unitized therewith, such unitized
properties).
5.14. Ownership/Title to the Properties; Licenses; Liens.
5.14.1. Except as set forth on Schedule 5.14, on the date of
this Agreement, the Guarantor, the Borrower and their Subsidiaries will have
good and defensible title, free of all Liens other than those permitted by
Section 6.15 or contemplated otherwise in this Agreement, all of the Collateral
(including but not limited to their respective material Oil and Gas Properties).
5.14.2. After giving full effect to the Liens permitted under
Section 6.15, except as set out in Schedule 5.14, the Guarantor, the Borrower or
their Subsidiaries own the net interests in production attributable to the ▇▇▇▇▇
and units evaluated in the Initial Reserve Report or the most recent Reserve
Report furnished to the Lenders pursuant to Section 6.1(x) or (xi). The
ownership of the Oil and Gas Properties shall not in any material respect
obligate the Borrower or any Subsidiary to bear the costs and expenses relating
to the maintenance, development and operations of each such Oil and Gas Property
in any amount in excess of the working interest of each Oil and Gas Property set
forth in the Initial Reserve Report or the most recent Reserve Report furnished
to the Lenders pursuant to Section 6.1(x) or (xi). The Guarantor, the Borrower
and their Subsidiaries shall have paid all royalties payable under the oil
Page 46
and gas leases to which they are operator, except those not yet due or contested
in accordance with the terms of the applicable joint operating agreement or
otherwise contested in good faith by appropriate proceedings. Upon the delivery
of each Reserve Report furnished to the Lenders pursuant to Section 6.1(x) or
(xi), the statements made in the preceding sentences of this section shall be
true with respect to such Reserve Reports.
5.14.3 The Borrower and each Subsidiary possesses all material
licenses, permits, franchises, patents, copyrights, trademarks and trade names,
and other intellectual property (or otherwise possess the right to use such
intellectual property without violation of the rights of any other Person) which
are necessary to carry out their respective business as presently conducted and
as presently proposed to be conducted hereafter, and neither the Borrower nor
any Subsidiary is in violation in any material respect of the terms under which
it possesses such intellectual property or the right to use such intellectual
property.
5.14.4 Upon filing of the Deed of Trusts with the Clerk of the
County or Parish where the Property thereby covered is located and the financing
statements with the appropriate governmental entity, and upon filing financing
statements relating to the other Collateral Documents with the appropriate
governmental entity, the Collateral Documents will constitute legal, valid and
continuing perfected first liens on the Collateral as security for the
Obligation, free and clear of all other Liens, except for the Liens permitted by
Section 6.15.
5.15. Plan Assets; Prohibited Transactions. The Borrower is not an
entity deemed to hold "plan assets" within the meaning of 29 C.F.R. Section
2510.3-101 of an employee benefit plan (as defined in Section 3(3) of ERISA)
which is subject to Title I of ERISA or any plan (within the meaning of Section
4975 of the Code), and neither the execution of this Agreement nor the making of
Loans hereunder gives rise to a prohibited transaction within the meaning of
Section 406 of ERISA or Section 4975 of the Code.
5.16. Environmental Matters.
Schedule 5.16 identifies: (a) all environmental audits,
analyses, assessments, or occupational health studies (whether routine or
special) with regard to any Property ordered or undertaken by the Borrower or
any Subsidiary or under the direction, suggestion of or by any Tribunal, lender
or other Person with an interest in such Property, any insurer or any
predecessor landowner or lessee of such Property or any predecessor in interest
and, in each case, now within the possession of the Guarantor, the Borrower or
any of their Subsidiaries; (b) the results of any and all tests or analyses of
water, soil, air, buildings on or near any Property, whether or not compliance
was questioned or indicated which have been taken or made in the period five (5)
years prior to the date hereof, whether conducted by the Borrower or any
Subsidiary or any predecessor landowner or lessee of the Property, any Tribunal
or any other Person; (c) the results of and circumstances surrounding any
Tribunal inspection or audit of any Property or each operating entity of the
Guarantor, the Borrower and any Subsidiary whether routine or relating directly
or indirectly to contamination or non-compliance with the Applicable
Environmental
Page 47
Laws; or (d) any claim or complaint concerning the Applicable Environmental Laws
relative to the Borrower or any Subsidiary. Except as set forth in Schedule
5.16, or except as would not have a Material Adverse Effect:
(i) The Guarantor, the Borrower and their Subsidiaries and their
Properties are not in violation of Applicable Environmental
Laws, or subject to any existing, pending or, to the best
knowledge of the Borrower, threatened investigation or
inquiry by any Tribunal or any other Person under or with
respect to Applicable Environmental Laws, or subject to any
remedial obligations under Applicable Environmental Laws,
and are in compliance with all permits and licenses required
under Applicable Environmental Laws, and this representation
will continue to be true and correct following disclosure to
the applicable Tribunal of all relevant facts, conditions
and circumstances, if any, pertaining to the Guarantor, the
Borrower and their Subsidiaries and their Properties.
(ii) The Borrower undertook, at the time of acquisition of such
Properties, all appropriate inquiry into the previous
ownership and uses of such Properties consistent with good
commercial or customary practice. The Borrower has taken all
steps necessary to determine and has determined that no
Hazardous Substances or Solid Wastes have been Disposed of
or otherwise Released at, into, upon or under such
Properties. The use which the Borrower makes and intends to
make of such Properties will not result in the use,
treatment, storage or Disposal or other Release of any
Hazardous Substance or Solid Waste at, into, upon or under
such Properties, except such usage, and temporary storage in
anticipation of usage, as is in the ordinary course of
business and in compliance with Applicable Environmental
Laws.
(iii) No notice, notification, demand, request for information,
citation, summons, or order has been received, no review is
pending, no penalty has been assessed and, to the best
knowledge of Borrower, no complaint has been filed, no
penalty has been assessed, and no investigation is
threatened by any Tribunal or any other Person with respect
to (a) any alleged generation, treatment, storage,
recycling, transportation, Disposal, or Release of any
Hazardous Substances by the Borrower or any Subsidiary or on
any Property owned by the Borrower or any Subsidiary, (b)
any material remedial action which might be needed to
respond to any such alleged generation, treatment, storage,
recycling, transportation, Disposal, or Release, or (c) any
alleged failure by the Borrower or any Subsidiary to have
any permit, license, or authorization required in connection
with the conduct of their business or with respect to any
such
Page 48
generation, treatment, storage, recycling, transportation,
Disposal, or Release.
(iv) There are no Liens arising under or pursuant to any
Applicable Environmental Laws on any of the Properties owned
or leased by the Borrower or any Subsidiary, and no
government actions have been taken or are in process which
could subject any of such Properties to such Liens; nor
would the Borrower or any Subsidiary be required to place
any notice or restrictions relating to the presence of
Hazardous Substances at any Properties owned by it in any
deed to such Properties.
5.17. Investment Company Act. Neither the Borrower nor any
Subsidiary is an "investment company" or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of 1940,
as amended.
5.18. Public Utility Holding Company Act. Neither the Borrower nor any
Subsidiary is a "holding company" or a "subsidiary company" of a "holding
company", or an "affiliate" of a "holding company" or of a "subsidiary company"
of a "holding company", within the meaning of the Public Utility Holding Company
Act of 1935, as amended, or subject to the Federal Power Act, and neither the
Borrower nor any Subsidiary is subject to any other Law regulating them as a
common carrier or a contract carrier in the rendering of electricity, gas,
steam, water, or other similar service as a regulated public utility.
5.19. Subordinated Indebtedness. The Obligations constitute senior
indebtedness which is entitled to the benefits of the subordination provisions
of all outstanding Subordinated Indebtedness.
5.20. Insurance. The Certificates signed by the applicable insurers
that attest to the existence of, and summarizes, the property and casualty
insurance program carried by the Borrower with respect to itself and its
Subsidiaries and that has been furnished by the Borrower to the Agent and the
Lenders, is complete and accurate. This summary includes the insurer's or
insurers' name(s), policy number(s), expiration date(s), amount(s) of coverage,
type(s) of coverage, exclusion(s), and deductibles. This summary also includes
similar information, and describes any reserves, relating to any self-insurance
program that is in effect.
5.21. Solvency.
5.21.1. Immediately after the consummation of the transactions
to occur on the date the initial Credit Extension is to be made
hereunder and immediately following the making of each Credit
Extension, if any, made on such date hereof and after giving effect to
the application of the proceeds of such Credit Extension, (a) the fair
value of the assets of the Guarantor, the Borrower and their
Subsidiaries on a consolidated basis, at a fair valuation, will exceed
the debts and liabilities, subordinated, contingent or otherwise, of
Page 49
the Guarantor, the Borrower and their Subsidiaries on a consolidated
basis; (b) the present fair saleable value of the Property of the
Guarantor, the Borrower and their Subsidiaries on a consolidated basis
will be greater than the amount that will be required to pay the
probable liability of the Guarantor, the Borrower and their
Subsidiaries on a consolidated basis on their debts and other
liabilities, subordinated, contingent or otherwise, as such debts and
other liabilities become absolute and matured; (c) the Guarantor, the
Borrower and their Subsidiaries on a consolidated basis will be able to
pay their debts and liabilities, subordinated, contingent or otherwise,
as such debts and liabilities become absolute and matured; and (d) the
Guarantor, the Borrower and their Subsidiaries on a consolidated basis
will not have unreasonably small capital with which to conduct the
businesses in which they are engaged as such businesses are now
conducted and are proposed to be conducted after the date hereof.
5.21.2. The Borrower does not intend to, or to permit any of
its Subsidiaries to, and does not believe that it or any of its
Subsidiaries will, incur debts beyond its ability to pay such debts as
they mature, taking into account the timing of and amounts of cash to
be received by it or any such Subsidiary and the timing of the amounts
of cash to be payable on or in respect of its Indebtedness or the
Indebtedness of any such Subsidiary.
5.22. Burdensome Provisions. Neither Borrower nor any Subsidiary is a
party to any agreement or instrument containing any burdensome or uncustomary
provisions, or subject to any charter or other corporate restrictions or to any
judgment, order, writ, injunction, decree, award, rule or regulation, which will
or could cause a Material Adverse Effect.
5.23. Relationship with the Lenders. Neither Borrower nor any Person
having "control" (as that term is defined in 12 U.S.C. Section 375b(9) or in
regulations promulgated pursuant thereto) of the Borrower is an "executive
officer", "director" or "principal shareholder" (as those terms are defined in
12 U.S.C. Section 375b(8) or (9) or in regulations promulgated pursuant thereto)
of any Lender, or a bank holding company of which any Lender is a Subsidiary or
of any Subsidiary of a bank holding company of which any Lender is a Subsidiary.
5.24. Jurisdiction of Organization. The Borrower's and each
Subsidiary's jurisdiction of organization and organizational identification
number and taxpayer identification number are as set forth on Schedule 5.24.
5.25. Full Disclosure. There are no significant material facts or
conditions relating to the making of Credit Extensions, any of the Collateral
and/or the financial condition and business of the Borrower or any Subsidiary
which could, collectively or individually, cause a Material Adverse Effect, and
which have not been fully disclosed, in writing, to the Lenders. There are no
statements or conclusions in any Reserve Report which are based upon or include
materially misleading information or fail to take into account material
information regarding the matter reported therein, except as to projections as
to the results of future operations and estimated quantities of reserves
furnished to the Lenders, as to which the Borrower represents
Page 50
that such projections were made based on assumptions believed by the Borrower to
be reasonable at the time made. The Borrower has heretofore delivered to each
Lender true, correct and complete copies of the Initial Reserve Report.
5.26. Gas Imbalances. Except as set forth on Schedule 5.26, as of the
date of this Agreement, on a net basis there are no gas imbalances, take or pay
or other prepayments with respect to the Borrower's or any Subsidiary's Oil and
Gas Properties which would require the Borrower or a Subsidiary to deliver
Hydrocarbons produced from the Borrower's or such Subsidiary's Oil and Gas
Properties at some future time without then or thereafter receiving full payment
therefor.
5.27. No Default. No event has occurred and is continuing which
constitutes a Default or an Unmatured Default.
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Page 51
ARTICLE VI
COVENANTS
During the term of this Agreement, unless the Required Lenders shall
otherwise consent in writing:
6.1. Financial Reporting. The Guarantor will maintain, for itself
and each Subsidiary, a system of accounting established and administered in
accordance with Agreement Accounting Principles, and furnish to the Lenders:
(i) within ninety (90) days after the close of each of its fiscal
years, unqualified audited financial statements prepared by
independent certified public accountants acceptable to the
Lenders, prepared in accordance with Agreement Accounting
Principles on a consolidated and consolidating basis for
itself and its subsidiaries, including balance sheets as of
the end of such period, related profit and loss and
reconciliation of surplus statements, and a statement of cash
flows, accompanied by (a) any management letter prepared by
said accountants, and (b) a certificate of said accountants
that, in the course of their examination, they have obtained
no knowledge of any Default or Unmatured Default, or if, in
the opinion of such accountants, any Default or Unmatured
Default shall exist, stating the nature and status thereof;
(ii) within forty-five (45) days after the close of the first three
quarterly periods of each of its fiscal years, for itself and
its Subsidiaries, consolidated and consolidating unaudited
balance sheets as at the close of each such period and
consolidated and consolidating profit and loss and
reconciliation of surplus statements and a statement of cash
flows for the period from the beginning of such fiscal year to
the end of such quarter, all certified by its chief financial
officer;
(iii) as soon as available, but in any event within thirty (30) days
after the beginning of each fiscal year of the Borrower, a
copy of its annual budget for such fiscal year;
(iv) together with the financial statements required under Sections
6.1(i) and (ii), a compliance certificate in substantially the
form of Exhibit F signed by its chief financial officer
showing the calculations necessary to determine compliance
with this Agreement and stating that no Default or Unmatured
Default exists, or if any Default or Unmatured Default exists,
stating the nature and status thereof;
(v) within two hundred seventy (270) days after the close of each
fiscal year, a statement of the Unfunded Liabilities of each
Single Employer Plan, certified as correct by an actuary
enrolled under ERISA;
Page 52
(vi) as soon as possible and in any event within ten (10) days
after the Guarantor knows that any Reportable Event has
occurred with respect to any Plan, a statement, signed by the
chief financial officer of the Guarantor, describing said
Reportable Event and the action which the Guarantor proposes
to take with respect thereto;
(vii) as soon as possible and in any event within ten (10) days
after receipt by the Borrower, a copy of (a) any notice or
claim to the effect that the Borrower or any of its
Subsidiaries is or may be liable to any Person as a result of
the Release by the Borrower, any of its Subsidiaries, or any
other Person of any Hazardous Substance into the environment,
and (b) any notice alleging any violation of any Applicable
Environmental Law by the Borrower or any of its Subsidiaries;
(viii) promptly upon the furnishing thereof to the shareholders of
the Guarantor, copies of all financial statements, reports and
proxy statements so furnished;
(ix) promptly upon the filing thereof, copies of all registration
statements and annual, quarterly, monthly or other regular
reports which the Guarantor files with the Securities and
Exchange Commission;
(x) by March 1st of each year, a Reserve Report prepared by an
independent petroleum engineer chosen by the Borrower and
acceptable to the Required Lenders (the "Independent
Engineer"), which report shall be dated as of January 1 of
such year, concerning the Oil and Gas Properties and interests
owned by the Guarantor, the Borrower and their Subsidiaries
which are located in or offshore of the United States of
America and which have attributable to them proved oil or gas
reserves. This report shall be in form satisfactory to Agent
and shall include such reasonable assumptions as the Agent
shall specify (including discount rates and projected
Hydrocarbon price assumptions), shall contain sufficient
information to enable the Borrower to meet the reporting
requirements concerning oil and gas reserves contained in
Regulations S-K and S-X promulgated by the Securities and
Exchange Commission, shall take into account any material
"over-produced" and "under produced" status under gas
balancing arrangements, and shall contain information and
analysis comparable in scope to that contained in the Initial
Reserve Report, including the proven oil and gas reserves of
the Guarantor, the Borrower and their Subsidiaries as of the
date of such report, and the discounted net present value (at
a rate acceptable to the Lenders). Together with such report,
the Borrower shall furnish to the Lenders any updated
production history of the proven oil and gas reserves of the
Guarantor, the Borrower and their Subsidiaries as of such
date, the lease operating expenses attributable to the
Borrower's and its Subsidiaries' Oil and Gas Properties for
the prior twelve month period, together with any other
information as to the
Page 53
operations of the Guarantor, the Borrower and their
Subsidiaries as reasonably requested by the Lenders. Together
with such report, the Borrower shall furnish to the Lenders
such additional data and information concerning pricing,
quantities, or volume of production from or attributable to
the Oil and Gas Properties with respect thereto as the Lenders
may reasonably request. This report shall distinguish (or
shall be delivered together with a certificate from an
appropriate officer of the Borrower which distinguishes) those
properties treated in the report which are Collateral from
those properties treated in the report which are not
Collateral;
(xi) by September 1st of each year and promptly following notice of
an additional Borrowing Base redetermination under Section
2.2.3 above, a Reserve Report prepared as of July 1 of such
year by petroleum engineers who are employees of the Borrower,
together with an accompanying report on Oil and Gas Property
sales, Oil and Gas Property purchases and changes in
categories, both in the same form and scope as the reports in
clause (x) above. The Reserve Report shall be prepared by or
at the direction of the Borrower and shall be certified by the
senior petroleum engineer of the Borrower as to the truth and
accuracy of the information utilized to prepare the Reserve
Report and the estimates included therein;
(xii) as soon as available, and in any event within forty-five (45)
days after the end of each quarter, a report describing by
lease or unit the gross volume of production and sales
attributable to production during such month from the Oil and
Gas Properties constituting Collateral and describing the
related severance taxes, other taxes, leasehold operating
expenses and capital costs attributable thereto and incurred
during such month;
(xiii) as soon as available, and in any event within forty-five (45)
days after the end of each fiscal quarter, a report setting
forth volumes, prices and margins for all marketing activities
of the Borrower and Subsidiaries during such fiscal quarter;
(xiv) upon the request of Agent, within forty-five (45) days after
the end of each fiscal quarter, a list, by name and address,
of those Persons who have purchased production during such
fiscal quarter from the Oil and Gas Properties constituting
Collateral, giving each such purchaser's owner number for the
Borrower and each such purchaser's property number for each
such mortgaged Oil and Gas Property; and
(xv) such other information (including reserve, engineering,
geological, and title information) as the Agent or any Lender
may from time to time reasonably request;
Page 54
6.2. Use of Proceeds. The Borrower will, and will cause the Guarantor
and each of their Subsidiaries to, use the proceeds of the Credit Extensions (x)
for the acquisition, development and exploration of Oil & Gas Properties; (y)
for working capital requirements; and (z) Letters of Credit. The Borrower will
not use any of the proceeds of the Credit Extensions to purchase or carry any
"margin stock" (as defined in Regulation U) or extend credit to others for the
purpose of purchasing or repurchasing or carrying margin stock.
6.3. Notice of Default. The Borrower will, and will cause each
Subsidiary to, give prompt notice in writing to the Lenders of the occurrence of
any Default or Unmatured Default and of any other development, financial or
otherwise, which could reasonably be expected to have a Material Adverse Effect.
6.4. Conduct of Business. The Borrower will, and will cause each
Subsidiary to, carry on and conduct its business in substantially the same
manner and in substantially the same fields of enterprise as it is presently
conducted and do all things necessary to remain duly incorporated or organized,
validly existing and (to the extent such concept applies to such entity) in good
standing as a domestic corporation, partnership or limited liability company in
its jurisdiction of incorporation or organization, as the case may be, and
maintain all requisite authority to conduct its business in each jurisdiction in
which its business is conducted.
6.5. Taxes. The Borrower will, and will cause each Subsidiary to,
timely file complete and correct United States federal and applicable foreign,
state and local tax returns required by Law and pay when due all Taxes,
assessments and governmental charges and levies upon it or its income, profits
or Property, except those which are being contested in good faith by appropriate
proceedings and with respect to which adequate reserves have been set aside in
accordance with Agreement Accounting Principles.
6.6. Insurance. The Borrower will, and will cause each Subsidiary to,
maintain with financially sound and reputable insurance companies insurance on
all their Property in such amounts and covering such risks as is consistent with
sound business practice, and the Borrower will furnish to any Lender upon
request full information as to the insurance carried.
6.7. Compliance with Laws. The Borrower will, and will cause each
Subsidiary to, comply with all Laws, rules, regulations, orders, writs,
judgments, injunctions, decrees or awards to which it may be subject including,
without limitation, all Environmental and ERISA Laws.
6.8. Maintenance of Properties. The Borrower will, and will cause each
Subsidiary to, do all things necessary to, or in respect of non-operated
properties cause the operator to, maintain, preserve, protect and keep in good
repair, working order and condition (ordinary wear and tear excepted) in
accordance with good industry practices all of the Oil and Gas Properties owned
by it including, without limitation, all equipment, machinery and facilities,
and will make all necessary and proper repairs, renewals and replacements so
that its business carried on in connection therewith may be properly conducted
at all times. The state and condition of the
Page 55
Collateral and the Oil and Gas Properties owned by the Guarantor, the Borrower
and their Subsidiaries will be preserved and maintained in accordance with the
foregoing standards, except to the extent a portion of such Oil and Gas
Properties is no longer capable of producing Hydrocarbons in economically
reasonable amounts. The Borrower will, and will cause each Subsidiary to, or in
respect of non-operated properties cause the operator to, promptly pay and
discharge or cause to be paid and discharged all delay rentals, royalties,
expenses and debt accruing under, and perform or cause to be performed each and
every act, matter or thing required by, each and all of the assignments, deeds,
leases, sub-leases, contracts and agreements affecting the Borrower's or any
Subsidiary's interests in its Oil and Gas Properties and will do all other
things necessary to keep unimpaired their respective rights with respect thereto
and prevent any forfeiture thereof or a default thereunder, except to the extent
a portion of the Oil and Gas Properties is no longer capable of producing
Hydrocarbons in economically reasonable amounts or without potential for
commercial development. The Borrower will, and will cause each Subsidiary to, or
in respect of non-operated properties cause the operator to, operate its Oil and
Gas Properties (or cause its owned but non-operated Oil and Gas Properties to be
operated) in a careful and efficient manner in accordance with the practices of
the industry and in compliance with all applicable contracts and agreements and
in compliance in all material respects with all applicable Laws.
6.9. Inspection. The Borrower will, and will cause each Subsidiary to,
keep accurate books and financial records and to permit the Agent and the
Lenders, by their respective representatives and agents, to inspect any of the
Property, books and financial records of the Borrower and each Subsidiary, to
examine and make copies of the books of accounts and other financial records of
the Borrower and each Subsidiary, and to discuss the affairs, finances and
accounts of the Borrower and each Subsidiary with, and to be advised as to the
same by, their respective officers at such reasonable times and intervals as the
Agent or any Lender may designate.
6.10. Dividends and Payments on Indebtedness. Neither the Guarantor nor
the Borrower will, nor will they permit any Subsidiary to, declare or pay any
dividends or make any distributions on its capital stock or membership interests
(other than dividends payable in its own capital stock or membership interests,
as applicable) or redeem, repurchase or otherwise acquire or retire any of its
capital stock or membership interests at any time outstanding, except (i) that
the Borrower or any Subsidiary may declare and pay dividends or make
distributions to its members or shareholders on a pro rata basis; (ii) the
Guarantor may repurchase, repay, defease, redeem or otherwise acquire or retire
any capital stock with the contemporaneous issuance of the capital stock of the
Guarantor, and (iii) with the prior approval of the Required Lenders, the
Guarantor may repurchase its capital stock upon the termination of employment of
any officer or employee of the Guarantor, the Borrower or any of their
Subsidiaries or upon the termination of the services of any director of such
Persons; provided further that, the Guarantor may repurchase up to $500,000 of
capital stock in the aggregate from one or more officers or employees of such
Persons upon the termination of the employment of such officers or employees.
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6.11. Indebtedness. The Guarantor and the Borrower will not, nor
will it permit any Subsidiary to, create, incur or suffer to exist any
Indebtedness, except:
(i) the Credit Extensions;
(ii) Indebtedness existing on the date hereof and described in
Schedule 6.11;
(iii) Indebtedness arising under Rate Management Transactions
permitted under Section 6.25;
(iv) Indebtedness among the Guarantor, the Borrower or any of their
Subsidiaries;
(v) Indebtedness associated with bonds or surety obligations
required by any governmental or regulatory authority or prior
owner in connection with owning or operating its Oil and Gas
Properties in the ordinary course of business;
(vi) unsecured accounts payable incurred in the ordinary course of
Business which remain unpaid after the expiration of ninety
(90) days beyond invoice date or are being contested in good
faith and as to which such reserve as is required by Agreement
Accounting Principles has been made;
(vii) Indebtedness not to exceed at any one time $500,000 related to
purchase money financing;
(viii) Indebtedness relating to Capitalized Lease Obligations not to
exceed at any one time $500,000;
(ix) Indebtedness relating to net production imbalances not to
exceed at any one time $1,000,000;
(x) Indebtedness relating to overriding royalties and other
interests carved out of production incurred in the ordinary
course of oil and gas exploration and development projects;
(xi) Indebtedness associated with finance of premiums for business
insurance of the Guarantor, the Borrower and their
Subsidiaries;
(xii) Contingent Obligations of the Guarantor in connection with
guarantees of the obligations of the Borrower and its
Subsidiaries in connection with owning and operating Oil and
Gas Properties in the ordinary course of business; and
(xiii) Non-Recourse Indebtedness not to exceed $25,000,000.
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6.12. Acquisitions and Merger. Except as provided below, neither the
Guarantor, the Borrower nor any Subsidiary will, directly or indirectly, acquire
all or any substantial portion of the property, assets or stock of, or interest
in, any Person, or merge or consolidate with or into any other Person, except
that a Subsidiary may merge into another Subsidiary or into the Guarantor or the
Borrower. Notwithstanding the forgoing, the Guarantor, the Borrower or any
Subsidiary may acquire by purchase, merger or otherwise, additional Oil and Gas
Properties or the capital stock or interests of any Person whose business is the
ownership and operation of Oil & Gas Properties.
6.13. Sale of Assets. The Borrower will not, nor will it permit any
Subsidiary to, lease, sell or otherwise dispose of its Property to any other
Person, except:
(i) the sales of Hydrocarbons in the ordinary course of business.
(ii) transfers of interests in Oil and Gas Properties in the
ordinary course of the joint development of Oil and Gas
Properties with others, including without limitation transfers
to other parties to joint development agreements,
participation agreements, farmout agreements, farmin
agreements, exploration agreements, operating agreements and
unit agreements;
(iii) the sale or transfer of equipment that is no longer necessary
for their business or is replaced by equipment of at least
comparable value and use;
(iv) during any consecutive twelve month period, sales of Oil and
Gas Properties in the ordinary course that will not exceed
$1,000,000.00 in the aggregate, and that will not materially
impair or diminish the value of the Collateral or the
Borrower's financial condition; and
(v) leases, sales or other dispositions of Oil and Gas Properties,
other than those permitted in subsections (i) through (iv)
above, that, during any consecutive twelve-month period, do
not constitute a Substantial Portion of the Oil and Gas
Properties of the Borrower and its Subsidiaries.
Upon the written request of the Borrower setting forth in reasonable
detail transfer, sale or conveyance of assets in a transaction which may
be permitted above, the Agent will execute and deliver to the Borrower
such documentation as is reasonably necessary in the opinion of the Agent
and its counsel to release the Lender Liens on assets so transferred, sold
or conveyed.
6.14. Investments and Acquisitions. The Borrower will not, nor will it
permit any Subsidiary to, make or suffer to exist any Investments or commitments
therefore, or to create any Subsidiary or to become or remain a partner in any
partnership or joint venture except:
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(i) Cash Equivalent Investments;
(ii) existing Investments in Subsidiaries and other Investments in
existence on the date hereof and described in Schedule 6.14;
(iii) acquisition of interests in Oil and Gas Properties in the
ordinary course of the conduct of the exploration, development
and production business of the Borrower and Guarantor;
(iv) loans and advances and other Investments among the Guarantor,
the Borrower and any of their Subsidiaries;
(v) any Subsidiary may be created or acquired if within two
Business Days of its creation or acquisition it becomes a
Guarantor by executing a guaranty substantially similar to the
Guaranty; and
(vi) an acquisition or merger as permitted in Section 6.12.
6.15. Liens. The Borrower will not, nor will it permit any
Subsidiary to, create, incur, or suffer to exist any Lien in, of or on the
Property of the Borrower or any of its Subsidiaries, except:
(i) Liens for taxes, assessments or governmental charges or levies
on its Property if the same shall not at the time be
delinquent or thereafter can be paid without penalty, or are
being contested in good faith and by appropriate proceedings
and for which adequate reserves in accordance with Agreement
Accounting Principles shall have been set aside on its books;
(ii) Liens imposed by Law, such as carriers', warehousemen's and
mechanics' liens and other similar liens arising in the
ordinary course of business which secure payment of
obligations not more than 60 days past due, or are being
contested in good faith and by appropriate proceedings and for
which adequate reserves in accordance with Agreement
Accounting Principles shall have been set aside on its books;
(iii) Liens arising out of pledges or deposits under worker's
compensation Laws, unemployment insurance, old age pensions,
or other social security or retirement benefits, or similar
legislation;
(iv) utility easements, building restrictions and such other
encumbrances or charges against real property as are of a
nature generally existing with respect to properties of a
similar character and which do not in any material way affect
the
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marketability of the same or interfere with the use thereof in
the business of the Borrower or its Subsidiaries;
(v) Liens existing on the date hereof in favor of the Minerals
Management Service;
(vi) Liens in favor of the Agent, for the benefit of the Lenders,
granted pursuant to any Collateral Document and other Liens
expressly permitted under the Collateral Documents;
(vii) Liens in favor of operators and non-operators under joint
operating agreements or similar contractual arrangements
arising in the ordinary course of the business of the Borrower
or its Subsidiaries to secure amounts owing, which amounts are
not more than sixty (60) days past due or are being contested
in good faith by appropriate proceedings, if such reserve as
may be required by Agreement Accounting Principles shall have
been made therefor;
(viii) Liens under production sales agreements, division orders,
operating agreements, and other agreements customary in the
oil and gas business for processing, producing, and selling
Hydrocarbons securing obligations not constituting
Indebtedness and provided that such Liens do not secure
obligations to deliver Hydrocarbons at some future date
without receiving full payment therefor within ninety (90)
days of delivery; and
(ix) Liens in favor of any of the Lenders in connection with Rate
Management Transactions.
6.16. [Intentionally Omitted].
6.17. Operating Leases. Neither the Borrower nor any Subsidiary
will enter into or remain liable upon any Operating Lease, except for Operating
Leases which have Operating Lease Obligations of not more than $500,000 per
annum.
6.18. Trade Liabilities. The Borrower and each of its Subsidiaries will
timely pay all liabilities owed by it on ordinary trade terms to vendors,
suppliers, and other Persons providing goods and services used by it in the
ordinary course of its business, except those which are being contested in good
faith by appropriate proceedings and with respect to which adequate reserves
have been set aside in accordance with Agreement Accounting Principles.
6.19. Affiliates. The Guarantor shall not permit the assets of
PetroQuest Oil & Gas to ever be anything other than the legal interests in oil
and gas properties, the beneficial interests of which is owned by Persons other
than the Borrower and/or the Guarantor. The Guarantor will not permit any other
Person to become a member of PetroQuest Oil & Gas. The Guarantor will not nor
will it permit the Borrower or any other Subsidiary to transfer assets of the
Guarantor or
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the Borrower to or assume or discharge the liabilities of PetroQuest Oil & Gas.
The Borrower will not, and will not permit any Subsidiary to, enter into any
transaction (including, without limitation, the purchase or sale of any Property
or service) with, or make any payment or transfer to, any Affiliate except in
the ordinary course of business and pursuant to the reasonable requirements of
the Borrower's or such Subsidiary's business and upon fair and reasonable terms
no less favorable to the Borrower or such Subsidiary than the Borrower or such
Subsidiary would obtain in a comparable arms-length transaction.
6.20. Agreement to Deliver Collateral Documents. The Borrower agrees to
deliver, and to cause each Subsidiary to deliver, to further secure the
Obligations whenever requested by the Agent in its sole and absolute discretion,
deeds of trust, mortgages, chattel mortgages, security agreements, financing
statements and other Collateral Documents in form and substance satisfactory to
the Agent for the purpose of granting, confirming, and perfecting first and
prior liens or security interests in any real or personal Property now owned or
hereafter acquired by the Borrower or any Subsidiary. The Borrower also agrees
to deliver, and to cause each Subsidiary to deliver, whenever requested by the
Agent in its sole and absolute discretion, favorable title opinions from legal
counsel acceptable to the Agent with respect to any of the Oil and Gas
Properties designated by the Agent, based upon abstract or record examinations
to dates acceptable to the Agent and (i) stating that such Person has good and
defensible title to such properties and interests, free and clear of all Liens
other than Liens permitted under Section 6.15, (ii) confirming that such Oil and
Gas Properties and interests therein are subject to Collateral Documents
securing the Obligations that constitute and create legal, valid and duly
perfected first deed of trust or mortgage liens in such properties and interests
and first priority assignments of and security interests in the Hydrocarbons
attributable to such properties and interests and the proceeds thereof, and
(iii) covering such other matters as the Agent may request.
6.21. Maintenance of Liens. The Borrower will perform, and will cause
each Subsidiary to perform, such acts and duly authorize, execute, acknowledge,
deliver, file and record such additional assignments, security agreements, deeds
of trust, mortgages and other agreements, documents, instruments and
certificates as the Lenders may reasonably deem necessary or appropriate in
order to perfect and maintain the Liens in favor of the Lenders and preserve and
protect the Rights of the Lenders.
6.22. Title Information. By March 1st and September 1st of each year,
the Borrower will deliver any acquisition summaries, title opinions and due
diligence reports prepared in connection with the acquisition and the financing
of the acquisition of such Oil and Gas Properties prepared for the Borrower or
the Person financing such acquisition and such additional title information in
form and substance acceptable to the Lenders as is requested so that the Lenders
shall have received, together with the title information previously received by
the Lenders, satisfactory title information covering Oil and Gas Properties
representing ninety percent (90%) of the value of such Oil and Gas Properties as
set forth in such Reserve Report, as such value is set forth therein. From time
to time upon written request of the Agent, the Borrower shall cause to be
delivered and addressed to the Agent and the Lenders the written
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opinions of counsel of the Borrower and Guarantor to the effect that the Deeds
of Trust constitute first, prior perfected Liens on the Oil and Gas Properties
the States of Texas and Louisiana, in substantially the form of Exhibit G.
6.23. Deposit of Production Proceeds. Notwithstanding that, by the
terms of the various Loan Documents, the Guarantor, the Borrower and their
Subsidiaries are and will be assigning to the Agent and the Lenders all of the
"Production Proceeds" (as defined therein) accruing to the Property covered
thereby, so long as no Default has occurred the Borrower and each Subsidiary may
continue to receive from the purchasers of production all such Production
Proceeds, subject, however, to the Liens created under the Loan Documents, which
Liens are hereby affirmed and ratified and provided that to further secure the
Agent's and Lenders' Liens upon such Production Proceeds, the Borrower and each
Subsidiary agree to maintain their operating accounts with the Agent and not to
redirect the payment of Production Proceeds from such operating accounts without
the written consent of the Agent. Upon the occurrence of a Default, the Agent
and the Lenders may exercise all rights and remedies granted under the Loan
Documents, including the right to obtain possession of all Production Proceeds
then held by the Borrower or any Subsidiary or to receive directly from the
purchasers of production all Production Proceeds. In no case shall any failure,
whether purposed or inadvertent, by the Agent or the Lenders to collect directly
any such Production Proceeds constitute in any way a waiver, remission or
release of any of their rights under the Loan Documents, nor shall any release
of any Production Proceeds by the Agent or the Lenders to the Borrower or any
Subsidiary constitute a waiver, remission, or release of any other Production
Proceeds or of any rights of the Agent or the Lenders to collect other
Production Proceeds thereafter.
6.24. General and Administrative Expense Limitation. Commencing with
the fiscal quarter beginning April 1, 2003, the Guarantor and the Borrower will
not permit, on a combined basis, as of the close of any fiscal quarter,
Consolidated G&A (net of all ▇▇▇▇▇ and other expense recoveries for the
preceding two quarters, determined in accordance with the Agreement Accounting
Principles), to exceed 50% of consolidated gross profit for such preceding two
quarters.
6.25. Rate Management Transactions. Neither the Borrower nor any
Subsidiary will be a party to or in any manner be liable on any Rate
Management Transactions except:
(i) contracts entered into with the purpose of fixing prices on
oil or gas expected to be produced by the Borrower or its
Subsidiaries, provided that at all times: (a) no such contract
fixes a price for a term of more than twenty-four (24) months;
(b) the aggregate monthly production covered by all such
contracts (determined, in the case of contracts that are not
settled on a monthly basis, by a monthly pro-ration acceptable
to the Agent) for any single month does not in the aggregate
exceed seventy-five percent (75%) of the Guarantor's and its
Subsidiaries' aggregate Projected Oil and Gas Production
anticipated to be sold in the ordinary course of such Person's
business for such month; (c) each such contract is with a
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counterparty or has a guarantor of the obligation of the
counterparty who (unless such counterparty is a Lender or one
of its Affiliates) at the time the agreement is made has (or
whose holding company has) long-term obligations rated AA or
AA2 or better, respectively, by either S&P or ▇▇▇▇▇'▇ or is an
investment grade-rated industry participant. As used in this
subsection, the term "Projected Oil and Gas Production" means
the projected production of oil or gas (measured by volume
unit or BTU equivalent, not sales price) for the term of the
contracts or a particular month, as applicable, from Oil and
Gas Properties and interests owned by the Guarantor, the
Borrower and their Subsidiaries which are located in or
offshore of the United States of America and which have
attributable to them proved oil or gas reserves, as such
production is projected in the most recent report delivered
pursuant to Section 6.1, after deducting projected production
from any properties or interests sold or under contract for
sale that had been included in such report and after adding
projected production from any properties or interests that had
not been reflected in such report but that are reflected in a
separate or supplemental reports meeting the requirements of
Section 6.1 above and otherwise are satisfactory to the Agent;
(ii) contracts entered into by the Borrower or any Subsidiary with
the purpose and effect of fixing interest rates on a principal
amount of indebtedness of such Person that is accruing
interest at a variable rate, provided that (a) the aggregate
notional amount of such contracts never exceeds seventy-five
percent (75%) of the anticipated outstanding principal balance
of the indebtedness to be hedged by such contracts or an
average of such principal balances calculated using a
generally accepted method of matching interest swap contracts
to declining principal balances, (b) the floating rate index
of each such contract generally matches the index used to
determine the floating rates of interest on the corresponding
indebtedness to be hedged by such contract, and (c) each such
contract is with a counterparty or has a guarantor of the
obligation of the counterparty who (unless such counterparty
is a Lender or one of its Affiliates) at the time the contract
is made has (or whose company has) long-term obligations rated
AA or AA2 or better, respectively, by either S&P or ▇▇▇▇▇'▇ or
is an investment grade-rated industry participant; and
(iii) Existing Rate Management Transactions with Credit Lyonnais
▇▇▇▇▇ Derivatives and Entergy-▇▇▇▇ Trading LP as more
particularly described on Schedule 6.25.
Within ninety (90) days of the date hereof, the Borrower shall establish and
shall at all times thereafter maintain Rate Management Transactions consisting
of contracts entered into with the purpose of fixing prices on oil or gas
expected to be produced by the Guarantor, the Borrower and their Subsidiaries,
covering at least fifty percent (50%) of the aggregate volumes of Hydrocarbons
listed in the "proved, developed, and producing" category set forth in the most
recent Reserve Report, determined on a rolling twelve month basis.
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6.26. Dry Hole Costs. The Borrower shall not enter into any authority
for expenditure for (i) any single exploration well having a dry hole cost
estimated to exceed $2,000,000; or (ii) any single development well having a dry
hole cost estimated to exceed $4,000,000.
6.27. Sale of Accounts. Neither the Borrower nor any Subsidiary
will sell or otherwise dispose of any notes receivable or accounts receivable,
with or without recourse.
6.28. Sale and Leaseback Transactions and Other Off-Balance Sheet
Liabilities. Neither the Borrower nor any Subsidiary will enter into or suffer
to exist any (i) Sale and Leaseback Transaction or (ii) any other transaction
pursuant to which it incurs or has incurred Off-Balance Sheet Liabilities,
except for (i) Non-Recourse Indebtedness permitted to be incurred under the
terms of Section 6.13; and (ii) Rate Management Transactions permitted to be
incurred under the terms of Section 6.25.
6.29. Contingent Obligations. Neither the Borrower nor any Subsidiary
will make or suffer to exist any Contingent Obligation (including, without
limitation, any Contingent Obligation with respect to the obligations of a
Subsidiary), other than those in connection with guarantees of the obligations
of Subsidiaries in connection with owning and operating Oil and Gas Properties
in the ordinary course of business), except (i) by endorsement of instruments
for deposit or collection in the ordinary course of business, (ii) the
Reimbursement Obligations, and (iii) that the Borrower or any Subsidiary may
incur Contingent Obligations with respect to Obligations permitted hereunder.
6.30. Financial Contracts. Neither the Borrower nor any Subsidiary
will enter into or remain liable upon any Financial Contract, except for Rate
Management Transactions required or permitted under Section 6.25.
6.31. Financial Covenants.
6.31.1 Facility Coverage Ratio. The Borrower will not permit
the ratio of (A) Aggregate Outstanding Credit Exposure as of any calendar
quarter-end to (B) annualized six-month Consolidated EBITDDA, determined (y) as
of June 30, 2003, for the two calendar quarter periods ending on such date, and
(z) as of each calendar quarter end thereafter for the two most recent calendar
quarter periods then ended, to be greater than 1.0 to 1.0; provided, for
determinations of annualized six-month Consolidated EBITDDA, annualized
six-month Consolidated EBITDDA shall be equal to the Consolidated EBITDDA for
such two calendar quarter periods times two.
6.31.2 Minimum Tangible Net Worth. The Borrower will at all
times maintain Consolidated Tangible Net Worth of not less than the sum of (i)
$87,500,000, plus (ii) seventy-five percent (75%) of Consolidated Net Income
earned from the date of this Agreement and in each fiscal quarter beginning with
the quarter beginning June 30, 2003
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(without deduction for losses but excluding from the calculation of losses any
non-cash reserve write-downs), plus (iii) 100% of the net proceeds of any
offering, sale, or other transfer of any capital stock or other equity
securities of any kind of the Guarantor, the Borrower or any of their
Subsidiaries.
6.31.3 Current Ratio. The Borrower will not permit the ratio
of Consolidated Current Assets plus Available Borrowing Base to Consolidated
Current Liabilities, excluding current maturities of long term debt and current
payables resulting from any Rate Management Transaction, to be less than 1.0 to
1.0 at any time.
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Page 65
ARTICLE VII
DEFAULTS
The occurrence of any one or more of the following events shall
constitute a Default:
7.1. Any representation or warranty made or deemed made by or on behalf
of the Borrower or any of its Subsidiaries to the Lenders or the Agent under or
in connection with this Agreement, any Credit Extension, or any certificate or
information delivered in connection with this Agreement or any other Loan
Document shall prove to have been materially false on the date as of which made.
7.2. Nonpayment of principal of any Loan when due, nonpayment of any
Reimbursement Obligation within three Business Days after the same becomes due,
or nonpayment of interest upon any Loan or of any commitment fee, LC Fee or
other obligations under any of the Loan Documents within five days after the
same becomes due.
7.3. The material breach by the Borrower of any of the terms or
provisions of Article VI Section 6.2, 6.10, 6.11, 6.12, 6.13, 6.14, 6.15, 6.16,
6.17, 6.18, 6.19, 6.20, 6.24, 6.25, 6.26, 6.27, 6.28, 6.29, 6.30,or 6.31.
7.4. The material breach by the Borrower (other than a breach which
constitutes a Default under another Section of this Article VII) of any of the
terms or provisions of this Agreement which is not remedied within thirty days
after written notice from the Agent or any Lender.
7.5. Failure of the Borrower or any of its Subsidiaries to pay when due
any Indebtedness (other than the Obligation) aggregating in excess of $1,000,000
("Material Indebtedness"); or the default by the Borrower or any of its
Subsidiaries in the performance (beyond the applicable grace period with respect
thereto, if any) of any term, provision or condition contained in any agreement
under which any such Material Indebtedness was created or is governed, or any
other event shall occur or condition exist, the effect of which default or event
is to cause, or to permit the holder or holders of such Material Indebtedness to
cause, such Material Indebtedness to become due prior to its stated maturity; or
any Material Indebtedness of the Borrower or any of its Subsidiaries shall be
declared to be due and payable or required to be prepaid or repurchased (other
than by a regularly scheduled payment) prior to the stated maturity thereof; or
the Borrower or any of its Subsidiaries shall not pay, or admit in writing its
inability to pay, its debts generally as they become due.
7.6. The Borrower or any of its Subsidiaries shall (i) have an order
for relief entered with respect to it under the federal bankruptcy Laws as now
or hereafter in effect, (ii) make an assignment for the benefit of creditors,
(iii) apply for, seek, consent to, or acquiesce in, the
Page 66
appointment of a receiver, custodian, trustee, examiner, liquidator or similar
official for it or any Substantial Portion of its Property, (iv) institute any
proceeding seeking an order for relief under the federal bankruptcy Laws as now
or hereafter in effect or seeking to adjudicate it a bankrupt or insolvent, or
seeking dissolution, winding up, liquidation, reorganization, arrangement,
adjustment or composition of it or its debts under any Law relating to
bankruptcy, insolvency or reorganization or relief of debtors or fail to file an
answer or other pleading denying the material allegations of any such proceeding
filed against it, (v) take any corporate, limited liability company or
partnership action to authorize or effect any of the foregoing actions set forth
in this Section 7.6 or (vi) fail to contest in good faith any appointment or
proceeding described in Section 7.7.
7.7. Without the application, approval or consent of the Borrower or
any of its Subsidiaries, a receiver, trustee, examiner, liquidator or similar
official shall be appointed for the Borrower or any of its Subsidiaries or any
Substantial Portion of its Property, or a proceeding described in Section
7.6(iv) shall be instituted against the Borrower or any of its Subsidiaries and
such appointment continues undischarged or such proceeding continues undismissed
or unstayed for a period of 30 consecutive days.
7.8. Any court, government or governmental agency shall condemn, seize
or otherwise appropriate, or take custody or control of, all or any portion of
the Property of the Guarantor, the Borrower and their Subsidiaries which, when
taken together with all other Property of the Guarantor, the Borrower and their
Subsidiaries so condemned, seized, appropriated, or taken custody or control of,
during the twelve-month period ending with the month in which any such action
occurs, constitutes a Substantial Portion unless Outstanding Credit Exposure is
contemporaneously reduced by the Release Price determined in connection
therewith by the Required Lenders.
7.9. The Borrower or any of its Subsidiaries shall fail within 30 days
to pay, bond or otherwise discharge one or more (i) judgments or orders for the
payment of money in excess of $1,000,000 (or the equivalent thereof in
currencies other than U.S. Dollars) in the aggregate, or (ii) nonmonetary
judgments or orders which, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect, which judgment(s), in any such case,
is/are not stayed on appeal or otherwise being appropriately contested in good
faith.
7.10. The Unfunded Liabilities of all Single Employer Plans shall
exceed in the aggregate $100,000 or any Reportable Event shall occur in
connection with any Plan.
7.11. The Borrower or any other member of the Controlled Group shall
have been notified by the sponsor of a Multiemployer Plan, if any, that it has
incurred withdrawal liability to such Multiemployer Plan in an amount which,
when aggregated with all other amounts required to be paid to Multiemployer
Plans by the Borrower or any other member of the Controlled Group as withdrawal
liability (determined as of the date of such notification), exceeds $100,000 or
requires payments exceeding $100,000 per annum.
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7.12. The Borrower or any other member of the Controlled Group shall
have been notified by the sponsor of a Multiemployer Plan that such
Multiemployer Plan, if any, is in reorganization or is being terminated, within
the meaning of Title IV of ERISA, if as a result of such reorganization or
termination the aggregate annual contributions of the Borrower and the other
members of the Controlled Group (taken as a whole) to all Multiemployer Plans
which are then in reorganization or being terminated have been or will be
increased over the amounts contributed to such Multiemployer Plans for the
respective plan years of each such Multiemployer Plan immediately preceding the
plan year in which the reorganization or termination occurs by an amount
exceeding $100,000.
7.13. The Borrower or any of its Subsidiaries shall (i) be the subject
of any proceeding or investigation pertaining to the Release by the Borrower,
any of its Subsidiaries or any other Person of any Hazardous Substance into the
environment, or (ii) violate any Applicable Environmental Law, which, in the
case of an event described in clause (i) or clause (ii), could reasonably be
expected to have a Material Adverse Effect.
7.14. Any Change in Control shall occur.
7.15. The occurrence of any "default", as defined in any Loan Document
(other than this Agreement) or the breach of any of the terms or provisions of
any Loan Document (other than this Agreement), which default or breach continues
beyond any period of grace therein provided.
7.16. Nonpayment by the Borrower or any Subsidiary of any Rate
Management Obligation when due or the material breach by the Borrower or any
Subsidiary of any term, provision or condition contained in any Rate Management
Transaction, in each case subject to any grace period associated therewith.
7.17. Any Guaranty shall fail to remain in full force or effect or any
action shall be taken to discontinue or to assert the invalidity or
unenforceability of any Guaranty, or any Guarantor shall fail to comply with any
of the terms or provisions of any Guaranty to which it is a party and such
failure could reasonably be expected to have a Material Adverse Effect, or any
Guarantor shall deny that it has any further liability under any Guaranty to
which it is a party, or shall give notice to such effect.
7.18. Any Collateral Document shall for any reason fail to create a
valid and perfected first priority security interest in any material portion of
the Collateral (as determined by the Agent in its reasonable judgment) purported
to be covered thereby, except as permitted by the terms of any Collateral
Document, or any Collateral Document shall fail to remain in full force or
effect or any action shall be taken to discontinue or to assert the invalidity
or unenforceability of any Collateral Document as to any material portion of the
Collateral (as determined by the
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Agent in its reasonable judgment), or the Borrower shall fail to comply with any
of the material terms or provisions of any Collateral Document.
7.19. The representations and warranties set forth in Section 5.15
(Plan Assets; Prohibited Transactions) shall at any time not be true and
correct.
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ARTICLE VIII
ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES
8.1. Acceleration.
(i) If any Default described in Section 7.6 or 7.7 occurs with
respect to the Borrower or any of its Subsidiaries, the
obligations of the Lenders to make Loans hereunder and the
obligation and power of the LC Issuer to issue Facility LCs
shall automatically terminate and the Obligations shall
immediately become due and payable without any election or
action on the part of the Agent, the LC Issuer or any Lender
and the Borrower will be and become thereby unconditionally
obligated, without any further notice, act or demand, to pay
to the Agent an amount in immediately available funds, which
funds shall be held in the Facility LC Collateral Account,
equal to the excess of (x) the amount of LC Obligations at
such time, over (y) the amount on deposit in the Facility LC
Collateral Account at such time which is free and clear of all
rights and claims of third parties and has not been applied
against the Obligations (such difference, the "Collateral
Shortfall Amount"). If any other Default occurs, the Required
Lenders (or the Agent with the consent of the Required
Lenders) may (a) terminate or suspend the obligations of the
Lenders to make Loans hereunder and the obligation and power
of the LC Issuer to issue Facility LCs, or declare the
Obligations to be due and payable, or both, whereupon the
Obligations shall become immediately due and payable, without
presentment, demand, protest, notice of intent to accelerate,
notice of acceleration or notice of any kind, all of which the
Borrower hereby expressly waives, and (b) upon notice to the
Borrower and in addition to the continuing right to demand
payment of all amounts payable under this Agreement, make
demand on the Borrower to pay, and the Borrower will,
forthwith upon such demand and without any further notice or
act, pay to the Agent the Collateral Shortfall Amount, which
funds shall be deposited in the Facility LC Collateral
Account.
(ii) If at any time while any Default is continuing, the Agent
determines that the Collateral Shortfall Amount is greater
than zero, the Agent may make demand on the Borrower to pay,
and the Borrower will, forthwith upon such demand and without
any further notice or act, pay to the Agent the Collateral
Shortfall Amount, which funds shall be deposited in the
Facility LC Collateral Account.
(iii) The Agent may at any time or from time to time after funds are
deposited in the Facility LC Collateral Account, apply such
funds to the payment of the Obligations or any other amounts
as shall from time to time have become due and payable by the
Borrower to the Lenders or the LC Issuer under the Loan
Documents.
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(iv) At any time while any Default is continuing, neither the
Borrower nor any Person claiming on behalf of or through the
Borrower shall have any right to withdraw any of the funds
held in the Facility LC Collateral Account. After all of the
Obligations have been indefeasibly paid in full and the
Aggregate Commitment has been terminated, any funds remaining
in the Facility LC Collateral Account shall be returned by the
Agent to the Borrower or paid to whomever may be legally
entitled thereto at such time.
(v) If, within ten (10) days after acceleration of the maturity of
the Obligations or termination of the obligations of the
Lenders to make Loans and the obligation and power of the LC
Issuer to issue Facility LCs hereunder as a result of any
Default (other than any Default as described in Section 7.6 or
7.7 with respect to the Borrower) and before any judgment or
decree for the payment of the Obligations due shall have been
obtained or entered, the Required Lenders (in their sole
discretion) shall so direct, the Agent shall, by notice to the
Borrower, rescind and annul such acceleration and/or
termination.
8.2. Amendments. Subject to the provisions of this Article VIII, the
Required Lenders (or the Agent with the consent in writing of the Required
Lenders) 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 Lenders or the Borrower hereunder or waiving any
Default hereunder; provided, however, that no such supplemental agreement shall,
without the consent of all of the Lenders:
(i) extend the final maturity of any Loan, or extend the expiry
date of any Facility LC to a date after the Facility
Termination Date or forgive all or any portion of the
principal amount thereof or any Reimbursement Obligation
related thereto, or reduce the rate or extend the time of
payment of interest or fees thereon or Reimbursement
Obligations related thereto;
(ii) reduce the percentage specified in the definition of Required
Lenders;
(iii) extend the Facility Termination Date, or reduce the amount or
extend the payment date for, the mandatory payments required
under Section 2.2.7, or increase the Commitment of any Lender
hereunder or the commitment to issue Facility LCs, or permit
the Borrower to assign its rights under this Agreement;
(iv) amend this Section 8.2; or
(v) except as provided in the Collateral Documents, release all or
substantially all of the Collateral.
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No amendment of any provision of this Agreement relating to the Agent shall be
effective without the written consent of the Agent, and no amendment of any
provision relating to the LC Issuer shall be effective without the written
consent of the LC Issuer. The Agent may waive payment of the fee required under
Section 12.3.2 without obtaining the consent of any other party to this
Agreement.
8.3. Preservation of Rights. No delay or omission of the Lenders, the
LC Issuer or the Agent to exercise any Right under the Loan Documents shall
impair such Right or be construed to be a waiver of any Default or an
acquiescence therein, and the making of a Credit Extension notwithstanding the
existence of a Default or the inability of the Borrower to satisfy the
conditions precedent to such Credit Extension shall not constitute any waiver or
acquiescence. Any single or partial exercise of any such Right shall not
preclude other or further exercise thereof or the exercise of any other Right,
and no waiver, amendment or other variation of the terms, conditions or
provisions of the Loan Documents whatsoever shall be valid unless in writing
signed by the Lenders required pursuant to Section 8.2, and then only to the
extent in such writing specifically set forth. All remedies contained in the
Loan Documents or by Law afforded shall be cumulative and all shall be available
to the Agent, the LC Issuer and the Lenders until the Obligations have been paid
in full.
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ARTICLE IX
GENERAL PROVISIONS
9.1. Survival of Representations. All representations and
warranties of the Borrower contained in this Agreement shall survive the
making of the Credit Extensions herein contemplated.
9.2. Governmental Regulation. Anything contained in this
Agreement to the contrary notwithstanding, neither the LC Issuer nor any Lender
shall be obligated to extend credit to the Borrower in violation of any
limitation or prohibition provided by any applicable Law.
9.3. Headings. Section headings in the Loan Documents are for
convenience of reference only, and shall not govern the interpretation of any of
the provisions of the Loan Documents.
9.4. ENTIRE AGREEMENT. THE LOAN DOCUMENTS EMBODY THE ENTIRE AGREEMENT
AND UNDERSTANDING AMONG THE BORROWER, THE AGENT, THE LC ISSUER AND THE LENDERS
AND SUPERSEDE ALL PRIOR AGREEMENTS AND UNDERSTANDINGS AMONG THE BORROWER, THE
AGENT, THE LC ISSUER AND THE LENDERS RELATING TO THE SUBJECT MATTER THEREOF
OTHER THAN THE FEE LETTER DESCRIBED IN SECTION 10.13.
9.5. Several Obligations; Benefits of this Agreement. The respective
obligations of the Lenders hereunder are several and not joint and no Lender
shall be the partner or agent of any other (except to the extent to which the
Agent is authorized to act as such). The failure of any Lender to perform any of
its obligations hereunder shall not relieve any other Lender from any of its
obligations hereunder. This Agreement shall not be construed so as to confer any
right or benefit upon any Person other than the parties to this Agreement and
their respective successors and assigns, provided, however, that the parties
hereto expressly agree that the Arranger shall enjoy the benefits of the
provisions of Sections 9.6, 9.10 and 10.11 to the extent specifically set forth
therein and shall have the right to enforce such provisions on its own behalf
and in its own name to the same extent as if it were a party to this Agreement.
9.6. Expenses; Indemnification. (i) The Borrower shall reimburse the
Agent and the Arranger for any costs, internal charges and out-of-pocket
expenses (including attorneys' fees and time charges of outside attorneys for
the Agent, the Arranger, the LC Issuer and the Lenders) paid or incurred by the
Agent or the Arranger in connection with the preparation, negotiation,
execution, delivery, syndication, review, amendment, modification, and
administration of the Loan Documents. The Borrower also agrees to reimburse the
Agent, the Arranger, the LC Issuer and the Lenders for any costs, internal
charges and out-of-pocket expenses (including attorneys' fees and time charges
of outside attorneys for the Agent, the Arranger, the LC Issuer and the Lenders)
paid or incurred by the Agent, the Arranger, the LC Issuer or any Lender in
connection
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with the collection and enforcement of the Loan Documents. The Borrower
acknowledges that from time to time Bank One may prepare and may distribute to
the Lenders (but shall have no obligation or duty to prepare or to distribute to
the Lenders) certain audit reports (the "Reports") pertaining to the Borrower's
assets for internal use by Bank One from information furnished to it by or on
behalf of the Borrower, after Bank One has exercised its rights of inspection
pursuant to this Agreement.
(ii) THE BORROWER HEREBY FURTHER AGREES TO INDEMNIFY THE AGENT, THE
ARRANGER, THE LC ISSUER, EACH LENDER, THEIR RESPECTIVE AFFILIATES, AND EACH OF
THEIR DIRECTORS, OFFICERS AND EMPLOYEES AGAINST ALL LOSSES, CLAIMS, DAMAGES,
PENALTIES, JUDGMENTS, LIABILITIES AND EXPENSES (INCLUDING, WITHOUT LIMITATION,
ALL EXPENSES OF LITIGATION OR PREPARATION THEREFOR WHETHER OR NOT THE AGENT, THE
ARRANGER, THE LC ISSUER, ANY LENDER OR ANY AFFILIATE IS A PARTY THERETO) WHICH
ANY OF THEM MAY PAY OR INCUR ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE
OTHER LOAN DOCUMENTS, THE TRANSACTIONS CONTEMPLATED HEREBY OR THE DIRECT OR
INDIRECT APPLICATION OR PROPOSED APPLICATION OF THE PROCEEDS OF ANY CREDIT
EXTENSION HEREUNDER EXCEPT TO THE EXTENT THAT THEY ARE DETERMINED IN A FINAL
NON-APPEALABLE JUDGMENT BY A COURT OF COMPETENT JURISDICTION TO HAVE RESULTED
FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE PARTY SEEKING
INDEMNIFICATION. THE OBLIGATIONS OF THE BORROWER UNDER THIS SECTION 9.6 SHALL
SURVIVE THE TERMINATION OF THIS AGREEMENT.
9.7. Numbers of Documents. All statements, notices, closing documents,
and requests hereunder shall be furnished to the Agent with sufficient
counterparts so that the Agent may furnish one to each of the Lenders.
9.8. Accounting. Except as provided to the contrary herein, all
accounting terms used herein shall be interpreted and all accounting
determinations hereunder shall be made in accordance with Agreement Accounting
Principles, except that any calculation or determination which is to be made on
a consolidated basis shall be made for the Borrower and all its Subsidiaries,
including those Subsidiaries, if any, which are unconsolidated on the Borrower's
audited financial statements.
9.9. Severability of Provisions. Any provision in any Loan Document
that is held to be inoperative, unenforceable, or invalid in any jurisdiction
shall, as to that jurisdiction, be inoperative, unenforceable, or invalid
without affecting the remaining provisions in that jurisdiction or the
operation, enforceability, or validity of that provision in any other
jurisdiction, and to this end the provisions of all Loan Documents are declared
to be severable.
9.10. Nonliability of Lenders. The relationship between the Borrower on
the one hand and the Lenders, the LC Issuer and the Agent on the other hand
shall be solely that of the Borrower and Lender. Neither the Agent, the
Arranger, the LC Issuer nor any Lender shall have any fiduciary responsibilities
to the Borrower. Neither the Agent, the Arranger, the LC Issuer nor any Lender
undertakes any responsibility to the Borrower to review or inform the Borrower
of any matter in connection with any phase of the Borrower's business or
operations. The
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Borrower agrees that neither the Agent, the Arranger, the LC Issuer nor any
Lender shall have liability to the Borrower (whether sounding in tort, contract
or otherwise) for losses suffered by the Borrower in connection with, arising
out of, or in any way related to, the transactions contemplated and the
relationship established by the Loan Documents, or any act, omission or event
occurring in connection therewith, unless it is determined in a final
non-appealable judgment by a court of competent jurisdiction that such losses
resulted from the gross negligence or willful misconduct of the party from which
recovery is sought. Neither the Agent, the Arranger, the LC Issuer nor any
Lender shall have any liability with respect to, and the Borrower hereby waives,
releases and agrees not to ▇▇▇ for, any special, indirect, consequential or
punitive damages suffered by the Borrower in connection with, arising out of, or
in any way related to the Loan Documents or the transactions contemplated
thereby.
9.11. Confidentiality. Each Lender 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 Lenders and
their respective Affiliates, (ii) to legal counsel, accountants, and other
professional advisors to such Lender or to a Transferee, (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 Lender is a party, (vi) to such Lender's direct or
indirect contractual counterparties in swap agreements or to legal counsel,
accountants and other professional advisors to such counterparties, (vii)
permitted by Section 12.4, and (viii) to rating agencies if requested or
required by such agencies in connection with a rating relating to the Advances
hereunder. Notwithstanding anything herein to the contrary, confidential
information shall not include, and each Lender (and each employee,
representative or other agent of any Lender) may disclose to any and all
Persons, without limitation of any kind, the "tax treatment" and "tax structure"
(in each case, within the meaning of Treasury Regulation Section 1.6011-4) of
the transactions contemplated hereby and all materials of any kind (including
opinions or other tax analyses) that are or have been provided to such Lender
relating to such tax treatment or tax structure; provided that with respect to
any document or similar item that in either case contains information concerning
such tax treatment or tax structure of the transactions contemplated hereby as
well as other information, this sentence shall only apply to such portions of
the document or similar item that relate to such tax treatment or tax structure.
9.12. Nonreliance. Each Lender hereby represents that it is not
relying on or looking to any margin stock (as defined in Regulation U of the
Board of Governors of the Federal Reserve System) for the repayment of the
Credit Extensions provided for herein.
9.13. Disclosure. The Borrower and each Lender hereby (i) acknowledge
and agree that Bank One and/or its Affiliates from time to time may hold
investments in, make other loans to or have other relationships with the
Guarantor, the Borrower and their Affiliates, and (ii) waive any liability of
Bank One or such Affiliate of Bank One to the Borrower or any Lender,
respectively, arising out of or resulting from such investments, loans or
relationships other than liabilities arising out of the gross negligence or
willful misconduct of Bank One or its Affiliates.
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9.14. Interest. It is the intention of the Parties to comply with
applicable usury Laws; accordingly, it is agreed that notwithstanding any
provisions to the contrary in any Loan Document, in no event shall any Loan
Document permit the collection of interest in excess of the maximum amount
permitted by such Laws. If any such excess of interest is contracted for,
charged or received under any Loan Document or if the maturity of the Obligation
is accelerated in whole or in part, or in the event that all or part of the
principal or interest of the Obligation shall be prepaid, so that under any of
such circumstances the amount of interest contracted for, charged or received
under any Loan Document on the amount of principal actually outstanding from
time to time under the Obligation shall exceed the maximum amount of interest
permitted by applicable usury Laws, then in any such event: (i) the provisions
of this Section 9.14 shall govern and control; (ii) no Person now or hereafter
liable for the payment of the Obligation shall be obligated to pay the amount of
such interest to the extent that it is in excess of the maximum amount of
interest permitted to be contracted for by, charged to or received from the
Person obligated thereon under the applicable usury Laws; (iii) any such excess
which may have been collected shall be either applied as a credit against the
then unpaid principal amount on the Obligation or refunded to the Person paying
the same, at the holder's option; and (iv) the effective rate of interest shall
be automatically reduced to the maximum lawful rate of interest permitted to be
contracted for by, charged to or received from the Person obligated thereon
under the applicable usury Laws as now or hereafter construed by the courts
having jurisdiction thereof. To the extent the Laws of the State of Texas are
applicable for purposes of determining the "Highest Lawful Rate," such term
shall mean the "weekly rate ceiling" from time to time in effect under Chapter
303 of the Texas Finance Code, as amended from time to time in effect, subject
to the Lender's right subsequently to change such method in accordance with
applicable law. The provisions of Chapter 346 of Tex. Finance Code ▇▇▇. (▇▇▇▇▇▇
2002), regulating certain revolving credit accounts shall not govern or in any
manner apply to the Obligation.
9.15. NO ORAL AGREEMENTS. THIS WRITTEN LOAN AGREEMENT, THE OTHER LOAN
DOCUMENTS AND THE FEE LETTER REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES
AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN
THE PARTIES.
9.16. Survival of Representations. All representations and warranties
herein contained or made in writing in connection with this Agreement shall
survive the execution and delivery of this Agreement and the making of the Loans
hereunder and shall continue in full force and effect until the Obligation shall
have been paid in full.
9.17. Amendment and Restatement. The Guarantor and the Borrower
acknowledge and agree and it is the intention of the parties hereto that this
Agreement and any Note issued hereunder (i) represents in part a renewal,
modification and extension but not a novation or discharge of the indebtedness
outstanding under the Prior Credit Agreement and any documents
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executed in connection therewith; and (b) is secured by and entitled to the
benefits of certain Collateral Documents (as identified and defined in the Prior
Credit Agreement). Payments pursuant to this Agreement or any Note hereunder
shall be made and applied as provided herein.
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ARTICLE X
THE AGENT
10.1. Appointment; Nature of Relationship. Bank One is hereby appointed
by each of the Lenders as its contractual representative (herein referred to as
the "Agent") hereunder and under each other Loan Document, and each of the
Lenders irrevocably authorizes the Agent to act as the contractual
representative of such Lender with the rights and duties expressly set forth
herein and in the other Loan Documents. The Agent agrees to act as such
contractual representative upon the express conditions contained in this Article
X. Notwithstanding the use of the defined term "Agent," it is expressly
understood and agreed that the Agent shall not have any fiduciary
responsibilities to any Lender by reason of this Agreement or any other Loan
Document and that the Agent is merely acting as the contractual representative
of the Lenders with only those duties as are expressly set forth in this
Agreement and the other Loan Documents. In its capacity as the Lenders'
contractual representative, the Agent (i) does not hereby assume any fiduciary
duties to any of the Lenders and (ii) is acting as an independent contractor,
the rights and duties of which are limited to those expressly set forth in this
Agreement and the other Loan Documents. Each of the Lenders hereby agrees to
assert no claim against the Agent on any agency theory or any other theory of
liability for breach of fiduciary duty, all of which claims each Lender hereby
waives.
10.2. Powers. The Agent shall have and may exercise such powers under
the Loan Documents as are specifically delegated to the Agent by the terms of
each thereof, together with such powers as are reasonably incidental thereto.
The Agent shall have no implied duties to the Lenders, or any obligation to the
Lenders to take any action thereunder except any action specifically provided by
the Loan Documents to be taken by the Agent.
10.3. General Immunity. Neither the Agent nor any of its directors,
officers, agents or employees shall be liable to the Borrower, the Lenders or
any Lender for any action taken or omitted to be taken by it or them hereunder
or under any other Loan Document or in connection herewith or therewith except
to the extent such action or inaction is determined in a final non-appealable
judgment by a court of competent jurisdiction to have arisen from the gross
negligence or willful misconduct of such Person.
10.4. No Responsibility for Loans, Recitals, etc. Neither the Agent nor
any of its directors, officers, agents or employees shall be responsible for or
have any duty to ascertain, inquire into, or verify: (a) any statement, warranty
or representation made in connection with any Loan Document or any borrowing
hereunder; (b) the performance or observance of any of the covenants or
agreements of any obligor under any Loan Document, including, without
limitation, any agreement by an obligor to furnish information directly to each
Lender; (c) the satisfaction of any condition specified in Article IV, except
receipt of items required to be delivered solely to the Agent; (d) the existence
or possible existence of any Default or Unmatured Default; (e) the validity,
enforceability, effectiveness, sufficiency or genuineness of any Loan Document
or any
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other instrument or writing furnished in connection therewith; (f) the value,
sufficiency, creation, perfection or priority of any Lender Lien in any
Collateral; or (g) the financial condition of the Borrower or any Guarantor of
any of the Obligations or of any of the Borrower's or any such Guarantor's
respective Subsidiaries. The Agent shall have no duty to disclose to the Lenders
information that is not required to be furnished by the Borrower to the Agent at
such time, but is voluntarily furnished by the Borrower to the Agent (either in
its capacity as Agent or in its individual capacity).
10.5. Action on Instructions of Lenders. The Agent shall in all cases
be fully protected in acting, or in refraining from acting, hereunder and under
any other Loan Document in accordance with written instructions signed by the
Required Lenders, and such instructions and any action taken or failure to act
pursuant thereto shall be binding on all of the Lenders. The Lenders hereby
acknowledge that the Agent shall be under no duty to take any discretionary
action permitted to be taken by it pursuant to the provisions of this Agreement
or any other Loan Document unless it shall be requested in writing to do so by
the Required Lenders. The Agent shall be fully justified in failing or refusing
to take any action hereunder and under any other Loan Document unless it shall
first be indemnified to its satisfaction by the Lenders pro rata against any and
all liability, cost and expense that it may incur by reason of taking or
continuing to take any such action.
10.6. Employment of Agents and Counsel. The Agent may execute any of
its duties as Agent hereunder and under any other Loan Document by or through
employees, agents, and attorneys-in-fact and shall not be answerable to the
Lenders, except as to money or securities received by it or its authorized
agents, for the default or misconduct of any such agents or attorneys-in-fact
selected by it with reasonable care. The Agent shall be entitled to advice of
counsel concerning the contractual arrangement between the Agent and the Lenders
and all matters pertaining to the Agent's duties hereunder and under any other
Loan Document.
10.7. Reliance on Documents; Counsel. The Agent shall be entitled to
rely upon any Note, notice, consent, certificate, affidavit, letter, telegram,
statement, paper or document believed by it to be genuine and correct and to
have been signed or sent by the proper Person or Persons, and, in respect to
legal matters, upon the opinion of counsel selected by the Agent, which counsel
may be employees of the Agent.
10.8. Agent's Reimbursement and Indemnification. The Lenders agree to
reimburse and indemnify the Agent ratably in proportion to their respective
Commitments (or, if the Commitments have been terminated, in proportion to their
Commitments immediately prior to such termination) (i) for any amounts not
reimbursed by the Borrower for which the Agent is entitled to reimbursement by
the Borrower under the Loan Documents, (ii) for any other expenses incurred by
the Agent on behalf of the Lenders, in connection with the preparation,
execution, delivery, administration and enforcement of the Loan Documents
(including, without limitation, for any expenses incurred by the Agent in
connection with any dispute between the Agent and any Lender or between two or
more of the Lenders) and (iii) for any liabilities,
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obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind and nature whatsoever which may be imposed
on, incurred by or asserted against the Agent in any way relating to or arising
out of the Loan Documents or any other document delivered in connection
therewith or the transactions contemplated thereby (including, without
limitation, for any such amounts incurred by or asserted against the Agent in
connection with any dispute between the Agent and any Lender or between two or
more of the Lenders), or the enforcement of any of the terms of the Loan
Documents or of any such other documents; provided that (i) no Lender shall be
liable for any of the foregoing to the extent any of the foregoing is found in a
final non-appealable judgment by a court of competent jurisdiction to have
resulted from the gross negligence or willful misconduct of the Agent and (ii)
any indemnification required pursuant to Section 3.5.7 shall, notwithstanding
the provisions of this Section 10.8, be paid by the relevant Lender in
accordance with the provisions thereof. The obligations of the Lenders under
this Section 10.8 shall survive payment of the Secured Obligations and
termination of this Agreement.
10.9. Notice of Default. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Unmatured Default
hereunder unless the Agent has received written notice from a Lender or the
Borrower referring to this Agreement describing such Default or Unmatured
Default and stating that such notice is a "notice of default". In the event that
the Agent receives such a notice, the Agent shall give prompt notice thereof to
the Lenders.
10.10. Rights as a Lender. In the event the Agent is a Lender, the
Agent shall have the same rights and powers hereunder and under any other Loan
Document with respect to its Commitment and its Loans as any Lender and may
exercise the same as though it were not the Agent, and the term "Lender" or
"Lenders" shall, at any time when the Agent is a Lender, unless the context
otherwise indicates, include the Agent in its individual capacity. The Agent and
its Affiliates may accept deposits from, lend money to, and generally engage in
any kind of trust, debt, equity, hedge, swap or other transaction, in addition
to those contemplated by this Agreement or any other Loan Document, with the
Borrower or any of its Subsidiaries in which the Borrower or such Subsidiary is
not restricted hereby from engaging with any other Person.
10.11. Lender Credit Decision. Each Lender acknowledges that it has,
independently and without reliance upon the Agent, the Arranger or any other
Lender and based on the financial statements prepared by the Borrower and such
other documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement and the other Loan
Documents. Each Lender also acknowledges that it will, independently and without
reliance upon the Agent, the Arranger or any other Lender and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under this
Agreement and the other Loan Documents.
10.12. Successor Agent. The Agent may resign at any time by giving
written notice thereof to the Lenders and the Borrower, such resignation to be
effective upon the appointment of a successor Agent or, if no successor Agent
has been appointed, forty-five days after the
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retiring Agent gives notice of its intention to resign. The Agent may be removed
at any time with or without cause by written notice received by the Agent from
the Required Lenders, such removal to be effective on the date specified by the
Required Lenders. Upon any such resignation or removal, the Required Lenders
shall have the right to appoint, on behalf of the Borrower and the Lenders, a
successor Agent. If no successor Agent shall have been so appointed by the
Required Lenders within thirty days after the resigning Agent's giving notice of
its intention to resign, then the resigning Agent may appoint, on behalf of the
Borrower and the Lenders, a successor Agent. Notwithstanding the previous
sentence, the Agent may at any time without the consent of the Borrower or any
Lender, appoint any of its Affiliates which is a commercial bank as a successor
Agent hereunder. If the Agent has resigned or been removed and no successor
Agent has been appointed, the Lenders may perform all the duties of the Agent
hereunder and the Borrower shall make all payments in respect of the Obligations
to the applicable Lender and for all other purposes shall deal directly with the
Lenders. No successor Agent shall be deemed to be appointed hereunder until such
successor Agent has accepted the appointment. Any such successor Agent shall be
a commercial bank having capital and retained earnings of at least
$1,000,000,000. Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the resigning or
removed Agent. Upon the effectiveness of the resignation or removal of the
Agent, the resigning or removed Agent shall be discharged from its duties and
obligations hereunder and under the Loan Documents. After the effectiveness of
the resignation or removal of an Agent, the provisions of this Article X shall
continue in effect for the benefit of such Agent in respect of any actions taken
or omitted to be taken by it while it was acting as the Agent hereunder and
under the other Loan Documents. In the event that there is a successor to the
Agent by merger, or the Agent assigns its duties and obligations to an Affiliate
pursuant to this Section 10.12, then the term "Corporate Base Rate" as used in
this Agreement shall mean the prime rate, base rate or other analogous rate of
the new Agent.
10.13. Agent's Fee. The Borrower agrees to pay to the Agent, for its
own account, the fees agreed to by the Borrower and the Agent pursuant to the
Fee Letter, or as otherwise agreed from time to time in writing.
10.14. Delegation to Affiliates. The Borrower and the Lenders agree
that the Agent may delegate any of its duties under this Agreement to any of its
Affiliates. Any such Affiliate (and such Affiliate's directors, officers, agents
and employees) which performs duties in connection with this Agreement shall be
entitled to the same benefits of the indemnification, waiver and other
protective provisions to which the Agent is entitled under Articles IX and X.
10.15. Execution of Collateral Documents. The Lenders hereby empower
and authorize the Agent to execute and deliver to the Borrower on their behalf
the Collateral Documents and all related financing statements and any financing
statements, agreements, documents or instruments as shall be necessary or
appropriate to effect the purposes of the Collateral Documents.
Page 81
10.16. Collateral Releases. The Lenders hereby empower and authorize
the Agent to execute and deliver to the Borrower on their behalf any agreements,
documents or instruments as shall be necessary or appropriate to effect any
releases of Collateral which shall be permitted by the terms hereof or of any
other Loan Document or which shall otherwise have been approved by the Required
Lenders (or, if required by the terms of Section 8.2, all of the Lenders) in
writing.
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Page 82
ARTICLE XI
SETOFF; RATABLE PAYMENTS
11.1. Setoff. In addition to, and without limitation of, any rights of
the Lenders under applicable Law, if the Borrower becomes insolvent, however
evidenced, or any Default occurs, any and all deposits (including all account
balances, whether provisional or final and whether or not collected or
available) and any other Indebtedness at any time held or owing by any Lender or
any Affiliate of any Lender to or for the credit or account of the Borrower or
any Guarantor may be offset and applied toward the payment of the Obligations
owing to such Lender, whether or not the Obligations, or any part thereof, shall
then be due.
11.2. Ratable Payments. If any Lender, whether by setoff or otherwise,
has payment made to it upon its Outstanding Credit Exposure (other than payments
received pursuant to Section 3.1, 3.2, 3.4 or 3.5) in a greater proportion than
that received by any other Lender, such Lender agrees, promptly upon demand, to
purchase a portion of the Outstanding Credit Exposure held by the other Lenders
so that after such purchase each Lender will hold its Pro Rata Share of the
Aggregate Outstanding Credit Exposure. If any Lender, whether in connection with
setoff or amounts which might be subject to setoff or otherwise, receives
Collateral or other protection for its Obligations or such amounts which may be
subject to setoff, such Lender agrees, promptly upon demand, to take such action
necessary such that all Lenders share in the benefits of such Collateral ratably
in proportion to their respective Pro Rata Share of the Aggregate Outstanding
Credit Exposure. In case any such payment is disturbed by legal process, or
otherwise, appropriate further adjustments shall be made.
11.3 Application of Collateral. The proceeds of the Collateral at any
time received by the Agent following an Enforcement Action shall, when received
by the Agent in cash or its equivalent, be applied by the Agent as follows:
(i) first, to the payment and satisfaction of all sums paid and costs
and expenses (including reasonable attorneys' fees and court costs) incurred by
the Agent in connection herewith or under the Collateral Documents, including
such amounts paid or incurred in connection with protecting, preserving or
realizing upon the Collateral or enforcing any of the terms of the Collateral
Documents to the extent the Agent is not reimbursed therefor by the Borrower or
any Guarantor; and
(ii) second, to the payment of all remaining Secured Obligations pro
rata to each Lender with each Lender's pro rata share calculated based on a
fraction, the numerator of which is the amount owing to such Lender in
connection with any Loan Document and/or Rate Management Transaction and the
denominator of which is the aggregate amount owing to all Lenders in connection
with the Loan Documents and/or Rate Management Transactions.
Page 83
The Borrower and Guarantors shall remain liable to the Agent and the Lenders for
any deficiency. Any surplus remaining after the full, indefeasible payment and
satisfaction of the foregoing shall be returned to the Borrower or to whomsoever
a court of competent jurisdiction shall determine to be entitled thereto. After
any Lender has been paid in full for all Secured Obligations of the Borrower
owed to it under the Loan Documents and/or Rate Management Transactions, such
Lender shall hold in trust for, and immediately return to, the Agent any
Collateral or proceeds thereof received or held hereunder.
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Page 84
ARTICLE XII
BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS
12.1. Successors and Assigns. The terms and provisions of the Loan
Documents shall be binding upon and inure to the benefit of the Borrower and the
Lenders and their respective successors and assigns, except that (i) the
Borrower shall not have the right to assign its rights or obligations under the
Loan Documents and (ii) any assignment by any Lender must be made in compliance
with Section 12.3. The parties to this Agreement acknowledge that clause (ii) of
this Section 12.1 relates only to absolute assignments and does not prohibit
assignments creating security interests, including, without limitation, any
pledge or assignment by any Lender of all or any portion of its rights under
this Agreement and any Note to a Federal Reserve Bank; provided, however, that
no such pledge or assignment creating a security interest shall release the
transferor Lender from its obligations hereunder unless and until the parties
thereto have complied with the provisions of Section 12.3. The Agent may treat
the Person which made any Loan or which holds any Note as the owner thereof for
all purposes hereof unless and until such Person complies with Section 12.3;
provided, however, that the Agent may in its discretion (but shall not be
required to) follow instructions from the Person which made any Loan or which
holds any Note to direct payments relating to such Loan or Note to another
Person. Any assignee of the rights to any Loan or any Note agrees by acceptance
of such assignment to be bound by all the terms and provisions of the Loan
Documents. Any request, authority or consent of any Person, who at the time of
making such request or giving such authority or consent is the owner of the
rights to any Loan (whether or not a Note has been issued in evidence thereof),
shall be conclusive and binding on any subsequent holder or assignee of the
rights to such Loan.
12.2. Participations.
12.2.1. Permitted Participants; Effect. Any Lender may, in the
ordinary course of its business and in accordance with applicable Law, at any
time sell to one or more banks or other entities (individually, a "Participant")
participating interests in any Outstanding Credit Exposure owing to such Lender,
any Note held by such Lender, any Commitment of such Lender or any other
interest of such Lender under the Loan Documents. In the event of any such sale
by a Lender of participating interests to a Participant, such Lender's
obligations under the Loan Documents shall remain unchanged, such Lender shall
remain solely responsible to the other parties hereto for the performance of
such obligations, such Lender shall remain the owner of its Outstanding Credit
Exposure and the holder of any Note issued to it in evidence thereof for all
purposes under the Loan Documents, all amounts payable by the Borrower under
this Agreement shall be determined as if such Lender had not sold such
participating interests, and the Borrower and the Agent shall continue to deal
solely and directly with such Lender in connection with such Lender's rights and
obligations under the Loan Documents.
12.2.2. Voting Rights. Each Lender shall retain the sole right
to approve, without the consent of any Participant, any amendment, modification
or waiver of any provision of the
Page 85
Loan Documents other than any amendment, modification or waiver with respect to
any Credit Extension or Commitment in which such Participant has an interest
which forgives principal, interest, fees or Reimbursement Obligation or reduces
the interest rate or fees payable with respect to any such Credit Extension or
Commitment, extends the Facility Termination Date or the expiration date for any
Facility LC, postpones any date fixed for any regularly-scheduled payment of
principal of or interest on any Loan in which such Participant has an interest,
or any regularly-scheduled payment of fees on any such Credit Extension or
Commitment, releases any Guarantor of any such Credit Extension or releases any
Collateral held in the Facility LC Collateral Account (except in accordance with
the terms hereof) or all or substantially all or any other Collateral, if any,
securing any such Credit Extension.
12.2.3. Benefit of Setoff. The Borrower and each Guarantor
agrees that each Participant shall be deemed to have the right of setoff
provided in Section 11.1 in respect of its participating interest in amounts
owing under the Loan Documents to the same extent as if the amount of its
participating interest were owing directly to it as a Lender under the Loan
Documents; provided that each Lender shall retain the right of setoff provided
in Section 11.1 with respect to the amount of participating interests sold to
each Participant. The Lenders agree to share with each Participant, and each
Participant, by exercising the right of setoff provided in Section 11.1, agrees
to share with each Lender, any amount received pursuant to the exercise of its
right of setoff, such amounts to be shared in accordance with Section 11.2 as if
each Participant were a Lender.
12.3. Assignments.
12.3.1. Permitted Assignments. Any Lender may, in the ordinary
course of its business and in accordance with applicable Law, at any time assign
to one or more banks or other entities (individually, an "Eligible Assignee")
all or any part of its rights and obligations under the Loan Documents. Such
assignment shall be substantially in the form of Exhibit C (the "Assignment
Agreement") or in such other form as may be agreed to by the parties thereto.
The consent of the Borrower, the Agent and LC Issuer shall be required prior to
an assignment becoming effective with respect to an Eligible Assignee which is
not a Lender or an Affiliate thereof; provided, however, that if a Default has
occurred and is continuing, the consent of the Borrower shall not be required.
Such consent shall not be unreasonably withheld or delayed. Each such assignment
with respect to an Eligible Assignee which is not a Lender or an Affiliate
thereof shall (unless each of the Borrower and the Agent otherwise consents) be
in an amount not less than the lesser of (i) $5,000,000 or (ii) the remaining
amount of the assigning Lender's Commitment (calculated as at the date of such
assignment) or outstanding Credit Exposure (if the applicable Commitment has
been terminated). Borrower shall not be required to pay any costs associated
with any such assignment.
12.3.2. Effect; Effective Date. Upon (i) delivery to the Agent
of an assignment, together with any consents required by Section 12.3.1, and
(ii) payment of a $3,500 fee to the Agent for processing such assignment (unless
such fee is waived by the Agent), such assignment
Page 86
shall become effective on the effective date specified in such assignment. The
assignment shall contain a representation by the Eligible Assignee to the effect
that none of the consideration used to make the purchase of the Commitment and
Outstanding Credit Exposure under the applicable assignment agreement
constitutes "plan assets" as defined under ERISA and that the rights and
interests of the Eligible Assignee in and under the Loan Documents will not be
"plan assets" under ERISA. On and after the effective date of such assignment,
such Eligible Assignee shall for all purposes be a Lender party to this
Agreement and any other Loan Document executed by or on behalf of the Lenders
and shall have all the rights and obligations of a Lender under the Loan
Documents, to the same extent as if it were an original party hereto, and no
further consent or action by the Borrower, the Lenders, the LC Issuer or the
Agent shall be required to release the transferor Lender with respect to the
percentage of the Aggregate Commitment and Outstanding Credit Exposure assigned
to such Eligible Assignee. Upon the consummation of any assignment to an
Eligible Assignee pursuant to this Section 12.3.2, the transferor Lender, the
Agent, the LC Issuer and the Borrower shall, if the transferor Lender or the
Eligible Assignee desires that its Outstanding Credit Exposure be evidenced by
Notes, make appropriate arrangements so that new Notes or, as appropriate,
replacement Notes are issued to such transferor Lender and new Notes or, as
appropriate, replacement Notes, are issued to such Eligible Assignee, in each
case in principal amounts reflecting their respective Commitments, as adjusted
pursuant to such assignment.
12.4. Dissemination of Information. The Borrower authorizes each
Lender, upon prior written notice to Borrower to disclose to any Participant or
Eligible Assignee or any other Person acquiring an interest in the Loan
Documents by operation of Law (each a "Transferee") and any prospective
Transferee any and all information in such Lender's possession concerning the
creditworthiness of the Guarantor, the Borrower and their Subsidiaries,
including without limitation any information contained in any Reports; provided
that each Transferee and prospective Transferee agrees to be bound by Section
9.11 of this Agreement.
12.5. Tax Treatment. If any interest in any Loan Document is
transferred to any Transferee which is organized under the Laws of any
jurisdiction other than the United States or any State thereof, the transferor
Lender shall cause such Transferee, concurrently with the effectiveness of such
transfer, to comply with the provisions of Section 3.5.4.
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Page 87
ARTICLE XIII
NOTICES
13.1. Notices. Except as otherwise permitted by Section 2.15 with
respect to borrowing notices, all notices, requests and other communications to
any party hereunder shall be in writing (including electronic transmission,
facsimile transmission or similar writing) and shall be given to such party: (x)
in the case of the Borrower, the LC Issuer or the Agent, at its address or
facsimile number set forth on the signature pages hereof, (y) in the case of any
Lender, at its address or facsimile number set forth below its signature hereto
or set forth in any Assignment Agreement if by virtue of such Assignment
Agreement the Lender became a party to this Agreement or (z) in the case of any
party, at such other address or facsimile number as such party may hereafter
specify for the purpose by notice to the Agent and the Borrower in accordance
with the provisions of this Section 13.1. Each such notice, request or other
communication shall be effective (i) if given by facsimile transmission, when
transmitted to the facsimile number specified in this Section and confirmation
of receipt is received, (ii) if given by mail, 72 hours after such communication
is deposited in the mails with first class postage prepaid, addressed as
aforesaid, or (iii) if given by any other means, when delivered (or, in the case
of electronic transmission, received) at the address specified in this Section;
provided that notices to the Agent under Article II shall not be effective until
received.
13.2. Change of Address. The Borrower, the Agent, the LC Issuer
and any Lender may each change the address for service of notice upon it by a
notice in writing to the other parties hereto.
ARTICLE XIV
COUNTERPARTS
14.1. Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one agreement, and
any of the parties hereto may execute this Agreement by signing any such
counterpart. This Agreement shall be effective when it has been executed by the
Borrower, the Agent and the Lenders and each party has notified the Agent by
facsimile transmission or telephone that it has taken such action.
14.2. Facsimile Documents and Signatures. For purposes of negotiating
and finalizing this Agreement, if this document or any document executed in
connection with it is transmitted by facsimile machine ("fax"), it shall be
treated for all purposes as an original document. Additionally, the signature of
any party on this document transmitted by way of a facsimile machine shall be
considered for all purposes as an original signature. Any such faxed document
shall be considered to have the same binding legal effect as an original
document. At the request
Page 88
of any party, any faxed document shall be re-executed by each signatory party in
an original form.
ARTICLE XV
CHOICE OF LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL
15.1. CHOICE OF LAW. THE LOAN DOCUMENTS (OTHER THAN THOSE CONTAINING A
CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL BE CONSTRUED IN ACCORDANCE WITH
THE INTERNAL LAWS OF THE STATE OF TEXAS, BUT GIVING EFFECT TO FEDERAL LAWS
APPLICABLE TO NATIONAL BANKS.
15.2. CONSENT TO JURISDICTION. THE BORROWER AND EACH GUARANTOR HEREBY
IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES
FEDERAL OR TEXAS STATE COURT SITTING IN HOUSTON, TEXAS IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENTS AND THE BORROWER
HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR
PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES
ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT,
ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN
INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE AGENT, THE LC
ISSUER OR ANY LENDER TO BRING PROCEEDINGS AGAINST THE BORROWER OR ANY GUARANTOR
IN THE COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY THE BORROWER
OR ANY GUARANTOR AGAINST THE AGENT, THE LC ISSUER OR ANY LENDER OR ANY AFFILIATE
OF THE AGENT, THE LC ISSUER OR ANY LENDER INVOLVING, DIRECTLY OR INDIRECTLY, ANY
MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN
DOCUMENT SHALL BE BROUGHT ONLY IN A COURT IN HOUSTON, TEXAS.
15.3. WAIVER OF JURY TRIAL. THE BORROWER, EACH GUARANTOR, THE AGENT,
THE LC ISSUER AND EACH LENDER HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL
PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN
TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED
WITH ANY LOAN DOCUMENT OR THE RELATIONSHIP ESTABLISHED THEREUNDER.
Page 89
IN WITNESS WHEREOF, The Borrower, the Lenders, the LC Issuer and the
Agent have executed this Agreement as of the date first above written.
BORROWER: PETROQUEST ENERGY, L.L.C.
By: PetroQuest Energy, Inc., its sole member
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Chief Financial Officer
Address for Borrower:
PetroQuest Energy, L.L.C.
▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇,
Chief Financial Officer
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
GUARANTOR: for the purpose of agreeing to the provisions of Article 5 and
Article 6 and Sections 11.1, 12.2.3, 15.2 and 15.3.
PETROQUEST ENERGY, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Chief Financial Officer
Page 90
LENDERS: BANK ONE, NA,
Individually and as the Agent and LC Issuer
Commitment: $48,750,000.00
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇-▇▇▇▇▇
------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇-▇▇▇▇▇
Director
Address:
Bank One, NA
▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇-▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Commitment: $26,250,000.00 UNION BANK OF CALIFORNIA, N.A.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
------------------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
---------------------------------------
Title: SVP
---------------------------------------
Address:
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Page 91
PRICING SCHEDULE
MARGIN LEVEL I STATUS LEVEL II STATUS LEVEL III STATUS LEVEL IV STATUS
------ -------------- --------------- ---------------- ---------------
Eurodollar Rate 2.00% 2.25% 2.375% 2.50%
Floating Rate 0.75% 1.00% 1.125% 1.25%
APPLICABLE FEE RATE LEVEL I STATUS LEVEL II STATUS LEVEL III STATUS LEVEL IV STATUS
------------------- -------------- --------------- ---------------- ---------------
Commitment 0.50% 0.50% 0.50% 0.50%
For the purposes of this Schedule, the following terms have the
following meanings, subject to the final paragraph of this Schedule:
"Level I Status" exists for any day that the Utilization Percentage is
less than 50%.
"Level II Status" exists for any day that the Utilization Percentage is
greater than or equal to 50% but is less than 75%.
""Level III Status" exists for any day that the Utilization Percentage
is greater than or equal to 75% but is less than 90%.
Level IV Status" exists any day that the Borrower does not qualify for
Level I Status, Level II Status or Level III Status.
"Status" means either Level I Status, Level II Status, Level III Status
or Level IV Status.
The Applicable Margin and Applicable Fee Rate for each day shall be
determined by Agent from time to time in accordance with the foregoing table.
Page 92
EXHIBIT A
PROMISSORY NOTE
$_______________ Houston, Texas May 14, 2003
FOR VALUE RECEIVED, the undersigned, PETROQUEST ENERGY, L.L.C., a
Louisiana limited liability company ("Borrower"), hereby promises to pay to the
order of __________, a [national banking] association (herein called "Lender"),
the principal sum of ________ DOLLARS ($___________), or, if greater or less,
the aggregate unpaid principal amount of the Credit Extensions made under this
Note by Lender to Borrower pursuant to the terms of the Credit Agreement (as
hereinafter defined), together with interest on the unpaid principal balance
thereof as hereinafter set forth, both principal and interest payable as herein
provided in lawful money of the United States of America at the offices of Agent
under the Credit Agreement, ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, or at such other
place within Houston, Texas, as from time to time may be designated by the
holder of this Note.
This Note (a) is issued and delivered under that certain Amended and
Restated Credit Agreement of even date herewith among Borrower, Bank One, NA, as
Agent, and the lenders (including Lender) referred to therein (herein, as from
time to time supplemented, amended or restated, called the "Credit Agreement"),
and is a "Note" as defined therein, (b) is subject to the terms and provisions
of the Credit Agreement, which contains provisions for payments and prepayments
hereunder and acceleration of the maturity hereof upon the happening of certain
stated events, and (c) is secured by and entitled to the benefits of certain
Loan Documents (as identified and defined in the Credit Agreement). Payments on
this Note shall be made and applied as provided herein and in the Credit
Agreement. Reference is hereby made to the Credit Agreement for a description of
certain rights, limitations of rights, obligations and duties of the parties
hereto and for the meanings assigned to terms used and not defined herein and to
the Collateral Documents for a description of the nature and extent of the
security thereby provided and the rights of the parties thereto.
The principal amount of this Note, together with all interest accrued
hereon, shall be due and payable in full on the Facility Termination Date.
So long as no Default has occurred and is continuing, all Floating Rate
Loans (exclusive of any past due principal or interest) from time to time
outstanding shall bear interest on each day outstanding at the Floating Rate in
effect on such day. If a Default has occurred and is continuing, all Floating
Rate Loans (exclusive of any past due principal or interest) from time to time
outstanding shall bear interest on each day outstanding at the default rate in
effect on such day as may be specified pursuant to Section 2.12 of the Credit
Agreement. On each Payment Date Borrower shall pay to the holder hereof all
unpaid interest which has accrued on the Floating Rate Loans to but not
including such Payment Date. So long as no Default has occurred and is
continuing, each Eurodollar Loan (exclusive of any past due principal or
interest) shall bear interest on each day during the related Interest Period at
the related Eurodollar Rate in effect
Exhibit A - Page 1
on such day. If a Default has occurred and is continuing, all Eurodollar Loans
(exclusive of any past due principal or interest) from time to time outstanding
shall bear interest on each day outstanding at the default rate in effect on
such day as may be specified pursuant to Section 2.12 of the Credit Agreement.
Borrower shall pay to the holder hereof all unpaid interest which has accrued on
each Eurodollar Loan on the last day of its applicable Interest Period and, if
such Interest Period is longer than three months, on the last day of each
three-month interval during such Interest Period. All past due principal of and
past due interest on the Loans shall bear interest on each day outstanding at
the default rate in effect on such day as may be specified pursuant to Section
2.12, and such interest shall be due and payable daily as it accrues.
Notwithstanding the foregoing provisions of this paragraph: (a) this Note shall
never bear interest in excess of the Highest Lawful Rate, and (b) if at any time
the rate at which interest is payable on this Note is limited by the Highest
Lawful Rate (by the foregoing subsection (a) or otherwise), this Note shall bear
interest at the Highest Lawful Rate and shall continue to bear interest at the
Highest Lawful Rate until such time as the total amount of interest accrued
hereon equals (but does not exceed) the total amount of interest which would
have accrued hereon had there been no Highest Lawful Rate applicable hereto.
Notwithstanding the foregoing paragraph and all other provisions of
this Note, in no event shall the interest payable hereon, whether before or
after maturity, exceed the maximum interest which, under applicable Law, may be
contracted for, charged, or received on this Note, and this Note is expressly
made subject to the provisions of the Credit Agreement which more fully set out
the limitations on how interest accrues hereon.
If this Note is placed in the hands of an attorney for collection after
default, or if all or any part of the indebtedness represented hereby is proved,
established or collected in any court or in any bankruptcy, receivership, debtor
relief, probate or other court proceedings, Borrower and all endorsers, sureties
and guarantors of this Note jointly and severally agree to pay reasonable
attorneys' fees and collection costs to the holder hereof in addition to the
principal and interest payable hereunder.
Borrower and all endorsers, sureties and guarantors of this Note hereby
severally waive demand, presentment, notice of demand and of dishonor and
nonpayment of this Note, protest, notice of protest, notice of intention to
accelerate the maturity of this Note, declaration or notice of acceleration of
the maturity of this Note, diligence in collecting, the bringing of any suit
against any party and any notice of or defense on account of any extensions,
renewals, partial payments or changes in any manner of or in this Note or in any
of its terms, provisions and covenants, or any releases or substitutions of any
security, or any delay, indulgence or other act of any trustee or any holder
hereof, whether before or after maturity.
Exhibit A - Page 2
This Note and the rights and duties of the parties hereto shall be
governed by the Laws of the State of Texas (without regard to principles of
conflicts of law), except to the extent the same are governed by applicable
federal Law.
PETROQUEST ENERGY, L.L.C.,
a Louisiana Limited Liability Company
By: _________________________________
Name: _______________________________
Title: ______________________________
Exhibit A - Page 3
EXHIBIT B
BORROWING NOTICE
Reference is made to that certain Credit Agreement dated as of May 14,
2003 (as from time to time amended, the "Agreement"), by and among PetroQuest
Energy, L.L.C. (the "Borrower"), Bank One, NA, as Agent, Banc One Capital
Markets, Inc., as Lead Arranger and Sole Book Runner and the lenders referred to
therein ("Lenders"). Terms which are defined in the Agreement are used herein
with the meanings given them in the Agreement.
Borrower hereby requests an Advance pursuant to Section 2.9 of the
Agreement as follows:
Borrowing Date: _______________, 200___
Aggregate amount of Advance: $__________________
Type of Loans in Advance: Floating Rate / Eurodollar
Length of Interest Period for Eurodollar Loans
(1, 2, 3 or 6 months): ___________ months
To meet the conditions set out in the Agreement for such Advance,
Borrower hereby represents, warrants, acknowledges, and agrees to and with Agent
and each Lender that:
a. The officer of Borrower signing this instrument is the duly elected,
qualified and acting officer of Borrower as indicated below such
officer's signature hereto having all necessary authority to act for
Borrower in making the request herein contained and is an Authorized
Officer of Borrower.
b. There does not exist on the date hereof any Default or Unmatured
Default that has not been waived in writing as provided in Article VIII
of the Agreement.
c. The representations and warranties contained in Article V of the
Agreement are true and correct as of Borrowing Date above except to the
extent any such representation or warranty is stated to relate solely
to an earlier date, in which case such representation or warranty shall
have been true and correct on and as of such earlier date.
d. There currently exists no litigation, arbitration, governmental
investigation, proceeding or inquiry pending or threatened against the
Borrower or any of the Borrower's Subsidiaries which, if adversely
determined, could reasonably be expected to have a Material Adverse
Effect.
Exhibit B - Page 1
The Authorized Officer of Borrower signing this instrument hereby
certifies that, to the best of his knowledge after due inquiry, the above
representations, warranties, acknowledgments, and agreements of Borrower are
true, correct and complete.
Exhibit B - Page 2
IN WITNESS WHEREOF this instrument is executed as of __________________.
PETROQUEST ENERGY, L.L.C.,
a Louisiana Limited Liability Company
By: ________________________________
Name: ______________________________
Title: _____________________________
Exhibit B - Page 3
EXHIBIT C
ASSIGNMENT AGREEMENT
Reference is made to the Credit Agreement dated as of May 14,
2003 (the "Credit Agreement") among PetroQuest Energy, L.L.C. (the "Borrower"),
the Lenders named therein, Bank One, NA, as Agent ("Agent"), and Banc One
Capital Markets, Inc. as Lead Arranger and Sole Book Runner. Terms defined in
the Credit Agreement are used herein with the same meaning.
The "Assignor" and the "Assignee" referred to on Schedule 1 agree as
follows:
1. The Assignor hereby sells and assigns to the Assignee, without
recourse and without representation or warranty except as expressly set forth
herein, and the Assignee hereby purchases and assumes from the Assignor, an
interest in and to the Assignor's rights and obligations under the Credit
Agreement and the other Loan Documents as of the date hereof equal to the
percentage interest specified on Schedule 1 of all outstanding rights and
obligations under the Credit Agreement and the other Loan Documents. After
giving effect to such sale and assignment, the Assignee's Commitment and the
amount of the Loans owing to the Assignee will be as set forth on Schedule 1.
2. The Assignor: (i) represents and warrants that it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any adverse claim; (ii) makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with the Loan Documents
or the execution, legality, validity, enforceability, genuineness, sufficiency
or value of the Loan Documents or any other instrument or document furnished
pursuant thereto; (iii) makes no representation or warranty and assumes no
responsibility with respect to the financial condition of Borrower or any of its
Subsidiaries any Restricted Person or the performance or observance by Borrower
or any of its Subsidiaries of any of their obligations under the Loan Documents
or any other instrument or document furnished pursuant thereto; and (iv)
attaches the Note held by the Assignor and requests that Agent exchange such
Note for new Notes payable to the order of the Assignee in an amount equal to
the Commitment assumed by the Assignee pursuant hereto and to the Assignor in an
amount equal to the Commitment retained by the Assignor, if any, as specified on
Schedule 1.
3. The Assignee: (i) confirms that it has received a copy of the Credit
Agreement, together with copies of the financial statements referred to in
Section 6.1 thereof and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into this
Assignment and Acceptance; (ii) agrees that it will, independently and without
reliance upon Agent, the Assignor or any other Lender and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under the Credit
Agreement; (iii) confirms that it is an Eligible Assignee; (iv) appoints and
authorizes Agent to take such action as agent on its behalf and to exercise such
powers and discretion under the Credit Agreement as are delegated to Agent by
the
Exhibit C - Page 1
terms thereof, together with such powers and discretion as are reasonably
incidental thereto; (vi) agrees that it will perform in accordance with their
terms all of the obligations that by the terms of the Credit Agreement are
required to be performed by it as a Lender; and (vi) attaches any U.S. Internal
Revenue Service or other forms required under Section 3.5.
4. Following the execution of this Assignment and Acceptance, it will
be delivered to Agent for acceptance and recording by Agent. The effective date
for this Assignment and Acceptance (the "Effective Date") shall be the date of
acceptance hereof by Agent, unless otherwise specified on Schedule 1.
5. Upon such acceptance and recording by Agent, as of the Effective
Date, (i) he Assignee shall be a party to the Credit Agreement and, to the
extent provided in this Assignment and Acceptance, have the rights and
obligations of a Lender thereunder and (ii) the Assignor shall, to the extent
provided in this Assignment and Acceptance, relinquish its rights and be
released from its obligations under the Credit Agreement.
6. Upon such acceptance and recording by Agent, from and after the
Effective Date, Agent shall make all payments under the Credit Agreement and the
Notes in respect of the interest assigned hereby (including, without limitation,
all payments of principal, interest and commitment fees with respect thereto) to
the Assignee. The Assignor and Assignee shall make all appropriate adjustments
in payments under the Credit Agreement and the Notes for periods prior to the
Effective Date directly between themselves.
7. This Assignment and Acceptance shall be governed by, and construed
in accordance with, the Laws of the State of Texas.
8. This Assignment and Acceptance may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement. Delivery of an executed
counterpart of Schedule 1 to this Assignment and Acceptance by telecopier shall
be effective as delivery of a manually executed counterpart of this Assignment
and Acceptance.
IN WITNESS WHEREOF, the Assignor and the Assignee have caused Schedule
1 to this Assignment and Acceptance to be executed by their officers thereunto
duly authorized as of the date specified thereon.
Exhibit C - Page 2
SCHEDULE 1
to Assignment Agreement
Percentage of Aggregate Commitment assigned: ________%
Assignee's Retained Commitment: $__________
Assignee's Commitment: $__________
Aggregate outstanding principal amount
of Loans assigned: $__________
Principal amount of Note payable to Assignee: $__________
Principal amount of Note payable to Assignor: $__________
Effective Date
(if other than date of acceptance by Agent): ___________, 200__
Dated: ____________, 200__
[NAME OF ASSIGNOR], as Assignor
By:
Title:
[NAME OF ASSIGNEE], as Assignee
By:
Title:
Accepted [and Approved]**
this ___ day of ___________, 200__.
BANK ONE, N.A., AGENT AND LC ISSUER
By:
Title:
[Approved this ____ day of ____________, 200__
PETROQUEST ENERGY, L.L.C.**
By:
Title:
**Required if Assignee is not Lender, unless Default has occurred and is
continuing.
Exhibit C - Page 3
Exhibit C - Page 4
EXHIBIT D
FORM OF OPINION
________,______
The Agent and the Lenders who are parties to the
Credit Agreement described below.
Gentlemen/Ladies:
We are counsel for PetroQuest Energy L.L.C., a Louisiana limited
liability company (the "Borrower"), and have represented the Borrower in
connection with its execution and delivery of a Credit Agreement dated as of May
14, 2003 (the "Agreement") among the Borrower, the Lenders named therein, Bank
One, NA, as Agent, and Banc One Capital Markets, Inc. as Lead Arranger and Sole
Book Runner, providing for Advances in an aggregate principal amount not
exceeding $75,000,000 at any one time outstanding. All capitalized terms used in
this opinion and not otherwise defined herein shall have the meanings attributed
to them in the Agreement.
We have examined the **[describe constitutive documents of the Borrower
and each Subsidiary and appropriate evidence of authority to enter into the
transaction]**, the Loan Documents and such other matters of fact and Law which
we deem necessary in order to render this opinion. Based upon the foregoing, it
is our opinion that:
l. Borrower is a limited liability company duly formed and organized,
validly existing and in good standing under the laws of the State of Louisiana
and has all requisite power and authority to own its properties and to conduct
its business as presently conducted. Borrower is duly qualified to do business
as a foreign limited liability company in good standing in each jurisdiction
where the ownership or leasing of its properties or the conduct of its business
requires such qualification.
2. The Guarantor is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware and has all requisite
power and authority to own its properties and to conduct its business as
presently conducted. The Guarantor is duly qualified to do business as a foreign
corporation in good standing in each jurisdiction where the ownership or leasing
of its properties or the conduct of its business requires such qualification.
3. The execution, delivery and performance by the Borrower and the
Subsidiaries of the Loan Documents (to the extent a party thereto) and the
consummation of the transaction contemplated thereby, do not conflict with or
constitute or result in a breach or a default under (or an event which with
notice or passage of time or both would constitute a default under) or
Exhibit D - Page 1
violation of or cause an acceleration of any obligation under, or result in the
imposition or creation of (or the obligation to create or impose) any Lien,
security interest or encumbrance on any properties or assets of the Borrower or
any Subsidiary with respect to (A) the terms or provisions of any contract,
agreement, indenture or instrument to which the Borrower or any Subsidiary is a
party, (B) the certificate of incorporation or bylaws (or similar organizational
document) of the Borrower or any Subsidiary, or (C) any statute, judgment,
decree, order, rule or regulation applicable to the Borrower or any Subsidiary
or any of their respective properties or assets.
4. The Loan Documents to which the Borrower and each Subsidiary is a
party have been duly executed and delivered by the Borrower and each Subsidiary
and constitute legal, valid and binding obligations of the Borrower and such
Subsidiary enforceable against the Borrower and such Subsidiary in accordance
with their respective terms.
5. There is no litigation, arbitration, governmental investigation,
proceeding or inquiry pending or, to the best of our knowledge after due
inquiry, threatened against the Borrower or any of its Subsidiaries which, if
adversely determined, could reasonably be expected to have a Material Adverse
Effect.
6. No order, consent, adjudication, approval, license, authorization,
or validation of, or filing, recording or registration with, or exemption by, or
other action in respect of any governmental or public body or authority, or any
subdivision thereof, which has not been obtained by the Borrower or any of its
Subsidiaries, is required to be obtained by the Borrower or any of its
Subsidiaries in connection with the execution and delivery of the Loan
Documents, the borrowings under the Agreement, the payment and performance by
the Borrower of the Obligations, or the legality, validity, binding effect or
enforceability of any of the Loan Documents.
7. No consent, waiver, approval, authorization or order of or filing,
registration, qualification, license or permit of or with any court or
governmental agency or body, or third party is required for the consummation by
the Borrower or any Guarantor of the other transactions contemplated by the Loan
Documents or any Rate Management Transaction, except such as may be required
under those which have previously been obtained and the timely and proper filing
of the Collateral Documents and related financing statements.
8. Neither the Borrower nor any Subsidiary is, or immediately after the
initial Credit Extension will be, an "investment company" as such term is
defined in the Investment Company Act of 1940, as amended or a "holding company"
as defined in, or otherwise subject to regulation under, the Public Utility
Holding Company Act of 1935.
9. The consummation of the transactions contemplated by the Loan
Documents will not violate Regulation T, U or X of the Board of Governors of the
Federal Reserve System.
Exhibit D - Page 2
10. The form of the Collateral Documents and the related financing
statements, including the form of acknowledgments thereto, comply with all
applicable recording, filing and registration laws and regulations of the States
of Texas and Louisiana, as applicable.
11. The Pledge Agreement creates a valid security interest in the
Collateral (as defined therein) in which a security interest may be created
under Article 9 of the Code.
12. The financing statements relating to the Pledge Agreement are in a
form sufficient to comply with the filing requirements of the States of
Louisiana and Texas, and the filing of the financing statements in the Office of
the Secretary of State of the States of Louisiana and Texas (together with
payment of applicable filing fees) are the only actions necessary to perfect the
security interest with respect to the Collateral (as defined therein) in which a
security interest has been created under the Pledge Agreement and in which a
security interest may be perfected by the filing of financing statements.
13. Exhibit A hereto accurately sets forth the authorized capital of
the each of the Subsidiaries of the Borrower. All of such capital is duly
authorized, validly issued and outstanding and are fully paid and nonassessable
and free of preemptive rights. To our knowledge, neither Borrower nor any
Subsidiary has any obligation or commitment to issue any other shares of capital
stock, membership interests, partnership interests or other securities issued
nor has it granted any options with respect thereto.
14. The property descriptions of the real properties contained in the
Deed of Trust located within the States of Texas and Louisiana which are
described therein are in legally sufficient form for the purposes of all
applicable recording, filing and registration laws in the States of Texas and
Louisiana, as applicable.
15. Upon the recording and filings as provided in following paragraph,
the Deeds of Trust are effective to create in favor of the Agent for the ratable
benefit of the Lenders, as security for the payment of the Secured Obligations,
a valid mortgage lien on all of, to the extent adequately described therein
(without in any manner limiting the opinion set forth in paragraph 21 above),
all of the right, title and interest of Borrower and Guarantor, as the case may
be, in and to the portion of the Oil & Gas Properties constituting real property
or interests in real property described in the Deeds of Trust as being mortgaged
thereby and a perfected security interest in all of, to the extent adequately
described therein and in which a security interest can be created, and perfected
by the filings contemplated by the following paragraph, under Article 9 of the
Uniform Commercial Code as in effect in the States of Texas and Louisiana.
16. Fully executed counterparts of the Deeds of Trust should be filed
for record in each county or parish in the States of Texas and Louisiana where
any portion of the Property described on Exhibit A thereto is located (or, in
the case of Properties located on the Outer Continental Shelf, in the adjacent
county or parish). Fully executed counterparts of the financing statements
relating to the Deeds of Trust should be filed for record with the Secretary of
State of
Exhibit D - Page 3
the States of [_________] and Texas and with the Parish Clerk of the Parish of
East Baton Rouge, Louisiana, as applicable. Other than the foregoing, no
authorization, consent, approval, license or exemption of, or filing or
registration with, any governmental authority of the States of Delaware, Texas
or Louisiana, as applicable, is necessary for either the due execution and
delivery by Borrower or Guarantor of the Deeds of Trust or the financing
statements related thereto, or with the holding and enforcement by the Agent of
the Deeds of Trust or the Secured Obligations secured thereby, except for such
authorizations, consents, approvals, licenses or exemptions of, or filings or
registrations with any Tribunal that are required to be obtained or maintained,
as the case may be, by the Agent in order for the Agent to be or remain
qualified to act in the capacity of trustee.
17. After the recordings and filings specified in the previous
paragraphs have occurred, no instruments need be recorded, registered or filed
or re-recorded, re-registered or re-filed in any public office in the States of
[_______], Texas, or Louisiana, as applicable in connection with the execution
and delivery of the Deeds of Trust or the financing statements related thereto
in order to maintain the perfection of the Lender Liens and security interests
created thereby after the date of recordation, other than continuation
statements as required by the Uniform Commercial Code as in effect in the States
of [__________], Texas, or Louisiana, as applicable.
18. No state or local recording tax, stamp tax or other similar fee,
tax or governmental charge (other than statutory filing and recording fees to be
paid upon the filing of the Collateral Documents or the financing statements) is
required to be paid in connection with the filing and recordation of any of the
Collateral Documents or the financing statements.
19. A state court of competent jurisdiction or a federal court sitting
in the States of Louisiana of competent jurisdiction and applying conflicts of
laws principles of such states, if properly presented with a choice of law
issue, will honor the choice of Texas law to govern the Collateral Documents
that state such documents shall be governed by the laws of the State of Texas,
except to the extent the laws of other jurisdictions may be mandatorily
applicable to certain matters under the Collateral Documents.
This opinion may be relied upon by the Agent, the Lenders and their
participants, assignees and other transferees.
Very truly yours,
Exhibit D - Page 4
EXHIBIT E
LOAN/CREDIT RELATED MONEY TRANSFER INSTRUCTION
PETROQUEST ENERGY, L.L.C.
_____________________
Lafayette, Louisiana _____
[Date]
Bank One, NA, as Agent
▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇-▇▇▇▇▇
Re: Borrowing Notice of even date herewith by PetroQuest Energy, L.L.C. (the
"Borrower"), pursuant to Credit Agreement dated May 14, 2003 (the "Credit
Agreement") among Borrower, Bank One, NA, as Agent, Banc One Capital
Markets, Inc., as Lead Arranger and Sole Book Runner, and the Lenders
named therein
Gentlemen:
Pursuant to the Borrowing Notice, Borrower has requested an Advance (as
defined in the Agreement) in the amount of $_____________.
Borrower, hereby instructs Agent to disburse the proceeds of the requested
Advance as follows:
TO: [NAME OF PAYEE] $____________
Wiring Information: [Name of Bank]
ABA No. ________________
Account # _______________
Reference: _______________
Contact: _________________
PETROQUEST ENERGY, L.L.C.
By:
Name:
Title:
Exhibit E - Page 1
EXHIBIT F
COMPLIANCE CERTIFICATE
To: Bank One, NA, as Agent, for Itself and the Lenders
to the Credit Agreement Described Below
This Compliance Certificate is furnished pursuant to that certain
Credit Agreement dated as of May 14, 2003 (as amended, modified, renewed or
extended from time to time, the "Agreement") by and among PetroQuest Energy,
L.L.C. (the "Borrower"), the Lenders named therein, Bank One, NA, as Agent
("Agent"), and Banc One Capital Markets, Inc. as Lead Arranger and Sole Book
Runner. Unless otherwise defined herein, capitalized terms used in this
Compliance Certificate have the meanings ascribed thereto in the Agreement.
THE UNDERSIGNED HEREBY CERTIFIES THAT:
1. I am the duly elected _____________ of Borrower.
2. I have reviewed the terms of the Agreement and I have made, or have
caused to be made under my supervision, a detailed review of the transactions
and conditions of Guarantor, the Borrower and their Subsidiaries during the
accounting period covered by the attached financial statements.
3. The examinations described in paragraph 2 did not disclose, and I
have no knowledge of, the existence of any condition or event which constitutes
a Default or Unmatured Default during or at the end of the accounting period
covered by the attached financial statements or as of the date of this
Certificate, except as set forth below.
4. Schedule I attached hereto sets forth financial data and
computations evidencing Borrower's compliance with certain covenants of the
Agreement, all of which data and computations are true, complete and correct.
5. Schedule II attached hereto sets forth the various reports and
deliveries which are required at this time under the Credit Agreement, the
Collateral Documents and the other Loan Documents and the status of compliance.
Described below are the exceptions, if any, to paragraph 3 by listing,
in detail, the nature of the condition or event, the period during which it has
existed and the action which each Borrower has taken, is taking, or proposes to
take with respect to each such condition or event:
________________________________________________
________________________________________________
________________________________________________
Exhibit F - Page 1
The foregoing certifications, together with the computations set forth
in Schedule I hereto and the financial statements delivered with this
Certificate in support hereof, are made and delivered this _________ day of
_______________, 200___.
PETROQUEST ENERGY, L.L.C.
By:
Name:
Chief Financial Officer
Exhibit F - Page 2
SCHEDULE I TO COMPLIANCE CERTIFICATE
Compliance as of ______________, 200____
Exhibit F - Page 3
SCHEDULE II TO COMPLIANCE CERTIFICATE
Reports and Deliveries Currently Due
Exhibit F - Page 4
EXHIBIT G
FORM OF TITLE OPINION
[Letterhead of Title Counsel]
___________________, 2003
Bank One, NA, as Agent
▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention:
TITLE OPINION
Interests of PetroQuest Energy, L.L.C.; and
PetroQuest Energy, Inc.
__________ County, __________
Gentlemen:
Please refer to our [Title Opinion] ("Title Opinion") dated
____________, 200__, covering lands more particularly described therein
(collectively the "Lands").
In addition to the title materials examined as listed in the Title
Opinion, we have examined executed originals of the following documents:
[HERE LIST DOCUMENTS EXAMINED]
We are of the opinion that:
A. The Mortgage constitutes, as security for (i) the loans made and to
be made by the Lender pursuant to the Credit Agreement and to be evidenced by
the Notes, and (ii) the obligations of the Borrowers and their Affiliates to the
Lender or its Affiliates under Rate Management Transactions between such
parties, a legally valid and enforceable first [mortgage/deed of trust] lien on
the interests of _______________________ ("Borrower") in the Lands, and a first
perfected security interest in the interests of the Borrower in all accounts and
proceeds resulting from the sale at the wellhead of minerals to be severed from
the aforesaid interests of the Borrower. No other or further filings or
recordings are required to establish, perfect and maintain such lien and
security interest, except as expressly set forth herein, subject to our comments
and requirements set forth herein below.
B. It is our opinion that the interests of the Borrower, and covered by
your Mortgage are as follows:
Exhibit G - Page 1
I. [Tract 1:] Operating Net Revenue
Interest Interest
Borrower __________ __________
[HERE LIST INTERESTS OF EACH IN EACH TRACT]
C. Under the applicable laws of the State of _______________, including
applicable recording, filing and registration laws and regulations, no mortgage,
documentary, stamp or similar taxes are payable in connection with the
execution, delivery or recording of the Mortgage or the transactions
contemplated thereby, insofar as the Mortgage and the transactions relate to
property located in or subject to the laws of the State of ______________, other
than statutory recording and filing fees which were paid upon the recording and
filing of the Mortgage, UCC 1 and other documents recorded in connection
herewith.
D. Under the laws of the State of ______________, the priority of the
Mortgage, to the extent the Mortgage secures obligatory future advances and is a
conveyance of or creates a lien against a real property interest, was
established as of ___________, 2002.
E. Under the laws of the State of and local jurisdictions therein,
there is no statutory regulatory lien in favor of any governmental entity for
(a) liability under ________ Applicable Environmental Laws or regulations, or
(b) damages (including natural resources damages) arising from or costs incurred
by such governmental entity in response to the release of a hazardous or toxic
waste, substance, pollutant, constituent, or other substance into the
environment which, if not of record in the mortgage records in the County where
such lands are located, would have priority over the Mortgage [HERE LIST
EXCEPTIONS, AS APPLICABLE] .
F. Under the laws of the State of _________ and local jurisdictions
therein, there are no statutory and regulatory requirements relating to the
transfer of ownership or operation or sale of premises upon which there are
hazardous or toxic wastes, or upon which there are certain facilities which
indicate a likelihood of such wastes (except for various requirements that
regulatory bodies receive notification when an environmental permittee,
licensee, or notifier changes) which require (i) notification of the State or of
the local jurisdiction of such transfer, or sale, (ii) certification that there
has been no discharge of toxic or hazardous waste or other substances, or (iii)
in the event of a discharge, the assumption prior to such transfer of ownership,
or operation, or sale, of responsibility by the lender for the undertaking of
remedial measures to alleviate environmental contamination resulting from such
discharge.
G. The Mortgage contains the terms and provisions necessary to enable
the Lender, following a default under the Mortgage, to exercise remedies which
are customarily available to mortgagees under mortgages encumbering real
property under the laws of the State of _____________.
Exhibit G - Page 2
H. The form of financing statement described in item _____ of this
opinion ("Financing Statements") sufficient in form to perfect the security
interest in the Borrower's interest in the Mortgaged Property not considered
real property or fixtures, to the extent that such Mortgaged Property is deemed
to be located in the State of _________, and a security interest in such
Mortgaged Property can be perfected by the filing of a financing statement. To
the extent that the Mortgaged Property owned by the Borrower not considered real
property or fixtures is deemed to be located in the State of __________ and
security interests in the various types of such Mortgaged Property described in
the Financing Statement can be perfected by filing in the State of ____________
under the provisions of Article 9 of the Uniform Commercial Code, such security
interests have been perfected by filing of the Financing Statement in the Office
of the ______________ Secretary of State.
I. The Lender is not required, solely as a result of the transactions
contemplated by the Loan Documents, to qualify to do business in the State of
__________ in order to exercise its rights under the Mortgage. Solely as a
result of the transactions contemplated by the Loan Documents, the Lender will
not become subject to any taxes or fees of any kind under the laws of the State
of __________________.
J. The payment by the Borrower and receipt by the Lender of the
aggregate principal, interest and fees to be paid, and the method of calculation
and payment thereof, pursuant to the Loan Documents is not usurious under, or
otherwise in violation of, the laws of the State of ___________ .
K. Certain rights, remedies and waivers contained in the Loan Documents
which relate to the Mortgaged Property may be rendered ineffective, or limited
by applicable State of ____________________ laws or judicial decisions (other
than those reflected in the qualifications and assumptions set forth herein)
governing such provisions, but in our opinion such laws and judicial decisions
do not make the Loan Documents invalid as a whole, and there exist, in the Loan
Documents or pursuant to applicable law, legally adequate remedies for a
realization of the principal benefits and/or security reasonably intended to be
provided by the Loan Documents.
L. It is necessary that a continuation statement be filed regarding the
Financing Statement within six ( 6 ) months prior to the end of each five (5)
year period.
M. This finding of mortgaged interests of Borrower in your favor, is
subject to all unsatisfied (in whole or in part) Requirements of the Title
Opinion, as well as all limitations, comments and remarks set forth therein and
herein.
Very truly yours,
Exhibit G - Page 3
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Exhibit G - Page 4