EXHIBIT (10)vii
AMENDED AND RESTATED CREDIT AGREEMENT
DATED AS OF JANUARY 14, 2003
BY AND AMONG
KCS ENERGY, INC.,
AS BORROWER,
THE LENDERS FROM TIME TO TIME PARTY HERETO,
AS LENDERS,
AND
FOOTHILL CAPITAL CORPORATION,
AS COLLATERAL AGENT AND ADMINISTRATIVE AGENT,
AND
HIGHBRIDE/▇▇▇▇▇ SPECIAL OPPORTUNITIES FUND, L.P.,
AS LEAD ARRANGER
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS; CERTAIN TERMS............................................................................2
Section 1.01 Definitions...............................................................................2
Section 1.02 Terms Generally..........................................................................34
Section 1.03 Accounting and Other Terms...............................................................35
Section 1.04 Time References..........................................................................35
ARTICLE II THE LOANS 35
Section 2.01 Commitments..............................................................................35
Section 2.02 Making the Loans.........................................................................37
Section 2.03 Repayment of Loans; Evidence of Debt.....................................................40
Section 2.04 Interest.................................................................................41
Section 2.05 Reduction of Commitment; Prepayment of Loans.............................................42
Section 2.06 Fees.. 46
Section 2.07 Securitization...........................................................................46
Section 2.08 Taxes 47
Section 2.09 LIBOR Not Determinable; Illegality or Impropriety........................................49
Section 2.10 Indemnity.................................................................................i
Section 2.11 Continuation and Conversion of Loans.....................................................50
ARTICLE III LETTERS OF CREDIT..................................................................................51
Section 3.01 Letter of Credit Guaranty................................................................51
Section 3.02 Participations...........................................................................53
Section 3.03 Letters of Credit........................................................................54
ARTICLE IV FEES, PAYMENTS AND OTHER COMPENSATION...............................................................55
Section 4.01 Audit and Collateral Monitoring Fees.....................................................55
Section 4.02 Payments; Computations and Statements....................................................55
Section 4.03 Sharing of Payments, Etc.................................................................57
Section 4.04 Apportionment of Payments................................................................57
Section 4.05 Increased Costs and Reduced Return.......................................................58
ARTICLE V CONDITIONS TO LOANS..................................................................................59
Section 5.01 Conditions Precedent.....................................................................59
Section 5.02 Conditions Precedent to All Loans and Letters of Credit..................................64
ARTICLE VI REPRESENTATIONS AND WARRANTIES......................................................................67
Section 6.01 Representations and Warranties...........................................................67
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Page
ARTICLE VII COVENANTS OF THE LOAN PARTIES......................................................................77
Section 7.01 Affirmative Covenants....................................................................77
Section 7.02 Negative Covenants.......................................................................91
Section 7.03 Financial Covenants......................................................................97
ARTICLE VIII MANAGEMENT, COLLECTION AND STATUS OF ACCOUNTS RECEIVABLE AND OTHER COLLATERAL.....................98
Section 8.01 Collection of Accounts Receivable; Management of Collateral..............................98
Section 8.02 Accounts Receivable Documentation.......................................................101
Section 8.03 Status of Accounts Receivable and Other Collateral......................................102
Section 8.04 Collateral Custodian....................................................................103
ARTICLE IX EVENTS OF DEFAULT..................................................................................103
Section 9.01 Events of Default.......................................................................103
ARTICLE X AGENTS 107
Section 10.01 Appointment............................................................................107
Section 10.02 Nature of Duties.......................................................................108
Section 10.03 Rights, Exculpation, Etc...............................................................108
Section 10.04 Reliance...............................................................................109
Section 10.05 Indemnification........................................................................109
Section 10.06 Agents Individually....................................................................110
Section 10.07 Successor Agent........................................................................110
Section 10.08 Collateral Matters.....................................................................110
Section 10.09 Agency for Perfection..................................................................112
ARTICLE XI [INTENTIONALLY OMITTED]............................................................................112
ARTICLE XII MISCELLANEOUS.....................................................................................112
Section 12.01 Notices, Etc...........................................................................112
Section 12.02 Amendments, Etc........................................................................114
Section 12.03 No Waiver; Remedies, Etc...............................................................115
Section 12.04 Expenses; Taxes; Attorneys' Fees.......................................................115
Section 12.05 Right of Set-off.......................................................................116
Section 12.06 Severability...........................................................................116
Section 12.07 Assignments and Participations.........................................................117
Section 12.08 Counterparts...........................................................................119
Section 12.09 GOVERNING LAW..........................................................................119
Section 12.10 CONSENT TO JURISDICTION; SERVICE OF PROCESS AND VENUE..................................120
Section 12.11 WAIVER OF JURY TRIAL, ETC..............................................................120
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Page
Section 12.12 Consent by the Agents and Lenders......................................................121
Section 12.13 No Party Deemed Drafter................................................................121
Section 12.14 Reinstatement; Certain Payments........................................................121
Section 12.15 Indemnification........................................................................122
Section 12.16 Records................................................................................123
Section 12.17 Binding Effect.........................................................................123
Section 12.18 Interest...............................................................................123
Section 12.19 Confidentiality........................................................................124
Section 12.20 Integration............................................................................125
Section 12.21 No Novation............................................................................125
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SCHEDULE AND EXHIBITS
Schedule D-1 Disbursement Account
Schedule R-1 Lenders and Lenders' Commitments
Schedule N-1 New Lien Properties
Schedule 6.01(a) Jurisdictions Where Qualified to do Business
Schedule 6.01(e) Subsidiaries
Schedule 6.01(f) Litigation; Commercial Tort Claims
Schedule 6.01(i) ERISA
Schedule 6.01(l) Nature of Business
Schedule 6.01(o)(A) Real Property
Schedule 6.01(o)(B) Oil and Gas Property
Schedule 6.01(r) Environmental Matters
Schedule 6.01(s) Insurance
Schedule 6.01(v) Bank Accounts
Schedule 6.01(w) Intellectual Property
Schedule 6.01(x) Material Contracts
Schedule 6.01(cc) Released Oil and Gas Properties
Schedule 6.01(dd) Name; Jurisdiction of Organization; Organizational ID
Number; Chief Place of Business; Chief Executive Office;
FEIN
Schedule 6.01(ee) Tradenames
Schedule 6.01(ff) ▇▇▇▇▇ Drilled Since Closing of Existing Credit Agreement
Schedule 6.01(hh) Oil and Gas Imbalances
Schedule 6.01(ii) Hedging Agreements
Schedule 7.02(a) Existing Liens
Schedule 7.02(b) Existing Indebtedness
Schedule 7.02(e) Existing Investments
Schedule 7.02(k) Limitations on Dividends and Other Payment Restrictions
Schedule 7.02(o) Compromise of Accounts Receivable
Schedule 8.01 Blocked Account Banks and Blocked Accounts
Exhibit A-1 Form of Assignment and Acceptance
Exhibit C-1 Form of Contribution Agreement
Exhibit G-1 Form of Guaranty
Exhibit P-1 Form of Pledge Agreement
Exhibit PV-10 Form of PV-10 Calculation
Exhibit S-1 Form of Security Agreement
Exhibit 2.02 Form of Notice of Borrowing
Exhibit 5.01(d)(xv) Form of Opinion of Counsel
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Execution Version
[▇▇▇▇▇▇▇ LOGO APPEARS HERE]
AMENDED AND RESTATED CREDIT AGREEMENT
Amended and Restated Credit Agreement, dated as of January 14, 2003, by and
among KCS ENERGY, INC., a Delaware corporation (the "Borrower"), the lenders
from time to time party hereto (each a "Lender" and collectively, the
"Lenders"), FOOTHILL CAPITAL CORPORATION, a California corporation ("Foothill"),
as collateral agent for the Lenders (in such capacity, together with any
successor collateral agent, the "Collateral Agent"), Foothill, as administrative
agent for the Lenders (in such capacity, together with any successor
administrative agent, the "Administrative Agent"; and together with the
Collateral Agent, each an "Agent" and collectively, the "Agents"), and
HIGHBRIDGE/▇▇▇▇▇ SPECIAL OPPORTUNITIES FUND, L.P., a Delaware limited
partnership ("Highbridge"), as lead arranger.
RECITALS
WHEREAS, the Borrower and the Existing Lenders (as hereafter defined) are
parties to the Existing Credit Agreement (as hereafter defined), pursuant to
which from time to time the Existing Lenders have extended credit to the
Borrower;
WHEREAS, the Borrower has asked the Agents and Highbridge to arrange, and
for the Lenders to extend, credit to the Borrower on the terms and conditions
set forth in this Amended and Restated Credit Agreement through the making of
loans on and after the Effective Date (as hereafter defined) consisting of a
term loan in the aggregate principal amount of $40,000,000, a revolving credit
facility "B" in an aggregate principal amount not to exceed $20,000,000 at any
time outstanding, and a revolving credit facility "A" in an aggregate principal
amount not to exceed $30,000,000 at any time outstanding, the latter of which
will include a subfacility for the issuance of letters of credit, all on the
terms and conditions of this Amended and Restated Credit Agreement;
WHEREAS, the proceeds of the loans made under the term loan and the
revolving credit facilities will be used by the Borrower (i) to repay the
Borrower's indebtedness under the Senior Notes (as hereafter defined), (ii) to
pay fees and expenses related to this Amended and
Restated Credit Agreement and the other Loan Documents (as hereafter defined),
and (iii) for the Borrower's and its Subsidiaries' general working capital
purposes; and
WHEREAS, the Lenders are severally, and not jointly, willing to extend such
credit to the Borrower and are willing to amend and restate the Existing Credit
Agreement in its entirety on the terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the premises and the covenants and
agreements contained herein, the parties hereto agree that the Existing Credit
Agreement is hereby amended and restated in its entirety as follows:
ARTICLE I
DEFINITIONS; CERTAIN TERMS
Section 1.01 Definitions. As used in this Agreement, the following terms
shall have the respective meanings indicated below, such meanings to be
applicable equally to both the singular and plural forms of such terms:
"Account Debtor" means any Person who is or who may become obligated under,
with respect to, or on account of, an Account Receivable, chattel paper, or a
general intangible.
"Account Receivable" means, with respect to any Person, all of such
Person's now owned or hereafter acquired right, title, and interest with respect
to "accounts" (as that term is defined in the Code), and any and all "supporting
obligations" (as that term is defined in the Code) in respect thereof.
"Action" has the meaning specified therefor in Section 12.12.
"Administrative Agent" has the meaning specified therefor in the preamble
hereto.
"Administrative Agent's Account" means an account at a bank designated by
the Administrative Agent from time to time as the account into which the
Borrower shall make all payments to the Administrative Agent for the benefit of
the Agents and the Lenders under this Agreement and the other Loan Documents.
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such Person. For purposes of
this definition, "control" of a Person means the power, directly or indirectly,
either to (i) vote 15% or more of the Capital Stock having ordinary voting power
for the election of directors of such Person or (ii) direct or cause the
direction of the management and policies of such Person whether by contract or
otherwise. Notwithstanding anything herein to the contrary, in no event shall
any Agent or any Lender be considered an "Affiliate" of any Loan Party.
"After Acquired Property" means any interest in real property (other than
Oil and Gas Properties) acquired by the Borrower or any of its Subsidiaries
after the date hereof with a
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Current Value in excess of $500,000 in the case of a fee interest or requiring
the payment of annual rent exceeding in the aggregate $500,000 in the case of a
leasehold interest.
"Agent" has the meaning specified therefor in the preamble hereto.
"Agent Reserve" and "Agent Reserves" have the meanings specified therefor
in Section 2.01(b)(i).
"Agreement" means this Amended and Restated Credit Agreement, including all
amendments, modifications and supplements and any exhibits or schedules to any
of the foregoing, and shall refer to the Agreement as the same may be in effect
at the time such reference becomes operative.
"Applicable Early Termination Fee" means, as of any date of determination,
an amount equal to (a) during the period of time from and after the date of the
execution and delivery of this Agreement up to the date that is the first
anniversary of the Effective Date, 1.5% times $30,000,000, (b) during the period
of time from and including the date that is the first anniversary of the
Effective Date up to the date that is the second anniversary of the Effective
Date, 1.0% times $30,000,000, and (c) thereafter, zero.
"Applicable LIBOR Margin" means, as to each LIBOR Rate Loan, the applicable
margin set forth in the right side of the grid below:
Percentage that the outstanding Revolving A
Loans and Letter of Credit Obligations bear
to the Total Revolving A Credit Commitment Applicable LIBOR Margin
Less than 50% 2.75 percentage points
Greater than or equal to 50% 3.0 percentage points
"Applicable Reference Rate Margin" means, as to each Reference Rate Loan,
the applicable margin set forth in the right side of the grid below:
Percentage that the outstanding Revolving A
Loans and Letter of Credit Obligations bear
to the Total Revolving A Credit Commitment Applicable Reference Rate Margin
Less than 50% 0.50 percentage points
Greater than or equal to 50% 0.75 percentage points
"Assignment and Acceptance" means an assignment and acceptance entered into
by an assigning Lender and an assignee, and accepted by the Collateral Agent, in
accordance with Section 12.07 hereof and substantially in the form of Exhibit
A-1 hereto or such other form reasonably acceptable to the Collateral Agent.
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"Assignment Documents" means each assignment or other similar agreement,
document or instrument entered into between or among the Agents and the Lenders,
on the one hand, and the Existing Lenders, on the other hand, in connection with
the purchase of the Existing Indebtedness from the Existing Lenders, including,
without limitation, the assignments of the Mortgages related to the Oil and Gas
Properties owned by the Loan Parties and UCC assignments with respect to the
Liens filed by the Existing Lenders pursuant to the Existing Credit Agreement.
"Audits" has the meaning therefor in Section 4.01.
"Authorized Officer" means, with respect to any Person, the chief executive
officer, chief financial officer, controller, president or any executive or
senior vice president of such Person.
"Availability" means, at any time, the difference between (i) the lesser of
(A) the Borrowing Base and (B) the Maximum Amount and (ii) the sum of (A) the
aggregate outstanding principal amount of all Loans, and (B) all Letter of
Credit Obligations, and (C) the aggregate amount, if any, of all trade payables
of the Borrower and its Subsidiaries aged in excess of historical levels
(exclusive of any amounts attributable to the Royalty Payments Suspense Account
that could be interpreted to be trade payables and trade payables being
contested in good faith by appropriate proceedings that do not exceed $200,000
in the aggregate outstanding at any one time).
"Bankruptcy Code" means the United States Bankruptcy Code (11 ▇.▇.▇.▇▇.
101, et seq.), as amended, and any successor statute.
"Basis Differential" means, in the case of any Oil and Gas Property, the
difference between the NYMEX futures contract prices and the sales prices at the
delivery point where the gas or oil, as the case may be, produced by such Oil
and Gas Property, is sold.
"Board" means the Board of Governors of the Federal Reserve System of the
United States.
"Board of Directors" means, with respect to any Person, the board of
directors (or comparable managers) of such Person or any committee thereof duly
authorized to act on behalf of the board.
"Borrower" has the meaning specified therefor in the preamble hereto.
"Borrowing Base" means, as of any date, the sum of (a) 60% of the PV-10 of
the Proved Developed Producing Reserves of the Borrower that are located in the
United States and subject to a Mortgage and UCC financing statements, that in
each case create a first or, if subject to a prior Production Payment 2001 Lien,
second priority perfected Lien in such Oil and Gas Properties in favor of the
Collateral Agent for the ratable benefit of the Lenders, (b) 40% of the PV-10 of
the Proved Developed Non-Producing Reserves of the Borrower that are located in
the United States and subject to a Mortgage and UCC financing statements, that
in each case create a first or, if subject to a prior Production Payment 2001
Lien, second priority perfected Lien in such Oil and Gas Properties in favor of
the Collateral Agent for the ratable benefit of the Lenders, and (c) 25% of the
PV-10 of the Proved Undeveloped Reserves of the Borrower that are
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located in the United States and subject to a Mortgage and UCC financing
statements, that in each case create a first or, if subject to a prior
Production Payment 2001 Lien, second priority perfected Lien in such Oil and Gas
Properties in favor of the Collateral Agent for the ratable benefit of the
Lenders; provided, however, that the borrowing capacity attributable to clause
(c) above shall not exceed the lesser of (i) 25% of the combined borrowing
capacity under clauses (a), (b) and (c) (without giving effect to this
limitation) above and (ii) $10,000,000.
"Business Day" means any day other than a Saturday, Sunday or other day on
which commercial banks in New York City are authorized or required to close;
provided that, with respect to the borrowing, payment or continuation of, or
determination of interest rate on, LIBOR Rate Loans, Business Day shall mean any
Business Day on which dealings in Dollars may be carried on in the interbank
eurodollar markets in New York City and London.
"Capital Expenditures" means, with respect to any Person for any period,
the sum of (i) the aggregate of all expenditures by such Person and its
Subsidiaries during such period that in accordance with GAAP are or should be
included in "property, plant and equipment" or in a similar fixed asset account
on its balance sheet, whether such expenditures are paid in cash or financed and
including all Capitalized Lease Obligations incurred during such period, and
(ii) to the extent not covered by clause (i) above, the aggregate of all
expenditures by such Person and its Subsidiaries during such period to acquire
by purchase or otherwise the business or fixed assets of, or the Capital Stock
of, any other Person.
"Capital Guideline" means any law, rule, regulation, policy, guideline or
directive of any Governmental Authority or any central bank (whether or not
having the force of law and whether or not the failure to comply therewith would
be unlawful) (i) regarding capital adequacy, capital ratios, capital
requirements, the calculation of a bank's capital or similar matters, or (ii)
affecting the amount of capital required to be obtained or maintained by any
Lender, any bank holding company controlling any Lender, or the L/C Issuer or
the manner in which any Lender, any bank holding company controlling any Lender,
or the L/C Issuer allocates capital to any of its contingent liabilities
(including letters of credit), advances, acceptances, commitments, assets or
liabilities.
"Capitalized Lease" means, with respect to any Person, any lease of real or
personal property by such Person as lessee which is required under GAAP to be
capitalized on the balance sheet of such Person.
"Capitalized Lease Obligations" means, with respect to any Person,
obligations of such Person and its Subsidiaries under Capitalized Leases, and,
for purposes hereof, the amount of any such obligation shall be the capitalized
amount thereof determined in accordance with GAAP.
"Capital Stock" means (i) with respect to any Person that is a corporation,
any and all shares, interests, participations or other equivalents (however
designated and whether or not voting) of corporate stock, and (ii) with respect
to any Person that is not a corporation, any and all partnership, membership or
other equity interests of such Person.
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"Cash and Cash Equivalents" means all cash, deposit or securities account
balances, certificates of deposit or other financial instruments properly
classified as cash or cash equivalents under GAAP.
"Change of Control" means each occurrence of any of the following:
(a) the acquisition, directly or indirectly, by any person or group (within
the meaning of Section 13(d)(3) of the Exchange Act) of beneficial ownership of
more than 30% of the aggregate outstanding voting power of the Capital Stock of
the Borrower;
(b) during any period of 12 consecutive months, individuals who at the
beginning of such period constituted the Board of Directors of the Borrower
(together with any new directors whose election by such Board of Directors or
whose nomination for election by the shareholders of the Borrower was approved
by a vote of at least a majority the directors of the Borrower then still in
office who were either directors at the beginning of such period, or whose
election or nomination for election was previously approved) cease for any
reason to constitute a majority of the Board of Directors of the Borrower;
(c) the Borrower ceases to own and control 100% of the shares of the
Capital Stock of the Borrower's Subsidiaries, unless otherwise permitted
hereunder; or
(d) (i) the Borrower consolidates with or merges into another entity or
conveys, transfers or leases all or substantially all of its property and assets
to any Person, or (ii) any entity consolidates with or merges into the Borrower,
which in either event (i) or (ii) is pursuant to a transaction in which the
outstanding voting Capital Stock of the Borrower is reclassified or changed into
or exchanged for cash, securities or other property.
"Code" means the New York Uniform Commercial Code, as in effect from time
to time.
"Collateral" means all of the property and assets and all interests therein
and proceeds thereof now owned or hereafter acquired by any Person upon which a
Lien is granted or purported to be granted by such Person as security for all or
any part of the Obligations.
"Collateral Agent" has the meaning specified therefor in the preamble
hereto.
"Collateral Agent Advances" has the meaning specified therefor in Section
10.08(a).
"Collection Account" has the meaning specified therefor in Section 8.01(a).
"Commitments" means, with respect to each Lender, such Lender's Revolving A
Credit Commitment, Revolving B Credit Commitment and Term Loan Commitment.
"Consolidated EBITDA" means, with respect to any Person for any period, the
Consolidated Net Income of such Person and its Subsidiaries for such period,
plus (i) without duplication, the sum of the following amounts of such Person
and its
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Subsidiaries for such period and to the extent deducted in determining
Consolidated Net Income of such Person and its Subsidiaries for such period: (A)
Consolidated Net Interest Expense, (B) income tax expense, (C) depreciation
expense, (D) depletion expense, (E) amortization expense and (F) other non-cash
expenses, minus the amortization of deferred revenue attributable to the
Production Payment 2001 Facility and the Takeout VPP Facility.
"Consolidated Funded Indebtedness" means, with respect to any Person at any
date, all Indebtedness of such Person, determined on a consolidated basis in
accordance with GAAP, which by its terms matures more than one year after the
date of calculation, and any such Indebtedness maturing within one year from
such date which is renewable or extendable at the option of such Person to a
date more than one year from such date, including, in any event, but without
duplication, with respect to the Borrower and its Subsidiaries, the Revolving
Loans and the amount of their Capital Lease Obligations and excluding the
Production Payment 2001 Obligations, the Takeout VPP Obligations and any
unrealized losses with respect to liabilities and obligations under Hedging
Agreements.
"Consolidated Funded Senior Indebtedness" means, with respect to Borrower
and its Subsidiaries at any date, all Obligations under this Agreement,
determined on a consolidated basis in accordance with GAAP.
"Consolidated Net Income" means, with respect to any Person for any period,
the net income (loss) of such Person and its Subsidiaries for such period,
determined on a consolidated basis and in accordance with GAAP, but excluding
from the determination of Consolidated Net Income (without duplication) (a) any
non-cash extraordinary or non-recurring gains or losses or non-cash gains or
losses from Dispositions, (b) restructuring charges, (c) effects of discontinued
operations, and (d) interest that is paid-in-kind.
"Consolidated Net Interest Expense" means, with respect to any Person for
any period, gross interest expense of such Person and its Subsidiaries for such
period determined on a consolidated basis and in accordance with GAAP
(including, without limitation, interest expense paid to Affiliates of such
Person but excluding non-cash amortization of debt expense and fees paid in
respect of Indebtedness of such Person and its Subsidiaries), less (i) the sum
of (A) interest income for such period and (B) gains for such period on interest
rate Hedging Agreements (to the extent not included in interest income above and
to the extent not deducted in the calculation of gross interest expense), plus
(ii) the sum of (A) losses for such period on interest rate Hedging Agreements
(to the extent not included in such gross interest expense) and (B) the upfront
costs or fees for such period associated with Hedging Agreements (to the extent
not included in such gross interest expense), in each case, determined on a
consolidated basis and in accordance with GAAP.
"Consolidated Total Interest Expense" means, with respect to any Person for
any period, gross interest expense for such Person and its Subsidiaries for such
period determined on a consolidated basis and in accordance with GAAP (including
without limitation interest expense paid to Affiliates of such Person but
excluding non-cash amortization of debt expense and fees paid in respect of
Indebtedness of such Person and its Subsidiaries).
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"Consolidated Total Senior Interest Expense" means, with respect to the
Borrower and its Subsidiaries for any period, gross interest expense incurred
under this Agreement for such period determined on a consolidated basis and in
accordance with GAAP.
"Contingent Obligation" means, with respect to any Person, any obligation
of such Person guaranteeing or intended to guarantee any Indebtedness, leases,
dividends or other obligations ("primary obligations") of any other Person (the
"primary obligor") in any manner, whether directly or indirectly, including,
without limitation, (i) the direct or indirect guaranty, endorsement (other than
for collection or deposit in the ordinary course of business), co-making,
discounting with recourse or sale with recourse by such Person of the obligation
of a primary obligor, (ii) the obligation to make take-or-pay or similar
payments, if required, regardless of nonperformance by any other party or
parties to an agreement, (iii) any obligation of such Person, whether or not
contingent, (A) to purchase any such primary obligation or any property
constituting direct or indirect security therefor, (B) to advance or supply
funds (1) for the purchase or payment of any such primary obligation or (2) to
maintain working capital or equity capital of the primary obligor or otherwise
to maintain the net worth or solvency of the primary obligor, (C) to purchase
property, assets, securities or services primarily for the purpose of assuring
the owner of any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation or (D) otherwise to assure or hold
harmless the holder of such primary obligation against loss in respect thereof;
provided, however, that the term "Contingent Obligation" shall not include any
product warranties extended in the ordinary course of business or delivery
obligations with respect to any volumetric production payment. The amount of any
Contingent Obligation shall be deemed to be an amount equal to the stated or
determinable amount of the primary obligation with respect to which such
Contingent Obligation is made (or, if less, the maximum amount of such primary
obligation for which such Person may be liable pursuant to the terms of the
instrument evidencing such Contingent Obligation) or, if not stated or
determinable, the maximum reasonably anticipated liability with respect thereto
(assuming such Person is required to perform thereunder), as determined by such
Person in good faith.
"Contribution Agreement" means the Contribution Agreement, dated as of the
Effective Date, duly executed by each Guarantor, substantially in the form of
Exhibit C-1.
"Current Value" has the meaning specified therefor in Section 7.01(o).
"Default" means an event which, with the giving of notice or the lapse of
time or both, would constitute an Event of Default.
"Disbursement Account" means the deposit account identified on Schedule
D-1.
"Disposition" means any transaction, or series of related transactions,
pursuant to which any Person or any of its Subsidiaries sells, assigns,
transfers or otherwise disposes of any property or assets (whether now owned or
hereafter acquired) to any other Person, in each case, whether or not the
consideration therefor consists of cash, securities or other assets owned by the
acquiring Person, excluding any sales of Inventory in the ordinary course of
business on ordinary business terms.
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"Dollar," "Dollars" and the symbol "$" each means lawful money of the
United States of America.
"Effective Date" means the date, on or before January 15, 2003, on which
all of the conditions precedent set forth in Section 5.01 are first satisfied or
waived.
"Eligible Assignee" means a Lender, an Affiliate of a Lender, a Related
Fund and any bank, finance company, insurance company, savings and loan
association, savings bank, other financial institution, Person or fund that is
regularly engaged in making or purchasing loans.
"Employee Plan" means an employee benefit plan (other than a Multiemployer
Plan) covered by Title IV of ERISA and maintained (or that was maintained at any
time during the six (6) calendar years preceding the date of any borrowing
hereunder) for employees of any Loan Party or any of its ERISA Affiliates.
"Environmental Actions" means any complaint, summons, citation, notice,
directive, order, claim, litigation, investigation, judicial or administrative
proceeding or judgment from any Governmental Authority relating to violations of
Environmental Laws or Releases of Hazardous Materials (i) from any assets,
properties or businesses of any Loan Party or any of its Subsidiaries; (ii) from
adjoining properties or businesses; or (iii) onto any facilities which received
Hazardous Materials generated by any Loan Party or any of its Subsidiaries.
"Environmental Laws" means the Comprehensive Environmental Response,
Compensation and Liability Act (42 ▇.▇.▇.▇▇. 9601, et seq.), the Hazardous
Materials Transportation Act (49 U.S.C.ss.1801, et seq.), the Resource
Conservation and Recovery Act (42 ▇.▇.▇.▇▇. 6901, et seq.), the Federal Clean
Water Act (33 ▇.▇.▇.▇▇. 1251 et seq.), the Clean Air Act (42 ▇.▇.▇.▇▇. 7401 et
seq.), the Toxic Substances Control Act (15 ▇.▇.▇.▇▇. 2601 et seq.), the Oil
Pollution Act of 1990 (33 ▇.▇.▇.▇▇. 2701 et seq.), the Emergency Planning and
the Community Right-to-Know Act of 1986 (42 ▇.▇.▇.▇▇. 11001 et seq.), the
Hazardous Material Transportation Act (49 ▇.▇.▇.▇▇. 1801 et seq.), and the
Occupational Safety and Health Act (29 ▇.▇.▇.▇▇. 651 et seq.), as such laws may
be amended or otherwise modified from time to time, and any other present or
future federal, state, local or foreign statute, ordinance, rule, regulation,
order, judgment, decree, permit, license or other binding determination of any
Governmental Authority imposing liability or establishing standards of conduct
for protection of the environment or other government restrictions relating to
the protection of the environment or the release, emission, deposit, discharge,
leaching, migration or spill of any Hazardous Materials into the environment.
"Environmental Liabilities and Costs" means all liabilities, monetary
obligations, Remedial Actions, losses, damages, punitive damages, consequential
damages, treble damages, costs and expenses (including all reasonable fees,
disbursements and expenses of counsel, experts and consultants and costs of
investigations and feasibility studies), fines, penalties, sanctions and
interest incurred as a result of any claim or demand by any Governmental
Authority or any third party, and which relate to any environmental condition or
a Release of Hazardous Materials from or onto (i) any property currently or
formerly owned by any Loan
-9-
Party or any of its Subsidiaries or (ii) any facility which received Hazardous
Materials generated by any Loan Party or any of its Subsidiaries.
"Environmental Lien" means any Lien in favor of any Governmental Authority
for Environmental Liabilities and Costs.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute of similar import, and regulations
thereunder, in each case, as in effect from time to time. References to sections
of ERISA shall be construed also to refer to any successor sections.
"ERISA Affiliate" means, with respect to any Person, any trade or business
(whether or not incorporated) which is a member of a group of which such Person
is a member and which would be deemed to be a "controlled group" within the
meaning of Sections 414(b), (c), (m) and (o) of the IRC.
"Event of Default" means any of the events set forth in Section 9.01.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Existing Credit Agreement" means that certain Credit Agreement dated as of
November 28, 2001, by and among the Borrower, the lenders signatory thereto,
Canadian Imperial Bank of Commerce, New York Agency, as agent, CIBC, Inc., as
collateral agent, CIBC World Markets Corp., as arranger and sole book runner,
and Guaranty Bank, FSB, as co-arranger, as amended, supplemented or otherwise
modified from time to time.
"Existing Credit Agreement First Lien Properties" means the Oil and Gas
Properties of the Loan Parties that, as of the Effective Date, are subject to a
first priority lien in favor of the collateral agent under the Existing Credit
Agreement.
"Existing Indebtedness" means the Indebtedness of the Borrower to the
Existing Lenders under the Existing Credit Agreement on the Effective Date.
"Existing Lenders" means the lenders and the agents party to the Existing
Credit Agreement.
"Existing Mortgages" means those certain mortgages or deeds of trust
executed and delivered by a Loan Party that secured obligations under the
Existing Credit Agreement.
"Extraordinary Receipts" means any cash received by the Borrower or any of
its Subsidiaries not in the ordinary course of business (and not consisting of
proceeds of Dispositions or Indebtedness), including, without limitation, (i)
foreign, United States, state or local tax refunds, (ii) pension plan
reversions, (iii) proceeds of insurance, (iv) judgments, proceeds of settlements
or other consideration of any kind in connection with any cause of action, (v)
condemnation awards (and payments in lieu thereof), and (vi) indemnity payments,
but excluding proceeds of the sale or issuance of Indebtedness or Capital Stock.
-10-
"FASB 133" means Statement No. 133 of the Financial Accounting Standards
Board as it applies to Hedging Agreements.
"Federal Funds Rate" means, for any period, a fluctuating interest rate per
annum equal to, for each day during such period, the weighted average of the
rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published on the next
succeeding Business Day by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day which is a Business Day, the average of the
quotations for such day on such transactions received by the Administrative
Agent from three Federal funds brokers of recognized standing selected by it.
"Fee Letter" means that certain fee letter agreement, dated as of the date
hereof, among the Borrower, the Administrative Agent, and Foothill and
Highbridge, as Lenders.
"Field Survey and Audit" means a field survey and audit of the Loan Parties
and an appraisal of the Collateral performed by auditors, examiners and/or
appraisers selected by the Collateral Agent, at the sole cost and expense of the
Borrower.
"Final Maturity Date" means October 3, 2005, or such earlier date on which
any Loan shall become due and payable in accordance with the terms of this
Agreement and the other Loan Documents.
"Financial Statements" means (i) the audited consolidated balance sheet of
the Borrower and its Subsidiaries as of December 31, 2001, and the related
consolidated statement of operations, shareholders' equity and cash flows for
the Fiscal Year then ended, and (ii) the unaudited consolidated balance sheet of
the Borrower and its Subsidiaries as of November 30, 2002, and the related
consolidated statement of operations, shareholder's equity and cash flows for
the 11 months then ended.
"Fiscal Year" means the fiscal year of the Borrower and its Subsidiaries
ending on December 31of each year.
"Fixed Charge Coverage Ratio" means, with respect to any Person for any
period, the ratio of (i) the TTM EBITDA of such Person and its Subsidiaries for
such period, to (ii) the sum of (A) all principal of Indebtedness of such Person
and its Subsidiaries scheduled to be paid during such period to the extent there
is not an equivalent permanent reduction in the commitments thereunder, plus (B)
Consolidated Net Interest Expense and any fees payable in respect of
Indebtedness of such Person and its Subsidiaries for such period, plus (C)
income taxes paid or payable by such Person and its Subsidiaries during such
period, plus (D) cash dividends or distributions paid by such Person and its
Subsidiaries (other than, in the case of the Borrower, dividends or
distributions paid to the Borrower or its wholly-owned Subsidiaries) during such
period, plus (E) Capital Expenditures made by such Person and its Subsidiaries
during such period, plus (F) all amounts paid or payable by such Person and its
Subsidiaries on Capitalized Lease Obligations having a scheduled due date during
such period. In determining the Fixed Charge Coverage Ratio for a particular
period (1) pro forma effect will be given to: (a) the incurrence, repayment or
retirement of any Indebtedness by such Person and its Subsidiaries since the
first day of such period as if such Indebtedness was incurred, repaid or
-11-
retired on the first day of such period and (b) the acquisition (whether by
purchase, merger or otherwise) or disposition (whether by sale, merger or
otherwise) of any property or assets acquired or disposed of by such Person and
its Subsidiaries since the first day of such period, as if such acquisition or
disposition occurred on the first day of such period; (2) interest on
Indebtedness bearing a floating interest rate will be computed as if the rate as
of the last day of the period had been the applicable rate for the entire
period; (3) if such Indebtedness bears, at the option of such Person and its
Subsidiaries, a fixed or floating rate of interest, interest thereon will be
computed by applying, at the option of such Person, either the fixed or floating
rate; and (4) interest on Indebtedness under a revolving credit facility will be
computed based upon the average daily balance of such Indebtedness during such
period.
"Foothill" has the meaning specified therefor in the preamble hereto.
"GAAP" means generally accepted accounting principles in effect from time
to time in the United States, applied on a consistent basis, provided that for
the purpose of Section 7.03 hereof and the definitions used therein, "GAAP"
shall mean generally accepted accounting principles in effect on the date hereof
and consistent with those used in the preparation of the Financial Statements,
provided, further, that if there occurs after the date of this Agreement any
change in GAAP that affects in any respect the calculation of any covenant
contained in Section 7.03 hereof, the Collateral Agent and the Borrower shall
negotiate in good faith amendments to the provisions of this Agreement that
relate to the calculation of such covenant with the intent of having the
respective positions of the Lenders and the Borrower after such change in GAAP
conform as nearly as possible to their respective positions as of the date of
this Agreement and, until any such amendments have been agreed upon, the
covenants in Section 7.03 hereof shall be calculated as if no such change in
GAAP has occurred.
"Governmental Authority" means any nation or government, any Federal,
state, city, town, municipality, county, local or other political subdivision
thereof or thereto and any department, commission, board, bureau,
instrumentality, agency or other entity exercising executive, legislative,
judicial, taxing, regulatory or administrative powers or functions of or
pertaining to government.
"Guarantor" means (i) each Subsidiary of the Borrower, and (ii) each other
Person which guarantees, pursuant to Section 7.01(b) or otherwise, all or any
part of the Obligations.
"Guaranty" means each guaranty substantially in the form of Exhibit G-1,
made by any Guarantor in favor of the Collateral Agent for the benefit of the
Lenders, including those made pursuant to Section 7.01(b).
"Hazardous Materials" means (a) any element, compound or chemical that is
defined, listed or otherwise classified as a contaminant, pollutant, toxic
pollutant, toxic or hazardous substance, extremely hazardous substance or
chemical, hazardous waste, special waste, or solid waste under Environmental
Laws or that is likely to cause immediately, or at some future time, harm to or
have an adverse effect on, the environment or risk to human health or safety,
including, without limitation, any pollutant, contaminant, waste, hazardous
waste or toxic substance which is defined or identified in any Environmental Law
applicable to a Loan Party or any property of a Loan Party and which is present
in the environment in such quantity or
-12-
state that it contravenes any Environmental Law applicable to a Loan Party or
any property of a Loan Party; (b) petroleum and its refined products; (c)
polychlorinated biphenyls; (d) any substance exhibiting a hazardous waste
characteristic, including, without limitation, corrosivity, ignitability,
toxicity or reactivity as well as any radioactive or explosive materials; and
(e) any raw materials, building components (including, without limitation,
asbestos-containing materials) and manufactured products containing hazardous
substances listed or classified as such under Environmental Laws applicable to a
Loan Party or any property of a Loan Party.
"Hedging Agreement" means any interest rate, foreign currency, commodity or
equity swap, collar, cap, floor or forward rate agreement, or other agreement or
arrangement designed to protect against fluctuations in interest rates or
currency, commodity or equity values (including, without limitation, any option
with respect to any of the foregoing and any combination of the foregoing
agreements or arrangements), and any confirmation executed in connection with
any such agreement or arrangement.
"Highbridge" has the meaning specified therefor in the preamble hereto.
"Highest Lawful Rate" means, with respect to any Agent or any Lender, the
maximum non-usurious interest rate, if any, that at any time or from time to
time may be contracted for, taken, reserved, charged or received on the
Obligations under laws applicable to such Agent or such Lender which are
currently in effect or, to the extent allowed by law, under such applicable laws
which may hereafter be in effect and which allow a higher maximum non-usurious
interest rate than applicable laws now allow.
"Hydrocarbons" means oil, gas, coal seam gas, casinghead gas, condensate,
distillate, liquid hydrocarbons, gaseous hydrocarbons, all products refined,
separated, settled and dehydrated therefrom and all products refined therefrom,
including, without limitation, kerosene, liquefied petroleum gas, refined
lubricating oils, diesel fuel, drip gasoline, natural gasoline, helium, sulfur
and all other gaseous or liquid minerals.
"Hydrocarbon Interests" means all rights, titles, interests and estates now
owned or hereafter acquired in and to Hydrocarbon leases, Hydrocarbon or mineral
fee or lease interests, farm-ins, overriding royalty and royalty interests, net
profit interests, oil payments, production payment interests and similar mineral
interests, including any reserved or residual interest of whatever nature.
"Indebtedness" means, with respect to any Person, without duplication, (i)
all indebtedness of such Person for borrowed money; (ii) all obligations of such
Person for the deferred purchase price of property or services (other than (A)
trade payables or other accounts payable incurred in the ordinary course of such
Person's business and not outstanding for more than 90 days after the date such
payable was created (unless such past-due payables are being contested in good
faith by appropriate proceedings and do not exceed $200,000 in the aggregate
outstanding at any one time) and (B) any obligations included in the Royalty
Payments Suspense Account); (iii) all obligations of such Person evidenced by
bonds, debentures, notes or other similar instruments or upon which interest
payments are customarily made; (iv) all reimbursement, payment or other
obligations and liabilities of such Person created or arising under any
conditional sales or other title retention agreement with respect to property
used and/or
-13-
acquired by such Person, even though the rights and remedies of the lessor,
seller and/or lender thereunder may be limited to repossession or sale of such
property; (v) all Capitalized Lease Obligations of such Person; (vi) all
obligations and liabilities, contingent or otherwise, of such Person, in respect
of letters of credit, acceptances and similar facilities; (vii) all obligations
and liabilities, calculated on a basis satisfactory to the Collateral Agent and
in accordance with accepted practice, of such Person under Hedging Agreements;
(viii) all Contingent Obligations; (ix) liabilities incurred under Title IV of
ERISA with respect to any plan (other than a Multiemployer Plan) covered by
Title IV of ERISA and maintained for employees of such Person or any of its
ERISA Affiliates; (x) withdrawal liability incurred under ERISA by such Person
or any of its ERISA Affiliates with respect to any Multiemployer Plan; (xi) all
other items which, in accordance with GAAP, would be included as liabilities on
the liability side of the balance sheet of such Person; and (xii) all
obligations referred to in clauses (i) through (xi) of this definition of
another Person to the extent secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by) a
Lien upon property owned by such Person, even though such Person has not assumed
or become liable for the payment of such Indebtedness but in all events
excluding the Production Payment 2001 Obligations and the Takeout VPP
Obligations. The Indebtedness of any Person shall include the Indebtedness of
any partnership of which such Person is a general partner and any Person's
allocable share of any Indebtedness of any joint venture in which such Person is
a joint venturer, including Indebtedness for which such Person is jointly and
severally liable, but excluding any non-recourse Indebtedness.
"Indemnified Matters" has the meaning specified therefor in Section 12.15.
"Indemnitees" has the meaning specified therefor in Section 12.15.
"Initial Ableco-Highbridge B Lenders" means Highbridge and Ableco Finance
LLC.
"Initial Reserve Report" has the meaning specified therefor in Section
5.01(k).
"Insolvency Proceeding" means any proceeding commenced by or against any
Person under any provision of the Bankruptcy Code or under any other bankruptcy
or insolvency law, assignments for the benefit of creditors, or proceedings
seeking reorganization, arrangement, or other similar relief.
"IRC" means the Internal Revenue Code of 1986, as amended (or any successor
statute thereto) and the regulations thereunder.
"Interest Period" means, with respect to any LIBOR Rate Loan, the period
commencing on the borrowing date or the date of any continuation of such LIBOR
Rate Loan, as the case may be, and ending 1, 2, 3 or 6 months thereafter, in
each case as selected by the Borrower in the applicable notice given to the
Administrative Agent pursuant to Sections 2.02 or 2.11 hereof, provided that (i)
any Interest Period that would otherwise end on a day that is not a Business Day
shall be extended to the next succeeding Business Day, unless such Business Day
falls in another calendar month, in which case such Interest Period shall end on
the next
-14-
preceding Business Day and (ii) no Interest Period for any LIBOR Rate Loan shall
end after the Final Maturity Date.
"Inventory" means all of each of the Loan Parties' now owned and/or
hereafter acquired right, title, and interest with respect to inventory as
defined in the Code, including Hydrocarbons.
"L/C Issuer" means ▇▇▇▇▇ Fargo Bank, National Association or such other
bank as the Administrative Agent may select with the consent of the Borrower
(not to be unreasonably withheld).
"L/C Subfacility" means that portion of the Total Revolving A Credit
Commitment equal to $7,500,000.
"Lease" means any lease of real property (other than Hydrocarbon Interests)
to which any Loan Party or any of its Subsidiaries is a party as lessor or
lessee.
"Lender" has the meaning specified therefor in the preamble hereto.
"Letter of Credit" has the meaning specified therefor in Section 3.01(a).
"Letter of Credit Application" has the meaning specified therefor in
Section 3.01(a).
"Letter of Credit Collateral Account" has the meaning specified therefor in
Section 3.01(b).
"Letter of Credit Fees" has the meaning specified therefor in Section
3.03(b).
"Letter of Credit Guaranty" means one or more guaranties by the
Administrative Agent in favor of the L/C Issuer guaranteeing the Borrower's
obligations to the L/C Issuer under a reimbursement agreement, Letter of Credit
Application or other like document in respect of any Letter of Credit.
"Letter of Credit Obligations" means, at any time and without duplication,
the sum of (i) the outstanding Reimbursement Obligations at such time, plus (ii)
the aggregate maximum amount available for drawing under the Letters of Credit
outstanding at such time, plus (iii) all amounts for which the Administrative
Agent may be liable to the L/C Issuer pursuant to any Letter of Credit Guaranty.
"Liabilities" has the meaning specified therefor in Section 2.07.
"LIBOR" means, with respect to any Interest Period, the rate per annum
determined by the LIBOR Reference Bank in New York, New York on the basis of the
rates at which Dollar deposits are offered to major banks in the London
interbank market on or about 2:00 p.m. (New York City time) 2 Business Days
prior to the commencement of the applicable Interest Period, for a term and in
amounts comparable to the Interest Period and amount of the LIBOR Rate Loan
requested or being continued by the Borrower in accordance with this
-15-
Agreement, or, if the foregoing rate is unavailable, the rate per annum
determined by the Administrative Agent in accordance with its customary
procedures, and utilizing such electronic or other quotation sources as it
considers appropriate, in each case rounded upwards, if necessary, to the next
1/16%, which determination shall be conclusive in the absence of manifest error.
"LIBOR Rate" means, for each Interest Period for each LIBOR Rate Loan, the
rate per annum determined by the Administrative Agent (rounded upwards if
necessary, to the next 1/16%) by dividing (a) LIBOR for such Interest Period by
(b) 100% minus the Reserve Percentage. The LIBOR Rate shall be adjusted on and
as of the effective day of any change in the Reserve Percentage.
"LIBOR Rate Loan" means a Revolving A Loan bearing interest calculated
based upon the LIBOR Rate.
"LIBOR Reference Bank" means ▇▇▇▇▇ Fargo Bank, National Association, its
successors or any other bank designated by the Administrative Agent to the
Borrower from time to time.
"Lien" means any mortgage, deed of trust, pledge, lien (statutory or
otherwise), security interest, charge or other encumbrance or security or
preferential arrangement of any nature, including, without limitation, any
conditional sale or title retention arrangement, any Capitalized Lease and any
assignment, deposit arrangement or financing lease intended as, or having the
effect of, security.
"Loan" means the Term Loan or any Revolving Loan made by an Agent or a
Lender to the Borrower pursuant to Article II hereof.
"Loan Account" means an account maintained hereunder by the Administrative
Agent on its books of account at the Payment Office, and with respect to the
Borrower, in which the Borrower will be charged with all Loans made to, and all
other Obligations incurred by, the Borrower.
"Loan Document" means this Agreement, the Assignment Documents, the Fee
Letter, any Guaranty, any Security Agreement, any Pledge Agreement, any
Mortgage, any Letter of Credit Application, any Transfer Order Letter, and any
other agreement, instrument, and other document executed and delivered by a Loan
Party pursuant hereto or thereto relating to, evidencing or securing any Loan,
any Letter of Credit Obligation or any other Obligation.
"Loan Party" means the Borrower and/or any Guarantor.
"Material Adverse Effect" means a material adverse effect on any of (i) the
operations, business, assets, properties, condition (financial or otherwise) or
prospects of the Borrower or KCS Resources, Inc. or the Loan Parties taken as a
whole, (ii) the ability of the Loan Parties to perform any material obligations
under the Loan Documents, (iii) the legality, validity or enforceability of this
Agreement or any other Loan Document, (iv) the rights and remedies of any Agent
or any Lender under any Loan Document, or (v) the validity, perfection
-16-
or priority of a Lien in favor of the Collateral Agent for the benefit of the
Lenders on any portion of the Collateral having a value greater than $250,000.
"Material Contract" means, with respect to any Loan Party, (i) each
contract or agreement to which such Loan Party is a party involving aggregate
consideration payable to or by such Loan Party of $500,000 or more (other than
purchase orders in the ordinary course of the business of such Loan Party and
other than contracts that by their terms may be terminated by such Loan Party in
the ordinary course of its business upon less than 60 days notice without
penalty or premium) and (ii) all other contracts or agreements that could
reasonably be expected to be material to the business, operations, condition
(financial or otherwise), performance, prospects or properties of the Borrower
or KCS Resources, Inc. or the Loan Parties taken as a whole.
"Maximum Amount" means a sum equal to the Total Commitment.
"MMS" means Minerals Management Service.
"Moody's" means ▇▇▇▇▇'▇ Investors Service, Inc. and any successor thereto.
"Mortgage" means a fee or leasehold mortgage, deed of trust or deed to
secure debt, in form and substance satisfactory to the Collateral Agent, made by
a Loan Party in favor of the Collateral Agent for the benefit of the Lenders,
securing the Obligations and delivered to the Collateral Agent pursuant to the
provisions hereof or otherwise.
"Multiemployer Plan" means a "multiemployer plan" as defined in Section
4001(a)(3) of ERISA to which any Loan Party or any of its ERISA Affiliates has
contributed to, or has been obligated to contribute, at any time during the
preceding six (6) years.
"Net Cash Proceeds" means, (i) with respect to any Disposition by any
Person or any of its Subsidiaries, the amount of cash received (directly or
indirectly) from time to time (whether as initial consideration or through the
payment or disposition of deferred consideration) by or on behalf of such Person
or such Subsidiary, in connection therewith after deducting therefrom only (A)
the amount of any Indebtedness secured by any Lien permitted by Section 7.02(a)
on any asset (other than Indebtedness assumed by the purchaser of such asset)
which is required to be, and is, repaid in connection with such Disposition
(other than Indebtedness under this Agreement), (B) reasonable expenses related
thereto incurred by such Person or such Subsidiary in connection therewith, (C)
transfer taxes paid to any taxing authorities by such Person or such Subsidiary
in connection therewith, and (D) net income taxes to be paid in connection with
such Disposition (after taking into account any tax credits or deductions and
any tax sharing arrangements) and (ii) with respect to the issuance or
incurrence of any Indebtedness of the type described in clause (iii) of the
definition of such term by any Person or any of its Subsidiaries, or the sale or
issuance by any Person or any of its Subsidiaries of any shares of its Capital
Stock, the aggregate amount of cash received (directly or indirectly) from time
to time (whether as initial consideration or through the payment or disposition
of deferred consideration) by or on behalf of such Person or such Subsidiary in
connection therewith, after deducting therefrom only (A) reasonable expenses
related thereto incurred by such Person or such Subsidiary in connection
therewith, (B) transfer taxes paid by such Person or
-17-
such Subsidiary in connection therewith and (C) net income taxes to be paid in
connection therewith (after taking into account any tax credits or deductions
and any tax sharing arrangements); in each case of clause (i) and (ii) to the
extent, but only to the extent, that the amounts so deducted are (x) actually
paid to a Person that, except in the case of reasonable out-of-pocket expenses,
is not an Affiliate of such Person or any of its Subsidiaries and (y) properly
attributable to such transaction or to the asset that is the subject thereof.
"New Lien Properties" means the Oil and Gas Properties of the Loan Parties
described on Schedule N-1.
"Notice of Borrowing" has the meaning specified therefor in Section
2.02(a).
"NYMEX" means the New York Mercantile Exchange or its successor entity.
"NYMEX Strip Price" means the lower of (i) as of any date of determination,
the average of the 24 succeeding monthly futures contract prices, commencing
with the month during which the determination date occurs, for each of the
appropriate crude oil and natural gas categories included in the most recent
Reserve Report provided by the Borrower to the Agents pursuant to Section
7.01(a)(vi), as quoted on the NYMEX; provided, that if the NYMEX no longer
provides futures contract price quotes or has ceased to operate, the future
contract prices used shall be the comparable futures contract prices quoted on
such other nationally recognized commodities exchange as the Administrative
Agent shall designate, and (ii) $27.005 per barrel of oil and $4.383 per MmBTU
of natural gas.
"Obligations" means all present and future indebtedness, obligations, and
liabilities of each Loan Party to the Agents and the Lenders, or any of them,
under the Loan Documents, whether or not the right of payment in respect of such
claim is reduced to judgment, liquidated, unliquidated, fixed, contingent,
matured, disputed, undisputed, legal, equitable, secured, unsecured, and whether
or not such claim is discharged, stayed or otherwise affected by any proceeding
referred to in Section 9.01. Without limiting the generality of the foregoing,
the Obligations of each Loan Party under the Loan Documents include (a) the
obligation (irrespective of whether a claim therefor is allowed in any
Insolvency Proceeding) to pay principal, interest, premiums, charges, expenses,
fees, attorneys' fees and disbursements, reimbursement obligations, indemnities
and other amounts payable by such Person under the Loan Documents, and (b) the
obligation of such Person to reimburse any amount in respect of any of the
foregoing that any Agent or any Lender (in its sole discretion) may elect to pay
or advance on behalf of such Person.
"Oil and Gas Business" means (a) the acquisition, exploration,
exploitation, development, operation and disposition of interests in Oil and Gas
Properties and Hydrocarbons, (b) the gathering, marketing, treating, processing,
storage, selling and transporting of any production from such interests or
properties, including, without limitation, the marketing of Hydrocarbons
obtained from unrelated Persons, (c) any business relating to or arising from
exploration for or development, production, treatment, processing, storage,
transportation or marketing of Hydrocarbons, (d) any business relating to
oilfield sales and service, and (e) any activity that is ancillary or necessary
or desirable to facilitate the activities described in clauses (a) through (d)
of this definition.
-18-
"Oil and Gas Properties" means Hydrocarbon Interests; the personal property
and/or real property now or hereafter pooled or unitized with Hydrocarbon
Interests; all presently existing or future unitization, pooling agreements and
declarations of pooled units and the units created thereby (including without
limitation all units created under orders, regulations and rules of any
Governmental Authority having jurisdiction) which may affect all or any portion
of the Hydrocarbon Interests; all pipelines, gathering lines, compression
facilities, tanks and processing plants; all oil ▇▇▇▇▇, gas ▇▇▇▇▇, water ▇▇▇▇▇,
injection ▇▇▇▇▇, platforms, spars or other offshore facilities, casings, rods,
tubing, pumping units and engines, Christmas trees, derricks, separators, gun
barrels, flow lines, gas systems (for gathering, treating and compression), and
water systems (for treating, disposal and injection); all interests held in
royalty trusts whether presently existing or hereafter created; all Hydrocarbons
in and under and which may be produced, saved, processed or attributable to the
Hydrocarbon Interests, the lands covered thereby and all Hydrocarbons in
pipelines, gathering lines, tanks and processing plants and all rents, issues,
profits, proceeds, products, revenues and other incomes from or attributable to
the Hydrocarbon Interests; all tenements, hereditaments, appurtenances and
personal property and/or real property in any way appertaining, belonging,
affixed or incidental to the Hydrocarbon Interests, and all rights, titles,
interests and estates described or referred to above, including any and all real
property, now owned or hereafter acquired, used or held for use in connection
with the operating, working or development of any of such Hydrocarbon Interests
or personal property and/or real property and including any and all surface
leases, rights-of-way, easements and servitude together with all additions,
substitutions, replacements, accessions and attachments to any and all of the
foregoing; all Hydrocarbon leasehold, fee and term interests, all overriding
royalty interests, mineral interests, royalty interests, net profits interests,
net revenue interests, oil and gas payments, production payments, carried
interests, leases, subleases, farmouts and any and all other interests in
Hydrocarbons; in each case whether now owned or hereafter acquired directly or
indirectly.
"Operating Lease Obligations" means all obligations for the payment of rent
for any real or personal property under leases or agreements to lease, other
than Capitalized Lease Obligations.
"Other Taxes" has the meaning specified therefor in Section 2.08(a)(iii).
"Participant Register" has the meaning specified therefor in Section
12.07(b)(v).
"Payment Office" means the Administrative Agent's office located at ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or at such
other office or offices of the Administrative Agent as may be designated in
writing from time to time by the Administrative Agent to the Collateral Agent
and the Borrower.
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
thereto.
"Permitted Business Investments" means (a) any investments made in the
ordinary course of, and of a nature that is or shall have become customary in,
the Oil and Gas Business as a means of actively exploiting, exploring for,
developing, processing, gathering, marketing or transporting oil and gas through
agreements, transactions, interests or arrangements
-19-
which permit one to share risks or costs, comply with regulatory requirements
regarding local ownership or satisfy other objectives customarily achieved
through the conduct of Oil and Gas Business jointly with third parties,
including, without limitation, the entry into operating agreements, working
interests, royalty interests, mineral leases, processing agreements, farm-out
and farm-in agreements, division orders, contracts for the sale, transportation
or exchange of oil or natural gas, unitization and pooling declarations and
agreements and area of mutual interest agreements, production sharing agreements
or other similar or customary agreements, transactions, properties, interests,
and investments and expenditures in connection therewith, (b) acquisitions of
Oil and Gas Properties (other than those that are permitted in clause (a) above)
that do not in the aggregate exceed $5,000,000 per Fiscal Year so long as, after
giving effect to any such acquisition, Borrower has Availability plus Qualified
Cash of at least $10,000,000 which must include Revolver A Availability of at
least $5,000,000, and after all outstanding Obligations in respect of the Term
Loan and the Revolving B Loans are paid in full and the Total Revolving B Credit
Commitment is terminated, has Revolver A Availability of at least $10,000,000;
provided that any acquisition (including leases or other arrangements) of Oil
and Gas Properties within the jurisdiction of the MMS shall not be permitted,
and (c) VPP Investments that do not in the aggregate exceed $5,000,000 per
Fiscal Year so long as, after giving effect to any such VPP Investment, Borrower
has Availability plus Qualified Cash of at least $15,000,000 which must include
Revolver A Availability of at least $5,000,000, and after all outstanding
Obligations in respect of the Term Loan and the Revolving B Loans are paid in
full and the Total Revolving B Credit Commitment is terminated, has Revolver A
Availability of at least $15,000,000; provided that, except for partnership
interests and joint venture interests that are deemed to arise under investments
that are permitted under clause (a) above, an investment in capital stock,
partnership interests, joint venture interests, limited liability company
interests or other similar equity interests in a Person shall not constitute a
Permitted Business Investment unless such investment is made in connection with
a VPP Investment.
"Permitted Dispositions" means (a) sales or other dispositions of Inventory
to buyers in the ordinary course of business, (b) sales or other dispositions of
obsolete or worn-out equipment or other property no longer used or useful in the
ordinary course of business, (c) sales or other dispositions of other property
or assets for cash in an aggregate amount not less than the fair market value of
such property or assets, provided that the Net Cash Proceeds of such
Dispositions in the case of clauses (b) and (c), do not exceed $500,000 in the
aggregate in any twelve-month period, (d) sales, dispositions, abandonment,
farm-out or sublease of Oil and Gas Properties not containing Proved Reserves in
the ordinary course of business, (e) sales, dispositions, abandonment, farm-out
or sublease of Oil and Gas Properties containing Proved Reserves in the ordinary
course of business; provided that the Net Cash Proceeds of such Dispositions in
the case of clause (e) do not exceed $2,000,000 in the aggregate in any
six-month period, (f) the Takeout VPP Facility so long as (i) the proceeds of
the Takeout VPP Facility are used to pay in full all outstanding Obligations in
respect of the Term Loan and the Revolving B Loans, (ii) the Total Revolving B
Credit Commitment is terminated, (iii) before and after giving effect to the
consummation of the Takeout VPP Facility, no Default or Event of Default has
occurred and is continuing and (iv) before and after giving effect to the
consummation of the Takeout VPP Facility, the Borrower is in compliance with the
Revolver A Borrowing Base, (g) the sale of emission credits relating to any Oil
and Gas Property, provided such emission credits are not necessary for the
efficient operation of such Oil and Gas
-20-
Property and will not increase the cost of operating such Oil and Gas Property ,
will not change the value of such Oil and Gas Property and will not increase any
Loan Party's operational risk, (h) the use or transfer of money or Cash
Equivalents by the Borrower and its Subsidiaries in a manner that is not
prohibited by the terms of this Agreement or the other Loan Documents, (i) the
licensing by the Borrower and its Subsidiaries, on a non-exclusive basis, of
patents, trademarks, copyrights, and other intellectual property rights in the
ordinary course of business, (j) the granting of leases or subleases to other
Persons not materially interfering with the conduct of business of any of the
Loan Parties, and (k) the sale of Proliq, Inc. or the assets thereof in
accordance with Section 7.01(d).
"Permitted Indebtedness" means:
(a) any Indebtedness owing to any Agent and any Lender under this Agreement
and the other Loan Documents;
(b) Indebtedness listed on Schedule 7.02(b), and the extension of maturity,
refinancing or modification of the terms thereof; provided, however, that (i)
such extension, refinancing or modification is pursuant to terms that are not
less favorable to the Loan Parties and the Lenders than the terms of the
Indebtedness being extended, refinanced or modified and (ii) after giving effect
to such extension, refinancing or modification, the amount of such Indebtedness
is not greater than the amount of Indebtedness outstanding immediately prior to
such extension, refinancing or modification plus accrued interest thereon and
the fees incurred in connection with the extension, refinancing, or
modification;
(c) Indebtedness evidenced by Capitalized Lease Obligations entered into in
order to finance Capital Expenditures made by the Loan Parties in accordance
with the provisions of Section 7.02(g), which Indebtedness, when aggregated with
the principal amount of all Indebtedness incurred under this clause (c) and
clause (d) of this definition, does not exceed $500,000 at any time outstanding;
(d) purchase money Indebtedness incurred to enable a Loan Party to acquire
equipment in the ordinary course of its business, which Indebtedness, when
aggregated with the principal amount of all Indebtedness incurred under this
clause (d) and clause (c) of this definition, does not exceed $500,000 at any
time outstanding;
(e) Indebtedness permitted under Section 7.02(e);
(f) Indebtedness of the Borrower or any of its Subsidiaries under any
Hedging Agreement so long as such Hedging Agreements are used solely as a part
of its normal business operations as a risk management strategy and/or hedge
against changes resulting from market operations and not as a means to speculate
for investment purposes on trends and shifts in financial or commodities
markets;
(g) Subordinated Debt;
(h) bank indemnifications or back-up letters of credit contemplated by
clause (i)(B) of the proviso in Section 3.01 to the extent such indemnifications
or letters of credit are unsecured;
-21-
(i) the Production Payment 2001 Obligations; and
(j) the Takeout VPP Obligations.
"Permitted Investments" means (i) marketable direct obligations issued or
unconditionally guaranteed by the United States Government or issued by any
agency or instrumentality thereof and backed by the full faith and credit of the
United States, in each case, maturing within 1 year from the date of acquisition
thereof; (ii) commercial paper, maturing not more than 270 days after the date
of issue rated P-1 by ▇▇▇▇▇'▇ or A-1 by Standard & Poor's; (iii) certificates of
deposit, demand deposits, eurodollar time deposits, overnight bank deposits and
banker's acceptances maturing not more than 1 year after the date of issue,
issued by commercial banking institutions and money market or demand deposit
accounts maintained at commercial banking institutions, each of which is a
member of the Federal Reserve System and has a combined capital and surplus and
undivided profits of not less than $500,000,000; (iv) repurchase agreements
having maturities of not more than 90 days from the date of acquisition which
are entered into with major money center banks included in the commercial
banking institutions described in clause (iii) above and which are secured by
readily marketable direct obligations of the United States Government or any
agency thereof, (v) money market accounts maintained with mutual funds having
assets in excess of $2,500,000,000; and (vi) tax exempt securities rated A or
better by ▇▇▇▇▇'▇ or A+ or better by Standard & Poor's.
"Permitted Liens" means:
(a) Liens securing the Obligations;
(b) Liens for taxes, assessments and governmental charges the payment of
which is not required under Section 7.01(c);
(c) Liens imposed by law, such as carriers', warehousemen's, mechanics',
materialmen's and other similar Liens arising (provided they are subordinate to
the Collateral Agent's Liens on Collateral) in the ordinary course of business
and securing obligations (other than Indebtedness for borrowed money) that are
not overdue by more than 30 days or are being contested in good faith and by
appropriate proceedings promptly initiated and diligently conducted, and a
reserve or other appropriate provision, if any, as shall be required by GAAP
shall have been made therefor; provided that mechanics' Liens described above
that are inchoate may have priority that is senior to that of the Collateral
Agent's Liens on Collateral;
(d) Liens described on Schedule 7.02(a), but not the extension of coverage
thereof to other property or assets
(e) Liens arising under Capital Leases or securing purchase money
Indebtedness permitted under the definition of Permitted Indebtedness; provided,
however, that (A) no such Lien shall extend to or cover any other property of
any Loan Party or any of its Subsidiaries, and (B) the principal amount of the
Indebtedness secured by any such Lien shall not exceed the lesser of 80% of the
fair market value or the cost of the property so held or acquired;
-22-
(f) deposits and pledges of cash securing (i) obligations incurred in
respect of workers' compensation, unemployment insurance or other forms of
governmental insurance or benefits, (ii) the performance of bids, tenders,
leases, contracts (other than for the payment of money) and statutory
obligations or (iii) obligations on surety or appeal bonds, but only to the
extent such deposits or pledges are incurred or otherwise arise in the ordinary
course of business and secure obligations not past due;
(g) easements, zoning restrictions and similar encumbrances on real
property and minor irregularities in the title thereto that are customarily
accepted in the Oil and Gas Business and that do not (i) secure obligations for
the payment of money or (ii) materially impair the value of such property or its
use by any Loan Party or any of its Subsidiaries in the normal conduct of such
Person's business;
(h) leases or subleases granted to other Persons not materially interfering
with the conduct of the business of the Borrower or any of its Subsidiaries;
(i) precautionary UCC financing statement filings regarding operating
leases;
(j) Liens arising out of the existence of judgments or awards not giving
rise to an Event of Default;
(k) statutory and common law landlords' liens under leases to which the
Borrower or any of its Subsidiaries is a party;
(l) the Production Payment 2001 Lien;
(m) Liens under production sales agreements, division orders, operating
agreements, unitization and pooling orders and other agreements customary in the
Oil and Gas Business for processing, producing, transporting, marketing and
exchanging produced Hydrocarbons securing obligations not constituting
Indebtedness and provided that with respect to Liens that secure obligations for
the payment of money, such payments are made within 90 days after the delivery
of Hydrocarbons or are being contested in good faith by appropriate proceedings
and do not exceed $200,000 in the aggregate outstanding at any one time;
(n) Liens incurred in the ordinary course of business covering deposit or
securities accounts in favor of the depositary institution or securities
intermediary holding such accounts and arising in connection with obligations of
the Borrower or any of its Subsidiaries arising from any such accounts;
(o) 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 Loan Parties to secure amounts owing, which amounts are not
yet due or are being contested in good faith by appropriate proceedings, if such
reserve as may be required by GAAP has been made therefor;
(p) the Takeout VPP Lien;
-23-
(q) Liens securing the refinancing of Indebtedness permitted to be incurred
hereunder; provided, that such Liens do not extend to any property or assets
other than the property or assets that served as collateral for the refinanced
Indebtedness and the Liens on such refinanced Indebtedness were permitted
hereunder; and
(r) consensual Liens in favor of lessors that arise under leases of Oil and
Gas Properties in which a Loan Party is the lessee.
"Permitted Preferred Stock" means and refers to (a) the Borrower's 5%
Convertible Preferred Stock, par value $.01 per share and (b) any other
Preferred Stock issued by the Borrower (and not by one or more of its
Subsidiaries) that is not Prohibited Preferred Stock.
"Person" means an individual, corporation, limited liability company,
partnership, association, joint-stock company, trust, unincorporated
organization, joint venture or other enterprise or entity or Governmental
Authority.
"Petroleum Engineers" means Netherland ▇▇▇▇▇▇ & Associates or such other
petroleum engineers of recognized national standing as may be selected by the
Borrower with the prior consent of the Agents.
"Pledge Agreement" means a Pledge and Security Agreement made by a Loan
Party in favor of the Collateral Agent for the benefit of the Lenders,
substantially in the form of Exhibit P-1, securing the Obligations and delivered
to the Collateral Agent.
"Post-Default Rate" means a rate of interest per annum equal to the rate of
interest otherwise in effect from time to time pursuant to the terms of this
Agreement plus 2.50%, or, if a rate of interest is not otherwise in effect,
interest at the highest rate specified herein for any Loan prior to the Event of
Default plus 2.50%.
"Preferred Stock" means, as applied to the Capital Stock of any Person, the
Capital Stock of any class or classes (however designated) that is preferred
with respect to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such Person,
over shares of Capital Stock of any other class of such Person.
"Production Payment 2001 Facility" means the transactions described by that
certain Purchase and Sale Agreement dated February 14, 2001, among KCS
Resources, Inc., KCS Energy Services, Inc., KCS Michigan Resources, Inc. and KCS
Medallion Resources, Inc., on the one hand, and Star VPP, LP, on the other hand,
and related agreements providing for the sale by certain of the Borrower's
Subsidiaries of the Star Production Payments.
"Production Payment ▇▇▇▇ ▇▇▇▇" means the Lien granted by certain of the
Borrower's Subsidiaries in favor of Star VPP, LP pursuant to Section 16 of those
certain Production and Delivery Agreements dated as of February 1, 2001, among
such Subsidiaries, on the one hand, and Star VPP, LP, on the other hand.
-24-
"Production Payment 2001 Obligations" means, as of any date of
determination, the obligations of the Borrower or any of its Subsidiaries under
the Production Payment 2001 Facility either recorded as liabilities or as
deferred revenues in accordance with GAAP.
"Prohibited Preferred Stock" means any Preferred Stock that by its terms is
mandatorily redeemable or subject to any other payment obligation (including any
obligation to pay dividends, other than dividends of shares of Preferred Stock
of the same class and series payable in kind or dividends of shares of common
stock) on or before a date that is less than 1 year after the Final Maturity
Date, or, on or before the date that is less than 1 year after the Final
Maturity Date, is redeemable at the option of the holder thereof for cash or
assets or securities (other than distributions in kind of shares of Preferred
Stock of the same class and series or of shares of common stock).
"property" means any right or interest in or to property of any kind
whatsoever, whether real, personal or mixed and whether tangible or intangible.
"Pro Rata Share" means:
(a) with respect to a Lender's obligation to make Revolving A Loans and
receive payments of interest, fees, and principal with respect thereto, the
percentage obtained by dividing (i) such Lender's Revolving A Credit Commitment,
by (ii) the Total Revolving A Credit Commitment, provided, that, if the Total
Revolving A Credit Commitment has been reduced to zero, the numerator shall be
the aggregate unpaid principal amount of such Lender's Revolving A Loans
(including an amount equal to such Revolving A Loan Lender's Pro Rata Share (as
determined by clause (d) hereof) of the Collateral Agent Advances) and its
interest in the Letter of Credit Obligations and the denominator shall be the
aggregate unpaid principal amount of all Revolving A Loans (including an
aggregate amount equal to the Revolving A Loan Lenders' Pro Rata Share (as
determined by clause (d) hereof) of the Collateral Agent Advances) and Letter of
Credit Obligations,
(b) with respect to a Lender's obligation to make Revolving B Loans and
receive payments of interest, fees, and principal with respect thereto, the
percentage obtained by dividing (i) such Lender's Revolving B Credit Commitment,
by (ii) the Total Revolving B Credit Commitment, provided, that, if the Total
Revolving B Credit Commitment has been reduced to zero, the numerator shall be
the aggregate unpaid principal amount of such Lender's Revolving B Loans
(including an amount equal to such Revolving B Loan Lender's Pro Rata Share (as
determined by clause (d) hereof) of the Collateral Agent Advances) and the
denominator shall be the aggregate unpaid principal amount of all Revolving B
Loans (including an aggregate amount equal to the Revolving B Loan Lenders' Pro
Rata Share (as determined by clause (d) hereof) of the Collateral Agent
Advances),
(c) with respect to a Lender's obligation to make the Term Loan and receive
payments of interest, fees, and principal with respect thereto, the percentage
obtained by dividing (i) such Lender's Term Loan Commitment, by (ii) the Total
Term Loan Commitment, provided that if the Total Term Loan Commitment has been
reduced to zero, the numerator shall be the aggregate unpaid principal amount of
such Lender's portion of the Term Loan and the denominator shall be the
aggregate unpaid principal amount of the Term Loan, and
-25-
(d) with respect to all other matters (including, without limitation, the
indemnification obligations arising under Section 10.05), the percentage
obtained by dividing (i) the sum of such Lender's Revolving A Credit Commitment,
such Lender's Revolving B Credit Commitment and such Lender's Term Loan
Commitment, by (ii) the sum of the Total Revolving A Credit Commitment, the
Total Revolving B Credit Commitment and the Total Term Loan Commitment;
provided, that if such Lender's Revolving A Credit Commitment shall have been
reduced to zero, such Lender's Revolving A Credit Commitment shall be deemed to
be the aggregate unpaid principal amount of such Lender's Revolving A Loans
(including Collateral Agent Advances) and its interest in the Letter of Credit
Obligations and if the Total Revolving A Credit Commitment shall have been
reduced to zero, the Total Revolving A Credit Commitment shall be deemed to be
the aggregate unpaid principal amount of all Revolving A Loans (including
Collateral Agent Advances) and Letter of Credit Obligations; provided, further,
that if such Lender's Revolving B Credit Commitment shall have been reduced to
zero, such Lender's Revolving B Credit Commitment shall be deemed to be the
aggregate unpaid principal amount of such Lender's Revolving B Loans (including
Collateral Agent Advances) and if the Total Revolving B Credit Commitment shall
have been reduced to zero, the Total Revolving B Credit Commitment shall be
deemed to be the aggregate unpaid principal amount of all Revolving B Loans
(including Collateral Agent Advances); and provided, further, that if such
Lender's Term Loan Commitment shall have been reduced to zero, such Lender's
Term Loan Commitment shall be deemed to be the aggregate unpaid principal amount
of such Lender's portion of the Term Loan and if the Total Term Loan Commitment
shall have been reduced to zero, the Total Term Loan Commitment shall be deemed
to be the aggregate unpaid principal amount of the Term Loan.
"Proved Developed Non-Producing Reserves" means those Oil and Gas
Properties designated as "proved developed non-producing" (in accordance with
the Definitions for Oil and Gas Reserves approved by the Board of Directors of
the Society for Petroleum Engineers, Inc. from time to time) in the Reserve
Report and used in establishing the Borrowing Base or the Revolver A Borrowing
Base, if applicable.
"Proved Developed Producing Reserves" means those Oil and Gas Properties
designated as "proved developed producing" (in accordance with the Definitions
for Oil and Gas Reserves approved by the Board of Directors of the Society for
Petroleum Engineers, Inc. from time to time) in the Reserve Report and used in
establishing the Borrowing Base or the Revolver A Borrowing Base, if applicable.
"Proved Reserves" means those Oil and Gas Properties designated as "proved"
(in accordance with the Definitions for Oil and Gas Reserves approved by the
Board of Directors of the Society for Petroleum Engineers, Inc. from time to
time) in the Reserve Report and used in establishing the Borrowing Base or the
Revolver A Borrowing Base, if applicable.
"Proved Undeveloped Reserves" means those Oil and Gas Properties designated
as "proved undeveloped producing" (in accordance with the Definitions for Oil
and Gas Reserves approved by the Board of Directors of the Society for Petroleum
Engineers, Inc. from time to time) in the Reserve Report and used in
establishing the Borrowing Base or the Revolver A Borrowing Base, if applicable.
-26-
"Public Subordinated Debt" means the Indebtedness of the Borrower and its
Subsidiaries under or in connection with the Public Subordinated Debt Indenture.
"Public Subordinated Debt Indenture" means that certain Indenture dated as
of January 15, 1998, by and among the Borrower, the Subsidiary Guarantors (as
such term is defined therein), and State Street Bank and Trust Company, as
trustee, relating to the sale by the Borrower of its 8-7/8% Senior Subordinated
Notes due 2006, as amended by a First Supplemental Indenture dated as of
February 20, 2001 and as hereafter amended from time to time as permitted
hereby.
"PV-10" means, as of any date of determination, the sum of the present
values of the amounts of net revenues before income taxes expected to be
received in each of the months following the date of determination on the basis
of estimated production from Proved Reserves (net of any production transferred
by the Loan Parties pursuant to the Production Payment 2001 Facility and the
Takeout VPP Facility) during such months determined as follows:
(a) each such monthly net revenue amount shall be calculated (x) on the
basis of the applicable NYMEX Strip Price for the appropriate category of oil or
gas as of such date of determination, adjusting such price to reflect (A) the
appropriate Basis Differential with respect to Hydrocarbons produced from
specific Oil and Gas Properties of the Loan Parties as set forth on Exhibit
PV-10, as such Exhibit may from time to time be amended at the request of the
Borrower with the consent of the Agents, which consent shall not be unreasonably
withheld, conditioned or delayed, (B) the prices for fixed price contracts for
such month, (C) the prices for hedged volumes for such month and (D) Btu
content, (y) assuming that production costs remain constant throughout the
periods of the calculation of such monthly net revenues, and (z) otherwise
applying the financial accounting and reporting standards prescribed by the SEC
for application of the successful efforts method of accounting for such revenues
under Rule 4-10 of Regulation S-X as promulgated by the SEC from time to time;
and
(b) the present value of each such monthly net revenue amount shall be
determined by discounting each such monthly net revenue amount from the month in
which it is expected to be received, on a monthly basis, to such date of
determination at a rate of 10% per annum.
"Qualified Cash" means, as of any date of determination, the amount of
unrestricted Cash and Cash Equivalents of the Borrower and its Subsidiaries that
is subject to a control agreement in favor of Collateral Agent and that is on
deposit with banks, or in securities accounts with securities intermediaries, or
any combination thereof.
"Rating Agencies" has the meaning specified therefor in Section 2.07.
"Reference Bank" means ▇▇▇▇▇ Fargo Bank, National Association., its
successors or any other commercial bank designated by the Administrative Agent
with the consent of the Borrower (not to be unreasonably withheld) from time to
time.
"Reference Rate" means the rate of interest publicly announced by the
Reference Bank in New York, New York from time to time as its reference rate,
base rate or prime rate. The reference rate, base rate or prime rate is
determined from time to time by the Reference
-27-
Bank as a means of pricing some loans to its borrowers and neither is tied to
any external rate of interest or index nor necessarily reflects the lowest rate
of interest actually charged by the Reference Bank to any particular class or
category of customers. Each change in the Reference Rate shall be effective from
and including the date such change is publicly announced as being effective.
"Reference Rate Loan" means a Loan bearing interest calculated based upon
the Reference Rate.
"Register" has the meaning specified therefor in Section 12.07(b)(ii).
"Registered Loan" has the meaning specified therefor in Section
12.07(b)(ii).
"Regulation T", "Regulation U" and "Regulation X" mean, respectively,
Regulations T, U and X of the Board or any successor, as the same may be amended
or supplemented from time to time.
"Reimbursement Obligations" means the unpaid (whether by a borrowing
hereunder or otherwise) obligations of the Borrower to reimburse the
Administrative Agent or any Lender for amounts payable by the Administrative
Agent or any Lender under a Letter of Credit Guaranty in respect of any drawing
made under any Letter of Credit, together with interest thereon as provided in
Section 2.04.
"Related Fund" means, with respect to any Lender, any Affiliate (other than
individuals) of such Lender, including, without limitation, a fund or an account
managed by such Lender or an Affiliate of such Lender or its investment manager.
"Release" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, seeping, migrating,
dumping or disposing of any Hazardous Material (including the abandonment or
discarding of barrels, containers and other closed receptacles containing any
Hazardous Material) into the indoor or outdoor environment, including, without
limitation, the movement of Hazardous Materials through or in the ambient air,
soil, surface or ground water, or property.
"Remedial Action" means all actions taken to (i) clean up, remove,
remediate, contain, treat, monitor, assess or evaluate Releases of Hazardous
Materials; (ii) prevent or minimize a Release or threatened Release of Hazardous
Materials so they do not migrate or endanger or threaten to endanger public
health or welfare or the indoor or outdoor environment; (iii) perform
pre-remedial studies and investigations and post-remedial operation and
maintenance activities; or (iv) perform any other response actions, as defined
in 42 U.S.C. ss. 9601(25).
"Reportable Event" means an event described in Section 4043 of ERISA (other
than an event not subject to the provision for 30-day notice to the PBGC under
the regulations promulgated under such Section).
"Required Lenders" means, at any time, Lenders whose Pro Rata Shares
aggregate 51% or more as determined pursuant to clause (d) of the definition of
"Pro Rata Share";
-28-
provided, that, (a) so long as Foothill and its Affiliates hold Loans or
Commitments of not less than 30% of the aggregate principal amount of the sum of
(x) the Total Revolving A Credit Commitment, or, if the Total Revolving A Credit
Commitment has been terminated or reduced to zero or the Obligations have been
accelerated, the Revolving A Loans then outstanding, (y) the Pro Rata Share of
the Total Revolving B Credit Commitment that Foothill held as of the Effective
Date, or, if the Total Revolving B Credit Commitment has been terminated or
reduced to zero or the Obligations have been accelerated, the Pro Rata Share of
the Revolving B Loans that Foothill held as of the Effective Date, and (z) the
Pro Rata Share of the Term Loan that Foothill held as of the Effective Date,
"Required Lenders" shall include Foothill, and (b) so long as the Initial
Ableco-Highbridge B Lenders and their Affiliates or funds, money market
accounts, investment accounts, or other accounts managed by the Initial
Ableco-Highbridge B Lenders or their Affiliates (without deduction for any
participations sold by the Initial Ableco-Highbridge B Lenders) hold not less
than 30% of the aggregate principal amount of the sum of (x) the Pro Rata Share
of Term Loan held by the Initial Ableco-Highbridge B Lenders as of the Effective
Date and (y) the Pro Rata Share of the Total Revolving B Credit Commitment held
by the Initial Ableco-Highbridge B Lenders as of the Effective Date, or, if the
Total Revolving B Credit Commitment has been terminated or reduced to zero or
the Obligations have been accelerated, the Pro Rata Share of the Revolving B
Loans held by the Initial Ableco-Highbridge B Lenders as of the Effective Date,
"Required Lenders" shall include the Required B Lenders.
"Required B Lenders" means Lenders representing 51% of the aggregate
principal amount of the Term Loan B then outstanding and the Total Revolving B
Credit Commitment or, if the Total Revolving B Credit Commitment has been
terminated, the amount of the Revolving B Loans then outstanding.
"Reserve Percentage" means, on any day, for any Revolving A Lender, the
maximum percentage prescribed by the Board of Governors of the Federal Reserve
System (or any successor Governmental Authority) for determining the reserve
requirements (including any basic, supplemental, marginal, or emergency
reserves) that are in effect on such date with respect to eurocurrency funding
(currently referred to as "eurocurrency liabilities") of that Revolving A
Lender, but so long as such Revolving A Lender is not required or directed under
applicable regulations to maintain such reserves, the Reserve Percentage shall
be zero.
"Reserve Report" means a report of the Petroleum Engineers in the form of
the Initial Reserve Report, setting forth, as of June 30 or December 31 of any
calendar year (a) the volumetric quantity and the PV-10 (and with respect to the
December 31 report only the SEC Value), of the oil and gas reserves attributable
to the Oil and Gas Properties of the Loan Parties included in the calculation of
the Borrowing Base or the Revolver A Borrowing Base, together with a projection
of the rate of production and future net income, taxes, operating expenses and
capital expenditures with respect thereto as of such date, and (b) such other
information as any Agent may reasonably request.
"Revolver A Availability" means, at any time, the difference between (i)
the lesser of (A) the Revolver A Borrowing Base and (B) the Revolving A Credit
Commitment Amount and (ii) the sum of (A) the outstanding principal amount of
Revolving A Loans, and (B) all Letter of Credit Obligations, and (C) the
aggregate amount, if any, of all trade payables of the Borrower and its
Subsidiaries aged in excess of historical levels (exclusive of any amounts
attributable to
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the Royalty Payments Suspense Account that could be interpreted to be trade
payables and trade payables being contested in good faith by appropriate
proceedings that do not exceed $200,000 in the aggregate outstanding at any one
time).
"Revolver A Borrowing Base" means, as of any date, (a) 65% of the PV-10 of
the Proved Developed Producing Reserves of the Borrower that are located in the
United States and subject to a Mortgage and UCC financing statements, that in
each case create a first priority, perfected Lien in such Oil and Gas Properties
in favor of the Collateral Agent for the ratable benefit of the Lenders, and (b)
after all outstanding Obligations in respect of the Term Loan and the Revolving
B Loans are paid in full and the Total Revolving B Credit Commitment is
terminated, the lesser of (i) 65% of the PV-10 of the Proved Developed Producing
Reserves of the Borrower that are located in the United States and subject to a
Mortgage and UCC financing statements, that in each case create a first
priority, perfected Lien in such Oil and Gas Properties in favor of the
Collateral Agent for the ratable benefit of the Lenders, and (ii) 50% of the
PV-10 of the Proved Developed Producing Reserves of the Borrower that are
located in the United States and subject to a Mortgage and UCC financing
statements, that in each case create a first or, if subject to a prior
Production Payment 2001 Lien or the Takeout VPP Lien, second priority perfected
Lien in such Oil and Gas Properties in favor of the Collateral Agent for the
ratable benefit of the Lenders.
"Revolving A Credit Commitment" means, with respect to each Lender, the
commitment of such Lender to make Revolving A Loans to the Borrower in the
amount set forth opposite such Lender's name in Schedule R-1 hereto, as such
amount may be terminated or reduced from time to time in accordance with the
terms of this Agreement.
"Revolving A Loan" means a loan made by a Lender to the Borrower pursuant
to Section 2.01(a)(i).
"Revolving A Loan Lender" means a Lender with a Revolving A Credit
Commitment.
"Revolving B Credit Commitment" means, with respect to each Lender, the
commitment of such Lender to make Revolving B Loans to the Borrower in the
amount set forth opposite such Lender's name in Schedule R-1 hereto, as such
amount may be terminated or reduced from time to time in accordance with the
terms of this Agreement.
"Revolving B Loan" means a loan made by a Lender to the Borrower pursuant
to Section 2.01(a)(ii).
"Revolving B Loan Lender" means a Lender with a Revolving B Credit
Commitment.
"Revolving Credit Commitment" means, with respect to each Lender, such
Lender's Revolving A Credit Commitment and Revolving B Credit Commitment.
"Revolving Loan" means a Revolving A Loan or a Revolving B Loan.
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"Revolving Loan Lender" means a Revolving A Loan Lender or a Revolving B
Loan Lender.
"Revolving Loan Obligations" means any Obligations with respect to the
Revolving Loans (including without limitation, the principal thereof, the
interest thereon, and the fees and expenses specifically related thereto).
"Royalty Payments Suspense Account" means that certain entry in the
Borrower's financial records identified as the "royalty suspense payments
account".
"Royalty Payments Suspense Account Reserve" means an Agent's Reserve
created and maintained pursuant to Section 2.01(b)(vi) in an amount equal to 30%
of the amount of the Royalty Payments Suspense Account.
"SEC" means the Securities and Exchange Commission or any other similar or
successor agency of the Federal government administering the Securities Act.
"SEC Value" means the future net revenues before income taxes from Proved
Reserves, estimated utilizing the actual price for the appropriate category of
oil or gas as of the date of determination and assuming that oil and natural gas
prices and production costs thereafter remain constant, then discounted at the
rate of 10% per year to obtain the present value, and otherwise applying the
financial accounting and reporting standards prescribed by the SEC for
application of the successful efforts method of accounting under Rule 4-10 and
Regulation S-X as promulgated by the SEC from time to time.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar Federal statute, and the rules and regulations of the SEC thereunder,
all as the same shall be in effect from time to time.
"Securitization" has the meaning specified therefor in Section 2.07.
"Securitization Parties" has the meaning specified therefor in Section
2.07.
"Security Agreement" means a Security Agreement made by a Loan Party in
favor of the Collateral Agent for the benefit of the Lenders, substantially in
the form of Exhibit S-1, securing the Obligations and delivered to the
Collateral Agent.
"Senior Notes" means the 11% Senior Notes due 2003 issued by the Borrower
pursuant to that certain Indenture dated as of January 15, 1996, by and among
the Borrower, the Subsidiary Guarantors (as such term is defined therein), and
Fleet National Bank of Connecticut, as trustee, as amended by a First
Supplemental Indenture dated as of December 2, 1996, a Second Supplemental
Indenture dated as of January 3, 1997 and a Third Supplemental Indenture dated
as of February 20, 2001.
"Settlement Period" has the meaning specified therefor in Section
2.02(d)(i) hereof.
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"Solvent" means, with respect to any Person on a particular date, that on
such date (i) the fair value of the property of such Person is not less than the
total amount of the liabilities of such Person, (ii) the present fair salable
value of the assets of such Person is not less than the amount that will be
required to pay the probable liability of such Person on its existing debts as
they become absolute and matured, (iii) such Person is able to realize upon its
assets and pay its debts and other liabilities, contingent obligations and other
commitments as they mature in the normal course of business, (iv) such Person
does not intend to, and does not believe that it will, incur debts or
liabilities beyond such Person's ability to pay as such debts and liabilities
mature, and (v) such Person is not engaged in business or a transaction, and is
not about to engage in business or a transaction, for which such Person's
property would constitute unreasonably small capital.
"Standard & Poor's" means Standard & Poor's Ratings Services, a division of
The ▇▇▇▇▇▇-▇▇▇▇ Companies, Inc. and any successor thereto.
"Star Production Payments" means the term overriding royalty interest and
the production payment conveyed to Star VPP, LP, pursuant to the Production
Payment 2001 Facility.
"Subordinated Debt" means Indebtedness of any Loan Party, including the
Public Subordinated Debt, the terms of which are reasonably satisfactory to the
Required Lenders and which has been expressly subordinated in right of payment
to all Indebtedness of such Loan Party under the Loan Documents and otherwise is
on terms and conditions (including, without limitation, subordination
provisions, payment terms, interest rates, covenants, remedies, defaults and
other material terms) reasonably satisfactory to the Required Lenders.
"Subsidiary" means, with respect to any Person at any date, any
corporation, limited or general partnership, limited liability company, trust,
estate, association, joint venture or other business entity (i) the accounts of
which would be consolidated with those of such Person in such Person's
consolidated financial statements if such financial statements were prepared in
accordance with GAAP or (ii) of which more than 50% of (A) the outstanding
Capital Stock having (in the absence of contingencies) ordinary voting power to
elect a majority of the board of directors or other managing body of such
Person, (B) in the case of a partnership or limited liability company, the
interest in the capital or profits of such partnership or limited liability
company or (C) in the case of a trust, estate, association, joint venture or
other entity, the beneficial interest in such trust, estate, association or
other entity business is, at the time of determination, owned or controlled
directly or indirectly through one or more intermediaries, by such Person.
"Takeout VPP Facility" means a production payment transaction, a term
overriding royalty transaction or a similar non-operating interest transaction,
the terms and structure of which are reasonably satisfactory to the Agents,
among one or more of the Loan Parties, on the one hand, and certain third
parties, on the other hand, pursuant to which all outstanding Obligations in
respect of the Term Loan and the Revolving B Loans are paid in full and the
Total Revolving B Credit Commitment is terminated and in connection with which
the Borrower delivers to the Agents, prior to the consummation thereof, a
recalculation of the
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Revolver A Borrowing Base calculated on a pro forma basis after giving effect to
such transaction that is reasonably satisfactory to the Agents.
"Takeout VPP Lien" means the Lien granted by one or more of the Loan
Parties to secure the Takeout VPP Obligations.
"Takeout VPP Obligations" means, as of any date of determination, the
obligations of the Borrower or any of its Subsidiaries under the Takeout VPP
Facility either recorded as liabilities or as deferred revenues in accordance
with GAAP. "Taxes" has the meaning specified therefor in Section 2.08(a).
"Term Loan" means, collectively, the loans made by the Term Loan Lenders to
the Borrower on the Term Loan Funding Date pursuant to Section 2.01(a)(iii).
"Term Loan Commitment" means, with respect to each Lender, the commitment
of such Lender to make its portion of the Term Loan to the Borrower in the
amount set forth in Schedule R-1 hereto, as the same may be terminated or
reduced from time to time in accordance with the terms of this Agreement.
"Term Loan Funding Date" means the date, on or before January 16, 2003, on
which the Term Loan is made.
"Term Loan Lender" means a Lender with a Term Loan Commitment.
"Term Loan Obligations" means any Obligations with respect to the Term Loan
(including without limitation, the principal thereof, the interest thereon, and
the fees and expenses specifically related thereto).
"Termination Event" means (i) a Reportable Event with respect to any
Employee Plan, (ii) any event that causes any Loan Party or any of its ERISA
Affiliates to incur liability under Section 409, 502(i), 502(l), 515, 4062,
4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section 4971 or 4975 of the
IRC, (iii) the filing of a notice of intent to terminate an Employee Plan or the
treatment of an Employee Plan amendment as a termination under Section 4041 of
ERISA, (iv) the institution of proceedings by the PBGC to terminate an Employee
Plan, or (v) any other event or condition which might constitute grounds under
Section 4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Employee Plan.
"Title Insurance Policy" means a mortgagee's loan policy, in form and
substance satisfactory to the Collateral Agent, together with all endorsements
made from time to time thereto, issued by or on behalf of a title insurance
company satisfactory to the Collateral Agent, insuring the Lien created by a
Mortgage in an amount and on terms satisfactory to the Collateral Agent,
delivered to the Collateral Agent.
"Total Commitment" means the sum of the Total Revolving Credit Commitment
and the Total Term Loan Commitment.
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"Total Revolving A Credit Commitment" means the sum of the amounts of the
Lenders' Revolving A Credit Commitments.
"Total Revolving B Credit Commitment" means the sum of the amounts of the
Lenders' Revolving B Credit Commitments.
"Total Revolving Credit Commitment" means the sum of the Total Revolving A
Credit Commitment and the Total Revolving B Credit Commitment.
"Total Term Loan Commitment" means the sum of the amounts of the Lenders'
Term Loan Commitments.
"Transfer Order Letters" means the letters in lieu of division or transfer
orders, in form acceptable to the Collateral Agent
"TTM EBITDA" means, as of any date of determination and with respect to a
Person, the Consolidated EBITDA of such Person and its Subsidiaries for the 12
month period most recently ended.
"Unused Line Fee" has the meaning specified therefor in Section 2.06(c).
"VPP Investment" means a direct or indirect investment in a production
payment or term overriding royalty interest investment from an oil and gas
producer.
"WARN" has the meaning specified therefor in Section 6.01(z).
Section 1.02 Terms Generally. The definitions of terms herein shall apply
equally to the singular and plural forms of the terms defined. Whenever the
context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include", "includes" and "including" shall
be deemed to be followed by the phrase "without limitation". The word "will"
shall be construed to have the same meaning and effect as the word "shall".
Unless the context requires otherwise, (a) any definition of or reference to any
agreement, instrument or other document herein shall be construed as referring
to such agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (b) any reference
herein to any Person shall be construed to include such Person's successors and
assigns, (c) the words "herein", "hereof" and "hereunder", and words of similar
import, shall be construed to refer to this Agreement in its entirety and not to
any particular provision hereof, (d) all references herein to Articles,
Sections, Exhibits and Schedules shall be construed to refer to Articles and
Sections of, and Exhibits and Schedules to, this Agreement and (e) the words
"asset" and "property" shall be construed to have the same meaning and effect
and to refer to any and all tangible and intangible assets and properties,
including cash, securities, accounts and contract rights. References in this
Agreement to "determination" by any Person include good faith estimates by such
Person (in the case of quantitative determinations) and good faith beliefs by
such Person (in the case of qualitative determinations).
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Section 1.03 Accounting and Other Terms. Unless otherwise expressly
provided herein, each accounting term used herein shall have the meaning given
it under GAAP. All terms used in this Agreement which are defined in Article 8
or Article 9 of the Code as in effect from time to time in the State of New York
and which are not otherwise defined herein shall have the same meanings herein
as set forth therein.
Section 1.04 Time References. Unless otherwise indicated herein, all
references to time of day refer to Eastern Standard Time or Eastern daylight
saving time, as in effect in New York City on such day. For purposes of the
computation of a period of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
means "to but excluding"; provided, however, that with respect to a computation
of fees or interest payable to any Agent, any Lender or the L/C Issuer, such
period shall in any event consist of at least one full day.
ARTICLE II
THE LOANS
Section 2.01 Commitments. (a) Subject to the terms and conditions and
relying upon the representations and warranties herein set forth:
(i) each Revolving A Loan Lender severally agrees to make Revolving
A Loans to the Borrower at any time and from time to time from the Effective
Date to the Final Maturity Date, or until the earlier reduction of its Revolving
A Credit Commitment to zero in accordance with Section 2.05 or Section 9.01, in
an aggregate principal amount of Revolving A Loans at any time outstanding not
to exceed the amount of such Lender's Revolving A Credit Commitment;
(ii) each Revolving B Loan Lender severally agrees to make
Revolving B Loans to the Borrower at any time and from time to time from the
Effective Date to the Final Maturity Date, or until the earlier reduction of its
Revolving B Credit Commitment to zero in accordance with Section 2.05 or Section
9.01, in an aggregate principal amount of Revolving B Loans at any time
outstanding not to exceed the amount of such Lender's Revolving B Credit
Commitment; and
(iii) each Term Loan Lender severally agrees to make its portion of
the Term Loan to the Borrower on the Term Loan Funding Date, in an aggregate
principal amount equal to the amount of such Lender's Term Loan Commitment.
(b) Notwithstanding the foregoing:
(i) The aggregate principal amount of Revolving Loans outstanding
at any time to the Borrower shall not exceed the lower of (A) the difference
between (x) the Total Revolving Credit Commitment and (y) the aggregate Letter
of Credit Obligations, and (B) the difference between (x) the then current
Borrowing Base and (y) the sum of the aggregate Letter of Credit Obligations and
the outstanding principal amount of the Term Loan.
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(ii) The aggregate principal amount of Revolving A Loans
outstanding at any time to the Borrower shall not exceed the difference between
(A) the lower of (x) the Revolver A Borrowing Base and (y) the Total Revolving A
Credit Commitment, and (B) the aggregate Letter of Credit Obligations.
(iii) The aggregate principal amount of Revolving B Loans
outstanding at any time to the Borrower shall not exceed the lesser of (A) the
Total Revolving B Credit Commitment, and (B) the result of (w) the Borrowing
Base, minus (x) the outstanding principal amount of the Term Loan, minus (y) the
outstanding Revolving A Loans, minus (z) the aggregate Letter of Credit
Obligations.
(iv) The aggregate principal amount of the Term Loan made on the
Term Loan Funding Date shall not exceed the Total Term Loan Commitment. Any
principal amount of the Term Loan which is repaid or prepaid may not be
reborrowed.
(v) The aggregate outstanding principal amount of the Loans and the
Letter of Credit Obligations shall not at any time exceed the lower of (x) the
then current Borrowing Base, (y) the Maximum Amount and (z) the maximum
principal amount of senior indebtedness that is permitted to be incurred by the
Borrower and its Subsidiaries under the Public Subordinated Debt Indenture.
(vi) The Revolving Credit Commitment of each Lender shall
automatically and permanently be reduced to zero on the Final Maturity Date.
Within the foregoing limits, the Borrower may borrow, repay and reborrow the
Revolving Loans, on or after the Effective Date and prior to the Final Maturity
Date, subject to the terms, provisions and limitations set forth herein.
Anything to the contrary in this Agreement notwithstanding, the Administrative
Agent shall create and maintain the Royalty Payments Suspense Account Reserve
and may, and at the request of the Required Lenders, shall create other reserves
against the Borrowing Base or the Revolver A Borrowing Base or reduce one or
more of the percentages set forth in the definition of Borrowing Base with
respect to the stated categories of oil and gas reserves (in either case without
declaring an Event of Default) as the Administrative Agent determines, in its
reasonable judgment (from the perspective of an asset-based lender), as being
appropriate to reflect impediments to the Collateral Agent's ability to realize
upon the Collateral or impairments or reductions to the value of the Collateral
(in each case, an "Agent Reserve", and collectively, the "Agent Reserves").
Without limiting the generality of the foregoing, Agent Reserves may include
(but are not limited to) reserves based upon (A) past due or accrued taxes or
other governmental charges, including ad valorem, personal property and other
taxes which may have priority over the Liens or security interests of the
Collateral Agent in the Collateral; (B) Liens in favor of third Persons,
including, without limitation, any Governmental Authority (whether or not such
Liens are Permitted Liens; (C) estimates of present and future costs, expenses,
deposits and liabilities related to the plugging and abandonment of the Oil and
Gas Properties (net of the amount thereof which has been taken into account in
the most recent Reserve Report or is fully secured by an escrow arrangement
acceptable to the Administrative Agent); (D) without duplication of the
foregoing, amounts owing by the Borrower to any Person, including, without
limitation, any Governmental Authority, to the extent secured by a Lien (whether
or not such Lien is a Permitted Lien) on, or trust (constructive or otherwise)
over, any of the Collateral (including proceeds thereof or collections from the
sale of Hydrocarbons which
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may from time to time come into the possession of any of the Lenders or their
agents), which Lien or trust, in the reasonable determination of the
Administrative Agent (from the perspective of an asset-based lender), has a
reasonable possibility of having a priority superior to the Collateral Agent's
Liens (such as landlord liens, ad valorem taxes, production taxes, severance
taxes, sales taxes, collections attributable to sale of Hydrocarbons of Persons
other than the Borrower or its Subsidiaries) in and to such item of Collateral,
proceeds or collection; and (E) to the extent not taken into account in the most
recent Reserve Report delivered to the Agents, amounts which the Administrative
Agent reasonably determines are appropriate to account for interests of Persons
other than the Loan Parties (including without limitation interests under the
Production Payment 2001 Facility or the Takeout VPP Facility) and natural gas
imbalances of the Loan Parties. The Borrower and the Agents understand and agree
that any amount of Agent Reserves shall not be considered a disbursement bearing
interest hereunder, but rather shall be an amount that is not available for
borrowing by the Borrower.
Section 2.02 Making the Loans. (a) The Borrower shall give the
Administrative Agent prior telephonic notice (immediately confirmed in writing,
in substantially the form of Exhibit 2.02 hereto (a "Notice of Borrowing")), not
later than 1:00 p.m. (New York City time) on the date which is 1 Business Day
prior to the date of the proposed Loan if such proposed Loan is a Reference Rate
Loan or 3 Business Days prior to the date of the proposed Loan if such proposed
Loan is a LIBOR Rate Loan (or such shorter period as the Administrative Agent is
willing to accommodate from time to time, but in no event later than 1:00 p.m.
(New York City time) on the borrowing date of the proposed Loan). Such Notice of
Borrowing shall be irrevocable and shall specify (i) the principal amount of the
proposed Loan, (ii) whether such Loan is a Revolving A Loan or a Revolving B
Loan, (iii) in the case of a Revolving A Loan, whether such Loan is a Reference
Rate Loan or a LIBOR Rate Loan, and, in the case of a LIBOR Rate Loan, the
initial Interest Period with respect thereto; and (iv) the proposed borrowing
date, which must be a Business Day, and, with respect to the Term Loan, must be
the Term Loan Funding Date. The Administrative Agent and the Lenders may act
without liability upon the basis of written, telecopied or telephonic notice
believed by the Administrative Agent in good faith to be from the Borrower (or
from any employee of the Borrower). The Borrower hereby waives the right to
dispute the Administrative Agent's record of the terms of any such telephonic
Notice of Borrowing. The Administrative Agent and each Lender shall be entitled
to rely conclusively on any Authorized Officer's authority to request a Loan on
behalf of the Borrower until the Administrative Agent receives written notice to
the contrary. The Administrative Agent and the Lenders shall have no duty to
verify the authenticity of the signature appearing on any written Notice of
Borrowing. The proceeds of all Revolving Loans shall be disbursed by the
Administrative Agent into the Disbursement Account.
(b) Each Notice of Borrowing pursuant to this Section 2.02 shall be
irrevocable and the Borrower shall be bound to make a borrowing in accordance
therewith. Except for Loans made by any charge to the Loan Account, each
Revolving Loan shall be made in a minimum amount of $1,000,000 and shall be in
integral multiples of $500,000 in excess thereof. No more than 5 Interest
Periods in the aggregate may exist at any one time.
(c) (i) Except as otherwise provided in this Section 2.02(c), all Loans
under this Agreement shall be made by the Lenders simultaneously and
proportionately to their Pro Rata Shares of the Total Revolving A Credit
Commitment, the Total Revolving B Credit Commitment
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and the Total Term Loan Commitment, as the case may be, it being understood that
no Lender shall be responsible for any default by any other Lender in that other
Lender's obligations to make a Loan requested hereunder, nor shall the
Commitment of any Lender be increased or decreased as a result of the default by
any other Lender in that other Lender's obligation to make a Loan requested
hereunder, and each Lender shall be obligated to make the Loans required to be
made by it by the terms of this Agreement regardless of the failure by any other
Lender.
(ii) Notwithstanding any other provision of this Agreement, and in
order to reduce the number of fund transfers among the Borrower, the Agents and
the Lenders, the Borrower, the Agents and the Lenders agree that the
Administrative Agent may (but shall not be obligated to), and the Borrower and
the Lenders hereby irrevocably authorize the Administrative Agent to, fund, on
behalf of the Lenders with a Revolving Credit Commitment, Revolving Loans
pursuant to Section 2.01, subject to the procedures for settlement set forth in
Section 2.02(d); provided, however, that (a) the Administrative Agent shall in
no event fund any such Revolving Loans if the Administrative Agent shall have
received written notice from the Collateral Agent or the Required Lenders on the
Business Day prior to the date of the proposed Revolving Loan that one or more
of the conditions precedent contained in Section 5.02 will not be satisfied at
the time of the proposed Revolving Loan, and (b) the Administrative Agent shall
not otherwise be required to determine that, or take notice whether, the
conditions precedent in Section 5.02 have been satisfied. If the Borrower gives
a Notice of Borrowing requesting a Revolving Loan and the Administrative Agent
elects not to fund such Revolving Loan on behalf of the Revolving Loan Lenders,
then promptly after receipt of the Notice of Borrowing requesting such Revolving
Loan, the Administrative Agent shall notify each Revolving Loan Lender of the
specifics of the requested Revolving Loan and that it will not fund the
requested Revolving Loan on behalf of the Revolving Loan Lenders. If either (x)
the Borrower gives a Notice of Borrowing requesting a Revolving A Loan that is a
LIBOR Rate Loan or (y) the Administrative Agent notifies the Revolving Loan
Lenders that it will not fund a requested Revolving Loan on behalf of such
Revolving Loan Lenders, each Revolving Loan Lender shall make its Pro Rata Share
of the Revolving Loan available to the Administrative Agent, in immediately
available funds, at the Payment Office no later than 3:00 p.m. (New York City
time) (provided that the Administrative Agent requests payment from such
Revolving Loan Lender not later than 1:00 p.m. (New York City time)) on the date
of the proposed Revolving Loan. The Administrative Agent will make the proceeds
of such Revolving Loans available to the Borrower on the day of the proposed
Revolving Loan by causing an amount, in immediately available funds, equal to
the proceeds of all such Revolving Loans received by the Administrative Agent at
the Payment Office or the amount funded by the Administrative Agent on behalf of
the Revolving Loan Lenders to be deposited in an account designated by the
Borrower.
(iii) If the Administrative Agent has notified the Revolving Loan
Lenders that the Administrative Agent, on behalf of such Revolving Loan Lenders,
will fund a particular Revolving Loan pursuant to Section 2.02(c)(ii), the
Administrative Agent may assume that each such Revolving Loan Lender has made
such amount available to the Administrative Agent on such day and the
Administrative Agent, in its sole discretion, may, but shall not be obligated
to, cause a corresponding amount to be made available to the Borrower on such
day. If the Administrative Agent makes such corresponding amount available to
the Borrower and such corresponding amount is not in fact made available to the
Administrative Agent by any such Revolving Loan Lender, the Administrative Agent
shall be entitled to recover
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such corresponding amount on demand from such Revolving Loan Lender together
with interest thereon, for each day from the date such payment was due until the
date such amount is paid to the Administrative Agent, at the Federal Funds Rate
for 3 Business Days and thereafter at the Reference Rate. During the period in
which such Revolving Loan Lender has not paid such corresponding amount to the
Administrative Agent, notwithstanding anything to the contrary contained in this
Agreement or any other Loan Document, the amount so advanced by the
Administrative Agent to the Borrower shall, for all purposes hereof, be a
Revolving Loan made by the Administrative Agent for its own account. Upon any
such failure by a Revolving Loan Lender to pay the Administrative Agent, the
Administrative Agent shall promptly thereafter notify the Borrower of such
failure and the Borrower shall immediately pay such corresponding amount to the
Administrative Agent for its own account.
(iv) Nothing in this Section 2.02(c) shall be deemed to relieve any
Revolving Loan Lender from its obligations to fulfill its Revolving Credit
Commitment hereunder or to prejudice any rights that the Administrative Agent or
the Borrower may have against any Revolving Loan Lender as a result of any
default by such Revolving Loan Lender hereunder.
(d) (i) With respect to each LIBOR Rate Loan, on the first and last day of
each Interest Period, and with respect to all periods for which the
Administrative Agent has funded Revolving Loans pursuant to Section 2.02(c), on
Friday of each week, or if the applicable Friday is not a Business Day, then on
the following Business Day, or such shorter period as the Administrative Agent
may from time to time select (any such week or shorter period being herein
called a "Settlement Period"), the Administrative Agent shall notify each
Revolving Loan Lender of the unpaid principal amount of the Revolving Loans
outstanding as of the last day of each such Settlement Period. In the event that
such amount is greater than the unpaid principal amount of the Revolving Loans
outstanding on the last day of the Settlement Period immediately preceding such
Settlement Period (or, if there has been no preceding Settlement Period, the
amount of the Revolving Loans made on the date of such Revolving Loan Lender's
initial funding), each Revolving Loan Lender shall promptly (and in any event
not later than 2:00 p.m. (New York City time) if the Administrative Agent
requests payment from such Lender not later than 12:00 noon (New York City time)
on such day) make available to the Administrative Agent its Pro Rata Share of
the difference in immediately available funds. In the event that such amount is
less than such unpaid principal amount, the Administrative Agent shall promptly
pay over to each Revolving Loan Lender its Pro Rata Share of the difference in
immediately available funds. In addition, if the Administrative Agent shall so
request at any time when a Default or an Event of Default shall have occurred
and be continuing, or any other event shall have occurred as a result of which
the Administrative Agent shall determine that it is desirable to present claims
against the Borrower for repayment, each Revolving Loan Lender shall promptly
remit to the Administrative Agent or, as the case may be, the Administrative
Agent shall promptly remit to each Revolving Loan Lender, sufficient funds to
adjust the interests of the Revolving Loan Lenders in the then outstanding
Revolving Loans to such an extent that, after giving effect to such adjustment,
each such Revolving Loan Lender's interest in the then outstanding Revolving
Loans will be equal to its Pro Rata Share thereof. The obligations of the
Administrative Agent and each Revolving Loan Lender under this Section 2.02(d)
shall be absolute and unconditional. Each Revolving Loan Lender shall only be
entitled to receive
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interest on its Pro Rata Share of the Revolving Loans which have been funded by
such Revolving Loan Lender.
(ii) In the event that any Revolving Loan Lender fails to make any
payment required to be made by it pursuant to Section 2.02(d)(i), the
Administrative Agent shall be entitled to recover such corresponding amount on
demand from such Revolving Loan Lender together with interest thereon, for each
day from the date such payment was due until the date such amount is paid to the
Administrative Agent, at the Federal Funds Rate for 3 Business Days and
thereafter at the Reference Rate. During the period in which such Revolving Loan
Lender has not paid such corresponding amount to the Administrative Agent,
notwithstanding anything to the contrary contained in this Agreement or any
other Loan Document, the amount so advanced by the Administrative Agent to the
Borrower shall, for all purposes hereof, be a Revolving Loan made by the
Administrative Agent for its own account. Upon any such failure by a Revolving
Loan Lender to pay the Administrative Agent, the Administrative Agent shall
promptly thereafter notify the Borrower of such failure and the Borrower shall
immediately pay such corresponding amount to the Administrative Agent for its
own account. Nothing in this Section 2.02(d)(ii) shall be deemed to relieve any
Revolving Loan Lender from its obligation to fulfill its Revolving Credit
Commitment hereunder or to prejudice any rights that the Administrative Agent or
the Borrower may have against any Revolving Loan Lender as a result of any
default by such Revolving Loan Lender hereunder.
Section 2.03 Repayment of Loans; Evidence of Debt (a) The outstanding
principal of all Revolving Loans shall be due and payable on the Final Maturity
Date.
(b) The outstanding principal of the Term Loan shall be repaid in full on
the earlier of (i) the termination of the Total Revolving Credit Commitment and
(ii) the Final Maturity Date.
(c) 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, including the amounts of principal
and interest payable and paid to such Lender from time to time hereunder.
(d) The Administrative Agent shall maintain accounts in which it shall
record (i) the amount of each Loan made hereunder, (ii) the amount of any
principal or interest due and payable or to become due and payable from the
Borrower to each Lender hereunder and (iii) the amount of any sum received by
the Administrative Agent hereunder for the account of the Lenders and each
Lender's share thereof.
(e) The entries made in the accounts maintained pursuant to subsections (c)
or (d) of this Section 2.03 shall be prima facie evidence of the existence and
amounts of the obligations recorded therein; provided that the failure of any
Lender or the Administrative Agent to maintain such accounts or any error
therein shall not in any manner affect the obligation of the Borrower to repay
the Loans in accordance with the terms of this Agreement.
(f) Any Lender may request that Loans made by it be evidenced by a
promissory note. In such event, the Borrower shall execute and deliver to such
Lender a
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promissory note payable to the order of such Lender (or, if requested by such
Lender, to such Lender and its registered assigns) in a form furnished by the
Collateral Agent and reasonably acceptable to the Borrower. Thereafter, the
Loans evidenced by such promissory note and interest thereon shall at all times
(including after assignment pursuant to Section 12.07) be represented by one or
more promissory notes in such form payable to the order of the payee named
therein (or, if such promissory note is a registered note, to such payee and its
registered assigns in accordance with this Agreement).
Section 2.04 Interest (a) Revolving A Loans. Each Revolving A Loan shall
bear interest on the principal amount thereof from time to time outstanding,
from the date of such Loan until such principal is repaid, at a rate per annum
equal to (i) if such Loan is a Reference Rate Loan, the Reference Rate plus the
Applicable Reference Rate Margin and (ii) if such Loan is a LIBOR Rate Loan,
LIBOR plus the Applicable LIBOR Margin.
(b) Revolving B Loans and the Term Loan. Each Revolving B Loan and the Term
Loan shall bear interest on the principal amount thereof from time to time
outstanding, (i) from the date of the making of the initial Loan hereunder until
the date that is 12 months after the date of the making of such initial Loan, at
a rate per annum equal to the Reference Rate plus 4.25 percentage points, (ii)
from the date that is 12 months after the date of the making of the initial Loan
hereunder until the date that is 24 months after the date of the making of such
initial Loan, at a rate per annum equal to the Reference Rate plus 5.75
percentage points, and (iii) from the date that is 24 months after the date of
the making of the initial Loan hereunder until such principal amount is repaid,
at a rate per annum equal to the Reference Rate plus 9.50 percentage points;
provided, however, that the Reference Rate, as used herein for calculating the
effective interest rate on each Revolving B Loan and the Term Loan, shall at no
time be deemed to be less than 4.75% per annum or greater than 5.50% per annum.
(c) Default Interest. Notwithstanding Sections 2.04(a) and (b), to the
extent permitted by law, upon the occurrence and during the continuance of an
Event of Default, (i) the principal of, (ii) all past-due, accrued and unpaid
interest on, all Loans, (iii) past-due fees, (iv) indemnities, (v) outstanding
Reimbursement Obligations or (vi) any other Obligations of the Loan Parties
under this Agreement and the other Loan Documents, shall bear interest, from the
date such Event of Default occurred until the date such Event of Default is
cured or waived in writing in accordance herewith, at a rate per annum equal at
all times to the Post-Default Rate.
(d) Interest Payment. Interest on each Loan, other than LIBOR Rate Loans,
shall be payable monthly, in arrears, on the first day of each month, commencing
on the first day of the month following the month in which such Loan is made and
at maturity (whether upon demand, by acceleration or otherwise). Interest on
each LIBOR Rate Loan with an Interest Period of 1, 2 or 3 months shall be
payable in arrears on the last day of the Interest Period applicable thereto and
at maturity (whether upon demand, by acceleration or otherwise). Interest on
each LIBOR Rate Loan with an Interest Period of 6 months shall be payable in
arrears on the last day of the 3rd month of the Interest Period applicable
thereto, on the last day of the Interest Period applicable thereto and at
maturity (whether upon demand, by acceleration or otherwise). Interest at the
Post-Default Rate shall be payable on demand. The Borrower hereby authorizes the
Administrative Agent to, and the Administrative Agent may, from time to time,
charge the Loan Account pursuant to Section 4.02 with the amount of any interest
payment due hereunder.
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(e) General. All interest that is calculated based on the Reference Rate
shall be computed on the basis of a year of 365 or 366 days, as applicable, for
the actual number of days, including the first day but excluding the last day,
elapsed. All interest that is calculated based on LIBOR shall be computed on the
basis of a year of 360 days, for the actual number of days, including the first
day but excluding the last day, elapsed.
Section 2.05 Reduction of Commitment; Prepayment of Loans.
(a) Reduction of Commitments.
(i) Revolving Credit Commitments. Each of the Total Revolving A
Credit Commitment and the Total Revolving B Credit Commitment shall terminate on
the Final Maturity Date. The Borrower may, without premium or penalty, reduce
the Total Revolving A Credit Commitment to an amount (which may be zero) not
less than the sum of (A) the aggregate unpaid principal amount of all Revolving
A Loans then outstanding, (B) the aggregate principal amount of all Revolving A
Loans not yet made as to which a Notice of Borrowing has been given by the
Borrower under Section 2.02, (C) the Letter of Credit Obligations at such time
and (D) the stated amount of all Letters of Credit not yet issued as to which a
request has been made and not withdrawn. The Borrower may, without premium or
penalty, reduce the Total Revolving B Credit Commitment to an amount (which may
be zero) not less than the sum of (A) the aggregate unpaid principal amount of
all Revolving B Loans then outstanding, and (B) the aggregate principal amount
of all Revolving B Loans not yet made as to which a Notice of Borrowing has been
given by the Borrower under Section 2.02. Each such reduction shall be in an
amount which is an integral multiple of $500,000 (unless the Total Revolving A
Credit Commitment or the Total Revolving B Credit Commitment, as applicable, in
effect immediately prior to such reduction is less than $500,000), shall be made
by providing not less than 5 Business Days prior written notice to the
Administrative Agent and shall be irrevocable. Once reduced, the Total Revolving
A Credit Commitment and the Total Revolving B Credit Commitment may not be
increased. Each such reduction of the Total Revolving A Credit Commitment or the
Total Revolving B Credit Commitment shall reduce the Revolving A Credit
Commitment or the Revolving B Credit Commitment, as applicable, of each Lender
proportionately in accordance with its Pro Rata Share thereof.
(ii) Term Loan. The Total Term Loan Commitment shall terminate upon
the making of the Term Loan on the Term Loan Funding Date.
(b) Optional Prepayment.
(i) Revolving Loans. The Borrower, at its option, may prepay
without penalty or premium (other than the Applicable Early Termination Fee in
the case of the Revolving A Loans) the principal of any Revolving A Loan or
Revolving B Loan, designated by the Borrower, in whole or in part.
(ii) Term Loan. The Borrower may, upon at least 5 Business Days
prior written notice to the Administrative Agent, prepay without penalty or
premium the principal of the Term Loan, in whole or in part, so long as, after
giving effect to such prepayment, no Event of Default has occurred and is
continuing and the Borrower has Revolver
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A Availability of at least $15,000,000. Each prepayment made pursuant to this
Section 2.05(b)(ii) shall be accompanied by the payment of accrued and unpaid
interest to the date of such payment on the amount prepaid.
(iii) Application. All optional prepayments shall be applied as
directed by the Borrower subject to Section 2.05(b)(ii) in the case of the Term
Loan.
(c) Mandatory Prepayment.
(i) The Borrower shall immediately prepay the Loans at any time
when the aggregate principal amount of all Loans plus the outstanding amount of
all Letter of Credit Obligations exceeds the least of (A) the Borrowing Base,
(B) the Maximum Amount and (C) the maximum principal amount of senior
indebtedness that is permitted to be incurred by the Borrower and its
Subsidiaries under the Public Subordinated Debt Indenture, to the full extent of
any such excess with such prepayment to be applied to the Loans as directed by
the Borrower. The Borrower shall immediately prepay the Revolving A Loans at any
time when the aggregate principal amount of all Revolving A Loans plus the
outstanding amount of all Letter of Credit Obligations exceeds the lesser of (A)
the Revolver A Borrowing Base and (B) the Total Revolving A Commitment, to the
full extent of any such excess. The Borrower shall immediately prepay the
Revolving B Loans at any time when the aggregate principal amount of all
Revolving B Loans exceeds the lesser of (A) the result of (w) the Borrowing
Base, minus (x) the outstanding principal amount of the Term Loan, minus (y) the
outstanding Revolving A Loans, minus (z) the aggregate Letter of Credit
Obligations, and (B) the Total Revolving B Credit Commitment, to the full extent
of any such excess. On each day that any Loans or Letter of Credit Obligations
are outstanding, the Borrower shall hereby be deemed to represent and warrant to
the Agents and the Lenders that the Borrowing Base then in effect equals or
exceeds the aggregate principal amount of all Loans and Letter of Credit
Obligations outstanding on such day. On each day that any Revolving A Loans or
Letter of Credit Obligations are outstanding, the Borrower shall hereby be
deemed to represent and warrant to the Agents and the Revolving A Lenders that
the Revolver A Borrowing Base then in effect equals or exceeds the aggregate
principal amount of all Revolving A Loans and Letter of Credit Obligations
outstanding on such day. If at any time after the Borrower has complied with the
first sentence or the second sentence of this Section 2.05(c)(i), the aggregate
Letter of Credit Obligations is greater than the then current Borrowing Base or
Revolver A Borrowing Base, as applicable, the Borrower shall provide cash
collateral to the Administrative Agent in an amount equal to 110% of such
excess, which cash collateral shall be deposited in the Letter of Credit
Collateral Account and, provided that no Event of Default shall have occurred
and be continuing, returned to the Borrower, at such time as the aggregate
Letter of Credit Obligations plus the aggregate principal amount of all
outstanding Loans no longer exceeds the then current Borrowing Base or Revolver
A Borrowing Base, as applicable.
(ii) [Intentionally omitted]
(iii) The Borrower shall immediately prepay the outstanding
principal amount of the Term Loan in the event that the Total Revolving A Credit
Commitment is terminated for any reason.
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(iv) The Administrative Agent shall on each Business Day apply all
funds transferred to or deposited in the Administrative Agent's Account, to the
payment, in whole or in part, of the outstanding principal amount of the
Revolving Loans. So long as no Event of Default has occurred and is continuing,
(A) the Borrower shall determine whether such funds are applied to the Revolving
A Loans or the Revolving B Loans and (B) any funds remaining in the
Administrative Agent's Account after payment of the outstanding principal amount
of the Revolving Loans shall be, upon request by the Borrower, disbursed by the
Administrative Agent into the Disbursement Account.
(v) Immediately upon receipt of any proceeds of any Disposition by
any Loan Party or its Subsidiaries other than a Permitted Disposition (except
Permitted Dispositions of the type described in clauses (b), (c), (d), (e) and
(g) of the definition of Permitted Dispositions), the Borrower shall prepay the
outstanding principal amount of the Loans in an amount equal to 100% of the Net
Cash Proceeds received by such Person in connection with such Disposition to the
extent that the aggregate amount of Net Cash Proceeds received by all Loan
Parties and their Subsidiaries (and not paid to the Administrative Agent as a
prepayment of the Loans) shall exceed for all such Dispositions during any
Fiscal Year $4,000,000. Nothing contained in this clause (v) shall permit any
Loan Party or any of its Subsidiaries to make a Disposition of any property
other than a Permitted Disposition.
(vi) Upon the issuance or incurrence by any Loan Party or any of
its Subsidiaries of any Indebtedness of the type contemplated by clause (iii) of
such term (other than the Public Subordinated Debt and Indebtedness referred to
in clauses (a), (b), (c), (d), (e), (f) and (h) of the definition of Permitted
Indebtedness), or the sale or issuance by any Loan Party or any of its
Subsidiaries of any shares of its Capital Stock, the Borrower shall prepay the
Loans in an amount equal to 80% of the Net Cash Proceeds received by such Person
in connection therewith; provided that any sale or issuance of Capital Stock by
the Borrower to its officers, directors or employees shall not trigger a
mandatory prepayment obligation hereunder so long as such sale or issuance does
not exceed $500,000 during any period of 6 consecutive months. The provisions of
this subsection (vi) shall not be deemed to be implied consent to any such
issuance, incurrence or sale otherwise prohibited by the terms and conditions of
this Agreement.
(vii) Upon the receipt by any Loan Party or any of its Subsidiaries
of any Extraordinary Receipts, the Borrowers shall prepay the outstanding
principal of the Loans in an amount equal to 100% of such Extraordinary
Receipts, net of any reasonable expenses incurred in collecting such
Extraordinary Receipts.
(viii) In the event that the aggregate amount of the cash and
Permitted Investments of the Loan Parties and their Subsidiaries exceeds, as of
the 15th day of each month, $5,000,000, the Borrower shall on the next Business
Day prepay the outstanding principal of the Loans in the amount equal to such
excess.
(ix) Concurrently with the consummation of the Takeout VPP
Facility, the Borrower shall prepay the outstanding principal amount of the
Revolving B Loans and the Term Loan in full and the Total Revolving B Credit
Commitment shall thereupon be
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automatically terminated and the remaining proceeds therefrom shall be applied
to the Revolving A Loans.
(d) Application of Payments. Each prepayment made pursuant to subsections
(c)(v), (c)(vi), (c)(vii) and (c)(viii) above shall be applied, first, to the
Revolving Loans and, second, to the Term Loan; provided that, with respect to
any prepayment that is sufficient to pay all outstanding Revolving Loans in
full, after such payment in full of the principal amount of the Revolving Loans,
the Borrower may, once during the term of this Agreement, re-invest in the Oil
and Gas Business of the Loan Parties a sum of up to $5,000,000 of the remaining
funds designated for prepayment (which must be reinvested within 120 days after
the event giving rise to such prepayment and if not reinvested within such time
frame such funds shall be applied to the Loans as determined by the Borrower)
and the balance of such remaining funds shall be applied to the Term Loan. So
long as no Event of Default has occurred and is continuing, the Borrower shall
determine whether such prepayments are applied to the Revolving A Loans or the
Revolving B Loans.
(e) Interest and Fees. Any prepayment made pursuant to this Section 2.05
(other than prepayments made pursuant to subsections (c)(i), (c)(ii), (c)(iii),
and (c)(iv) of this Section 2.05) shall be accompanied by accrued and unpaid
interest on the principal amount being prepaid to the date of prepayment, and
(i) if such prepayment would reduce the amount of the outstanding Loans to zero
at a time when the Total Revolving Credit Commitment has been terminated, such
prepayment shall be accompanied by the payment of all fees accrued to such date
pursuant to Section 2.06 and the Fee Letter or (ii) if such prepayment would
reduce the amount of the outstanding Term Loan and Revolving B Loans to zero at
a time when the Total Revolving B Credit Commitment has been terminated, such
prepayment shall be accompanied by the payment of all fees accrued to such date
pursuant to the Fee Letter.
(f) Cumulative Prepayments. Except as otherwise expressly provided in this
Section 2.05, payments with respect to any subsection of this Section 2.05 are
in addition to payments made or required to be made under any other subsection
of this Section 2.05.
Section 2.06 Fees.
(a) Unused Line Fee. From and after the Effective Date and until the Final
Maturity Date, the Borrower shall pay monthly to the Administrative Agent for
the account of the Revolving A Loan Lenders, in accordance with their Pro Rata
Shares, an unused line fee (the "Unused Line Fee"), which shall accrue at the
rate per annum of 0.5% on the excess, if any, of the Total Revolving A Credit
Commitment over the sum of the average principal amount of all Revolving A Loans
and Letter of Credit Obligations outstanding from time to time during the
relevant month and shall be payable monthly in arrears on the first day of each
month commencing February 1, 2003.
(b) Fee Letter Fees. As and when due and payable under the terms of the Fee
Letter, the Borrower shall pay to the Administrative Agent the fees set forth in
the Fee Letter.
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(c) Revolving A Credit Commitment Early Termination Fee. If the Total
Revolving A Credit Commitment is terminated and all Obligations in respect of
the Total Revolving A Credit Commitment are paid in full (the first date on
which such events occur is hereafter referred to as the "A Facility Termination
Date") prior to October 3, 2005, the Borrower shall pay to the Administrative
Agent for the account of the Revolving A Loan Lenders an amount equal to the
Applicable Early Termination Fee. In the event the A Facility Termination Date
occurs at any time prior to October 3, 2005, for any reason, including, without
limitation, (A) as a result of the occurrence of an Event of Default, (B)
foreclosure and sale of Collateral, (C) sale of the Collateral in any Insolvency
Proceeding, or (D) restructure, reorganization, or compromise of the Obligations
by the confirmation of a plan of reorganization or any other plan of compromise,
restructure, or arrangement in any Insolvency Proceeding, then, the Borrower
shall pay the Applicable Early Termination Fee to the Administrative Agent for
the account of the Revolving A Loan Lenders, measured as of the date the A
Facility Termination Date shall occur; provided, however, if the A Facility
Termination Date occurs prior to October 3, 2005 as a result of (y) a sale
(including a sale transaction accomplished through a merger) of all or
substantially all of the Loan Parties' assets or all of the Stock of the
Borrower, in each case, to an unaffiliated third Person or (z) a refinancing of
the Total Revolving A Credit Commitment by a commercial banking unit of ▇▇▇▇▇
Fargo Bank, National Association, the Applicable Early Termination Fee shall be
zero.
Section 2.07 Securitization. The Loan Parties hereby acknowledge that the
Lenders and their Affiliates may sell or securitize the Loans (a
"Securitization") through the pledge of the Loans as collateral security for
loans to the Lenders or their Affiliates or through the sale of the Loans or the
issuance of direct or indirect interests in the Loans, which loans to the
Lenders or their Affiliates or direct or indirect interests will be rated by
▇▇▇▇▇'▇, Standard & Poor's or one or more other rating agencies (the "Rating
Agencies"). The Loan Parties shall cooperate with the Lenders and their
Affiliates to effect the Securitization including, without limitation, by (a)
amending this Agreement and the other Loan Documents, and executing such
additional documents, as reasonably requested by the Lenders in connection with
the Securitization, provided that (i) any such amendment or additional
documentation does not impose material additional costs on the Loan Parties and
(ii) any such amendment or additional documentation does not materially
adversely affect the rights, or materially increase the obligations, of the Loan
Parties under the Loan Documents or change or affect in a manner adverse to the
Loan Parties the financial terms of the Loans, (b) providing such information as
may be reasonably requested by the Lenders in connection with the rating of the
Loans or the Securitization, and (c) providing in connection with any rating of
the Loans a certificate (i) agreeing to indemnify the Lenders and their
Affiliates, any of the Rating Agencies, or any party providing credit support or
otherwise participating in the Securitization (collectively, the "Securitization
Parties") for any losses, claims, damages or liabilities (the "Liabilities") to
which the Lenders, their Affiliates or such Securitization Parties may become
subject insofar as the Liabilities arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in any Loan
Document or in any writing delivered by or on behalf of any Loan Party to the
Lenders in connection with any Loan Document or arise out of or are based upon
the omission or alleged omission to state therein a material fact required to be
stated therein, or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading, and such
indemnity shall survive any transfer by the Lenders or their successors or
assigns of the Loans and (ii) agreeing to reimburse the Lenders
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and their Affiliates for any legal or other expenses reasonably incurred by such
Persons in connection with defending the Liabilities.
Section 2.08 Taxes. (a) All payments made by the Loan Parties hereunder or
under any other Loan Document shall be made without set-off, counterclaim,
deduction or other defense. All such payments shall be made free and clear of
and without deduction for any present or future income, franchise, sales, use,
excise, stamp or other taxes, levies, imposts, deductions, charges, fees, or
withholdings now or hereafter imposed, levied, collected, withheld or assessed
by any jurisdiction (whether pursuant to United States Federal, state, local or
foreign law) or by any political subdivision or taxing authority thereof or
therein, and all interest, penalties or similar liabilities, excluding income
and other taxes based on the net income, capital or profits of, and branch
profit taxes of, any Lender, any Agent or the L/C Issuer imposed by the
jurisdiction in which such Lender, such Agent or the L/C Issuer is organized or
any political subdivision thereof or taxing authority thereof or any
jurisdiction in which such Person's principal office or relevant lending office
is located or any political subdivision thereof or taxing authority thereof
(such excluded taxes, levies, imposts, deductions, charges, fees and
withholdings being hereinafter collectively referred to as "Excluded Taxes" and
such nonexcluded taxes, levies, imposts, deductions, charges, fees, and
withholdings being hereinafter collectively referred to as "Taxes"). If the
Borrower shall be required by law, rule, regulation or any interpretation of any
relevant Governmental Authority to deduct or to withhold any Taxes from or in
respect of any amount payable hereunder,
(i) the amount so payable shall be increased to the extent
necessary so that after making all required deductions and withholdings
(including Taxes on amounts payable to the Lenders, the Agents or the L/C Issuer
pursuant to this sentence) the Lenders, the Agents or the L/C Issuer receive an
amount equal to the sum they would have received had no such deduction or
withholding been made,
(ii) the Borrower shall make such deduction or withholding, and
(iii) the Borrower shall pay the full amount deducted or withheld
to the relevant taxation authority in accordance with applicable law. Whenever
any Taxes are payable by the Borrower, as promptly as possible thereafter, the
Borrower shall send the Lenders, the Agents and the L/C Issuer an official
receipt (or, if an official receipt is not available, such other documentation
as shall be reasonably satisfactory to the Lenders, the Agents or the L/C
Issuer, as the case may be) showing payment. In addition, the Borrower agrees to
pay any other present or future taxes, charges or similar levies which arise
from any payment made hereunder or from the execution, delivery, or performance
by any Loan Party, recordation or filing of, or otherwise with respect to, this
Agreement, the Letters of Credit or any other Loan Document other than the
Excluded Taxes (hereinafter referred to as "Other Taxes").
(b) The Borrower hereby indemnifies the Lenders, the Agents and the L/C
Issuer for the amount of Taxes or Other Taxes (including, without limitation,
any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under
this Section 2.08) paid by any Lender, any Agent or the L/C Issuer and any
liability (including penalties, interest and expenses for nonpayment, late
payment or otherwise) arising therefrom or with respect thereto, whether or
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not such Taxes or Other Taxes were correctly or legally asserted. This
indemnification shall be paid within 15 days from the date on which any such
Lender, any such Agent or the L/C Issuer makes written demand therefor, which
demand shall identify with reasonable specificity the nature and amount of Taxes
or Other Taxes for which indemnification is being sought and the basis of the
claim.
(c) Each Lender that is organized in a jurisdiction other than the United
States, a State thereof or the District of Columbia hereby agrees that:
(i) it shall, no later than the Effective Date (or, in the case of
a Lender which becomes a party hereto pursuant to Section 12.07 hereof after the
Effective Date, the date upon which such Lender becomes a party hereto) deliver
to the Borrower and the Agents: (A) two accurate, complete and signed originals
of U.S. Internal Revenue Service Form W-8ECI or successor form, or (B) two
accurate, complete and signed originals of U.S. Internal Revenue Service Form
W-8BEN or successor form, in each case, indicating that such Lender is on the
date of delivery thereof entitled to receive payments of principal, interest and
fees for the account of its lending office under this Agreement free from, or
subject to a reduced rate of, withholding of United States Federal income tax;
and
(ii) if at any time such Lender changes its lending office or
offices or selects an additional lending office for purposes of this Agreement,
it shall, at the same time or reasonably promptly thereafter, deliver to the
Borrower and the Agents the appropriate forms as described in clause (i) above
in replacement for, or in addition to, the forms previously delivered by it
hereunder.
(d) If the Borrower fails to perform any of its obligations under this
Section 2.08, the Borrower shall indemnify the Lenders, the Agents and the L/C
Issuer for any taxes, interest or penalties that may become payable as a result
of any such failure. The obligations of the Loan Parties under this Section 2.08
shall survive the termination of this Agreement and the payment of the Loans and
all other amounts payable hereunder.
Section 2.09 LIBOR Not Determinable; Illegality or Impropriety. (a) In the
event, and on each occasion, that on or before the day on which LIBOR is to be
determined for a borrowing that is to include LIBOR Rate Loans, the
Administrative Agent has determined in good faith that, or has been advised by
the Collateral Agent or the Required Lenders that, (i) LIBOR cannot be
reasonably determined for any reason, (ii) LIBOR will not adequately and fairly
reflect the cost of maintaining LIBOR Rate Loans or (iii) Dollar deposits in the
principal amount of the applicable LIBOR Rate Loans are not available in the
interbank eurodollar market where the eurodollar and foreign currency and
exchange operations in respect of the Revolving A Loan Lenders' LIBOR Rate Loans
are then being conducted, the Administrative Agent shall, as soon as practicable
thereafter, give written notice of such determination to the Borrower and the
other Lenders. In the event of any such determination, any request by the
Borrower for a LIBOR Rate Loan pursuant to Section 2.02 shall, until, (i) in the
case of such a determination by the Collateral Agent or the Required Lenders,
the Administrative Agent has been advised by the Collateral Agent or the
Required Lenders and the Administrative Agent has so advised the Borrower that,
or (ii) in the case of a determination by the Administrative Agent, the
Administrative Agent has advised the Borrower and the other Lenders that, the
circumstances
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giving rise to such notice no longer exist, be deemed to be a request for a
Reference Rate Loan. Each determination by the Administrative Agent, the
Collateral Agent and/or the Required Lenders hereunder shall be conclusive and
binding absent manifest error.
(b) In the event that it shall be unlawful or improper for any Revolving A
Loan Lender to make, maintain or fund any LIBOR Rate Loan as contemplated by
this Agreement, then such Revolving A Lender shall forthwith give notice thereof
to the Administrative Agent and the Borrower describing such illegality or
impropriety in reasonable detail. Effective immediately upon the giving of such
notice, the obligation of such Revolving A Loan Lender to make LIBOR Rate Loans
shall be suspended for the duration of such illegality or impropriety and, if
and when such illegality or impropriety ceases to exist, such suspension shall
cease, and such Revolving A Loan Lender shall notify the Administrative Agent
and the Borrower. If any such change shall make it unlawful or improper for any
Revolving A Loan Lender to maintain any outstanding LIBOR Rate Loan as a LIBOR
Rate Loan, such Revolving A Loan Lender shall, upon the happening of such event,
notify the Administrative Agent and the Borrower, and the Borrower shall
immediately, or if permitted by applicable law, rule, regulation, order, decree,
interpretation, request or directive, at the end of the then current Interest
Period for such LIBOR Rate Loan, convert each such LIBOR Rate Loan into a
Reference Rate Loan.
Section 2.10 Indemnity. (a) The Borrower hereby indemnifies each Revolving
A Loan Lender against any loss or expense that such Revolving A Loan Lender
actually sustains or incurs (including, without limitation, any loss or expense
incurred by reason of the liquidation or reemployment of deposits or other funds
acquired by such Revolving A Loan Lender to fund or maintain any LIBOR Rate
Loan, and including loss of anticipated profits) as a consequence of (i) any
failure by the Borrower to fulfill on the date of any borrowing hereunder the
applicable conditions set forth in Article V, (ii) any failure by the Borrower
to borrow any LIBOR Rate Loan hereunder, to convert any Reference Rate Loan into
a LIBOR Rate Loan or to continue a LIBOR Rate Loan as such after notice of such
borrowing, conversion or continuation has been given pursuant to Section 2.02 or
2.11 hereof, (iii) any payment, prepayment (mandatory or optional) or conversion
of a LIBOR Rate Loan required by any provision of this Agreement or otherwise
made on a date other than the last day of the Interest Period applicable
thereto, (iv) any default in payment or prepayment of the principal amount of
any LIBOR Rate Loan or any part thereof or interest accrued thereon, as and when
due and payable (at the due date thereof, by notice of prepayment or otherwise),
or (v) the occurrence of any Event of Default, including, in each such case, any
loss (including, without limitation, loss of anticipated profits) or reasonable
expense sustained or incurred in liquidating or employing deposits from third
parties acquired to effect or maintain such Loan or any part thereof as a LIBOR
Rate Loan. Such loss or reasonable expense shall include but not be limited to
an amount equal to the excess, if any, as reasonably determined by such
Revolving A Loan Lender, of (i) its cost of obtaining the funds for the Loan
being paid or prepaid or converted or continued or not borrowed or converted or
continued (based on LIBOR applicable thereto) for the period from the date of
such payment, prepayment, conversion, continuation or failure to borrow, convert
or continue on the last day of the Interest Period for such Loan (or, in the
case of a failure to borrow, convert or continue, the last day of the Interest
Period for such Loan that would have commenced on the date of such failure to
borrow, convert or continue) over (ii) the amount of interest (as reasonably
determined by such Revolving A Loan Lender) that would be
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realized by such Revolving A Loan Lender in re-employing the funds so paid,
prepaid, converted or continued or not borrowed, converted or continued for such
Interest Period. A certificate of any Revolving A Loan Lender setting forth in
reasonable detail any amount or amounts that such Revolving A Loan Lender is
entitled to receive pursuant to this Section 2.10 and the basis for the
determination of such amount or amounts shall be delivered to the Borrower and
shall be conclusive and binding absent manifest error.
(b) Notwithstanding paragraph (a) of this Section 2.10, the Administrative
Agent will use reasonable efforts to minimize or reduce any such loss or expense
resulting from the mandatory prepayments required by Section 2.05 of this
Agreement by applying all payments and prepayments to Reference Rate Loans prior
to any application of payments to LIBOR Rate Loans.
Section 2.11 Continuation and Conversion of Loans. Subject to Section 2.09
hereof, the Borrower shall have the right, at any time, on three (3) Business
Days prior irrevocable written notice to the Administrative Agent, to continue
any LIBOR Rate Loan, or any portion thereof, into a subsequent Interest Period
or to convert any Reference Rate Loan or portion thereof into a LIBOR Rate Loan,
or on one (1) Business Day prior irrevocable written notice to the
Administrative Agent, to convert any LIBOR Rate Loan or portion thereof into a
Reference Rate Loan, subject to the following:
(a) no LIBOR Rate Loan may be continued as such and no Reference Rate Loan
may be converted into a LIBOR Rate Loan, when any Event of Default or Default
shall have occurred and be continuing at such time,
(b) in the case of a continuation of a LIBOR Rate Loan as such or a
conversion of a Reference Rate Loan into a LIBOR Rate Loan, the aggregate
principal amount of such LIBOR Rate Loan shall not be less than $1,000,000 and
in multiples of $500,000 if in excess thereof;
(c) any portion of a Revolving A Loan maturing or required to be repaid in
less than 1 month may not be converted into or continued as a LIBOR Rate Loan;
and
(d) if any conversion of a LIBOR Rate Loan shall be effected on a day other
than the last day of an Interest Period, the Borrower shall reimburse each
Revolving A Loan Lender on demand for any loss incurred or to be incurred by it
in the reemployment of the funds released by such conversion as provided in
Section 2.10 hereof.
In the event that the Borrower shall not give notice to continue any LIBOR Rate
Loan into a subsequent Interest Period, such Loan shall automatically become a
Reference Rate Loan at the expiration of the then current Interest Period.
ARTICLE III
LETTERS OF CREDIT
Section 3.01 Letter of Credit Guaranty. (a) In order to assist the Borrower
in establishing or opening standby letters of credit, which shall not have
expiration dates later than
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the Final Maturity Date (each a "Letter of Credit"), with the L/C Issuer, the
Borrower has requested the Administrative Agent to join in the applications for
such Letters of Credit, and/or guarantee payment or performance of such Letters
of Credit and any drafts thereunder through the issuance of a Letter of Credit
Guaranty, thereby lending the Administrative Agent's credit to that of the
Borrower, and the Administrative Agent has agreed to do so. These arrangements
shall be coordinated by the Administrative Agent, subject to the terms and
conditions set forth below. The Administrative Agent shall not be required to be
the issuer of any Letter of Credit. The Borrower will be the account party for
the application for each Letter of Credit, which shall be in form and substance
satisfactory to the Administrative Agent and the L/C Issuer or on a computer
transmission system approved by the Administrative Agent and the L/C Issuer, or
such other written form or computer transmission system as may from time to time
be reasonably approved by the Administrative Agent and the L/C Issuer, and shall
be duly completed at a time and in a manner reasonably acceptable to the
Administrative Agent, together with such other certificates, agreements,
documents and other papers and information as the Administrative Agent and the
L/C Issuer may reasonably request, which shall include without limitation, the
requested date of issuance and the name and address of the beneficiary (the
"Letter of Credit Application"). In the event of any conflict between the terms
of any Letter of Credit Application and this Agreement, for purposes of this
Agreement, the terms of this Agreement shall control.
(b) The aggregate Letter of Credit Obligations shall not exceed the lowest
of (i) the difference between (A) the Total Revolving A Credit Commitment and
(B) the aggregate principal amount of all Revolving A Loans then outstanding,
(ii) the difference between (A) the Revolver A Borrowing Base and (B) the
aggregate principal amount of all Revolving A Loans then outstanding, and (iii)
the L/C Subfacility. In addition, the terms and conditions of all Letters of
Credit and all changes or modifications thereof by the Borrower and/or the L/C
Issuer shall in all respects be subject to the prior approval of the
Administrative Agent in the exercise of its reasonable discretion; provided,
however, that (i) the expiry date of all Letters of Credit shall be no later
than the Final Maturity Date unless, on or prior to the Final Maturity Date
either (A) such Letters of Credit shall be cash collateralized in an amount
equal to 110% of the face amount of such Letters of Credit by deposit of cash in
such amount in an account under the sole and exclusive control of the
Administrative Agent for the benefit of the Administrative Agent and/or the L/C
Issuer (the "Letter of Credit Collateral Account") or (B) the Borrower shall
provide the Administrative Agent and the Revolving A Loan Lenders with an
indemnification or back-up letter of credit, in form and substance reasonably
satisfactory to the Administrative Agent, from a commercial bank reasonably
acceptable to the Agents for any Letter of Credit Obligations with respect to
such Letters of Credit and (ii) the Letters of Credit and all documentation in
connection therewith shall be in form and substance reasonably satisfactory to
the Administrative Agent and the L/C Issuer.
(c) If the Administrative Agent is obligated to advance funds under a
Letter of Credit, the Administrative Agent may immediately reimburse such
disbursement by charging the Loan Account as set forth below. The Administrative
Agent shall have the right, without notice to the Borrower, to charge the Loan
Account with the amount of any and all Indebtedness, liabilities and obligations
of any kind (including indemnification for breakage costs, capital adequacy and
reserve requirement charges) incurred by the Agents or the Revolving A Loan
Lenders under the Letter of Credit Guaranty or incurred by the L/C Issuer with
respect to a Letter of Credit at the earlier of (i) payment by the
Administrative Agent or the
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Revolving A Loan Lenders under the Letter of Credit Guaranty or (ii) the
occurrence of any Default or Event of Default. Any amount charged to the Loan
Account shall be deemed a Revolving A Loan hereunder made by the Revolving A
Loan Lenders to the Borrower, funded by the Administrative Agent on behalf of
the Revolving A Loan Lenders and subject to Section 2.02 of this Agreement. Any
charges, fees, commissions, costs and expenses charged to the Administrative
Agent for the Borrower's account by the L/C Issuer in connection with or arising
out of Letters of Credit or transactions relating thereto will be charged to the
Loan Account in full when charged to or paid by the Administrative Agent and,
when charged, shall be conclusive on the Borrower absent manifest error. Each of
the Revolving A Loan Lenders and the Borrower agrees that the Administrative
Agent shall have the right to make such charges regardless of whether any
Default or Event of Default shall have occurred and be continuing or whether any
of the conditions precedent in Section 5.02 have been satisfied.
(d) The Borrower understands that the Letter of Credit Guaranties may
require the Revolving A Loan Lenders to indemnify the L/C Issuer for certain
costs or liabilities arising out of claims by the Borrower against such L/C
Issuer. The Borrower agrees to unconditionally indemnify each Agent and each
Revolving A Loan Lender and holds each Agent and each Revolving A Loan Lender
harmless from any and all loss, claim or liability incurred by any Agent or any
Revolving A Loan Lender arising from any transactions or occurrences relating to
Letters of Credit, any drafts or acceptances thereunder, the Collateral relating
thereto, and all Obligations in respect thereof, including any such loss or
claim due to any action taken by the L/C Issuer, other than for any such loss,
claim or liability arising out of the gross negligence or willful misconduct of
the L/C Issuer, any Agent or any Lender as determined by a final judgment of a
court of competent jurisdiction. The Borrower further agrees to hold each Agent
and each Lender harmless from any errors or omission, negligence or misconduct
by the L/C Issuer. The Borrower agrees to be bound by the L/C Issuer's
regulations and interpretations of any Letter of Credit that is the subject of a
Letter of Credit Guaranty and opened to or for the Borrower's account or by the
Administrative Agent's interpretations of any Letter of Credit issued for the
Borrower's account, even though such interpretation may be different from the
Borrower's own, and the Borrower understands and agrees that the Lenders, the
Agents and the L/C Issuer shall not be liable for any error, negligence or
mistake, whether of omission or commission, in following the Borrower's
instructions or those contained in the Letter of Credit or any modifications,
amendments, or supplements thereto. The Borrower's unconditional obligations to
each Agent, each Lender and the L/C Issuer with respect to Letters of Credit
hereunder shall not be modified or diminished for any reason or in any manner
whatsoever, other than as a result of such Agent's, such Lender's or the L/C
Issuer's gross negligence or willful misconduct as determined by a final
judgment of a court of competent jurisdiction. The Borrower agrees that any
charges incurred by the Administrative Agent or the L/C Issuer for the
Borrower's account hereunder may be charged to the Loan Account.
(e) Upon any payments made to the L/C Issuer under the Letter of Credit
Guaranty, the Agents or the Revolving A Loan Lenders, as the case may be, shall,
without prejudice to their rights under this Agreement (including that such
unreimbursed amounts shall constitute Loans hereunder), acquire by subrogation,
any rights, remedies, duties or obligations granted or undertaken by the
Borrower in favor of the L/C Issuer in any application for Letters of Credit,
any standing agreement relating to Letters of Credit or otherwise, all of which
shall be deemed to have been granted to the Agents and the Revolving A Loan
Lenders and apply in all
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respects to the Agents and the Revolving A Loan Lenders and shall be in addition
to any rights, remedies, duties or obligations contained herein.
Section 3.02 Participations.
(a) Purchase of Participations. Immediately upon issuance by the L/C Issuer
of any Letter of Credit pursuant to this Agreement, each Revolving A Loan Lender
shall be deemed to have irrevocably and unconditionally purchased and received
from the Administrative Agent, without recourse or warranty, an undivided
interest and participation, to the extent of such Revolving A Loan Lender's Pro
Rata Share, in all obligations of the Administrative Agent in such Letter of
Credit (including, without limitation, all Reimbursement Obligations of the
Borrower with respect thereto pursuant to the Letter of Credit Guaranty or
otherwise).
(b) Sharing of Payments. In the event that the Administrative Agent makes
any payment in respect of the Letter of Credit Guaranty and the Borrower shall
not have repaid such amount to the Administrative Agent, the Administrative
Agent shall charge the Loan Account in the amount of the Reimbursement
Obligation, in accordance with Sections 3.01(c) and 4.02 of this Agreement.
(c) Obligations Irrevocable. The obligations of a Revolving A Loan Lender
to make payments to the Administrative Agent for the account of the Agents, the
Revolving A Loan Lenders or the L/C Issuer with respect to a Letter of Credit
shall be irrevocable, without any qualification or exception whatsoever and
shall be made in accordance with the terms and conditions of this Agreement
under all circumstances, including, without limitation, any of the following
circumstances:
(i) any lack of validity or enforceability of this Agreement or any
of the other Loan Documents;
(ii) the existence of any claim, setoff, defense or other right
which the Borrower may have at any time against a beneficiary named in such
Letter of Credit or any transferee of such Letter of Credit (or any Person for
whom any such transferee may be acting), any Agent, any Lender, or any other
Person, whether in connection with this Agreement, such Letter of Credit, the
transactions contemplated herein or any unrelated transactions (including any
underlying transactions between the Borrower or any other party and the
beneficiary named in such Letter of Credit);
(iii) any draft, certificate or any other document presented under
such Letter of Credit proving to be forged, fraudulent, invalid or insufficient
in any respect or any statement therein being untrue or inaccurate in any
respect;
(iv) the surrender or impairment of any security for the
performance or observance of any of the terms of any of the Loan Documents;
(v) any failure by any Agent to provide any notices required
pursuant to this Agreement relating to such Letter of Credit;
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(vi) any payment by the L/C Issuer under such Letter of Credit
against presentation of a draft or certificate which does not comply with the
terms of such Letter of Credit; or
(vii) the occurrence of any Default or Event of Default.
Section 3.03 Letters of Credit.
(a) Request for Issuance. The Borrower may, upon reasonable notice in
advance of such issuance but, in any event, not later than 12:00 noon, New York
City time, at least 2 Business Days in advance of the issuance thereof, request
the Administrative Agent to assist the Borrower in establishing or opening a
Letter of Credit by delivering to the Administrative Agent, with a copy to the
L/C Issuer, a Letter of Credit Application, together with any necessary related
documents. The Administrative Agent shall not provide support, pursuant to the
Letter of Credit Guaranty, if the Administrative Agent shall have received
written notice from the Collateral Agent or the Required Lenders on the Business
Day immediately preceding the proposed issuance date for such Letter of Credit
that one or more of the conditions precedent in Section 5.02 will not have been
satisfied on such date, and the Administrative Agent shall not otherwise be
required to determine that, or take notice whether, the conditions precedent set
forth in Section 5.02 have been satisfied.
(b) Letter of Credit Fees. (i) The Borrower shall pay to the Administrative
Agent for the account of the Revolving A Loan Lenders, in accordance with the
Revolving A Loan Lenders' Pro Rata Shares (x) for any Letter of Credit issued
hereunder, a non-refundable fee equal to 2.0% per annum of the stated amount of
such Letter of Credit, payable monthly in arrears and (y) for any amendment to
an existing Letter of Credit that increases the stated amount of such Letter of
Credit, a non-refundable fee equal to 2.0% per annum of the increase in the
stated amount of such Letter of Credit, payable monthly in arrears (the "Letter
of Credit Fees").
(ii) L/C Issuer Charges. The Borrower shall pay to the
Administrative Agent any and all charges assessed by the L/C Issuer in
connection with the issuance, administration, amendment, payment or cancellation
of Letters of Credit.
(iii) Charges to the Loan Account. The Borrower hereby authorizes
the Administrative Agent to, and the Administrative Agent may, from time to
time, charge the Loan Account pursuant to Sections 3.01(c) and 4.02 of this
Agreement with the amount of any Letter of Credit fees or charges due under this
Section 3.03.
ARTICLE IV
FEES, PAYMENTS AND OTHER COMPENSATION
Section 4.01 Audit and Collateral Monitoring Fees. The Borrower
acknowledges that pursuant to Section 7.01(f), representatives of the Agents may
visit any Loan Party and/or conduct audits, inspections and/or field
examinations (including, without limitation, examinations and audits of such
Loan Party's major ▇▇▇▇▇, rigs, pipeline distribution systems and operations)
("Audits") of any Loan Party and valuations or appraisals of any or all of the
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Collateral and/or business or enterprise valuations of the Loan Parties at any
time and from time to time, and so long as no Event of Default has occurred and
is continuing, Audits shall be conducted on reasonable notice during normal
business hours in a manner so as to not unduly disrupt the business of such Loan
Party; provided that so long as no Event of Default has occurred and is
continuing, the Borrower shall only be required to pay the fees and expenses of
no more than 2 Audits during any Fiscal Year. The Borrower agrees to pay (i)
$850 per day per examiner plus the examiner's reasonable out-of-pocket costs and
expenses incurred in connection with all such Audits, appraisals and valuations
and (ii) the cost of all Audits, appraisals and valuations conducted by third
party auditors or appraisers on behalf of the Agents; provided that so long as
no Event of Default has occurred and is continuing, the Borrower shall only be
required to pay the fees and expenses of no more than 2 Audits during any Fiscal
Year.
Section 4.02 Payments; Computations and Statements. (a) The Borrower will
make each payment under this Agreement not later than 3:00 p.m. (New York City
time) on the day when due, in lawful money of the United States of America and
in immediately available funds, to the Administrative Agent's Account. All
payments received by the Administrative Agent after 3:00 p.m. (New York City
time) on any Business Day will be applied to the Obligations for which such
payment has been made on the next succeeding Business Day. All payments shall be
made by the Borrower without set-off, counterclaim, deduction or other defense
to the Agents and the Lenders. Except as provided in Section 2.02, after
receipt, the Administrative Agent will promptly thereafter cause to be
distributed like funds relating to the payment of principal ratably to the
Lenders entitled to such payment in accordance with their Pro Rata Shares and
like funds relating to the payment of any other amount payable to any Lender to
such Lender, in each case to be applied in accordance with the terms of this
Agreement, provided that the Administrative Agent will cause to be distributed
all interest and fees received from or for the account of the Borrower not less
than once each month and in any event promptly after receipt thereof. The
Lenders and the Borrower hereby authorize the Administrative Agent to, and the
Administrative Agent shall, from time to time, charge the Loan Account of the
Borrower with any amount due and payable by the Borrower under any Loan
Document. Each of the Lenders and the Borrower agrees that the Administrative
Agent shall have the right to make such charges whether or not any Default or
Event of Default shall have occurred and be continuing or whether any of the
conditions precedent in Section 5.02 have been satisfied. Any amount charged to
the Loan Account of the Borrower shall be deemed a Revolving Loan (and a
Revolving A Loan to the extent of Revolver A Availability) hereunder made by the
applicable Revolving Loan Lenders to the Borrower, funded by the Administrative
Agent on behalf of the applicable Revolving Loan Lenders and subject to Section
2.02 of this Agreement. The Lenders and the Borrower confirm that any charges
which the Administrative Agent may so make to the Loan Account of the Borrower
as herein provided will be made as an accommodation to the Borrower and solely
at the Administrative Agent's discretion. Whenever any payment to be made under
any such Loan Document shall be stated to be due on a day other than a Business
Day, such payment shall be made on the next succeeding Business Day and such
extension of time shall in such case be included in the computation of interest
or fees, as the case may be. All computations of fees shall be made by the
Administrative Agent on the basis of a year of 365 or 366 days, as applicable,
for the actual number of days (including the first day but excluding the last
day) occurring in the period for which such fees are payable. Each determination
by the Administrative Agent of an interest rate or fees hereunder shall be
conclusive and binding for all purposes in the absence of manifest error.
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(b) The Administrative Agent shall provide the Borrower, promptly after the
end of each calendar month, a summary statement (in the form from time to time
used by the Administrative Agent) of the opening and closing daily balances in
the Loan Account of the Borrower during such month, the amounts and dates of all
Loans made to the Borrower during such month, the amounts and dates of all
payments on account of the Loans to the Borrower during such month and the Loans
to which such payments were applied, the amount of interest accrued on the Loans
to the Borrower during such month, any Letters of Credit issued by the L/C
Issuer for the account of the Borrower during such month, specifying the face
amount thereof, the amount of charges to the Loan Account and/or Loans made to
the Borrower during such month to reimburse the Revolving Loan Lenders for
drawings made under Letters of Credit, and the amount and nature of any charges
to the Loan Account made during such month on account of fees, commissions,
expenses and other Obligations. All entries on any such statement shall be
presumed to be correct and, 30 days after the same is sent, shall be final and
conclusive absent manifest error.
Section 4.03 Sharing of Payments, Etc. Except as provided in Section 2.02
hereof, if any Lender shall obtain any payment (whether voluntary, involuntary,
through the exercise of any right of set-off, or otherwise) on account of any
Obligation in excess of its ratable share of payments on account of similar
obligations obtained by all the Lenders, such Lender shall forthwith purchase
from the other Lenders such participations in such similar obligations held by
them as shall be necessary to cause such purchasing Lender to share the excess
payment ratably with each of them; provided, however, that if all or any portion
of such excess payment is thereafter recovered from such purchasing Lender, such
purchase from each Lender shall be rescinded and such Lender shall repay to the
purchasing Lender the purchase price to the extent of such recovery together
with an amount equal to such Lender's ratable share (according to the proportion
of (i) the amount of such Lender's required repayment to (ii) the total amount
so recovered from the purchasing Lender of any interest or other amount paid by
the purchasing Lender in respect of the total amount so recovered). The Borrower
agrees that any Lender so purchasing a participation from another Lender
pursuant to this Section 4.03 may, to the fullest extent permitted by law,
exercise all of its rights (including the Lender's right of set-off) with
respect to such participation as fully as if such Lender were the direct
creditor of the Borrower in the amount of such participation.
Section 4.04 Apportionment of Payments. Subject to Section 2.02 hereof:
(a) all payments of principal and interest in respect of outstanding Loans,
all payments in respect of the Reimbursement Obligations, all payments of fees
(other than the fees with respect to Letters of Credit provided for in Section
3.03(b)(ii) and the audit and collateral monitoring fees provided for in Section
4.01) and all other payments in respect of any other Obligations, shall be
allocated by the Administrative Agent among such of the Lenders as are entitled
thereto, in proportion to their respective Pro Rata Shares or otherwise as
provided herein or, in respect of payments not made on account of Loans or
Letter of Credit Obligations, as designated by the Person making payment when
the payment is made.
(b) Except as otherwise specifically provided in Section 2.05(c), all
proceeds of Collateral received by the Administrative Agent shall be applied as
follows: (i) first, to pay the principal of all Collateral Agent Advances until
paid in full; (ii) second, ratably to pay all principal amounts then due and
payable with respect to the Revolving A Loans until paid in full; (iii) third,
ratably to pay
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all principal amounts then due and payable with respect to the Revolving B Loans
until paid in full; (iv) fourth, to pay all principal amounts then due and
payable with respect to the Term Loan until paid in full; (v) fifth, to pay any
other Obligations then due and payable until paid in full; and (vi) sixth, to
the Borrower (to be wired to the Disbursement Account) or such other Person
entitled thereto under applicable law.
(c) Section 4.04(b) shall not be deemed to apply (i) to any payment by the
Borrower specified by the Borrower to be for the payment of specific Obligations
then due and payable (or prepayable) under any provision of this Agreement or
(ii) after the occurrence and during the continuance of an Event of Default.
After the occurrence and during the continuance of an Event of Default, all
proceeds of Collateral received by the Administrative Agent shall be applied as
agreed by the Agents and the Lenders.
(d) [Intentionally omitted]
(e) [Intentionally omitted]
Section 4.05 Increased Costs and Reduced Return. (a) If any Lender, any
Agent or the L/C Issuer shall have determined that the adoption or
implementation of after the date hereof, or any change after the date hereof in,
any law, rule, treaty or regulation, or any policy, guideline or directive of,
or any change after the date hereof in, the interpretation or administration
thereof by, any court, central bank or other administrative or Governmental
Authority, or compliance by any Lender, any Agent or the L/C Issuer or any
Person controlling any such Lender, any such Agent or the L/C Issuer with any
directive of, or guideline from, any central bank or other Governmental
Authority or the introduction of, or change in, any accounting principles
applicable to any Lender, any Agent or the L/C Issuer or any Person controlling
any such Lender, any such Agent or the L/C Issuer (in each case, whether or not
having the force of law), shall (i) subject any Lender, any Agent or the L/C
Issuer, or any Person controlling any such Lender, any such Agent or the L/C
Issuer to any tax, duty or other charge with respect to this Agreement or any
Loan made by such Lender or such Agent or any Letter of Credit issued by the L/C
Issuer, or change the basis of taxation of payments to any Lender, any Agent or
the L/C Issuer or any Person controlling any such Lender, any such Agent or the
L/C Issuer of any amounts payable hereunder (except for Excluded Taxes), (ii)
impose, modify or deem applicable any reserve, special deposit or similar
requirement against any Loan, any Letter of Credit or against assets of or held
by, or deposits with or for the account of, or credit extended by, any Lender,
any Agent or the L/C Issuer or any Person controlling any such Lender, any such
Agent or the L/C Issuer or (iii) impose on any Lender, any Agent or the L/C
Issuer or any Person controlling any such Lender, any such Agent or the L/C
Issuer any other condition regarding this Agreement or any Loan or Letter of
Credit, and the result of any event referred to in clauses (i), (ii) or (iii)
above shall be to increase the actual direct cost to any Lender, any Agent or
the L/C Issuer of making any Loan, issuing, guaranteeing or participating in any
Letter of Credit, or agreeing to make any Loan or issue, guaranty or participate
in any Letter of Credit, or to reduce any amount received or receivable by any
Lender, any Agent or the L/C Issuer hereunder, then, within 15 days of demand by
any such Lender, any such Agent or the L/C Issuer, in accordance with Section
4.05(c) the Borrower shall pay to such Lender, such
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Agent or the L/C Issuer such additional amounts as will compensate such Lender,
such Agent or the L/C Issuer for such increased costs or reductions in amount.
(b) If any Lender, any Agent or the L/C Issuer shall have determined in
good faith that any change after the date hereof of any Capital Guideline or the
adoption or implementation of, or any change after the date hereof in, any
Capital Guideline by the Governmental Authority charged with the interpretation
or administration thereof, or compliance by any Lender, any Agent or the L/C
Issuer or any Person controlling such Lender, such Agent or the L/C Issuer with
any Capital Guideline or with any request or directive of any such Governmental
Authority with respect to any Capital Guideline, or the implementation of, or
any change in, any applicable accounting principles (in each case, whether or
not having the force of law), either (i) affects or would affect the amount of
capital required or expected to be maintained by any Lender, any Agent or the
L/C Issuer or any Person controlling such Lender, such Agent or the L/C Issuer,
and any Lender, any Agent or the L/C Issuer determines in good faith that the
amount of such capital is increased as a direct or indirect consequence of any
Loans made or maintained, Letters of Credit issued or any guaranty or
participation with respect thereto, any Lender's, any Agent's or the L/C
Issuer's or any such other controlling Person's other obligations hereunder, or
(ii) has or would have the effect of reducing the rate of return on any
Lender's, any Agent's or the L/C Issuer's any such other controlling Person's
capital to a level below that which such Lender, such Agent or the L/C Issuer or
such controlling Person could have achieved but for such circumstances as a
consequence of any Loans made or maintained, Letters of Credit issued, or any
guaranty or participation with respect thereto or any agreement to make Loans,
to issue Letters of Credit or such Lender's, such Agent's or the L/C Issuer's or
such other controlling Person's other obligations hereunder (in each case,
taking into consideration, such Lender's, such Agent's or the L/C Issuer's or
such other controlling Person's policies with respect to capital adequacy),
then, within 15 days of demand by any Lender, any Agent or the L/C Issuer, in
accordance with Section 4.05(c) the Borrower shall pay to such Lender, such
Agent or the L/C Issuer from time to time such additional amounts as will
compensate such Lender, such Agent or the L/C Issuer for such cost of
maintaining such increased capital or such reduction in the rate of return on
such Lender's, such Agent's or the L/C Issuer's or such other controlling
Person's capital.
(c) All amounts payable under this Section 4.05 shall bear interest from
the date that is 15 days after the date of receipt by the Borrower of the
certificate described in the following sentence delivered by any Lender, any
Agent or the L/C Issuer until payment in full to such Lender, such Agent or the
L/C Issuer at the Reference Rate. A certificate of such Lender, such Agent or
the L/C Issuer claiming compensation under this Section 4.05, specifying in
reasonable detail the event herein above described and the nature of such event
shall be submitted by such Lender, such Agent or the L/C Issuer to the Borrower,
setting forth the additional amount due and an explanation of the calculation
thereof, and such Lender's, such Agent's or the L/C Issuer's reasons for
invoking the provisions of this Section 4.05, and shall be final and conclusive
absent manifest error.
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ARTICLE V
CONDITIONS TO LOANS
Section 5.01 Conditions Precedent. The obligation of the Lenders (or any
member thereof) to make the initial Loans (or otherwise to extend any credit
provided for hereunder), is subject to the fulfillment, to the satisfaction of
the Agents, of each of the conditions precedent set forth below:
(a) Payment of Fees, Etc. The Borrower shall have paid all fees, costs,
expenses and taxes then payable pursuant to the Fee Letter and Sections 2.06 and
12.04 of this Agreement.
(b) Representations and Warranties; No Event of Default. The following
statements shall be true and correct: (i) the representations and warranties
contained in Article VI and in each other Loan Document or certificate delivered
to any Agent or any Lender or the L/C Issuer pursuant hereto or thereto on or
prior to the Effective Date are true and correct in all material respects
(except that such materiality qualifier shall not be applicable to any
representations and warranties that already are qualified or modified by
materiality in the text thereof) on and as of the Effective Date as though made
on and as of such date (it being understood and agreed that any representation
or warranty which by its terms is made as of a specified date shall be required
to be true and correct in all material respects only as of such specified date)
and (ii) no Default or Event of Default shall have occurred and be continuing on
the Effective Date or would result from this Agreement or the other Loan
Documents becoming effective in accordance with its or their respective terms.
(c) Legality. The making of the initial Loans or the issuance of any
Letters of Credit shall not contravene any law, rule or regulation applicable to
any Agent, any Lender or the L/C Issuer.
(d) Delivery of Documents. The Collateral Agent shall have received on or
before the Effective Date the following, each in form and substance satisfactory
to the Collateral Agent and, unless indicated otherwise, dated the Effective
Date:
(i) a Security Agreement, duly executed by each Loan Party;
(ii) a Pledge Agreement, duly executed by each Loan Party, together
with the original stock certificates representing all of the common stock of
such Loan Party's Subsidiaries and all intercompany promissory notes of such
Loan Parties, accompanied by undated stock powers executed in blank and other
proper instruments of transfer;
(iii) a Guaranty, duly executed by each Subsidiary of the Borrower;
(iv) the Fee Letter, duly executed by the Borrower, the
Administrative Agent, Highbridge and Foothill;
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(v) a Mortgage with respect to the New Lien Properties duly
executed by the appropriate Loan Party;
(vi) information acceptable to the Lenders confirming the Loan
Parties' interests in their respective Oil and Gas Properties and the priority
of all existing Mortgages thereon;
(vii) the Assignment Documents, including UCC assignments,
assignments of existing Mortgages and other documents, as may be required by the
Collateral Agent, evidencing the assignment by the Existing Lenders of their
Liens in the properties of the Loan Parties;
(viii) appropriate financing statements on Form UCC-1 duly filed in
such office or offices as may be necessary or, in the opinion of the Collateral
Agent, desirable to perfect the security interests purported to be created by
each Security Agreement, each Pledge Agreement and each Mortgage;
(ix) certified copies of request for copies of information on Form
UCC-11, listing all effective financing statements which name as debtor any Loan
Party and which are filed in the offices referred to in clause (viii) above,
together with copies of such financing statements, none of which, except as
otherwise agreed in writing by the Collateral Agent, shall cover any of the
Collateral and the results of searches for any tax Lien and judgment Lien filed
against such Person or its property, which results, except as otherwise agreed
to in writing by the Collateral Agent, shall not show any such Liens;
(x) a copy of the resolutions of each Loan Party, certified as of
the Effective Date by an Authorized Officer thereof, authorizing (A) the
transactions contemplated by the Loan Documents to which such Loan Party is or
will be a party, and (B) the execution, delivery and performance by such Loan
Party of each Loan Document to which such Loan Party is or will be a party and
the execution and delivery of the other documents to be delivered by such Person
in connection herewith and therewith;
(xi) a certificate of an Authorized Officer of each Loan Party,
certifying the names and true signatures of the representatives of such Loan
Party authorized to sign each Loan Document to which such Loan Party is or will
be a party and the other documents to be executed and delivered by such Loan
Party in connection herewith and therewith, together with evidence of the
incumbency of such authorized officers;
(xii) with respect to each state that provides such certificates, a
certificate of the appropriate official(s) of the state of organization and each
state of foreign qualification of each Loan Party certifying as to the
subsistence in good standing of, and the payment of taxes by, such Loan Party in
such states;
(xiii) a true and complete copy of the charter, certificate of
formation, certificate of limited partnership or other publicly filed
organizational document of each Loan Party certified as of a recent date not
more than 30 days prior to the Effective Date by an appropriate official of the
state of organization of such Loan Party which shall set forth the
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same complete name of such Loan Party as is set forth herein and the
organizational number of such Loan Party, if an organizational number is issued
in such jurisdiction;
(xiv) a copy of the by-laws, limited liability company agreement,
operating agreement, agreement of limited partnership or other organizational
document of each Loan Party, together with all amendments thereto, certified as
of the Effective Date by an Authorized Officer of such Loan Party;
(xv) an opinion of ▇▇▇▇▇▇▇ & ▇▇▇▇▇ L.L.P., counsel to the Loan
Parties, substantially in the form of Exhibit 5.01(d)(xv);
(xvi) a certificate of an Authorized Officer of the Borrower,
certifying as to the matters set forth in Section 5.01(b);
(xvii) a copy of the Financial Statements and financial statements
for the 11 months ended November 30, 2002 (which shall include year-to-date
figures and the figures for the corresponding period of 2001), together with a
certificate of an Authorized Officer of the Borrower setting forth all existing
Indebtedness, pending or, to the extent known by the Borrower, threatened
litigation or claims and other contingent liabilities of the Borrower and its
Subsidiaries not otherwise reflected in such Financial Statements; (xviii) a
copy of the financial projections described in Section 6.01(g)(ii) hereof;
(xix) a certificate of the chief financial officer or vice
president-controller of the Borrower, certifying as to the solvency of such Loan
Party;
(xx) evidence of the insurance coverage required by Section 7.01
and the terms of each Security Agreement and each Mortgage and such other
insurance coverage with respect to the business and operations of the Loan
Parties as the Collateral Agent may reasonably request, in each case, where
requested by the Collateral Agent, with such endorsements as to the named
insureds or loss payees thereunder as the Collateral Agent may request and
providing that such policy may be terminated or canceled (by the insurer or the
insured thereunder) only upon 30 days prior written notice to the Collateral
Agent and each such named insured or loss payee;
(xxi) a certificate of an Authorized Officer of the Borrower,
certifying the names and true signatures of the persons that are authorized to
provide Notices of Borrowing, Letter of Credit Applications and all other
notices under this Agreement and the other Loan Documents;
(xxii) copies of the Public Subordinated Debt Indenture and the
other Material Contracts as in effect on the Effective Date, certified as true
and correct copies thereof by an Authorized Officer of the Borrower and a
certificate that the agreements relating to the Production Payment 2001 Facility
that have been delivered to Highbridge were true and correct copies thereof;
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(xxiii) the Contribution Agreement, duly executed by each
Guarantor;
(xxiv) such account control agreements and other documents as the
Agents may request with respect to the Loan Parties' accounts with Guaranty Bank
identified on Schedule 8.01(a);
(xxv) Transfer Order Letters applicable to the production of oil
and gas from any Proved Reserves; and
(xxvi) such other agreements, instruments, approvals, opinions and
other documents, each satisfactory to the Collateral Agent in form and
substance, as the Collateral Agent may reasonably request.
(e) Material Adverse Effect. The Collateral Agent shall have determined, in
its sole judgment, that no event or development shall have occurred since
September 30, 2002, which could reasonably be expected to result in a Material
Adverse Effect.
(f) Consummation of Acquisition of Existing Indebtedness. Concurrently with
the making of the initial Loans, the Lenders shall have purchased the Existing
Indebtedness at par from the Existing Lenders.
(g) Proceedings; Receipt of Documents. All proceedings in connection with
the making of the initial Loans or the issuance of the initial Letters of Credit
and the other transactions contemplated by this Agreement and the other Loan
Documents, and all documents incidental hereto and thereto, shall be reasonably
satisfactory to the Collateral Agent and its counsel, and the Collateral Agent
and such counsel shall have received all such information and such counterpart
originals or certified or other copies of such documents as the Collateral Agent
or such counsel may reasonably request.
(h) Due Diligence; Takeover Audit. The Agents shall have completed their
business and legal due diligence with respect to each Loan Party and the results
thereof shall be acceptable to the Agents, in their sole and absolute
discretion. Without limiting the foregoing, (i) the Collateral Agent shall have
received a Field Survey and Audit, dated not earlier than 30 days prior to the
Effective Date, and such Field Survey and Audit and the results thereof shall be
acceptable to the Collateral Agent, in its sole and absolute discretion and (ii)
the Administrative Agent shall have completed its "takeover" audit which shall
include, among other things, a verification that the Loan Parties' production
taxes, royalty payments and Production Payment 2001 Obligations are current,
verification of the Loan Parties' cash balances (including the sources of such
cash), in each case the results of which shall be satisfactory to the
Administrative Agent.
(i) Availability. After giving effect to all Loans to be made on the
Effective Date and the Letters of Credit to be issued on the Effective Date, the
Availability shall not be less than $10,000,000 . The Borrower shall deliver to
the Collateral Agent a certificate of the vice president-controller of the
Borrower certifying as to the calculation of Availability.
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(j) Initial Reserve Report. The Lenders shall have received a Reserve
Report, dated as of November 30, 2002, with respect to the Proved Reserves
(which Reserve Report shall have been prepared by Netherland ▇▇▇▇▇▇ & Associates
with respect to proved developed gas properties subject to the Production
Payment 2001 Facility and by the Borrower's internal engineers with respect to
all other Oil and Gas Properties of the Loan Parties) in form and substance
reasonably satisfactory to the Lenders (the "Initial Reserve Report").
(k) Title to Oil and Gas Properties. The Agents and the Lenders shall be
satisfied as to the title of the Loan Parties to the Oil and Gas Properties
identified on Schedule 6.01(o)(B).
(l) Borrowing Base Certificate. The Lenders shall have received a borrowing
base certificate setting forth the Borrowing Base and the Revolver A Borrowing
Base, each of which includes a roll forward of production volumes and update of
the NYMEX Strip Price from the Initial Reserve Report, together with a detailed
breakdown of each oil and gas well setting forth whether such well is subject to
a Mortgage or the Production Payment 2001 Lien.
(m) Material Litigation. The Administrative Agent shall have received and
reviewed information with respect to all material litigation of the Borrower and
its Subsidiaries, and shall be satisfied with the results of its review;
(n) Commodities Hedging Agreements. The Administrative Agent shall have
received evidence that the Loan Parties shall have entered into commodities
Hedging Agreements with respect to its Hydrocarbon production with one or more
counterparties, each of which are rated at least BBB by Standard & Poor's and
Baa2 by ▇▇▇▇▇'▇, with the aggregate notional volumes of Hydrocarbons covered by
such commodities Hedging Agreements (together with such volumes subject to the
Production Payment 2001 Facility) constituting not less than 25% and not more
than 75% of the aggregate amount of the Loan Parties' estimated Hydrocarbon
production volumes on an mcf equivalent basis (where one barrel of oil is equal
to six mcf of gas) for the succeeding six calendar months after the Effective
Date from Oil and Gas Properties of the Loan Parties classified as Proved
Developed Producing Reserves plus the estimated production from anticipated
drilling by the Loan Parties during such succeeding six months;
Section 5.02 Conditions Precedent to All Loans and Letters of Credit. The
obligation of any Agent or any Lender to make any Loan or of the Administrative
Agent to assist the Borrower in establishing or opening any Letter of Credit is
subject to the fulfillment of each of the following conditions precedent:
(a) Payment of Fees, Etc. The Borrower shall have paid all fees, costs,
expenses and taxes then payable by the Borrower pursuant to this Agreement and
the other Loan Documents, including, without limitation, Sections 2.06 and 12.04
hereof.
(b) Representations and Warranties; No Event of Default. The following
statements shall be true and correct, and the submission by the Borrower to the
Administrative Agent of a Notice of Borrowing with respect to each such Loan,
and the Borrower's acceptance of the proceeds of such Loan, or the submission by
the Borrower of a Letter of Credit
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Application with respect to a Letter of Credit, and the issuance of such Letter
of Credit, shall each be deemed to be a representation and warranty by each Loan
Party on the date of such Loan or the date of issuance of such Letter of Credit
that: (i) the representations and warranties contained in Article VI and in each
other Loan Document, or certificate delivered any Agent or any Lender pursuant
hereto or thereto on or prior to the date of such Loan or such Letter of Credit
(except to the extent that any such representations or warranties expressly
relate solely to an earlier date) are true and correct on and as of such date as
though made on and as of such date, (ii) at the time of and after giving effect
to the making of such Loan and the application of the proceeds thereof or at the
time of issuance of such Letter of Credit, no Default or Event of Default has
occurred and is continuing or would result from the making of the Loan to be
made, or the issuance of such Letter of Credit to be issued, on such date and
(iii) the conditions set forth in this Section 5.02 have been satisfied as of
the date of such request.
(c) Legality. The making of such Loan or the issuance of such Letter of
Credit shall not contravene any law, rule or regulation applicable to any Agent,
any Lender or the L/C Issuer.
(d) Notices. The Administrative Agent shall have received (i) a Notice of
Borrowing pursuant to Section 2.02 hereof and/or (ii) a Letter of Credit
Application pursuant to Section 3.03 hereof, as applicable.
Section 5.03 Condition Precedent to Funding of the Term Loan. The
obligation of any Lender to make its portion of the Term Loan on the Term Loan
Funding Date is subject to the fulfillment of the following condition precedent:
(a) Availability. After giving effect to all Loans to be made on the Term
Loan Funding Date and any Loans and Letters of Credit then outstanding, the
Availability shall not be less than $10,000,000. The Borrower shall deliver to
the Collateral Agent a certificate of the vice president-controller of the
Borrower certifying as to the calculation of Availability on the Term Loan
Funding Date.
Section 5.04 Conditions Subsequent. The obligation of any Agent or any
Lender to continue to make Loans (or otherwise extend credit hereunder) is
subject to the fulfillment, on or before the date applicable thereto, of each of
the conditions subsequent set forth below (the failure of the Borrower to so
perform or cause to be performed constituting an Event of Default):
(a) The Borrower shall, within 2 Business Days following the Effective
Date, submit for recording, in the applicable real property records of each
jurisdiction in which the New Lien Properties are located, counterparts of at
least 75% of all Mortgages (which shall be duly executed and acknowledged), via
either (i) hand delivery by landmen or attorneys retained by the Borrower, or
(ii) reputable national overnight courier service or (iii) United States mail,
if either of the foregoing is not feasible. The Borrower shall, within 4
Business Days following the Effective Date, submit for recording, in the
applicable real property records of each jurisdiction in which the New Lien
Properties are located, counterparts of all Mortgages (which shall be duly
executed and acknowledged), via either (i) hand delivery by landmen or attorneys
retained by the Borrower, or (ii) reputable national overnight courier service
or (iii) United States
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mail, if either of the foregoing is not feasible. The Borrower shall endeavor to
cause all recordings to be made as soon as possible, but in all events, within 3
Business Days following the Effective Date with respect to 75% of such Mortgages
and within 5 Business Days with respect to all of such Mortgages. The Borrower
acknowledges and agrees that the Borrower's obligations, as set forth above, to
record and cause to be recorded the Mortgages, shall not be construed in
derogation of the Collateral Agent's right (exercisable in its sole discretion)
to cause such recording and, in furtherance thereof, the Borrower shall promptly
provide counsel for the Collateral Agent with copies of all transmittal letters
and other recording instructions issued to the recording clerks, landmen or
attorneys, as applicable. The Borrower shall use all commercially reasonable
efforts to obtain, and shall provide the Collateral Agent with either copies of,
or notice of the Borrower's failure to have received, written evidence of the
acceptance for recording by the relevant jurisdiction of each such Mortgage,
within 5 Business Days following such submission. The Borrower shall reasonably
promptly take all actions required by the Collateral Agent with respect to
Mortgages not confirmed as having been so accepted for recording, and if the
Borrower fails to take any such action reasonably promptly, the Collateral Agent
may take such action. The Borrower shall reasonably promptly provide the
Collateral Agent with copies of all recorded Mortgages as received from each
jurisdiction.
(b) The Borrower shall, promptly following the Effective Date, issue
requests to attorneys and/or landmen for the review of the public records
required for the issuance of the updated title opinions described in paragraph
(c) immediately below. The Borrower shall request that it be provided with
copies of the ▇▇▇▇▇▇▇'▇ or attorney's runsheets or other tabulations of the
recorded documents affecting the Loan Parties' title to the Oil and Gas
Properties in question as soon as possible. The Borrower shall organize such
materials by well, lease or property and provide copies thereof, as so
organized, to counsel for the Collateral Agent twice weekly, as received by the
Borrower.
(c) The Borrower shall cause to be delivered to the Collateral Agent
updated title opinions, in form and substance acceptable to the Collateral
Agent, covering not less than 80% of the PV-10 of all Proved Reserves of the
Loan Parties, which the Borrower represents are correctly described in the
Initial Reserve Report, and not less than 80% of the PV-10 of all Proved
Developed Producing Reserves of the Loan Parties consisting of Oil and Gas
Properties that are not subject to a Production Payment 2001 Lien. Each such
opinion shall (i) be based upon updated searches of the applicable real property
records, limited to the interests of the Loan Parties, the Lenders, the
Collateral Agent and their respective predecessors and successors in interest,
(ii) be addressed jointly to KCS Resources, Inc., the Collateral Agent and the
Lenders, and each of their successors and assigns, and (iii) confirm the working
interest and net revenue interest of the Loan Parties in each well covered
thereby which is set forth in the Initial Reserve Report, without any
qualification or limitation except as accepted by the Collateral Agent on the
Effective Date, or, if received subsequent to the Effective Date, as accepted by
the Collateral Agent in its reasonable discretion. The Borrower shall cause such
opinions to be delivered as soon as possible but in all events prior to the
dates set forth in the following schedule:
(i) With respect to those Oil and Gas Properties subject to a
Production Payment 2001 Lien for which a title opinion has previously been
furnished to counsel for the Lenders, within 30 days following the Effective
Date;
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(ii) With respect to 40% of the total value of the Existing Credit
Agreement First Lien Properties and the New Lien Properties for which a title
opinion has previously been furnished to counsel for the Lenders, within 30 days
following the Effective Date;
(iii) With respect to 60% of the total value of the Existing Credit
Agreement First Lien Properties and the New Lien Properties for which a title
opinion has previously been furnished to counsel for the Lenders, within 45 days
following the Effective Date;
(iv) With respect to 75% of the total value of the Existing Credit
Agreement First Lien Properties and the New Lien Properties for which a title
opinion has previously been furnished to counsel for the Lenders, and with
respect to 40% of the total value of the New Lien Properties, within 60 days
following the Effective Date; and
(v) With respect to all other title opinions required hereunder,
within 90 days following the Effective Date.
(d) The Borrower shall deliver, or cause to be delivered, to the Collateral
Agent, within thirty (30) days following the Effective Date (a) an assignment in
recordable form relating to the interests in the Oil and Gas Properties earned
by KCS Resources, Inc., as more particularly described on Exhibit A to that
certain Collateral Assignment of Contracts dated of even date herewith, executed
by KCS Resources, Inc. in favor of the Collateral Agent and (b) a recordable
release of Lien relating to that certain mortgage, and any other Lien instrument
covering any of the interests required to be assigned to KCS Resources, Inc.
under clause (a) above, including without limitation that certain mortgage
executed by ▇▇▇▇ ▇▇▇▇▇▇ 1995, Ltd. in favor of Union Bank.
(e) Within 15 days following the Effective Date, the Borrower shall cause
to be delivered to the Collateral Agent account control agreements with respect
to the Loan Parties' accounts (other than accounts at Guaranty Bank referenced
in Section 5.01(d)(xxiv)).
(f) Within 30 days following the Effective Date, the Borrower shall cause
to be delivered to the Collateral Agent a landlord waiver, in form and substance
satisfactory to the Collateral Agent with respect to the Borrower's' principal
offices.
(g) Within 3 days following the Effective Date, the Borrower shall cause to
be delivered to the Collateral Agent a long form insurance endorsement in
accordance with the requirements set forth in Section 5.01(d)(xx).
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
Section 6.01 Representations and Warranties. The Borrower hereby represents and
warrants to the Agents, the Lenders and the L/C Issuer as follows:
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(a) Organization, Good Standing, Etc. Each Loan Party (i) is a corporation,
limited liability company or limited partnership duly organized, validly
existing and in good standing under the laws of the state or jurisdiction of its
organization, (ii) has all requisite power and authority to conduct its business
as now conducted and as currently contemplated and, in the case of the Borrower,
to make the borrowings hereunder, and to execute and deliver each Loan Document
to which it is a party, and to consummate the transactions contemplated thereby,
and (iii) except as set forth on Schedule 6.01(a),is duly qualified to do
business and is in good standing in each jurisdiction in which the character of
the material properties owned or leased by it or in which the transaction of its
business makes such qualification necessary. Schedule 6.01(a) sets forth the
jurisdictions where each Loan Party is qualified to do business as of the
Effective Date.
(b) Authorization, Etc. The execution, delivery and performance by each
Loan Party of each Loan Document to which it is or will be a party, (i) have
been duly authorized by all necessary action, (ii) do not and will not
contravene its charter or by-laws, its limited liability company or operating
agreement or its certificate of partnership or partnership agreement, as
applicable, or, except as could not reasonably be expected to result in a
Material Adverse Effect, any applicable law or any contractual restriction
binding on or otherwise affecting it or any of its properties, (iii) do not and
will not result in or require the creation of any Lien (other than pursuant to
any Loan Document) upon or with respect to any of its properties, and (iv) do
not and will not result in any default, noncompliance, suspension, revocation,
impairment, forfeiture or nonrenewal of any material permit, license,
authorization or approval applicable to its operations or any of its properties.
(c) Governmental Approvals. No authorization or approval or other action
by, and no notice to or filing with, any Governmental Authority is required in
connection with the due execution, delivery and performance by any Loan Party of
any Loan Document to which it is or will be a party (other than the filing of
the Assignment Documents with respect to the Mortgages and UCC financing
statements and other action necessary to assign the Liens of the Existing
Lenders to the Collateral Agent).
(d) Enforceability of Loan Documents. This Agreement is, and each other
Loan Document to which any Loan Party is or will be a party, when duly executed
and delivered hereunder, will be, a legal, valid and binding obligation of such
Person, enforceable against such Person in accordance with its terms, except as
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws.
(e) Subsidiaries. Schedule 6.01(e) is a complete and correct description of
the name, jurisdiction of incorporation and ownership of the outstanding Capital
Stock of each Subsidiary of the Borrower. All of the issued and outstanding
shares of Capital Stock of such Subsidiaries have been validly issued and are
fully paid and nonassessable, and the holders thereof are not entitled to any
preemptive, first refusal or other similar rights. Except as indicated on such
Schedule, all such Capital Stock is owned by the Borrower or one or more of its
wholly-owned Subsidiaries, free and clear of all Liens other than Liens
described in clause (a) of the definition of Permitted Liens. There are no
outstanding debt or equity securities or other outstanding obligations of the
Borrower or any of its Subsidiaries convertible into or exchangeable for, or
warrants, options or other rights for the purchase or acquisition from the
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Borrower or any of its Subsidiaries of, or other obligations of any Subsidiary
to issue, directly or indirectly, any shares of Capital Stock of any Subsidiary
of the Borrower.
(f) Litigation; Commercial Tort Claims. Except as set forth in Schedule
6.01(f), (i) there is no pending or, to the best knowledge of the Borrower,
threatened action, suit or proceeding affecting any Loan Party before any court
or other Governmental Authority or any arbitrator that (A) could reasonably be
expected to result in a Material Adverse Effect or (B) relates to this Agreement
or any other Loan Document or any transaction contemplated hereby or thereby and
(ii) as of the Effective Date, none of the Loan Parties holds any commercial
tort claims in respect of which a claim has been filed in a court of law or a
written notice by an attorney has been given to a potential defendant.
(g) Financial Condition.
(i) The Financial Statements, copies of which have been delivered
to each Agent and each Lender, fairly present the consolidated financial
condition of the Borrower and its Subsidiaries as at the respective dates
thereof and the consolidated results of operations of the Borrower and its
Subsidiaries for the fiscal periods ended on such respective dates, all in
accordance with GAAP (except, in the case of the unaudited interim Financial
Statements, for the absence of footnotes and the effect of normal year-end audit
adjustmenst), and since September 30, 2002, no event or development has occurred
that has had or could reasonably be expected to result in a Material Adverse
Effect.
(ii) The Borrower has heretofore furnished to each Agent and each
Lender (A) projected consolidated monthly income statements, together with
selected consolidated balance sheet data and cash flow data, with respect to the
Borrower and its Subsidiaries for the period from January 1, 2003, through
December 31, 2003, and (B) projected consolidated annual income statements,
together with selected balance sheet data and cash flow data, with respect to
the Borrower and its Subsidiaries for the Fiscal Years ending in 2003 through
2005, which projected consolidated financial statements and data shall be
updated from time to time pursuant to Section 7.01(a)(vii) and shall be prepared
using the format used to prepare such projected financial statements and data.
Such projections, as so updated, are believed by the Borrower at the time
furnished to be reasonable, have been prepared on a reasonable basis and in good
faith by the Borrower, and have been based on assumptions believed by the
Borrower to be reasonable at the time made and upon the best information then
reasonably available to the Borrower, and the Borrower is not aware of any facts
or information that would lead it to believe that such projections, as so
updated, are incorrect or misleading in any material respect.
(h) Compliance with Law, Etc. No Loan Party is in violation of its
organizational documents, or, in any material respect, any law, rule,
regulation, judgment or order of any Governmental Authority applicable to it or
any of its property or assets, or any material term of any agreement or
instrument (including, without limitation, any Material Contract) binding on or
otherwise affecting it or any of its properties, and no Default or Event of
Default has occurred and is continuing. The Loan Parties' Oil and Gas Properties
(and properties utilized therewith) have been maintained, operated and developed
in a good and workmanlike manner and in substantial conformity with all
applicable laws and all rules, regulations and
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orders of all duly constituted Governmental Authorities (including the MMS)
having jurisdiction and in substantial conformity with the provisions of all
leases, subleases or other contracts comprising the Hydrocarbon Interests and
other contracts and agreements forming such Oil and Gas Properties; specifically
in this connection, (i) no Oil and Gas Property is subject to having allowable
production reduced below the full and regular allowable production (including
the maximum permissible tolerance) because of any overproduction (whether or not
the same was permissible at the time) and (ii) none of the ▇▇▇▇▇ comprising a
part of the Loan Parties' Oil and Gas Properties (or properties utilized
therewith) are deviated from the vertical more than the maximum permitted by
applicable laws, regulations, rules and orders, and such ▇▇▇▇▇ are, in fact,
bottomed under and are producing from, and the well bores are wholly within, the
Loan Parties' Oil and Gas Properties (or in the case of ▇▇▇▇▇ located on real
property utilized therewith, such utilized real property) covered by the leases
that are the subject of the title opinions or reviews delivered or to be
delivered pursuant to Section 5.01(d)(vi) or Section 5.04(b).
(i) ERISA. Except as set forth on Schedule 6.01(i), (i) each Employee Plan
is in substantial compliance with ERISA and the IRC, (ii) no Termination Event
has occurred nor is reasonably expected to occur with respect to any Employee
Plan, (iii) the most recent annual report (Form 5500 Series) with respect to
each Employee Plan, including any required Schedule B (Actuarial Information)
thereto, copies of which have been filed with the Internal Revenue Service and
delivered to the Agents, is complete and correct and fairly presents the funding
status of such Employee Plan, and since the date of such report there has been
no material adverse change in such funding status, (iv) copies of each agreement
entered into with the PBGC, the U.S. Department of Labor or the Internal Revenue
Service with respect to any Employee Plan have been delivered to the Agents, (v)
no Employee Plan had an accumulated or waived funding deficiency or permitted
decrease which would create a deficiency in its funding standard account or has
applied for an extension of any amortization period within the meaning of
Section 412 of the IRC at any time during the previous 60 months, and (vi) no
Lien imposed under the IRC or ERISA exists or is likely to arise on account of
any Employee Plan within the meaning of Section 412 of the IRC. Except as set
forth on Schedule 6.01(i), no Loan Party or any of its ERISA Affiliates has
incurred any withdrawal liability under ERISA with respect to any Multiemployer
Plan, or is aware of any facts indicating that it or any of its ERISA Affiliates
may in the future incur any such withdrawal liability. No Loan Party or any of
its ERISA Affiliates nor, to the knowledge of the Borrower, any fiduciary of any
Employee Plan has (A) engaged in a nonexempt prohibited transaction described in
Sections 406 of ERISA or 4975 of the IRC, (B) failed to pay any required
installment or other payment required under Section 412 of the IRC on or before
the due date for such required installment or payment, (C) engaged in a
transaction within the meaning of Section 4069 of ERISA or (D) incurred any
liability to the PBGC which remains outstanding other than the payment of
premiums, and there are no premium payments which have become due which are
unpaid. There are no pending or, to the best knowledge of any Loan Party,
threatened claims, actions, proceedings or lawsuits (other than claims for
benefits in the normal course) asserted or instituted against (1) any Employee
Plan or its assets, (2) any fiduciary with respect to any Employee Plan, or (3)
any Loan Party or any of its ERISA Affiliates with respect to any Employee Plan.
Except as required by Section 4980B of the Internal Revenue Code, no Loan Party
or any of its ERISA Affiliates maintains an employee welfare benefit plan (as
defined in Section 3(1) of ERISA) which provides health or medical benefits
(through the purchase of insurance or otherwise) for any retired or former
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employee of any Loan Party or any of its ERISA Affiliates or health or medical
coverage after a participant's termination of employment.
(j) Taxes, Etc. All Federal and material state and local tax returns and
other reports required by applicable law to be filed by any Loan Party have been
filed, or extensions have been obtained, and all taxes, assessments and other
governmental charges imposed upon any Loan Party or any property of any Loan
Party and which have become due and payable have been paid, except to the extent
contested in good faith by proper proceedings and with respect to which adequate
reserves have been set aside for the payment thereof in accordance with GAAP.
(k) Regulations T, U and X. No Loan Party is or will be engaged in the
business of extending credit for the purpose of purchasing or carrying margin
stock (within the meaning of Regulation T, U or X), and no proceeds of any Loan
will be used to purchase or carry any margin stock or to extend credit to others
for the purpose of purchasing or carrying any margin stock.
(l) Nature of Business. Except as set forth on Schedule 6.01(l), no Loan
Party is engaged in any business other than the Oil and Gas Business.
(m) Adverse Agreements, Etc. No Loan Party is a party to any agreement or
instrument, or subject to any charter, limited liability company agreement,
partnership agreement or other corporate, partnership or limited liability
company restriction or any judgment, order, regulation, ruling or other
requirement of a court or other Governmental Authority, which has, or in the
future could reasonably be expected to result in, a Material Adverse Effect.
(n) Permits, Etc. Each Loan Party has, and is in compliance in all respects
with, all permits, licenses, authorizations, approvals, entitlements and
accreditations required for such Person lawfully to own, lease, manage or
operate, or to acquire, each business currently owned, leased, managed or
operated, or to be acquired, by such Person, except for such failures to have
any of the foregoing as could not reasonably be expected to result in a Material
Adverse Effect. No condition exists or event has occurred which, in itself or
with the giving of notice or lapse of time or both, would result in the
suspension, revocation, impairment, forfeiture or non-renewal of any such
permit, license, authorization, approval, entitlement or accreditation that is
material to the Oil and Gas Business of the Loan Parties, and there is no claim
that any thereof is not in full force and effect. No Loan Party has received any
written notices or, to Borrower's knowledge, oral notices, concerning, and there
are no existing orders of, proceedings pending before, or other requirements of,
any Governmental Authority, including the Bureau of Land Management and the
Federal Energy Regulatory Commission and any comparable state or local
Governmental Authority, which could reasonably be expected to materially
interfere with, limit or otherwise restrict the Oil and Gas Business of the Loan
Parties (other than such orders and proceedings of general applicability to
Persons in the Oil and Gas Business similarly situated to the Loan Parties) or
which could or will require any such Loan Party to refund or otherwise return
any portion of the proceeds received or to be received from the sale of
Hydrocarbons by any such Loan Party except for refunds or returns that are not,
individually or in the aggregate, material.
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(o) Properties. (i) Each Loan Party has good and marketable title to, valid
leasehold interests in, or valid licenses to use, all property and assets (other
than Oil and Gas Properties) material to its business, free and clear of all
Liens, except Permitted Liens. All such properties and assets constituting
personalty are in good working order and condition, ordinary wear and tear
excepted.
(ii) Part A of Schedule 6.01(o) sets forth a complete and accurate
list, as of the Effective Date, of the location, by state and street address, of
all real property owned or leased by each Loan Party, other than Oil and Gas
Properties. As of the Effective Date, each Loan Party has valid leasehold
interests in the Leases described on Part A of Schedule 6.01(o) to which it is a
party. Part A of Schedule 6.01(o) sets forth with respect to each such Lease
described on Part A of Schedule 6.01(o), the commencement date, termination
date, renewal options (if any) and annual base rents. Each Lease described on
Part A of Schedule 6.01(o) is valid and enforceable in accordance with its terms
in all material respects and is in full force and effect. Except as could not
reasonably be expected to have a Material Adverse Effect, to the best knowledge
of any Loan Party, no other party to any Lease described on Part A of Schedule
6.01(o) is in default of its obligations thereunder, and no Loan Party (or any
other party to any such Lease) has at any time delivered or received any notice
of default which remains uncured under any such Lease and, as of the Effective
Date, no event has occurred which, with the giving of notice or the passage of
time or both, would constitute a default under any such Lease.
(iii) Part B of Schedule 6.01(o) sets forth a complete and accurate
list, as of the Effective Date, of all Oil and Gas Properties consisting of
Proved Reserves whether leased or owned by any Loan Party. The Borrower and its
Subsidiaries each have good and defensible title to all of its Oil and Gas
Properties set forth in Part B of Schedule 6.01(o) which constitute real
property and good title to all of its Oil and Gas Properties which constitute
personal property, except for (A) such imperfections of title which do not in
the aggregate materially detract from the value thereof to, or the use thereof
in, the business of the Borrower or any of its Subsidiaries and (B) Permitted
Liens. The Initial Reserve Report or each Reserve Report, as the case may be,
includes and describes the entire interest of the Borrower and its Subsidiaries
in such Oil and Gas Properties as of the date of the Initial Reserve Report or
such applicable Reserve Report, as the case may be, and the descriptions are
complete and accurate in all material respects as of the date of the Initial
Reserve Report or such applicable Reserve Report, as the case may be; and there
are no "back-in" or "reversionary" interests held by third parties which could
materially reduce the interest of the Borrower or its Subsidiaries in such Oil
and Gas Properties except as reflected in the Initial Reserve Report or such
applicable Reserve Report, as the case may be. The ownership of the Oil and Gas
Properties by the Borrower and its Subsidiaries shall not in any material
respect obligate any such Loan Party to bear the costs and expenses relating to
the maintenance, development or operations of each such Oil and Gas Property in
an amount in excess of the working interest of such Loan Party in each Oil and
Gas Property set forth in the Initial Reserve Report or the most recent Reserve
Report, as the case may be.
(iv) The Loan Parties' marketing, gathering, transportation,
processing and treating facilities and equipment, together with any marketing,
gathering, transportation, processing and treating contracts in effect among the
Loan Parties and any other
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Person, are sufficient to gather, transport, process and/or treat, reasonably
anticipated volumes of production of Hydrocarbons from the Oil and Gas
Properties of the Loan Parties subject to force majeure.
(p) Full Disclosure. Each Loan Party has disclosed to the Agents all
agreements, instruments and corporate or other restrictions to which it is
subject, and all other matters known to it, that, individually or in the
aggregate, could reasonably be expected to result in a Material Adverse Effect.
None of the other reports, financial statements, certificates or other
information furnished by or on behalf of any Loan Party to the Agents in
connection with the negotiation of this Agreement or delivered hereunder (as
modified or supplemented by other information so furnished) contains any
material misstatement of fact or omits to state any material fact necessary to
make the statements therein, in the light of the circumstances under which it
was made, not misleading; provided that, with respect to projected financial
information, each Loan Party represents only that such information was prepared
in good faith based upon assumptions believed to be reasonable at the time.
There is no contingent liability or fact of any Loan Party that could reasonably
be expected to result in a Material Adverse Effect which has not been set forth
in a footnote included in the Financial Statements or a Schedule hereto.
(q) [Intentionally omitted]
(r) Environmental Matters. Except as set forth on Schedule 6.01(r), (i) the
operations of each Loan Party are in compliance in all material respects with
all Environmental Laws; (ii) there has been no Release at any of the properties
owned or operated by any Loan Party, or at any disposal or treatment facility
which received Hazardous Materials generated by any Loan Party which could
reasonably be expected to result in a Material Adverse Effect; (iii) no
Environmental Action has been asserted against any Loan Party nor does any Loan
Party have knowledge or notice of any threatened or pending Environmental Action
against any Loan Party or any predecessor in interest which could reasonably be
expected to result in a Material Adverse Effect; (iv) no Environmental Actions
have been asserted against any facilities that may have received Hazardous
Materials generated by any Loan Party which could reasonably be expected to
result in a Material Adverse Effect; (v) no property now or formerly owned or
occupied by a Loan Party has been used, to the the Borrower's knowledge, as a
treatment or disposal site for any Hazardous Material; (vi) no Loan Party has
failed to report to the proper Governmental Authority the occurrence of any
Release which is required to be so reported by any Environmental Laws which
could reasonably be expected to result in a Material Adverse Effect; (vii) each
Loan Party holds all licenses, permits and approvals required under any
Environmental Laws in connection with the operation of the business carried on
by it, except for such licenses, permits and approvals as to which a Loan
Party's failure to maintain or comply with could not reasonably be expected to
result in a Material Adverse Effect; and (viii) no Loan Party has received any
notification pursuant to any Environmental Laws that (A) any work, repairs,
construction or Capital Expenditures are required to be made in respect as a
condition of continued compliance with any Environmental Laws, or any license,
permit or approval issued pursuant thereto or (B) any license, permit or
approval referred to above is about to be reviewed, made subject to limitations
or conditions, revoked, withdrawn or terminated, except, in the case of clauses
(A) and (B) above, as could not reasonably be expected to result in a Material
Adverse Effect.
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(s) Insurance. Each Loan Party keeps its property adequately insured and
bonded against and maintains (i) insurance to such extent and against such
risks, including fire, as is customary with companies in the same or similar
businesses, (ii) worker's compensation insurance in the amount required by
applicable law, (iii) public liability insurance in the amount customary with
companies in the same or similar business against claims for personal injury or
death on properties owned, occupied or controlled by it, (iv) performance bonds
related to operations on or pertaining to its Oil and Gas Properties and (v)
such other insurance and performance bonds as may be required by law or as may
be reasonably required by the Collateral Agent (including, without limitation,
against larceny, embezzlement or other criminal misappropriation). Schedule
6.01(s) sets forth a list of all insurance of the Loan Parties and all
performance bonds related to operations on or pertaining to the Oil and Gas
Properties of the Loan Parties as in effect on the Effective Date.
(t) [Intentionally omitted]
(u) Solvency. After giving effect to the transactions contemplated by this
Agreement and before and after giving effect to each Loan and Letter of Credit,
Borrower is, and the Loan Parties on a consolidated basis are, Solvent.
(v) Location of Bank Accounts. Schedule 6.01(v) sets forth a complete and
accurate list as of the Effective Date of all deposit, checking and other bank
accounts, all securities and other accounts maintained with any broker dealer
and all other similar accounts maintained by each Loan Party, together with a
description thereof (i.e., the bank or broker dealer at which such deposit or
other account is maintained and the account number and the purpose thereof).
(w) Intellectual Property. Except as set forth on Schedule 6.01(w), each
Loan Party owns or licenses or otherwise has the right to use all licenses,
permits, patents, patent applications, trademarks, trademark applications,
service marks, tradenames, copyrights, copyright applications, franchises,
authorizations, non-governmental licenses and permits and other intellectual
property rights that are material to the operation of its business, without
infringement upon or conflict with the rights of any other Person with respect
thereto, except for such infringements and conflicts which, individually or in
the aggregate, could not reasonably be expected to result in a Material Adverse
Effect. Set forth on Schedule 6.01(w) is a complete and accurate list as of the
Effective Date of all such material licenses, permits, patents, patent
applications, trademarks, trademark applications, service marks, tradenames,
copyrights, copyright applications, franchises, authorizations, non-governmental
licenses and permits and other intellectual property rights of each Loan Party.
No slogan or other advertising device, product, process, method, substance, part
or other material now employed, or now contemplated to be employed, by any Loan
Party infringes upon or conflicts with any rights owned by any other Person, and
no claim or litigation regarding any of the foregoing is pending or threatened,
except for such infringements and conflicts which could not reasonably be
expected to result in, individually or in the aggregate, a Material Adverse
Effect.
(x) Material Contracts. Set forth on Schedule 6.01(x) is a complete and
accurate list as of the Effective Date of all Material Contracts of each Loan
Party, showing the parties and amendments and modifications thereto. Each such
Material Contract (i) is in full force and effect and is binding upon and
enforceable against each Loan Party that is a party thereto and,
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to the best knowledge of such Loan Party, all other parties thereto in
accordance with its terms, (ii) has not been otherwise amended or modified, and
(iii) except as could not reasonably be expected to result in a Material Adverse
Effect, is not in default due to the action of any Loan Party or, to the best
knowledge of any Loan Party, any other party thereto.
(y) Holding Company and Investment Company Acts. None of the Loan Parties
is (i) a "holding company" or a "subsidiary company" of a "holding company" or
an "affiliate" of a "holding company", as such terms are defined in the Public
Utility Holding Company Act of 1935, as amended, or (ii) an "investment company"
or an "affiliated person" or "promoter" of, or "principal underwriter" of or
for, an "investment company", as such terms are defined in the Investment
Company Act of 1940, as amended.
(z) Employee and Labor Matters. Except as could not reasonably be expected
to have a Material Adverse Effect, there is (i) no unfair labor practice
complaint pending or, to the best knowledge of any Loan Party, threatened
against any Loan Party before any Governmental Authority and no grievance or
arbitration proceeding pending or threatened against any Loan Party which arises
out of or under any collective bargaining agreement, (ii) no strike, labor
dispute, slowdown, stoppage or similar action or grievance pending or threatened
against any Loan Party or (iii) to the best knowledge of any Loan Party, no
union representation question existing with respect to the employees of any Loan
Party and no union organizing activity taking place with respect to any of the
employees of any Loan Party. No Loan Party or any of its ERISA Affiliates has
incurred any liability or obligation under the Worker Adjustment and Retraining
Notification Act ("WARN") or similar state law, which remains unpaid or
unsatisfied. The hours worked and payments made to employees of any Loan Party
have not been in violation of the Fair Labor Standards Act or any other
applicable legal requirements, except to the extent such violations could not,
individually or in the aggregate, reasonably be expected to result in a Material
Adverse Effect. All material payments due from any Loan Party on account of
wages and employee health and welfare insurance and other benefits have been
paid or accrued as a liability on the books of such Loan Party, except where the
failure to do so could not, individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect.
(aa) Customers and Suppliers. There exists no actual or, to the knowledge
of the Borrower, threatened termination, cancellation or limitation of, or
adverse modification to or adverse change in, the business relationship between
(i) any Loan Party, on the one hand, and any customer or any group thereof, on
the other hand, whose agreements with any Loan Party are individually or in the
aggregate material to the business or operations of such Loan Party, or (ii) any
Loan Party, on the one hand, and any material supplier thereof, on the other
hand, except for terminations or cancellations of relationships that are
promptly replaced by relationships that are no less favorable to the applicable
Loan Party than those being terminated or cancelled.
(bb) No Bankruptcy Filing. No Loan Party is contemplating either the filing
of a petition by it under any state, federal or foreign bankruptcy or insolvency
laws or the liquidation of all or a major portion of such Loan Party's assets or
property, and no Loan Party has any knowledge of any Person contemplating the
filing of any such petition against it.
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(cc) Released Oil and Gas Properties. Since November 28, 2001, only those
certain Oil and Gas Properties of the Loan Parties described on Schedule
6.01(cc) have been released from Existing Mortgages. Such releases were
consummated pursuant to those release documents described and recorded as set
forth on Schedule 6.01(cc).
(dd) Name; Jurisdiction of Organization; Organizational ID Number; Chief
Place of Business; Chief Executive Office; FEIN. Schedule 6.01(dd) sets forth a
complete and accurate list as of the date hereof of (i) the exact legal name of
each Loan Party, (ii) the jurisdiction of organization of each Loan Party, (iii)
the organizational identification number of each Loan Party (or indicates that
such Loan Party has no organizational identification number), (iv) the chief
executive office of each Loan Party and (v) the federal employer identification
number of each Loan Party.
(ee) Tradenames. Schedule 6.01(ee) hereto sets forth a complete and
accurate list as of the Effective Date of all tradenames used by each Loan
Party.
(ff) ▇▇▇▇▇ Drilled Since Closing of Existing Credit Agreement. Those
certain ▇▇▇▇▇ described on Schedule 6.01(ff) have been drilled within, and are
producing from, the leases and/or units which are subject to the Liens under the
Existing Mortgages, and the working interest and net revenue interest
attributable to each such well as set forth on Schedule 6.01(ff) are true and
accurate in all material respects.
(gg) Security Interests. Each Security Agreement and each Pledge Agreement,
upon assignment pursuant to the Assignment Documents will create in favor of the
Collateral Agent, for the benefit of the Lenders, a legal, valid and enforceable
security interest in the Collateral covered thereby. The UCC-1 financing
statements described in Section 5.01(d)(vii), upon assignment to the Collateral
Agent pursuant to the Assignment Documents, will create perfected, first
priority or, if subject to a prior Production Payment 2001 Lien or Takeout VPP
Lien, second priority security interests in the Collateral covered thereby
(subject to Permitted Liens), and no further recordings or filings are or will
be required in connection with the creation, perfection or enforcement of such
security interests.
(hh) Oil and Gas Imbalances. Except as set forth on Schedule 6.01(hh) or on
the most recent certificate delivered pursuant to Section 7.01(a)(vi), on a net
basis there are not gas imbalances, take-or-pay oil and gas or other prepayments
with respect to the Loan Parties' Oil and Gas Properties which would require
such Person either to make cash settlements for such production or deliver
Hydrocarbons produced from such Oil and Gas Properties at some future time
without then or thereafter receiving full payments therefor exceeding 3% of the
current monthly production of oil and gas from the Oil and Gas Properties of the
Loan Parties in the aggregate.
(ii) Hedging Agreements. Schedule 6.01(ii) sets forth, as of the Effective
Date, a true and complete list of all Hedging Agreements (including commodity
price swap agreements, forward agreements or contracts of sale which provide for
prepayment for deferred shipment or delivery of any Hydrocarbons) of the
Borrower and each Subsidiary of the Borrower, the material terms thereof
(including the type, term, effective date, termination date and notional amounts
or volumes), the net ▇▇▇▇ to market value thereof (including the hedged
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prices), all credit support agreements relating thereto, interest rate(s) or
exchange rate(s), as applicable, margin required or supplied), and the
counterparty to each such agreement.
(jj) Schedules. All of the information which is required to be scheduled to
this Agreement is set forth on the Schedules attached hereto, is correct and
accurate and does not omit to state any information material thereto.
(kk) Representations and Warranties in Documents; No Default. All
representations and warranties set forth in this Agreement and the other Loan
Documents are true and correct in all respects at the time as of which such
representations were made and on the Effective Date. No Event of Default has
occurred and is continuing and no condition exists which constitutes a Default
or an Event of Default.
(ll) ▇▇▇▇▇▇ County Production Payment. The production payment reserved by
Medallion Production Company (predecessor to both KCS Medallion Resources, Inc.
and KCS Resources, Inc.) in Assignment and Agreement (the "Assignment and
Agreement") dated April 12, 1996, and recorded in Volume 288, page 428 of the
Official Records of ▇▇▇▇▇▇ County, Texas, is an interest in real property under
Texas law. KCS Resources, Inc., as successor to Medallion Production Company, is
not in default of any of its covenants, representations or warranties set forth
in the Assignment and Agreement, including the warranties set out in Part I,
Paragraph 5, of the Assignment and Agreement. As of September 30, 2002,
11,142.992 Mcf of "Required Volumes" (as such term is defined in the Assignment
and Agreement) were outstanding. 15,370,078 Mcf of Required Volumes have been
recovered by KCS Resources, Inc. to date. Borrower projects that the
"Termination Date" (as set forth in the Assignment and Agreement and as
supplemented by Conveyance of Production Payment dated April 18, 2000, recorded
in Volume 308, page 67) is December 2014. KCS Resources, Inc. has satisfied in
full each month since February 2001, its delivery obligations under Conveyance
of Production Payment recorded in Volume 311, page 765 of the Official Records
of ▇▇▇▇▇▇ County, Texas.
ARTICLE VII
COVENANTS OF THE LOAN PARTIES
Section 7.01 Affirmative Covenants. So long as any principal of or interest
on any Loan, Reimbursement Obligation, Letter of Credit Obligation or any other
Obligation (whether or not due) shall remain unpaid or any Lender shall have any
Commitment hereunder, the Borrower shall:
(a) Reporting Requirements. Furnish to each Agent and each Lender:
(i) as soon as available and in any event within 45 days after the
end of each fiscal quarter of the Borrower (other than the fourth fiscal
quarter), consolidated balance sheets, consolidated statements of operations and
retained earnings and consolidated statements of cash flows of the Borrower and
its Subsidiaries as at the end of such quarter, and for the period commencing at
the end of the immediately preceding Fiscal Year and ending with the end of such
quarter, setting forth in each case in comparative form the figures for the
corresponding date or period of the immediately preceding Fiscal Year, all in
reasonable detail
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and certified by an Authorized Officer of the Borrower as fairly presenting, in
all material respects, the financial position of the Borrower and its
Subsidiaries as of the end of such quarter and the results of operations and
cash flows of the Borrower and its Subsidiaries for such quarter, in accordance
with GAAP applied in a manner consistent with that of the most recent audited
financial statements of the Borrower and its Subsidiaries furnished to the
Agents and the Lenders, subject to normal year-end audit adjustments and the
absence of footnotes;
(ii) as soon as available, and in any event within 90 days after
the end of each Fiscal Year of the Borrower and its Subsidiaries, consolidated
and consolidating balance sheets, consolidated and consolidating statements of
operations and retained earnings and consolidated and consolidating statements
of cash flows of the Borrower and its Subsidiaries as at the end of such Fiscal
Year, setting forth in each case in comparative form the corresponding
consolidated figures for the immediately preceding Fiscal Year, all in
reasonable detail and prepared in accordance with GAAP, and accompanied by a
report and an unqualified opinion, prepared in accordance with generally
accepted auditing standards, of independent certified public accountants of
recognized standing selected by the Borrower and reasonably satisfactory to the
Agents (which opinion shall be without (A) a "going concern" or like
qualification or exception, (B) any qualification or exception as to the scope
of such audit; provided that any exception relating to the transition from
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ to ▇▇▇▇▇ & ▇▇▇▇▇ shall be permitted, or (C) any qualification
which relates to the treatment or classification of any item and which, as a
condition to the removal of such qualification, would require an adjustment to
such item, the effect of which would be to cause any noncompliance with the
provisions of Section 7.03, together with a written statement of such
accountants (1) to the effect that, in making the examination necessary for
their audit of such financial statements, they have not obtained any knowledge
of the existence of an Event of Default or a Default under Section 7.03 and (2)
if such accountants shall have obtained any knowledge of the existence of an
Event of Default or such Default under Section 7.03, describing the nature
thereof;
(iii) as soon as available, and in any event within 30 days after
the end of each fiscal month of the Borrower and its Subsidiaries, internally
prepared consolidated balance sheets, consolidated statements of operations and
retained earnings and consolidated statements of cash flows as at the end of
such fiscal month, and for the period commencing at the end of the immediately
preceding Fiscal Year and ending with the end of such fiscal month, all in
reasonable detail and certified by an Authorized Officer of the Borrower as
fairly presenting, in all material respects, the financial position of the
Borrower and its Subsidiaries as at the end of such fiscal month and the results
of operations, retained earnings and cash flows of the Borrower and its
Subsidiaries for such fiscal month, in accordance with GAAP applied in a manner
consistent with that of the most recent audited financial statements furnished
to the Agents and the Lenders, subject to normal year-end audit adjustments and
the absence of footnotes; provided that such financial statements prepared after
the end of the 12th fiscal month of each Fiscal Year shall be in consolidated
and consolidating form and may be delivered within 45 days after the end of such
month and be subject to year-end audit adjustments;
(iv) simultaneously with the delivery of the financial statements
of the Borrower and its Subsidiaries required by clauses (i), (ii) and (iii) of
this Section 7.01(a), a certificate of an Authorized Officer of the Borrower (A)
stating that such Authorized Officer has
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reviewed the provisions of this Agreement and the other Loan Documents and has
made or caused to be made under his or her supervision a review of the condition
and operations of the Borrower and its Subsidiaries during the period covered by
such financial statements with a view to determining whether the Borrower and
its Subsidiaries were in compliance with all of the provisions of this Agreement
and such Loan Documents at the times such compliance is required hereby and
thereby, and that such review has not disclosed, and such Authorized Officer has
no knowledge of, the existence during such period of an Event of Default or
Default or, if an Event of Default or Default existed, describing the nature and
period of existence thereof and the action which the Borrower and its
Subsidiaries propose to take or have taken with respect thereto and (B)
attaching a schedule showing the calculation of the financial covenants
specified in Section 7.03;
(v) (A) as soon as available and in any event within 30 days after
the end of each fiscal month of the Borrower and its Subsidiaries, reports in
form and detail satisfactory to the Agents and certified by an Authorized
Officer of the Borrower as being accurate and complete listing all Accounts
Receivable of the Loan Parties as of such day, which shall include the amount of
each such Account Receivable, showing separately, with respect to Accounts
Receivable that consist of trade and oil and gas purchase receivables only,
those which are more than 30, 60 and 90 days old and a description of all Liens
(other than the Production Payment 2001 Lien and the Takeout VPP Lien),
set-offs, defenses and counterclaims with respect thereto, together with a
reconciliation of such schedule with the schedule delivered to the Agents
pursuant to this clause (v)(A) for the immediately preceding fiscal month, and
such other information as any Agent may reasonably request, (B) as soon as
available and in any event within 30 days after the end of each fiscal month of
the Borrower and its Subsidiaries, reports in form and detail satisfactory to
the Agents and certified by an Authorized Officer of the Borrower as being
accurate and complete listing all accounts payable of the Loan Parties as of
each such day which shall include the amount and, with respect to trade payables
only, age of each account payable, and such other information as any Agent may
reasonably request, (C) within 30 days after the end of each fiscal month, a
certificate of an Authorized Officer certifying that all insurance premiums
payable during such month with respect to insurance required to be maintained by
the Loan Parties hereunder were timely paid, identifying the insurance company
that was paid, the amount that was owed and the amount that was paid, (D) as
soon as available and in any event within 30 days after the end of each fiscal
month of the Borrower and its Subsidiaries, reports in form and substance
satisfactory to the Agents describing the amounts that have been paid from and
added to the Royalty Payment Suspense Account during such month and detailed
information with respect to any single account in an amount greater than
$500,000 that was paid from or added to the Royalty Payment Suspense Account
during such month, (E) as soon as available and in any event within 30 days
after the end of each fiscal month of the Borrower and its Subsidiaries, reports
that include a calculation of the Loan Parties' cash disbursements and cash
receipts during such month, and (F) within 45 days after the end of each Fiscal
Year, a listing of the name and mailing address of each Account Debtor with
respect to the Accounts Receivable referenced in clause (A) above and the name
and mailing address of each account creditor with respect to the accounts
payable referenced in clause (B) above;
(vi) not later than 70 days after December 31st of each year and 50
days after June 30th of each year, a Reserve Report, prepared by the Petroleum
Engineers who shall certify such Reserve Report to have been prepared in
accordance with the procedures used
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in the Initial Reserve Report, and together with each such Reserve Report, a
certificate of an Authorized Officer certifying that, to the best of his
knowledge (A) the information contained in the Reserve Report and any other
information delivered in connection therewith is true and correct, (B) the
Borrower and its Subsidiaries own good and defensible title to their Oil and Gas
Properties evaluated in such Reserve Report and such Properties are free and
clear of all Liens except for Permitted Liens, (C) except as set forth on an
exhibit to the certificate, on a net basis there are no gas imbalances,
take-or-pay or other prepayments with respect to the Oil and Gas Properties
evaluated in such Reserve Report which would require the Borrower or its
Subsidiaries to deliver Hydrocarbons produced from such Oil and Gas Properties
or make cash payments at some future time without then or thereafter receiving
full payment therefor, (D) except as set forth on an exhibit to the certificate,
none of such Oil and Gas Properties have been sold since the date of the Reserve
Report, most recently delivered pursuant to this Section 7.01(a)(vi), which
exhibit shall list all of the Oil and Gas Properties sold and in such detail as
is reasonably required by the Collateral Agent, (E) attached as an exhibit to
the certificate is a list of the Oil and Gas Properties added to and deleted
from the Reserve Report most recently delivered pursuant to this Section
7.01(a)(vi) and a list of all Persons disbursing proceeds to the Borrower or its
Subsidiaries, as applicable, from their Oil and Gas Properties, (F) attached to
the certificate as an exhibit is a detailed breakdown of each of the oil and gas
▇▇▇▇▇ evaluated by such Reserve Report setting forth whether such well is
subject to a Production Payment 2001 Lien, a Takeout VPP Lien or a Mortgage, a
Security Agreement and UCC financing statements in favor of the Collateral Agent
for the ratable benefit of the Lenders and (G) except as set forth on an exhibit
to such certificate, there has not been any change in the working interest or
net revenue interest of the Borrower and its Subsidiaries in any of the Oil and
Gas Properties included on such Reserve Report, which change has occurred since
the date of the last certificate delivered pursuant to this Section 7.01(a)(vi),
such exhibit to set forth the reason for such change; provided that the Required
Lenders shall have the right to require the Borrower to cause to be delivered up
to 2 additional Reserve Reports per calendar year, at the Borrower's expense, if
(A) there occurs a 10% or greater decline in the NYMEX Strip Price (calculating
the change by comparing the prices on the last business day of the month with
the prices on the last business day of the previous month) or (B) an Event of
Default occurs and is continuing;
(vii) as soon as available and in any event within 30 days after
the end of each month ending after the Effective Date, a report setting forth,
in form reasonably acceptable to the Agents, the calculation of the PV-10 of the
Proved Reserves composing the Borrowing Base and the Revolver A Borrowing Base
as determined by the Reserve Report most recently delivered by the Borrower
under Section 7.01(a)(vi), such calculation to be made by multiplying (x) the
volumetric quantity of the categories of estimated Proved Reserves set forth in
such Reserve Report less such aggregate projected production of Proved Reserves
since the date of and as provided in such Reserve Report by (y) the applicable
NYMEX Strip Price as of the last Business Day of the month preceding the date of
the delivery by the Borrower of such report to the Agents; each such report
shall (A) also include a discussion of (I) any material changes since the date
of such Reserve Report in the categorization of any Oil and Gas Properties among
Proved Developed Producing Reserves, Proved Developed Non-Producing Reserves,
Proved Undeveloped Reserves and "other", (II) any changes in the working
interest or net revenue interest in the Oil and Gas Properties of the Borrower
and its Subsidiaries reflected on such Reserve Report, (III) production
delivered during such month and remaining production to be delivered under the
Production Payment 2001 Facility and the Takeout VPP Facility, and
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(IV) such other information as the Agents shall reasonably consider appropriate
or necessary from the perspective of an asset-based lender; and (B) be
accompanied by a certificate of an Authorized Officer of the Borrower certifying
to the completeness and accuracy of the report, including the calculation of the
PV-10 of Proved Reserves comprising the Borrowing Base and the Revolver A
Borrowing Base;
(viii) as soon as available and in any event within 30 days after
each month, a report, in form and substance satisfactory to the Agents, setting
forth as of the last Business Day of such month, a summary of its hedging
positions under all Hedging Agreements (including commodity price swap
agreements, forward agreements or contracts of sale which provide for prepayment
for deferred shipment or delivery of Hydrocarbons of the Loan Parties),
including the type, term, effective date, termination date and notional
principal amounts or volumes, the hedged price(s), interest rate(s) or exchange
rate(s), as applicable, the net ▇▇▇▇ to market value thereof and any credit
support agreements relating thereto (including any margin required or supplied),
and the counterparty to each such agreement;
(ix) within 45 days of the end of each Fiscal Year, a report on a
lease-by-lease or unit basis, showing (A) the gross proceeds from the sale of
Hydrocarbon products produced from the Loan Parties' Oil and Gas Properties, (B)
the quantity of Hydrocarbon products sold, (C) the severance, gross production,
occupation, or gathering taxes deducted from or paid out of the proceeds, (D)
the lease operating expenses, tangible drilling costs, and capital expenditures,
(E) the number of ▇▇▇▇▇ operated (or the numbers of pooled units), drilled, or
abandoned, (F) the name, address, telephone number, and contact with the
purchaser of production for all of the Loan Parties' Oil and Gas Properties, and
(G) such other information as the Agents may reasonably request; provided that
the information specified in clauses (C) through (F) above shall only be
required if requested by the Agents;
(x) (A) on or before December 1 of each year, financial
projections, supplementing and superseding the financial projections for the
period referred to in Section 6.01(g)(ii)(A), prepared on a monthly basis in the
form contemplated by Section 6.01(g)(ii) and otherwise reasonably satisfactory
to the Agents, for the immediately succeeding Fiscal Year for the Borrower and
its Subsidiaries on a consolidated basis and (B) on or before the last day of
each fiscal quarter, financial projections, supplementing and superseding the
financial projections for the period referred to in Section 6.01(g)(ii)(B), in
the form contemplated by Section 6.01(g)(ii) and otherwise reasonably
satisfactory to the Agents, for each remaining quarterly period in such Fiscal
Year, all such financial projections to be prepared on a reasonable basis and in
good faith, and to be based on assumptions believed by the Borrower to be
reasonable at the time made and from the best information then available to the
Borrower;
(xi) promptly after submission to any Governmental Authority, all
documents and information furnished to such Governmental Authority in connection
with any investigation of any Loan Party other than routine inquiries by such
Governmental Authority;
(xii) as soon as possible, and in any event within 3 Business Days
after the Borrower obtains knowledge of the occurrence of an Event of Default or
Default or the occurrence of any event or circumstance that could reasonably be
expected to result in a Material Adverse Effect, the written statement of an
Authorized Officer of the Borrower setting
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forth the details of such Event of Default or Default or other event or
circumstance reasonably expected to have a Material Adverse Effect and the
action which the affected Loan Party proposes to take with respect thereto;
(xiii) (A) as soon as possible and in any event within 10 Business
Days after any Loan Party or any ERISA Affiliate thereof knows or has reason to
know that (1) any Reportable Event with respect to any Employee Plan has
occurred, (2) any other Termination Event with respect to any Employee Plan has
occurred, or (3) an accumulated funding deficiency has been incurred or an
application has been made to the Secretary of the Treasury for a waiver or
modification of the minimum funding standard (including installment payments) or
an extension of any amortization period under Section 412 of the IRC with
respect to an Employee Plan, a statement of an Authorized Officer of the
Borrower setting forth the details of such occurrence and the action, if any,
which such Loan Party or such ERISA Affiliate proposes to take with respect
thereto, (B) promptly and in any event within 3 days after receipt thereof by
any Loan Party or any ERISA Affiliate thereof from the PBGC, copies of each
notice received by any Loan Party or any ERISA Affiliate thereof of the PBGC's
intention to terminate any Plan or to have a trustee appointed to administer any
Plan, (C) promptly and in any event within 10 days after the filing thereof with
the Internal Revenue Service if requested by any Agent, copies of each Schedule
B (Actuarial Information) to the annual report (Form 5500 Series) with respect
to each Employee Plan and Multiemployer Plan, (D) promptly and in any event
within 10 days after any Loan Party or any ERISA Affiliate thereof knows or has
reason to know that a required installment within the meaning of Section 412 of
the IRC has not been made when due with respect to an Employee Plan, (E)
promptly and in any event within 3 days after receipt thereof by any Loan Party
or any ERISA Affiliate thereof from a sponsor of a Multiemployer Plan or from
the PBGC, a copy of each notice received by any Loan Party or any ERISA
Affiliate thereof concerning the imposition or amount of withdrawal liability
under Section 4202 of ERISA or indicating that such Multiemployer Plan may enter
reorganization status under Section 4241 of ERISA, and (F) promptly and in any
event within 10 days after any Loan Party or any ERISA Affiliate thereof sends
notice of a plant closing or mass layoff (as defined in WARN) to employees,
copies of each such notice sent by such Loan Party or such ERISA Affiliate
thereof;
(xiv) promptly after the commencement thereof but in any event not
later than 5 Business Days after service of process with respect thereto on, or
the obtaining of knowledge thereof by, any Loan Party, notice of each action,
suit or proceeding before any court or other Governmental Authority or other
regulatory body or any arbitrator which could reasonably be expected to result
in a Material Adverse Effect;
(xv) as soon as available, but in any event not later than 30 days
after the end of each quarter, a report, certified by an Authorized Officer of
Borrower: (A) setting forth the total amount actually paid by each Loan Party
during the preceding quarter for (I) plugging and abandonment costs for previous
or ongoing plugging and abandonment operations pertaining to the producing or
previously producing Oil and Gas Properties of the Loan Parties, and (II)
general bond and supplemental bond payments pertaining to plugging and
abandonment costs; and (B) estimating the future payments for (I) and (II) above
for each of the succeeding 2 quarters;
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(xvi) as soon as possible and in any event within 5 Business Days
after execution, receipt or delivery thereof, copies of any material notices
that any Loan Party executes or receives in connection with any Material
Contract;
(xvii) promptly after the sending or filing thereof, copies of all
statements, reports and other information any Loan Party sends to any holders of
its Indebtedness or its securities or files with the SEC or any national
(domestic or foreign) securities exchange;
(xviii) promptly upon receipt thereof, copies of all financial
reports (including, without limitation, management letters), if any, submitted
to any Loan Party by its auditors in connection with any annual or interim audit
of the books thereof; and
(xix) promptly upon request, such other information concerning the
condition or operations, financial or otherwise, of any Loan Party as any Agent
may from time to time may reasonably request.
(b) Additional Guaranties and Collateral Security. Cause:
(i) each Subsidiary of any Loan Party to execute and deliver to the
Collateral Agent promptly and in any event within 5 Business Days after the
formation or acquisition of such Subsidiary (A) a Guaranty guaranteeing the
Obligations, (B) a Security Agreement, (C) if such Subsidiary has any
Subsidiaries, a Pledge Agreement together with (x) certificates evidencing all
of the Capital Stock of any Person owned by such Subsidiary, (y) undated stock
powers executed in blank with signature guaranteed, and (z) such opinion of
counsel and such approving certificate of such Subsidiary as the Collateral
Agent may reasonably request in respect of complying with any legend on any such
certificate or any other matter relating to such shares, (D) one or more
Mortgages creating on the real property or Oil and Gas Properties of such
Subsidiary a perfected, first priority Lien on such real property or Oil and Gas
Properties (subject in each case to Permitted Liens), a Title Insurance Policy
covering any such real property that is not Oil and Gas Property or a title
opinion from Borrower's counsel covering such Oil and Gas Properties, as
applicable, each in form and substance reasonably satisfactory to the Collateral
Agent, together with such other agreements, instruments and documents as the
Collateral Agent may reasonably require whether comparable to the documents
required under Section 7.01(o) or otherwise, and (E) such other agreements,
instruments, approvals, legal opinions or other documents reasonably requested
by the Collateral Agent in order to create, perfect, establish the first
priority of or otherwise protect any Lien purported to be covered by any such
Security Agreement, Pledge Agreement, or Mortgage, or otherwise to effect the
intent that such Subsidiary shall become bound by all of the terms, covenants
and agreements contained in the Loan Documents and that all property and assets
of such Subsidiary shall become Collateral for the Obligations; and
(ii) each owner of the Capital Stock of any such Subsidiary to
execute and deliver promptly and in any event within 5 Business Days after the
formation or acquisition of such Subsidiary a Pledge Agreement, together with
(A) certificates evidencing all of the Capital Stock of such Subsidiary, (B)
undated stock powers or other appropriate instruments of assignment executed in
blank with signature guaranteed, (C) such opinion of counsel and such approving
certificate of such Subsidiary as the Collateral Agent may reasonably request in
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respect of complying with any legend on any such certificate or any other matter
relating to such shares and (D) such other agreements, instruments, approvals,
legal opinions or other documents reasonably requested by the Collateral Agent.
(c) Compliance with Laws, Etc. Comply, and cause each of its Subsidiaries
to comply, in all material respects with all applicable laws, rules, regulations
and orders (including, without limitation, all Environmental Laws), such
compliance to include, without limitation, (i) paying before the same become
delinquent all taxes, assessments and governmental charges or levies imposed
upon it or upon its income or profits or upon any of its properties, and (ii)
paying all other lawful claims which if unpaid might become a Lien or charge
upon any of its properties, except, in each case, to the extent contested in
good faith by proper proceedings and with respect to which adequate reserves
have been set aside for the payment thereof in accordance with GAAP.
(d) Preservation of Existence, Etc. Maintain and preserve, and cause each
of its Subsidiaries to maintain and preserve, its existence, rights and
privileges, and become or remain, and cause each of its Subsidiaries to become
or remain, duly qualified and in good standing in each jurisdiction in which the
character of the properties owned or leased by it or in which the transaction of
its business makes such qualification necessary, except any failure to maintain
the good standing of any Loan Party in any such jurisdiction as would not be
material to the business of the Loan Parties; provided that Proliq, Inc. may be
dissolved or sold so long as the assets or sale proceeds thereof are transferred
to the Borrower.
(e) Keeping of Records and Books of Account. Keep, and cause each of its
Subsidiaries to keep, adequate records and books of account, with complete
entries made to permit the preparation of financial statements in accordance
with GAAP.
(f) Inspection Rights. Subject to the limitations set forth in Section
4.01, permit, and cause each of its Subsidiaries to permit, the agents and
representatives of any Agent at any time and from time to time during normal
business hours, at the expense of the Borrower, to examine and make copies of
and abstracts from its records and books of account, to visit and inspect its
properties, to verify leases, notes, accounts receivable, deposit accounts and
its other assets, to conduct audits, physical counts, valuations, appraisals,
Phase I Environmental Site Assessments (and, if requested by the Collateral
Agent based upon the results of any such Phase I Environmental Site Assessment,
a Phase II Environmental Site Assessment) or examinations, to engage a qualified
engineer to audit the Loan Parties' material ▇▇▇▇▇, rigs and pipeline
distribution systems and operations, and to discuss its affairs, finances and
accounts with any of its directors, officers, managerial employees, independent
accountants or any of its other representatives.
(g) Maintenance of Properties, Etc.
(i) Use reasonable and customary efforts to maintain and preserve,
and cause each of its Subsidiaries use reasonable and customary efforts to
maintain and preserve, all of its properties, other than Oil and Gas Properties,
which are necessary or useful in the proper conduct of its business in good
repair and condition, ordinary wear and tear excepted, and comply, and cause
each of its Subsidiaries to comply, at all times with the material
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provisions of all material leases to which it is a party as lessee or under
which it occupies property.
(ii) Maintain, preserve and keep, and cause each of its
Subsidiaries to maintain, preserve and keep, all operating equipment material to
the Oil and Gas Business of the Loan Parties, and oil and gas marketing,
gathering, transportation, processing and treating facilities and equipment in
proper repair, working order and condition, and make all necessary or
appropriate repairs, renewals, replacements, additions and improvements thereto
so that the efficiency thereof shall at all times be properly preserved and
maintained.
(iii) Prudently operate and produce with respect to the Loan
Parties' Oil and Gas Properties in accordance with good engineering practices
and the following requirements: (A) the amount of Hydrocarbons produced from any
well shall not exceed in any month the lower of (I) the maximum amount that such
well is capable of producing at its maximum efficient rate of flow or (II) the
respective allowable rate of flow under applicable orders, rules, regulations or
laws, if any; (B) the amount of Hydrocarbons produced from the Loan Parties'
▇▇▇▇▇ shall be sufficient to prevent a net migration of Hydrocarbons from the
reservoirs to which proved reserves are attributed; and (C) subject to field
rules established by governmental authorities having or asserting jurisdiction,
the amount of Hydrocarbons produced from the Loan Parties' ▇▇▇▇▇ shall be
equitable and ratable, based on factors used in determining such field rules.
(iv) With respect to any Loan Party's Oil and Gas Properties, and
oil and gas gathering assets which are operated by operators other than the
Borrower or a Subsidiary of the Borrower, use reasonable and customary efforts
to enforce the operators' contractual obligations to maintain, develop, and
operate such properties in accordance with the applicable operating agreements.
(v) Promptly: (A) pay and discharge in accordance with the usual
and customary practices of the industry, or make reasonable and customary
efforts to cause to be paid and discharged, all delay rentals, royalties,
expenses and indebtedness accruing under the lease, contract or other agreements
affecting or pertaining to the Loan Parties' Oil and Gas Properties, (B)
perform, observe and comply or make reasonable and customary efforts to cause to
be performed, observed and complied with, in accordance with usual and customary
industry standards, the obligations required by each and all of the assignments,
deeds, leases, sub-leases, contracts and agreements affecting its interests in
its Oil and Gas Properties and the accompanying elements therefrom and other
material properties so long as such properties are capable of producing
commercial quantities of Hydrocarbons and the accompanying elements in
quantities and at prices providing for continued efficient and profitable
operation of the Loan Parties' business and (C) do all other things reasonably
necessary to keep unimpaired, except for Permitted Liens, its rights with
respect thereto and prevent any forfeiture thereof or a default thereunder,
except to the extent a portion of such properties is no longer capable of
producing Hydrocarbons in economically reasonable amounts.
(vi) Operate, and cause its Subsidiaries to operate, its Oil and
Gas Properties and other material properties or cause or make reasonable and
customary efforts to cause such Oil and Gas Properties and other material
properties to be operated on a continuous
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basis for the production of Hydrocarbons and in a careful and efficient manner
in accordance with the usual and customary practices of the industry and in
substantial compliance with all applicable contracts and agreements and in
compliance in all material respects with all material laws
(h) Maintenance of Insurance. Maintain, and cause each of its Subsidiaries
to maintain, insurance with responsible and reputable insurance companies or
associations (including, without limitation, comprehensive general liability and
hazard) with respect to its properties (including all real properties leased or
owned by it) and business, in such amounts and covering such risks as is
required by any Governmental Authority having jurisdiction with respect thereto
or as is carried generally in accordance with sound business practice by
companies in similar businesses similarly situated and in any event in amount,
adequacy and scope reasonably satisfactory to the Collateral Agent. All policies
covering the Collateral are to be made payable to the Collateral Agent for the
benefit of the Lenders, as its interests may appear, in case of loss, under a
standard non-contributory "lender" or "secured party" clause and are to contain
such other provisions as the Collateral Agent may reasonably require to fully
protect the Lenders' interest in the Collateral and to any payments to be made
under such policies. All certificates of insurance are to be delivered to the
Collateral Agent and the policies are to be premium prepaid, with the loss
payable and additional insured endorsement in favor of the Collateral Agent and
such other Persons as the Collateral Agent may designate from time to time, and
shall provide for not less than 30 days prior written notice to the Collateral
Agent of the exercise of any right of cancellation; provided that the Borrower
may pay its insurance premiums on a monthly basis. If any Loan Party or any of
its Subsidiaries fails to maintain such insurance, the Collateral Agent may
arrange for such insurance, but at the Borrower's expense and without any
responsibility on the Collateral Agent's part for obtaining the insurance, the
solvency of the insurance companies, the adequacy of the coverage, or the
collection of claims. Upon the occurrence and during the continuance of an Event
of Default, the Collateral Agent shall have the sole right, in the name of the
Lenders, any Loan Party and its Subsidiaries, to file claims under any insurance
policies, to receive, receipt and give acquittance for any payments that may be
payable thereunder, and to execute any and all endorsements, receipts, releases,
assignments, reassignments or other documents that may be necessary to effect
the collection, compromise or settlement of any claims under any such insurance
policies. During the period of the drilling of ▇▇▇▇▇ and the construction of any
other improvements comprising a part of the Loan Parties' Oil and Gas
Properties, the Borrower shall, or, as applicable, shall cause its contractors
or subcontractors to, obtain and maintain well control insurance (including
coverage for costs and redrilling) and builder's risk insurance, as and if
applicable, in all of the above cases in such form and amounts as is customary
in the industry and worker's compensation insurance covering all Persons
employed by the Borrower or its agents or subcontractors of any tier in
connection with any construction affecting such Oil and Gas Properties
(including, without limitation, all agents and employees of the Borrower and the
Borrower's subcontractors with respect to whom death or bodily injury claims
could be asserted against the Borrower).
(i) Obtaining of Permits, Etc. Obtain, maintain and preserve, and cause
each of its Subsidiaries to obtain, maintain and preserve, and take all
necessary action to timely renew, all material permits, licenses,
authorizations, approvals, entitlements and accreditations which are necessary
or useful in the proper conduct of its business.
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(j) Environmental. (i) Keep any property either owned or operated by it or
any of its Subsidiaries free of any Environmental Liens; (ii) comply, and cause
each of its Subsidiaries to comply, in all material respects with Environmental
Laws and provide to the Collateral Agent any documentation of such compliance
which the Collateral Agent may reasonably request; (iii) within the notification
period provided under applicable Environmental Law, notify the Agents of any
Release of a Hazardous Material in excess of any reportable quantity from or
onto property owned or operated by it or any of its Subsidiaries and take any
Remedial Actions required under applicable Environmental Law to ▇▇▇▇▇ said
Release; (iv) promptly provide the Agents with written notice within 10 days of
the receipt of any of the following: (A) notice that an Environmental Lien has
been filed against any property of any Loan Party or any of its Subsidiaries;
(B) commencement of any Environmental Action or notice that an Environmental
Action will be filed against any Loan Party or any of its Subsidiaries which
could reasonable be expected to result in a Material Adverse Effect; and (C)
notice of a violation, citation or other administrative order which could
reasonably be expected to result in a Material Adverse Effect and (v) defend,
indemnify and hold harmless the Agents and the Lenders and their transferees,
and their respective employees, agents, officers and directors, from and against
any claims, demands, penalties, fines, liabilities, settlements, damages, costs
or expenses (including, without limitation, attorney and consultant fees,
investigation and laboratory fees, court costs and litigation expenses) arising
out of (A) the presence, disposal, Release or threatened Release of any
Hazardous Materials on any property at any time owned or occupied by any Loan
Party or any of its Subsidiaries, (B) any personal injury (including wrongful
death) or property damage (real or personal) arising out of or related to such
Hazardous Materials on any property at any time owned or occupied by any Loan
Party or any of its Subsidiaries, (C) any request for information,
investigation, lawsuit brought or threatened, settlement reached or order by a
Governmental Authority relating to the presence or Release of such Hazardous
Materials on any property at any time owned or occupied by any Loan Party or any
of its Subsidiaries, (D) any violation of any Environmental Law by any Loan
Party or any of its Subsidiaries and/or (E) any Environmental Action filed
against any Agent or any Lender relating to this Agreement or any property at
any time owned or occupied by any Loan Party or any of its Subsidiaries.
(k) Further Assurances. Take such action and execute, acknowledge and
deliver, and cause each of its Subsidiaries to take such action and execute,
acknowledge and deliver, at its sole cost and expense, such agreements,
instruments or other documents as any Agent may reasonably require from time to
time in order (i) to carry out more effectively the purposes of this Agreement
and the other Loan Documents, (ii) to subject to valid and perfected first or,
if subject to a prior Production Payment 2001 Lien, second priority Liens
(subject to Permitted Liens) any of the Collateral or any other property of any
Loan Party and its Subsidiaries, (iii) to establish and maintain the validity
and effectiveness of any of the Loan Documents and the validity, perfection and
priority of the Liens intended to be created thereby, and (iv) to better assure,
convey, grant, assign, transfer and confirm unto each Agent, each Lender and the
L/C Issuer the rights now or hereafter intended to be granted to it under this
Agreement or any other Loan Document. In furtherance of the foregoing, to the
maximum extent permitted by applicable law, each Loan Party (A) authorizes each
Agent to execute any such agreements, instruments or other documents in such
Loan Party's name and to file such agreements, instruments or other documents in
any appropriate filing office, (B) authorizes each Agent to file any financing
statement required hereunder or under any other Loan Document, and
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any continuation statement or amendment with respect thereto, in any appropriate
filing office without the signature of such Loan Party, and (C) ratifies the
filing of any financing statement, and any continuation statement or amendment
with respect thereto, filed without the signature of such Loan Party prior to
the date hereof.
(l) Collateral Records. Execute and deliver, and cause each of its
Subsidiaries to execute and deliver, to the Collateral Agent for the benefit of
the Lenders from time to time, solely for the Collateral Agent's convenience in
maintaining a record of Collateral, such written statements and schedules as the
Collateral Agent may reasonably require, designating, identifying or describing
the Collateral.
(m) [Intentionally Omitted]
(n) Subordination. Cause all Indebtedness and other obligations now or
hereafter owed by the Borrower to any of its Affiliates, to be subordinated in
right of payment and security to the Indebtedness and other Obligations owing to
the Agents and the Lenders in accordance with a subordination agreement in form
and substance satisfactory to the Agents to be executed by the Borrower promptly
after a request therefor from the Collateral Agent.
(o) After Acquired Property.
(i) Upon the acquisition by it or any of its Subsidiaries of any
After Acquired Property (other than leasehold interests that can be terminated
on less than 60 days notice without premium or penalty or that involve annual
payments by the Loan Parties of less than $60,000 individually or $100,000 in
the aggregate), immediately so notify the Collateral Agent, setting forth with
specificity a description of the interest acquired, the location of the real
property, any structures or improvements thereon and either an appraisal or such
Loan Party's good-faith estimate of the current value of such real property (for
purposes of this Section, the "Current Value"). The Collateral Agent shall
notify such Loan Party whether it intends to require a Mortgage and the other
documents referred to below or in the case of leasehold, a leasehold Mortgage or
landlord's waiver (pursuant to Section 7.01(m) hereof). Upon receipt of such
notice requesting a Mortgage, the Person which has acquired such After Acquired
Property shall immediately furnish to the Collateral Agent the following, each
in form and substance satisfactory to the Collateral Agent: (i) a Mortgage with
respect to such real property and related assets located at the After Acquired
Property, each duly executed by such Person and in recordable form; (ii)
evidence of the recording of the Mortgage referred to in clause (i) above in
such office or offices as may be necessary or, in the opinion of the Collateral
Agent, desirable to create and perfect a valid and enforceable first priority
lien on the property purported to be covered thereby or to otherwise protect the
rights of the Agents and the Lenders thereunder, (iii) a Title Insurance Policy,
(iv) a survey of such real property, certified to the Collateral Agent and to
the issuer of the Title Insurance Policy by a licensed professional surveyor
reasonably satisfactory to the Collateral Agent, (v) Phase I Environmental Site
Assessments with respect to such real property (excluding leasehold interests),
certified to the Collateral Agent by a company reasonably satisfactory to the
Collateral Agent, (vi) in the case of a leasehold interest, a certified copy of
the lease between the landlord and such Person with respect to such real
property in which such Person has a leasehold interest, and the certificate of
occupancy with respect thereto, (vii) in the case of a leasehold interest, an
attornment and nondisturbance agreement between the
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landlord (and any fee mortgagee) with respect to such real property and the
Collateral Agent, and (viii) such other documents or instruments (including
guarantees and opinions of counsel) as the Collateral Agent may reasonably
require. The Borrower shall pay all fees and expenses, including reasonable
attorneys' fees and expenses, and all title insurance charges and premiums, in
connection with each Loan Party's obligations under this Section 7.01(o).
(ii) With respect to any Oil and Gas Property acquired after the
Effective Date by the Borrower or any Subsidiary, promptly (and in any event
within 30 days after the acquisition thereof), grant to the Collateral Agent,
for the benefit of the Lenders, a perfected, first priority Lien on such Oil and
Gas Property if such a grant is necessary for the Collateral Agent to have
perfected first or, if subject to a prior Production Payment 2001 Lien or
Takeout VPP Lien, second priority Liens, at all times, on at least 85% of the
PV-10 of the Oil and Gas Properties of the Loan Parties as determined by the
Collateral Agent. In furtherance of the foregoing, the Loan Parties shall: (A)
execute and deliver to the Collateral Agent such amendments to the Mortgages,
the Security Agreements or such other documents as the Collateral Agent shall
deem necessary or advisable to grant to the Collateral Agent, for the benefit of
the Lenders, a Lien on such Oil and Gas Property; (B) take all actions necessary
or advisable to cause such Lien to be duly perfected in accordance with all
applicable law, including, without limitation, the filing of Mortgages or
financing statements in such jurisdictions as may be requested by the Collateral
Agent; and (C) if requested by the Collateral Agent, deliver to the Collateral
Agent legal opinions from the Borrower's counsel relating to title and to the
matters described in clauses (A) and (B) immediately preceding, which opinions
shall be in form and substance, and from counsel, reasonably satisfactory to the
Collateral Agent.
(p) Total Collateral. Grant to the Collateral Agent, for the benefit of the
Lenders, (i) a perfected, first or, if subject to a prior Production Payment
2001 Lien or Takeout VPP Lien, second priority Lien on Oil and Gas Properties of
the Loan Parties constituting at least 85% of the PV-10 of the Proved Reserves
of the Loan Parties and (ii) a perfected, first priority Lien on Oil and Gas
Properties of the Loan Parties that are not subject to a Production Payment 2001
Lien or a Takeout VPP Lien constituting at least 85% of the PV-10 of the Proved
Developed Producing Reserves of the Loan Parties that are not subject to a
Production Payment 2001 Lien or a Takeout VPP Lien. In furtherance of the
foregoing, the Loan Parties shall, from time to time (and in any event
immediately after the request by the Collateral Agent to do so): (A) execute and
deliver to the Collateral Agent such amendments to the Mortgages, the Security
Agreements or such other documents as the Collateral Agent shall deem necessary
or advisable to grant to the Collateral Agent, for the benefit of the Lenders, a
perfected Lien on assets and property of the Loan Parties with the priority
described above; (B) take all actions necessary or advisable to cause such Lien
to be duly perfected in accordance with all applicable law, including, without
limitation, the filing of Mortgages or financing statements in such
jurisdictions as may be requested by the Collateral Agent; and (C) if requested
by the Collateral Agent, deliver to the Collateral Agent legal opinions from the
Borrower's counsel relating to title as set forth in Section 7.01(t).
(q) Fiscal Year. Cause the Fiscal Year of the Borrower and its Subsidiaries
to end on December 31 of each calendar year unless the Agents consent to a
change in such Fiscal Year (and appropriate related changes to this Agreement).
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(r) Borrowing Base. Maintain all Loans and Letter of Credit Obligations in
compliance with the then current Borrowing Base and Revolver A Borrowing Base
(it being understood that the Borrower has the right to cure any non-compliance
with this covenant by making a prepayment under Section 2.05(c)(i) within 1
Business Day after such non-compliance).
(s) Protection Against Drainage. To the extent that the Loan Parties' Oil
and Gas Properties (i) are operated by the Borrower or its Subsidiaries, the
Borrower shall, or shall cause its Subsidiaries to, act as a reasonably prudent
operator with respect to the occurrence and prevention of any drainage of
Hydrocarbons from their Oil and Gas Properties and (ii) are not operated by the
Borrower of its Subsidiaries, the Borrower shall utilize, or shall cause its
Subsidiaries to utilize, its property and contractual rights as a reasonably
prudent owner with respect to the occurrence and prevention of any drainage of
Hydrocarbons from their Oil and Gas Properties.
(t) Additional Title Opinions and Information. The Borrower shall, from
time to time upon the reasonable request of the Collateral Agent, take such
actions and execute and deliver such documents and instruments as the Collateral
Agent shall require to ensure that the Collateral Agent shall, at all times,
have received satisfactory evidence of the Loan Parties' title to their Oil and
Gas Properties comprising 80% of the PV-10 of the Proved Reserves of the Loan
Parties after giving effect to the satisfaction of the post-closing conditions
set forth in Section 5.04(b), such information to include title opinions
(whether new or supplemental) addressed to the Collateral Agent, copies of
contracts and agreements, ▇▇▇▇▇▇▇ run sheets and the results of other searches
of public records, as applicable. All of the tendered information shall be in
form and substance acceptable to the Collateral Agent in its sole discretion and
shall evidence and confirm the Loan Parties' ownership interests (including
before and after payout interests, if any) in and to the Oil and Gas Property in
question.
(u) Hedging Agreements. Maintain in effect one or more commodities Hedging
Agreements with respect to the Loan Parties' Hydrocarbon production with one or
more counterparties, each of which are rated at least BBB by Standard & Poor's
and Baa2 by ▇▇▇▇▇'▇. The aggregate notional volumes of Hydrocarbons covered by
such Hedging Agreements (including volumes subject to the Production Payment
2001 Facility and the Takeout VPP Facility) shall constitute not less than 25%
and not more than 75% of the Loan Parties' aggregate estimated Hydrocarbon
production volumes on an mcf equivalent basis (where one barrel of oil is equal
to six mcf of gas) for the succeeding 6 calendar months on a rolling 6 calendar
month basis for such period from Oil and Gas Properties classified as Proved
Developed Producing Reserves as of the date of the most recent Reserve Report
delivered pursuant to Section 7.01(a)(vi) plus the estimated production from
anticipated drilling by the Loan Parties during such succeeding 6 months.
Borrower shall use such Hedging Agreements solely as a part of its normal
business operations as a risk management strategy and/or hedge against changes
resulting from market conditions related to the Loan Parties' Oil and Gas
Business and not as a means to speculate for investment purposes on trends and
shifts in financial or commodities markets.
(v) Use of Proceeds. Use the proceeds of the Loans to (a) purchase or
redeem in full, all Indebtedness of the Borrower under the Senior Notes, (b) pay
fees and expenses in connection with the transactions contemplated hereby and
(c) fund working capital of the
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Borrower; provided that no more than $13,000,000 of the proceeds of the Revolver
A Loans may be used for the purchase or redemption of the Indebtedness of the
Borrower under the Senior Notes. The Letters of Credit will be used for general
working capital purposes.
Section 7.02 Negative Covenants. So long as any principal of or interest on any
Loan, Reimbursement Obligation, Letter of Credit Obligation or any other
Obligation (whether or not due) shall remain unpaid or any Lender shall have any
Commitment hereunder, the Borrower shall not:
(a) Liens, Etc. Create, incur, assume or suffer to exist, or permit any of
its Subsidiaries to create, incur, assume or suffer to exist, any Lien upon or
with respect to any of its properties, whether now owned or hereafter acquired;
file or suffer to exist under the Uniform Commercial Code or any similar law or
statute of any jurisdiction, a financing statement (or the equivalent thereof)
that names it or any of its Subsidiaries as debtor; sign or suffer to exist any
security agreement authorizing any secured party thereunder to file such
financing statement (or the equivalent thereof); sell any of its property or
assets subject to an understanding or agreement, contingent or otherwise, to
repurchase such property or assets (including sales of accounts receivable) with
recourse to it or any of its Subsidiaries or assign or otherwise transfer, or
permit any of its Subsidiaries to assign or otherwise transfer, any account or
other right to receive income; other than, as to all of the above, Permitted
Liens and as permitted under Section 7.02(c)(iii); provided, that, no Liens
shall be permitted on any assets included in the Borrowing Base or the Revolver
A Borrowing Base other than (i) Liens of the types described in clauses (a),
(b), (c), (g), (m), (o) and (r) of the definition of Permitted Liens, and (ii)
with respect to the Borrowing Base and, after the repayment in full of the Term
Loan and the Revolving B Loans and the termination of the Total Revolving B
Credit Commitment, the Revolver A Borrowing Base, Production Payment 2001 Liens
and Takeout VPP Liens.
(b) Indebtedness. Create, incur, assume, guarantee or suffer to exist, or
otherwise become or remain liable with respect to, or permit any of its
Subsidiaries to create, incur, assume, guarantee or suffer to exist or otherwise
become or remain liable with respect to, any Indebtedness other than Permitted
Indebtedness.
(c) Fundamental Changes; Dispositions. Wind-up, liquidate or dissolve, or
merge, consolidate or amalgamate with any Person, or convey, sell, lease or
sublease, transfer or otherwise dispose of, whether in one transaction or a
series of related transactions, all or any part of its business, property or
assets, whether now owned or hereafter acquired (or agree to do any of the
foregoing), or purchase or otherwise acquire, whether in one transaction or a
series of related transactions, all or substantially all of the assets of any
Person (or any division thereof) (or agree to do any of the foregoing), or
permit any of its Subsidiaries to do any of the foregoing; provided, however,
that
(i) any wholly-owned Subsidiary of any Loan Party may be merged
into such Loan Party or another wholly-owned Subsidiary of such Loan Party, or
may consolidate with another wholly-owned Subsidiary of such Loan Party, so long
as (A) no other provision of this Agreement would be violated thereby, (B) such
Loan Party gives the Agents at least 15 days prior written notice of such merger
or consolidation, (C) no Default or Event of Default shall have occurred and be
continuing either before or after giving effect to such
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transaction, (D) the Lenders' rights in any Collateral, including, without
limitation, the existence, perfection and priority of any Lien thereon, are not
adversely affected by such merger or consolidation and (E) the surviving
Subsidiary, if any, is joined as a Loan Party hereunder and is a party to a
Guaranty and a Security Agreement and the Capital Stock of which Subsidiary is
the subject of a Pledge Agreement, in each case, which is in full force and
effect on the date of and immediately after giving effect to such merger or
consolidation; and
(ii) any Loan Party may make Permitted Dispositions; and
(iii) any Loan Party may transfer any of its property to any other
Loan Party upon 15 days prior written notice to the Collateral Agent and subject
to Liens in favor of the Collateral Agent.
(d) Change in Nature of Business. Make, or permit any of its Subsidiaries
to make, any change in the nature of its business as described in Section
6.01(l). The Borrower shall not permit the operations of Proliq, Inc. to expand
or be more active than such operations are on the Effective Date.
(e) Loans, Advances, Investments, Etc. Make or commit or agree to make any
loan, advance guarantee of obligations, other extension of credit or capital
contributions to, or hold or invest in or commit or agree to hold or invest in,
or purchase or otherwise acquire or commit or agree to purchase or otherwise
acquire any shares of the Capital Stock, bonds, notes, debentures or other
securities of, or make or commit or agree to make any other investment in, any
other Person, or purchase or own any futures contract or otherwise become liable
for the purchase or sale of currency or other commodities at a future date in
the nature of a futures contract, or permit any of its Subsidiaries to do any of
the foregoing, except for: (i) investments existing on the date hereof, as set
forth on Schedule 7.02(e) hereto, but not any increase in the amount thereof as
set forth in such Schedule or any other modification of the terms thereof, (ii)
loans and advances by a Loan Party to any other Loan Party made in the ordinary
course of business, (iii) Permitted Investments, (iv) Permitted Business
Investments, (v) loans, advances, payments or transfers of the property of any
Loan Party to any other Loan Party upon 15 days prior written notice to the
Collateral Agent and subject to Liens in favor of the Collateral Agent; and (vi)
and investments in any Hedging Agreements otherwise permitted hereunder.
(f) Lease Obligations. (i) Create, incur or suffer to exist, or permit any
of its Subsidiaries to create, incur or suffer to exist, any obligations as
lessee (x) for the payment of rent for any real or personal property in
connection with any sale and leaseback transaction, (y) for the payment of rent
for any real or personal property under leases or agreements to lease other than
(A) Capitalized Lease Obligations for property other than the Loan Parties' Oil
and Gas Properties which would not cause the aggregate amount of all obligations
under Capitalized Leases entered into after the Effective Date owing by all Loan
Parties and their Subsidiaries in any Fiscal Year to exceed the amounts set
forth in subsection (g) of this Section 7.02, and (B) Operating Lease
Obligations for property other than Oil and Gas Properties which would not cause
the aggregate amount of all such Operating Lease Obligations owing by all Loan
Parties and their Subsidiaries in any Fiscal Year to exceed $1,000,000 or (z)
for the payment of rent or hire of Oil and Gas Properties of any kind whatsoever
(real or personal, including capital leases but excluding leases of Hydrocarbon
Interests, leases directly related to oil and gas field
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operations constituting a Permitted Disposition and compressor leases), under
leases or lease agreements which would cause the aggregate amount of all
payments made by such Person pursuant to such leases or lease agreements to
exceed $500,000, in any period of 12 consecutive calendar months in the
aggregate.
(g) Capital Expenditures. (i) Make or commit or agree to make, or permit
any of its Subsidiaries to make or commit or agree to make, any Capital
Expenditure (by purchase or Capitalized Lease) that would cause the aggregate
amount of all Capital Expenditures made by the Loan Parties and their
Subsidiaries to exceed $54,500,000 in the Borrower's Fiscal Year ending December
31, 2003, $75,000,000 in the Borrower's Fiscal Year ending December 31, 2004 and
$86,000,000 in any Fiscal Year thereafter, or (ii) make aggregate Capital
Expenditures during any fiscal quarter of the Borrower that exceed an amount
equal to 50% of the applicable annual amount set forth in clause (i) above;
provided that at any time that the Borrower has Revolver A Availability of less
than $5,000,000, Borrower shall be prohibited from making any Capital
Expenditure without the written approval of the Administrative Agent.
(h) Restricted Payments. (i) Declare or pay any dividend or other
distribution, direct or indirect, on account of any Capital Stock of the
Borrower, now or hereafter outstanding, (ii) make any repurchase, redemption,
retirement, defeasance, sinking fund or similar payment, purchase or other
acquisition for value, direct or indirect, of any Capital Stock of the Borrower,
now or hereafter outstanding, (iii) make any payment to retire, or to obtain the
surrender of, any outstanding warrants, options or other rights for the purchase
or acquisition of shares of any class of Capital Stock of any Loan Party, now or
hereafter outstanding, or (iv) other than payments under employment agreements
entered into in the ordinary course of business, pay any management fees or any
other fees or expenses (including the reimbursement thereof by any Loan Party or
any of its Subsidiaries) pursuant to any management, consulting or other
services agreement to any Affiliates of the Borrower (excluding any Subsidiaries
of the Borrower); provided, however, (A) any Subsidiary of the Borrower may pay
dividends to the Borrower or to another Loan Party, (B) the Borrower may pay
regularly scheduled dividends on its 5% Convertible Preferred Stock par value
$.01 per share so long as, after giving effect to the payment of such dividends,
the Borrower has Revolver A Availability of $10,000,000, and may retire such
Preferred Stock upon its conversion to common stock, (C) the Borrower may pay
dividends in the form of common stock, provided that no such payment shall be
made if an Event of Default shall have occurred and be continuing or would
result from the making of any such payment, (D) the exercise price of any
options, interests or other rights to purchase common stock of the Borrower may
be paid in common stock of the Borrower and (E) any Loan Party may make any
payment or transfer any of its property to any other Loan Party upon 15 days
prior written notice to the Collateral Agent and subject to Liens in favor of
the Collateral Agent.
(i) Federal Reserve Regulations. Permit any Loan or the proceeds of any
Loan under this Agreement to be used for any purpose that would cause such Loan
to be a margin loan under the provisions of Regulation T, U or X of the Board.
(j) Transactions with Affiliates. Enter into, renew, extend or be a party
to, or permit any of its Subsidiaries to enter into, renew, extend or be a party
to, any transaction or series of related transactions (including, without
limitation, the purchase, sale, lease, transfer or exchange of property or
assets of any kind or the rendering of services of any kind) with any
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Affiliate, except (i) in the ordinary course of business in a manner and to an
extent consistent with past practice and necessary or desirable for the prudent
operation of its business, for fair consideration and on terms no less favorable
to it or its Subsidiaries than would be obtainable in a comparable arm's length
transaction with a Person that is not an Affiliate thereof, (ii) transactions
with another Loan Party and (iii) transactions permitted by Section 7.02(e) or
(h).
(k) Limitations on Dividends and Other Payment Restrictions Affecting
Subsidiaries. Create or otherwise cause, incur, assume, suffer or permit to
exist or become effective any consensual encumbrance or restriction of any kind
on the ability of any Subsidiary of any Loan Party (i) to pay dividends or to
make any other distribution on any shares of Capital Stock of such Subsidiary
owned by any Loan Party or any of its Subsidiaries, (ii) to pay or prepay or to
subordinate any Indebtedness owed to any Loan Party or any of its Subsidiaries,
(iii) to make loans or advances to any Loan Party or any of its Subsidiaries or
(iv) to transfer any of its property or assets to any Loan Party or any of its
Subsidiaries, or permit any of its Subsidiaries to do any of the foregoing;
provided, however, that nothing in any of clauses (i) through (iv) of this
Section 7.02(k) shall prohibit or restrict compliance with:
(A) this Agreement and the other Loan Documents;
(B) any agreements in effect on the date of this Agreement and
described on Schedule 7.02(k);
(C) any applicable law, rule or regulation (including, without
limitation, applicable currency control laws and applicable state corporate
statutes restricting the payment of dividends in certain circumstances);
(D) in the case of clause (iv), any agreement setting forth
customary restrictions on the subletting, assignment or transfer of any
property or asset that is leased or licensed; or
(E) in the case of clause (iv), any agreement, instrument or other
document evidencing a Permitted Lien that restricts, on customary terms,
the transfer of any property or assets subject thereto.
(l) Limitation on Issuance of Capital Stock. Except for the issuance or
sale by the Borrower of common stock, Permitted Preferred Stock or any
securities convertible into, exercisable for or exchangeable for common stock of
the Borrower, issue or sell or enter into any agreement or arrangement for the
issuance and sale of, or permit any of its Subsidiaries to issue or sell or
enter into any agreement or arrangement for the issuance and sale of, any shares
of its Capital Stock, any securities convertible into or exchangeable for its
Capital Stock or any warrants.
(m) Modifications of Indebtedness, Organizational Documents and Certain
Other Agreements; Etc. (i) Amend, modify or otherwise change (or permit the
amendment, modification or other change in any manner of) any of the provisions
of any of its or its Subsidiaries' Indebtedness (including the Public
Subordinated Debt and the Production Payment 2001 Obligations) or of any
instrument or agreement (including, without limitation, any purchase
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agreement, indenture, loan agreement or security agreement) relating to any such
Indebtedness if such amendment, modification or change would shorten the final
maturity or average life to maturity of, or require any payment to be made
earlier than the date originally scheduled on, such Indebtedness, would increase
the interest rate applicable to such Indebtedness, would change the
subordination provisions, if any, of such Indebtedness, or would otherwise be
adverse to the Lenders or the issuer of such Indebtedness in any material
respect; provided that the Borrower may, in one transaction or a series of
transactions, prepay, repurchase or redeem up to $5,000,000 of the face amount
of the Public Subordinated Debt so long as all such transactions are consummated
within a period of 6 consecutive months and, after giving effect to any such
transaction, the Borrower has Availability plus Qualified Cash of at least
$15,000,000 which must include Revolver A Availability of at least $10,000,000
and after all outstanding Obligations in respect of the Term Loan and the
Revolving B Loans are paid in full and the Total Revolving B Credit Commitment
is terminated, has Revolver A Availability of at least $10,000,000, (ii) except
for the Obligations and obligations payable to or in favor of any other Loan
Party, make any voluntary or optional payment, prepayment, redemption,
defeasance, sinking fund payment or other acquisition for value of any of its or
its Subsidiaries' Indebtedness (including, without limitation, by way of
depositing money or securities with the trustee therefor before the date
required for the purpose of paying any portion of such Indebtedness when due),
or refund, refinance, replace or exchange any other Indebtedness for any such
Indebtedness (except to the extent such Indebtedness is otherwise expressly
permitted by the definition of "Permitted Indebtedness"), or make any payment,
prepayment, redemption, defeasance, sinking fund payment or repurchase of any
outstanding Indebtedness as a result of any asset sale, change of control,
issuance and sale of debt or equity securities or similar event, or give any
notice with respect to any of the foregoing, (iii) except as permitted by
Section 7.02(c), amend, modify or otherwise change its name, jurisdiction of
organization, organizational identification number or FEIN or (iv) amend, modify
or otherwise change its certificate of incorporation or bylaws (or other similar
organizational documents), including, without limitation, by the filing or
modification of any certificate of designation, or any agreement or arrangement
entered into by it, with respect to any of its Capital Stock (including any
shareholders' agreement), or enter into any new agreement with respect to any of
its Capital Stock, except any such amendments, modifications or changes or any
such new agreements or arrangements pursuant to this clause (iv) that either
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect.
(n) Investment Company Act of 1940. Engage in any business, enter into any
transaction, use any securities or take any other action or permit any of its
Subsidiaries to do any of the foregoing, that would cause it or any of its
Subsidiaries to become subject to the registration requirements of the
Investment Company Act of 1940, as amended, by virtue of being an "investment
company" or a company "controlled" by an "investment company" not entitled to an
exemption within the meaning of such Act.
(o) Compromise of Accounts Receivable. Except as contemplated by Schedule
7.02(o), compromise or adjust any Account Receivable that is an account
receivable under GAAP (or extend the time of payment thereof) or grant any
discounts, allowances or credits or permit any of its Subsidiaries to do so
other than, provided no Default or Event of Default has occurred and is
continuing, in the ordinary course of its business; provided, however, in no
event
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shall any such discount, allowance or credit exceed $250,000 in the aggregate
and no such extension of the time for payment extend beyond 120 days from the
original due date thereof.
(p) ERISA. (i) Engage, or permit any ERISA Affiliate to engage, in any
transaction described in Section 4069 of ERISA; (ii) engage, or permit any ERISA
Affiliate to engage, in any prohibited transaction described in Section 406 of
ERISA or 4975 of the IRC for which a statutory or class exemption is not
available or a private exemption has not previously been obtained from the U.S.
Department of Labor; (iii) adopt or permit any ERISA Affiliate to adopt any
employee welfare benefit plan within the meaning of Section 3(1) of ERISA which
provides health or medical benefits to employees after termination of employment
other than as required by Section 601 of ERISA or applicable law; (iv) fail to
make any contribution or payment to any Multiemployer Plan which it or any ERISA
Affiliate may be required to make under any agreement relating to such
Multiemployer Plan, or any law pertaining thereto; or (v) fail, or permit any
ERISA Affiliate to fail, to pay any required installment or any other payment
required under Section 412 of the IRC on or before the due date for such
installment or other payment.
(q) Environmental. Permit the use, handling, generation, storage,
treatment, Release or disposal of Hazardous Materials at any property owned or
leased by it or any of its Subsidiaries, except in compliance with Environmental
Laws and so long as such use, handling, generation, storage, treatment, Release
or disposal of Hazardous Materials does not result in a Material Adverse Effect.
(r) Certain Agreements. Agree to any materially adverse amendment or other
materially adverse change to or material waiver of any of its rights under any
Material Contract.
(s) Forward Sales. Except for the Production Payment 2001 Facility and the
Takeout VPP Facility and otherwise in accordance with ordinary practice in the
Oil and Gas Business, enter into or permit to exist any advance payment
agreement or other arrangement pursuant to which the Borrower or any of its
Subsidiaries, having received full or substantial payment of the purchase price
for a specified quantity of Hydrocarbons upon entering the date of such
agreement or arrangement, is required to deliver, in one or more installments
subsequent to the date of such agreement or arrangement, such quantity of
Hydrocarbons pursuant to and during the terms of such agreement or arrangement.
(t) Hedging Agreements. Enter into any Hedging Agreement, other than
Hedging Agreements entered into the ordinary course of business to hedge or
mitigate the management of its liabilities, provided that such Hedging
Agreements may not be entered into for speculative purposes.
(u) Limitation on Negative Pledge Clauses. Enter into with any Person any
agreement which prohibits or limits the ability of the Borrower or any
Subsidiary to create, incur, assume or suffer to exist any Lien, in favor of any
of the Agents, the Lenders under the Loan Documents and their respective
assignees under the Loan Documents or any Person refinancing all or a portion of
the Commitments hereunder, upon any of its property, assets or revenues, whether
now owned or hereafter acquired.
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(v) Oil and Gas Imbalances. Enter into any contracts or agreements which
warrant production of Hydrocarbons (other than Hedging Agreements otherwise
permitted hereunder) and will not hereafter allow gas imbalances, take-or-pay or
other prepayment with respect to their Oil and Gas Properties which would
require any Loan Party to deliver Hydrocarbons produced on Oil and Gas
Properties at some future time without then or thereafter receiving full payment
therefor to exceed, during any monthly period, 3% of the current aggregate
monthly gas production for such monthly period from the Oil and Gas Properties.
Section 7.03 Financial Covenants. So long as any principal of or interest
on any Loan, Reimbursement Obligation, Letter of Credit Obligation or any other
Obligation (whether or not due) shall remain unpaid or any Lender shall have any
Commitment hereunder, each Loan Party shall not:
(a) Leverage Ratio. Permit the ratio of Consolidated Funded Indebtedness as
of the last day of each fiscal quarter set forth below to TTM EBITDA of the
Borrower and its Subsidiaries as of the last day of such fiscal quarter to be
greater than the applicable ratio set forth below:
Fiscal Quarter End Leverage Ratio
March 31, 2003 through March 31, 2004 4.5 to 1.0
June 30, 2004 through December 31, 2004 4.0 to 1.0
March 31, 2005 and thereafter 3.5 to 1.0
(b) Fixed Charge Coverage Ratio. Permit the Fixed Charge Coverage Ratio of
the Borrower and its Subsidiaries as of the last day of each fiscal quarter to
be less than 0.7 to 1.0.
(c) Interest Coverage Ratio. Permit the ratio of Consolidated EBITDA of the
Borrower and its Subsidiaries to Consolidated Total Interest Expense of the
Borrower and its Subsidiaries as of the end of each period of 4 consecutive
fiscal quarters to be less than 2.6 to 1.0.
(d) Consolidated EBITDA. Permit TTM EBITDA of the Borrower and its
Subsidiaries at the end of each fiscal quarter to be less than the applicable
amount set forth below:
Fiscal Quarter End Consolidated EBITDA
March 31, 2003 through December 31, 2003 $47,500,000
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March 31, 2004 through June 30, 2004 $49,000,000
September 30, 2004 and thereafter $60,000,000
(e) Liquidity. Permit (x) the sum of Qualified Cash plus Availability to be
less than $2,000,000 at any time or (y) Revolver A Availability to be less than
$2,000,000 at any time.
(f) Current Ratio. Permit, the ratio of consolidated current assets (which
shall include an amount equal to Availability and Revolver A Availability but
shall exclude an amount equal to any increase (but not decrease) resulting from
the application of FASB 133 from and after December 31, 2002) to consolidated
current liabilities (excluding (i) all Indebtedness and accrued interest expense
otherwise included as current liabilities and (ii) an amount equal to any
increase (but not decrease) in current liabilities resulting from the
application of FASB 133 from and after December 31, 2002) of the Borrower and
its Subsidiaries to be less than 0.8 to 1.0 at the end of any fiscal quarter of
the Borrower.
(g) Senior Leverage Ratio. Permit the ratio of Consolidated Funded Senior
Indebtedness as of the last day of each fiscal quarter set forth below to TTM
EBITDA of the Borrower and its Subsidiaries as of the last day of such fiscal
quarter to be greater than the applicable ratio set forth below:
Fiscal Quarter End Leverage Ratio
March 31, 2003 through December 31, 2004 1.9 to 1.0
March 31, 2004 through December 31, 2004 1.8 to 1.0
March 31, 2005 and thereafter 1.5 to 1.0
(h) Senior Interest Coverage Ratio. Permit the ratio of Consolidated EBITDA
of the Borrower and its Subsidiaries to Consolidated Total Senior Interest
Expense of the Borrower and its Subsidiaries as of the end of each period of 4
consecutive fiscal quarters to be less than 6.4 to 1.0.
ARTICLE VIII
MANAGEMENT, COLLECTION AND STATUS OF
ACCOUNTS RECEIVABLE AND OTHER COLLATERAL
Section 8.01 Collection of Accounts Receivable; Management of Collateral.
(a) On or prior to the Effective Date, each Loan Party shall assist the
Administrative Agent in (i) establishing, and, during the term of this
Agreement, maintaining one
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or more lockboxes in the name of the Administrative Agent (collectively, the
"Lockboxes") with one or more financial institutions set forth on Schedule 8.01
or such other financial institutions selected by the Borrower and acceptable to
the Administrative Agent in its sole discretion (each being referred to as a
"Lockbox Bank"), and (ii) establishing, and, during the term of this Agreement,
maintaining an account (a "Collection Account" and, collectively, the
"Collection Accounts") in the name of the Administrative Agent with each Lockbox
Bank. On or prior to the Effective Date, each Loan Party shall irrevocably
instruct its Account Debtors, with respect to Accounts Receivable of such Loan
Party, to remit all payments to be made by checks or other drafts to the
Lockboxes and to remit all payments to be made by wire transfer or by Automated
Clearing House, Inc. payment as directed by the Administrative Agent and shall
instruct each Lockbox Bank to deposit all amounts received in its Lockbox to the
Collection Accounts at such Lockbox Bank on the day received or, if such day is
not a Business Day, on the next succeeding Business Day. Until the
Administrative Agent has advised the Borrower to the contrary, after (x) the
occurrence and during the continuance of a Default or Event of Default or (y)
the date on which the aggregate amount of Qualified Cash and the Revolver A
Availability is less than $5,000,000 (either such event described in clause (x)
or (y), an "Activation Event"), each Loan Party may and will enforce, collect
and receive all amounts owing on the Accounts Receivable of such Loan Party for
the Administrative Agent's benefit and on the Administrative Agent's behalf, but
at such Loan Party's expense; such privilege shall terminate, at the
Administrative Agent's election, during the continuance of an Activation Event.
All checks, drafts, notes, money orders, acceptances, cash and other evidences
of Indebtedness received directly by any Loan Party from any Account Debtor, as
proceeds from Accounts Receivable of any Loan Party, or as proceeds of any other
Collateral, shall be held by such Loan Party in trust for the Agents and the
Lenders and upon receipt be deposited by such Loan Party in original form and no
later than the next Business Day after receipt thereof into a Collection
Account. All proceeds received by any Loan Party in the accounts identified on
Schedule 8.01(a) shall, no later than the next Business Day, be transferred to a
Collection Account. The Borrower shall, and shall cause each other Loan Party
to, use its commercially reasonable efforts to have its customers remit its
checks, drafts, notes, money orders, acceptances, cash or other evidences of
Indebtedness directly to a Collection Account or a Lockbox. None of the Loan
Parties shall commingle such collections with such Loan Party's own funds or the
funds of any Subsidiary or Affiliate of such Loan Party that is not itself a
Loan Party or with the proceeds of any assets not included in the Collateral
other than with funds collected on behalf of third parties representing amounts
attributable to trust fund taxes or Hydrocarbon interests of third Persons. For
so long as the Administrative Agent has not directed funds received in the
Collection Accounts to be sent to the Administrative Agent's Account as set
forth in this Section 8.01(a), each Lockbox Bank shall transfer funds received
in the Collection Accounts to the operating account of the Loan Parties
specified on Schedule 8.01. During the continuance of an Activation Event, the
Administrative Agent may direct that not more than 45% of all funds received in
the Collection Accounts shall be sent by wire transfer or Automated Clearing
House, Inc. ("ACH") payment to the Payment Office to be credited to the
Administrative Agent's Account and applied to the Obligations. The Borrower
shall, on a monthly basis delivery to the Administrative Agent a report (the
"Cash Report") reflecting the actual percentage of ownership by the Loan Parties
of all funds received from the sale of Hydrocarbons deposited into the
Collection Accounts (such percentage, the "Actual Cash Sweep Percentage") and
the aggregate amount of such deposits in the Collection Accounts (including,
without limitation, funds collected on behalf of third parties representing
amounts attributable to
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trust fund taxes or Hydrocarbon interest of third Persons) (the "Total Collected
Cash"). In the event that the Administrative Agent has directed funds from the
Collection Accounts to the Payment Office to be credited to the Administrative
Agent's Account resulting in funds transferred to such account to be less than
an amount equal to the Total Collected Cash multiplied by the Cash Sweep
Percentage, the Administrative Agent may, in its sole discretion, direct
additional funds equal to such deficiency in the Collection Accounts to be sent
by wire transfer or ACH payment to the Payment Office to be credited to the
Administrative Agent's Account and applied to the Obligations. In the event that
the Administrative Agent has directed funds from the Collection Accounts to the
Payment Office to be credited to the Administrative Agent's Account resulting in
funds transferred to such account to be greater than an amount equal to the
Total Collected Cash multiplied by the Cash Sweep Percentage, the Administrative
Agent, shall upon five (5) Business Days' written request from the Borrower,
remit funds equal to such excess to the Disbursement Account, provided that
before and after giving effect to such remittance, Revolver A Availability shall
not be less than $2,000,000. No checks, drafts, notes, money orders,
acceptances, cash or other instruments received by the Administrative Agent
shall constitute final payment to the Administrative Agent unless and until such
checks, drafts, notes, money orders, acceptances, cash or instruments have
actually been collected.
(b) After the occurrence and during the continuance of an Event of Default,
the Collateral Agent may send a notice of assignment and/or notice of the
Lenders' security interest to any and all Account Debtors and, thereafter, the
Collateral Agent shall have the sole right to collect the Accounts Receivable
and payment intangibles of the Borrower and its Subsidiaries and/or, to the
extent permitted by applicable law, take possession of the Collateral and the
books and records relating thereto. After the occurrence and during the
continuation of an Event of Default, the Borrower and its Subsidiaries shall
not, without prior written consent of the Collateral Agent, grant any extension
of time of payment of any Account Receivable or payment intangible, compromise
or settle any Account Receivable or payment intangible for less than the full
amount thereof, release, in whole or in part, any Person or property liable for
the payment thereof, or allow any credit or discount whatsoever thereon.
(c) The Borrower hereby appoints each Agent or its designee on behalf of
such Agent as the Borrower's attorney-in-fact with power exercisable during the
continuance of an Event of Default to (i) endorse any Loan Party's name upon any
notes, acceptances, checks, drafts, money orders or other evidences of payment
relating to the Accounts Receivable or payment intangibles of such Loan Party,
(ii) sign any Loan Party's name on any invoice or ▇▇▇▇ of lading relating to any
of the Accounts Receivable or payment intangibles of such Loan Party, drafts
against Account Debtors with respect to Accounts Receivable or payment
intangibles of such Loan Party, assignments and verifications of Accounts
Receivable or payment intangibles and notices to Account Debtors with respect to
Accounts Receivable or payment intangibles of such Loan Party, (iii) send
verification of Accounts Receivable of the Loan Parties, and (iv) after the
occurrence and during the continuation of an Event of Default, notify the Postal
Service authorities to change the address for delivery of mail addressed to the
Loan Parties to such address as such Agent may designate and to do all other
acts and things necessary to carry out this Agreement. All acts of said attorney
or designee are hereby ratified and approved, and said attorney or designee
shall not be liable for any acts of omission or commission (other than acts of
omission or commission constituting gross negligence or willful misconduct as
determined by a final judgment of a court of competent jurisdiction), or for any
error of judgment or mistake of
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fact or law; this power being coupled with an interest is irrevocable until all
of the Loans and other Obligations under the Loan Documents are paid in full and
all of the Commitments are terminated.
(d) Nothing herein contained shall be construed to constitute any Agent as
agent of any Loan Party for any purpose whatsoever, and the Agents shall not be
responsible or liable for any shortage, discrepancy, damage, loss or destruction
of any part of the Collateral wherever the same may be located and regardless of
the cause thereof (other than from acts of omission or commission constituting
gross negligence or willful misconduct as determined by a final judgment of a
court of competent jurisdiction). The Agents shall not, under any circumstance
or in any event whatsoever, have any liability for any error or omission or
delay of any kind occurring in the settlement, collection or payment of any of
the Accounts Receivable of the Loan Parties or any instrument received in
payment thereof or for any damage resulting therefrom (other than acts of
omission or commission constituting gross negligence or willful misconduct as
determined by a final judgment of a court of competent jurisdiction). The
Agents, by anything herein or in any assignment or otherwise, do not assume any
of the obligations under any contract or agreement assigned to any Agent and
shall not be responsible in any way for the performance by the Loan Parties of
any of the terms and conditions thereof.
(e) If any Account Receivable of the Loan Parties includes a charge for any
tax payable to any Governmental Authority, each Agent is hereby authorized (but
in no event obligated) in its discretion to pay the amount thereof to the proper
taxing authority for the Borrower's account and to charge the Borrower therefor
provided that such tax is not being disputed by appropriate action. The Borrower
shall notify the Agents if any Account Receivable of the Loan Parties includes
any taxes due to any such Governmental Authority and, in the absence of such
notice, the Agents shall have the right to retain the full proceeds of such
Account Receivable and shall not be liable for any taxes that may be due by
reason of the sale and delivery creating such Account Receivable.
(f) Notwithstanding any other terms set forth in the Loan Documents, the
rights and remedies of the Agents and the Lenders herein provided, and the
obligations of the Borrower set forth herein, are cumulative of, may be
exercised singly or concurrently with, and are not exclusive of, any other
rights, remedies or obligations set forth in any other Loan Document or as
provided by law.
Section 8.02 Accounts Receivable Documentation. During the continuance of
an Event of Default, the Borrower shall at such intervals as the Agents may
reasonably require, execute and deliver confirmatory written assignments of the
Accounts Receivable to the Agents and furnish such further schedules and/or
information as any such Agent may require relating to the Accounts Receivable,
including, without limitation, sales invoices or the equivalent, credit memos
issued, remittance advices, reports and copies of deposit slips and copies of
original shipping or delivery receipts for all merchandise sold. In addition,
the Loan Parties shall notify the Agents of any non-compliance in respect of the
representations, warranties and covenants contained in Section 8.03. The items
to be provided under this Section 8.02 are to be in form reasonably satisfactory
to the Agents. The Borrower's failure to give any of such items to the Agents
shall not affect, terminate, modify or otherwise limit the Collateral Agent's
Lien on the Collateral. During the continuance of an Event of Default, the
Borrower shall not re-date any
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invoice or sale or make sales on extended dating beyond that customary in the
Borrower's industry or consistent with past practice, and shall not re-▇▇▇▇ any
material Accounts Receivable without promptly disclosing the same to the Agents
and providing the Agents with a copy of such re-billing, identifying the same as
such.
Section 8.03 Status of Accounts Receivable and Other Collateral. With
respect to Collateral of any Loan Party at the time the Collateral becomes
subject to the Collateral Agent's Lien, each Loan Party covenants, represents
and warrants: (a) such Loan Party shall be the sole owner, free and clear of all
Liens (except for the Liens granted in the favor of the Collateral Agent for the
benefit of the Lenders and Permitted Liens), and shall be fully authorized to
sell, transfer, pledge and/or grant a security interest in each and every item
of said Collateral; (b) each Account Receivable shall be a good and valid
account representing a bona fide indebtedness incurred by the Account Debtor
therein named, for a fixed sum as set forth in the invoice relating thereto; (c)
no Account Receivable shall be subject to any defense, offset, counterclaim,
discount or allowance except as may be stated in the invoice relating thereto,
discounts and allowances as may be customary in such Loan Party's business and
as otherwise disclosed to the Agents; (d) none of the transactions underlying or
giving rise to any Account Receivable shall violate any applicable state or
federal laws or regulations, and all documents relating thereto shall be legally
sufficient under such laws or regulations and shall be legally enforceable in
accordance with their terms; (e) no agreement under which any deduction or
offset of any kind, other than normal trade discounts, may be granted or shall
have been made by such Loan Party at or before the time such Account Receivable
is created; (f) all agreements, instruments and other documents relating to any
Account Receivable shall be true and correct and in all material respects what
they purport to be; (g) all signatures and endorsements that appear on all
material agreements, instruments and other documents relating to any Account
Receivable shall be genuine and all signatories and endorsers shall have full
capacity to contract; (h) such Loan Party shall maintain books and records
pertaining to said Collateral in such detail, form and scope as the Agents shall
reasonably require; (i) such Loan Party shall immediately notify the Agents if
any Account Receivable arises out of contracts with any Governmental Authority,
and will execute any instruments and take any steps required by the Agents in
order that all monies due or to become due under any such contract shall be
assigned to the Collateral Agent and notice thereof given to such Governmental
Authority under the Federal Assignment of Claims Act or any similar state or
local law; (j) such Loan Party will, immediately upon learning thereof, report
to the Agents any material loss or destruction of, or substantial damage to, any
of the Collateral, and any other matters affecting the value, enforceability or
collectability of any of the Collateral; (k) if any amount payable under or in
connection with any Account Receivable is evidenced by a promissory note or
other instrument, such promissory note or instrument shall be immediately
pledged, endorsed, assigned and delivered to the Collateral Agent for the
benefit of the Lenders as additional Collateral; (l) such Loan Party shall not
re-date any invoice or sale or make sales on extended dating beyond that which
is customary in the ordinary course of its business and in the industry; (m)
such Loan Party shall conduct a physical count of its Inventory at such
intervals as any Agent may request and such Loan Party shall promptly supply the
Agents with a copy of such count accompanied by a report of the value (based on
the lower of cost (on a first in first out basis) and market value) of such
Inventory; and (n) such Loan Party is not and shall not be entitled to pledge
any Agent's or any Lender's credit on any purchases or for any purpose
whatsoever.
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Section 8.04 Collateral Custodian. Upon the occurrence and during the
continuance of any Default or Event of Default, the Collateral Agent may at any
time and from time to time employ and maintain on the premises of any Loan Party
a custodian selected by the Collateral Agent who shall have full authority to do
all acts necessary to protect the Agents' and the Lenders' interests. Each Loan
Party hereby agrees to, and to cause its Subsidiaries to, cooperate with any
such custodian and to do whatever the Collateral Agent may reasonably request to
preserve the Collateral. All costs and expenses incurred by the Collateral Agent
by reason of the employment of the custodian shall be the responsibility of the
Borrower and charged to the Loan Account.
ARTICLE IX
EVENTS OF DEFAULT
Section 9.01 Events of Default. If any of the following Events of Default
shall occur and be continuing:
(a) the Borrower shall fail to pay any principal of or interest on any
Loan, any Collateral Agent Advance, any Reimbursement Obligation or any fee,
indemnity or other amount payable under this Agreement or any other Loan
Document when due (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise);
(b) any representation or warranty made or deemed made by or on behalf of
any Loan Party or by any authorized officer of the foregoing under or in
connection with any Loan Document or under or in connection with any report,
certificate, or other document delivered to any Agent, any Lender or the L/C
Issuer pursuant to any Loan Document shall have been incorrect in any material
respect when made or deemed made;
(c) any Loan Party shall fail to perform or comply with any covenant or
agreement contained in (i) clauses (a), (b), (c), (d), (f), (h), (j), (l), (o),
(q), (r), (s), (t), (u) or (v) of Section 7.01, Section 7.02 or Section 7.03 or
Article VIII, or any Loan Party shall fail to perform or comply with any
covenant or agreement contained in any Security Agreement to which it is a
party, any Pledge Agreement to which it is a party, or any Mortgage to which it
is a party or (ii) clauses (e), (g), (i), (k), (n) or (p) of Section 7.01 and
such failure, if capable of being remedied, shall remain unremedied for 5 days,
after the earlier of the date a senior officer of any Loan Party shall become
aware of such failure and the date written notice of such default shall have
been given by any Agent or Lender to such Loan Party;
(d) any Loan Party shall fail to perform or comply with any other term,
covenant or agreement contained in any Loan Document to be performed or observed
by it and, except as set forth in subsections (a), (b) and (c) of this Section
9.01, such failure, if capable of being remedied, shall remain unremedied for 15
days after the earlier of the date a senior officer of any Loan Party becomes
aware of such failure and the date written notice of such default shall have
been given by any Agent to such Loan Party;
(e) any Loan Party shall fail to pay any principal of or interest on any of
its Indebtedness (excluding Indebtedness evidenced by this Agreement) in excess
of $500,000, or
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any premium thereon, when due (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise) and such failure shall continue
after the applicable grace period, if any, specified in the agreement or
instrument relating to such Indebtedness, or any other default under any
agreement or instrument relating to any such Indebtedness, or any other event,
shall occur and shall continue after the applicable grace period, if any,
specified in such agreement or instrument, if the effect of such default or
event is to accelerate, or to permit the acceleration of, the maturity of such
Indebtedness; or any such Indebtedness shall be declared to be due and payable,
or required to be prepaid (other than by a regularly scheduled required
prepayment), redeemed, purchased or defeased or an offer to prepay, redeem,
purchase or defease such Indebtedness shall be required to be made, in each
case, prior to the stated maturity thereof;
(f) any Loan Party (i) shall institute any proceeding or voluntary case
seeking to adjudicate it a bankrupt or insolvent, or seeking dissolution,
liquidation, winding up, reorganization, arrangement, adjustment, protection,
relief or composition of it or its debts under any law relating to bankruptcy,
insolvency, reorganization or relief of debtors, or seeking the entry of an
order for relief or the appointment of a receiver, trustee, custodian or other
similar official for any such Person or for any substantial part of its
property, (ii) shall be generally not paying its debts as such debts become due
or shall admit in writing its inability to pay its debts generally, (iii) shall
make a general assignment for the benefit of creditors, or (iv) shall take any
action to authorize or effect any of the actions set forth above in this
subsection (f);
(g) any proceeding shall be instituted against any Loan Party or any of its
Subsidiaries seeking to adjudicate it a bankrupt or insolvent, or seeking
dissolution, liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief of debtors, or seeking the entry of an order for relief or
the appointment of a receiver, trustee, custodian or other similar official for
any such Person or for any substantial part of its property, and either such
proceeding shall remain undismissed or unstayed for a period of 45 days or any
order, judgment or decree shall be entered against any Loan Party in such
proceeding (including, without limitation, the entry of an order for relief
against any such Person or the appointment of a receiver, trustee, custodian or
other similar official for it or for any substantial part of its property);
(h) any provision of any Loan Document shall at any time for any reason
(other than pursuant to the express terms thereof) cease to be valid and binding
on or enforceable against any Loan Party intended to be a party thereto, or the
validity or enforceability thereof shall be contested by any party thereto, or a
proceeding shall be commenced by any Loan Party or any Governmental Authority
having jurisdiction over any of them, seeking to establish the invalidity or
unenforceability thereof, or any Loan Party shall deny in writing that it has
any liability or obligation purported to be created under any Loan Document;
(i) any Assignment Document, any Security Agreement, any Pledge Agreement,
any Mortgage or any other security document, after delivery thereof pursuant
hereto, shall for any reason fail or cease to create a valid and perfected and,
except to the extent permitted by the terms hereof or thereof, first priority
Lien or, if subject to a prior Production Payment 2001 Lien or Takeout VPP Lien,
second priority Lien in favor of the Collateral Agent for the benefit of the
Lenders on any Collateral purported to be covered thereby having a value greater
than $250,000 in the aggregate for all such Collateral, unless the Borrower
shall have
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provided the Collateral Agent, within 30 days, with additional Collateral having
at least an equivalent value to the Collateral affected by such failure and
otherwise reasonably acceptable to the Required Lenders;
(j) any bank at which any deposit account, blocked account, or lockbox
account of any Loan Party is maintained shall fail to comply with any of the
terms of any deposit account, blocked account, lockbox account or similar
agreement to which such bank is a party or any securities intermediary,
commodity intermediary or other financial institution at any time in custody,
control or possession of any investment property of any Loan Party shall fail to
comply with any of the terms of any investment property control agreement to
which such Person is a party;
(k) one or more judgments or orders for the payment of money exceeding
$250,000 in the aggregate shall be rendered against any Loan Party and remain
unsatisfied and such judgment or order shall not be dismissed or stayed 15 days
before the date on which execution of any property of such Loan Party may be
issued; provided, however, that any such judgment or order shall not give rise
to an Event of Default under this subsection (k) if and for so long as (A) the
amount of such judgment or order is covered by a valid and binding policy of
insurance between the defendant and the insurer covering full payment thereof
(subject to customary deductibles) and (B) such insurer has been notified, and
has not disputed the claim made for payment, of the amount of such judgment or
order;
(l) any Loan Party is enjoined, restrained or in any way prevented by the
order of any court or any Governmental Authority from conducting all or any part
of its business and such circumstance could reasonably be expected to result in
a Material Adverse Effect;
(m) any material damage to, or loss, theft or destruction of, any
Collateral, whether or not insured, or any strike, lockout, labor dispute,
embargo, condemnation, act of God or public enemy, or other casualty which
causes, for more than 15 days, the cessation or substantial curtailment of
revenue producing activities at any facility of any Loan Party, if any such
event or circumstance could reasonably be expected to result in a Material
Adverse Effect;
(n) any cessation of a substantial part of the business of any Loan Party
for a period which materially and adversely affects the ability of any Loan
Party to continue its business on a profitable basis;
(o) the loss, suspension or revocation of, or failure to renew, any license
or permit now held or hereafter acquired by the Borrower or any of its
Subsidiaries, if such loss, suspension, revocation or failure to renew could
reasonably be expected to result in a Material Adverse Effect;
(p) the indictment of any Loan Party under any criminal statute, or
commencement of criminal or civil proceedings against any Loan Party, which
could reasonably be expected to result in forfeiture to any Governmental
Authority of any material portion of the property of such Person that is subject
to a Lien in favor of the Collateral Agent without satisfaction or provision for
satisfaction of such Lien;
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(q) any Loan Party or any of its ERISA Affiliates shall have made a
complete or partial withdrawal from a Multiemployer Plan, and, as a result of
such complete or partial withdrawal, any Loan Party or any of its ERISA
Affiliates incurs a withdrawal liability in an annual amount exceeding $50,000;
or a Multiemployer Plan enters reorganization status under Section 4241 of
ERISA, and, as a result thereof any Loan Party's or any of its ERISA Affiliates'
annual contribution requirements with respect to such Multiemployer Plan
increases in an annual amount exceeding $50,000;
(r) any Termination Event with respect to any Employee Plan shall have
occurred, and, 30 days after notice thereof shall have been given to any Loan
Party by any Agent, (i) such Termination Event (if correctable) shall not have
been corrected, and (ii) the then current value of such Employee Plan's vested
benefits exceeds the then current value of assets allocable to such benefits in
such Employee Plan by more than $50,000 (or, in the case of a Termination Event
involving liability under Section 409, 502(i), 502(l), 515, 4062, 4063, 4064,
4069, 4201, 4204 or 4212 of ERISA or Section 4971 or 4975 of the IRC, the
liability is in excess of such amount);
(s) the Borrower or any of its Subsidiaries shall be liable for any
Environmental Liabilities and Costs the payment of which could reasonably be
expected to result in a Material Adverse Effect; or
(t) a Change of Control shall have occurred;
then, and in any such event, the Collateral Agent, at the
request of the Required Lenders or as otherwise agreed to among the Agents and
the Lenders, by notice to the Borrower, shall (i) terminate or reduce all
Commitments, whereupon all Commitments shall immediately be so terminated or
reduced, (ii) declare all or any portion of the Loans and Reimbursement
Obligations then outstanding to be due and payable, whereupon all or such
portion of the aggregate principal of all Loans and Reimbursement Obligations,
all accrued and unpaid interest thereon, all fees and all other amounts payable
under this Agreement and the other Loan Documents shall become due and payable
immediately, without presentment, demand, protest or further notice of any kind,
all of which are hereby expressly waived by each Loan Party and (iii) exercise
any and all of its other rights and remedies under applicable law, hereunder and
under the other Loan Documents; provided, however, that upon the occurrence of
any Event of Default described in subsection (f) or (g) of this Section 9.01,
without any notice to any Loan Party or any other Person or any act by any Agent
or any Lender, all Commitments shall automatically terminate and all Loans and
Reimbursement Obligations then outstanding, together with all accrued and unpaid
interest thereon, all fees and all other amounts due under this Agreement and
the other Loan Documents shall become due and payable automatically and
immediately, without presentment, demand, protest or notice of any kind, all of
which are expressly waived by each Loan Party. Upon demand by the Administrative
Agent after the occurrence and during the continuation of any Event of Default,
the Borrower shall deposit with the Administrative Agent with respect to each
Letter of Credit then outstanding cash in an amount equal to 110% of the
greatest amount for which such Letter of Credit may be drawn. Such deposits
shall be held by the Administrative Agent in the Letter of Credit Collateral
Account as security for, and to provide for the payment of, the Letter of Credit
Obligations.
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ARTICLE X
AGENTS
Section 10.01 Appointment. Each Lender (and each subsequent maker of any
Loan by its making thereof) hereby irrevocably appoints and authorizes the
Administrative Agent and the Collateral Agent to perform the duties of each such
Agent as set forth in this Agreement including: (i) to receive on behalf of each
Lender any payment of principal of or interest on the Loans outstanding
hereunder and all other amounts accrued hereunder for the account of the Lenders
and paid to such Agent, and, subject to Section 2.02 of this Agreement, to
distribute promptly to each Lender its Pro Rata Share of all payments so
received; (ii) to distribute to each Lender copies of all material notices and
agreements received by such Agent and not required to be delivered to each
Lender pursuant to the terms of this Agreement, provided that the Agents shall
not have any liability to the Lenders for any Agent's inadvertent failure to
distribute any such notices or agreements to the Lenders; (iii) to maintain, in
accordance with its customary business practices, ledgers and records reflecting
the status of the Obligations, the Loans, and related matters and to maintain,
in accordance with its customary business practices, ledgers and records
reflecting the status of the Collateral and related matters; (iv) to execute or
file any and all financing or similar statements or notices, amendments,
renewals, supplements, documents, instruments, proofs of claim, notices and
other written agreements with respect to this Agreement or any other Loan
Document; (v) to make the Loans and Collateral Agent Advances, for such Agent or
on behalf of the applicable Lenders as provided in this Agreement or any other
Loan Document; (vi) to perform, exercise, and enforce any and all other rights
and remedies of the Lenders with respect to the Loan Parties, the Obligations,
or otherwise related to any of same to the extent reasonably incidental to the
exercise by such Agent of the rights and remedies specifically authorized to be
exercised by such Agent by the terms of this Agreement or any other Loan
Document; (vii) to incur and pay such fees necessary or appropriate for the
performance and fulfillment of its functions and powers pursuant to this
Agreement or any other Loan Document; and (viii) subject to Section 10.03 of
this Agreement, to take such action as such Agent deems appropriate on its
behalf to administer the Loans and the Loan Documents and to exercise such other
powers delegated to such Agent by the terms hereof or the other Loan Documents
(including, without limitation, the power to give or to refuse to give notices,
waivers, consents, approvals and instructions and the power to make or to refuse
to make determinations and calculations) together with such powers as are
reasonably incidental thereto to carry out the purposes hereof and thereof. As
to any matters not expressly provided for by this Agreement and the other Loan
Documents (including, without limitation, enforcement or collection of the
Loans), the Agents shall not be required to exercise any discretion or take any
action, but shall be required to act or to refrain from acting (and shall be
fully protected in so acting or refraining from acting) upon the instructions of
the Required Lenders, and such instructions of the Required Lenders shall be
binding upon all Lenders and all makers of Loans; provided, however, that the
L/C Issuer shall not be required to refuse to honor a drawing under any Letter
of Credit and the Agents shall not be required to take any action which, in the
reasonable opinion of any Agent, exposes such Agent to liability or which is
contrary to this Agreement or any other Loan Document or applicable law.
Section 10.02 Nature of Duties. The Agents shall have no duties or
responsibilities except those expressly set forth in this Agreement or in the
other Loan
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Documents. The duties of the Agents shall be mechanical and administrative in
nature. The Agents shall not have by reason of this Agreement or any other Loan
Document a fiduciary relationship in respect of any Lender. Nothing in this
Agreement or any other Loan Document, express or implied, is intended to or
shall be construed to impose upon the Agents any obligations in respect of this
Agreement or any other Loan Document except as expressly set forth herein or
therein. Each Lender shall make its own independent investigation of the
financial condition and affairs of the Loan Parties in connection with the
making and the continuance of the Loans hereunder and shall make its own
appraisal of the creditworthiness of the Loan Parties and the value of the
Collateral, and the Agents shall have no duty or responsibility, either
initially or on a continuing basis, to provide any Lender with any credit or
other information with respect thereto, whether coming into their possession
before the initial Loan hereunder or at any time or times thereafter, provided
that, upon the reasonable request of a Lender, each Agent shall provide to such
Lender any documents or reports delivered to such Agent by the Loan Parties
pursuant to the terms of this Agreement or any other Loan Document. If any Agent
seeks the consent or approval of the Required Lenders to the taking or
refraining from taking any action hereunder, such Agent shall send notice
thereof to each Lender. Each Agent shall promptly notify each Lender any time
that the Required Lenders have instructed such Agent to act or refrain from
acting pursuant hereto.
Section 10.03 Rights, Exculpation, Etc. The Agents and their directors,
officers, agents or employees shall not be liable to any Lender for any action
taken or omitted to be taken by them under or in connection with this Agreement
or the other Loan Documents, except for their own gross negligence or willful
misconduct as determined by a final judgment of a court of competent
jurisdiction. Without limiting the generality of the foregoing, the Agents (i)
may treat the payee of any Loan as the owner thereof until the Collateral Agent
receives written notice of the assignment or transfer thereof, pursuant to
Section 12.07 hereof, signed by such payee and in form satisfactory to the
Collateral Agent; (ii) may consult with legal counsel (including, without
limitation, counsel to any Agent or counsel to the Loan Parties), independent
public accountants, and other experts selected by any of them and shall not be
liable for any action taken or omitted to be taken in good faith by any of them
in accordance with the advice of such counsel or experts; (iii) make no warranty
or representation to any Lender and shall not be responsible to any Lender for
any statements, certificates, warranties or representations made in or in
connection with this Agreement or the other Loan Documents; (iv) shall not have
any duty to any Lender to ascertain or to inquire as to the performance or
observance of any of the terms, covenants or conditions of this Agreement or the
other Loan Documents on the part of any Person, the existence or possible
existence of any Default or Event of Default, or to inspect the Collateral or
other property (including, without limitation, the books and records) of any
Person; (v) shall not be responsible to any Lender for the due execution,
legality, validity, enforceability, genuineness, sufficiency or value of this
Agreement or the other Loan Documents or any other instrument or document
furnished pursuant hereto or thereto; and (vi) shall not be deemed to have made
any representation or warranty regarding the existence, value or collectability
of the Collateral, the existence, priority or perfection of the Collateral
Agent's Lien thereon, or any certificate prepared by any Loan Party in
connection therewith, nor shall the Agents be responsible or liable to the
Lenders for any failure to monitor or maintain any portion of the Collateral.
The Agents shall not be liable to any Lender for any apportionment or
distribution of payments made in good faith pursuant to Section 4.04, and if any
such apportionment or distribution is subsequently determined to have been made
in error the sole recourse of any
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Lender to whom payment was due but not made, shall be to recover from other
Lenders any payment in excess of the amount which they are determined to be
entitled. The Agents may at any time request instructions from the Lenders with
respect to any actions or approvals which by the terms of this Agreement or of
any of the other Loan Documents the Agents are permitted or required to take or
to grant, and if such instructions are promptly requested, the Agents shall be
absolutely entitled to refrain from taking any action or to withhold any
approval under any of the Loan Documents until they shall have received such
instructions from the Required Lenders. Without limiting the foregoing, no
Lender shall have any right of action whatsoever against any Agent as a result
of such Agent acting or refraining from acting under this Agreement or any of
the other Loan Documents in accordance with the instructions of the Required
Lenders.
Section 10.04 Reliance. Each Agent shall be entitled to rely upon any
written notices, statements, certificates, orders or other documents or any
telephone message believed by it in good faith to be genuine and correct and to
have been signed, sent or made by the proper Person, and with respect to all
matters pertaining to this Agreement or any of the other Loan Documents and its
duties hereunder or thereunder, upon advice of counsel selected by it.
Section 10.05 Indemnification. To the extent that any Agent, any sub-agent
or other agent appointed by either Agent, or the L/C Issuer is not reimbursed
and indemnified by any Loan Party, the Lenders will reimburse and indemnify such
Agent, any sub-agent or other agent appointed by either Agent, and the L/C
Issuer from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses, advances or disbursements
of any kind or nature whatsoever which may be imposed on, incurred by, or
asserted against such Agent, any sub-agent or other agent appointed by either
Agent, or the L/C Issuer in any way relating to or arising out of this Agreement
or any of the other Loan Documents or any action taken or omitted by such Agent,
any sub-agent or other agent appointed by either Agent, or the L/C Issuer under
this Agreement or any of the other Loan Documents, in proportion to each
Lender's Pro Rata Share, including, without limitation, advances and
disbursements made pursuant to Section 10.08; provided, however, that no Lender
shall be liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses, advances or
disbursements for which there has been a final judicial determination that such
liability resulted from any such Agent's, any sub-agent's or other agent's, or
the L/C Issuer's gross negligence or willful misconduct. The obligations of the
Lenders under this Section 10.05 shall survive the payment in full of the Loans
and the termination of this Agreement.
Section 10.06 Agents Individually. With respect to its Pro Rata Share of
the Total Commitment hereunder and the Loans made by it, each Agent shall have
and may exercise the same rights and powers hereunder and is subject to the same
obligations and liabilities as and to the extent set forth herein for any other
Lender or maker of a Loan. The terms "Lenders" or "Required Lenders" or any
similar terms shall, unless the context clearly otherwise indicates, include
each Agent in its individual capacity as a Lender or one of the Required
Lenders. Each Agent and its Affiliates may accept deposits from, lend money to,
and generally engage in any kind of banking, trust or other business with the
Borrower as if it were not acting as an Agent pursuant hereto without any duty
to account to the other Lenders.
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Section 10.07 Successor Agent. (a) Each Agent may resign from the performance of
all its functions and duties hereunder and under the other Loan Documents at any
time by giving at least 30 Business Days prior written notice to the Borrower
and each Lender. Such resignation shall take effect upon the acceptance by a
successor Agent of appointment pursuant to clauses (c) and (d) below or as
otherwise provided below.
(b) Upon any such notice of resignation or action to remove, the Required
Lenders shall appoint a successor Agent. 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 retiring Agent, and the retiring Agent shall be discharged from its
duties and obligations under this Agreement and the other Loan Documents. After
any Agent's resignation or removal hereunder as an Agent, the provisions of this
Article X shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was an Agent under this Agreement and the other Loan
Documents.
(c) If a successor Agent shall not have been so appointed within the thirty
(30) Business Day period referenced in Section 10.07(a), the retiring Agent,
with the consent of the other Agent shall then appoint a successor Agent who
shall serve as an Agent until such time, if any, as the Required Lenders, with
the consent of the other Agent, appoint a successor Agent as provided above.
Section 10.08 Collateral Matters.
(a) The Collateral Agent may from time to time make such disbursements and
advances ("Collateral Agent Advances") which the Collateral Agent, in its sole
discretion, deems necessary or desirable to preserve, protect, prepare for sale
or lease or dispose of the Collateral or any portion thereof, to enhance the
likelihood or maximize the amount of repayment by the Borrower of the Loans,
Reimbursement Obligations, Letter of Credit Obligations and other Obligations or
to pay any other amount chargeable to the Borrower pursuant to the terms of this
Agreement, including, without limitation, costs, fees and expenses as described
in Section 12.04. The Collateral Agent Advances shall be repayable on demand and
be secured by the Collateral. The Collateral Agent Advances shall constitute
Obligations hereunder which may be charged to the Loan Account in accordance
with Section 4.02. The Collateral Agent shall notify each Lender and the
Borrower in writing of each such Collateral Agent Advance, which notice shall
include a description of the purpose of such Collateral Agent Advance. Without
limitation to its obligations pursuant to Section 10.05, each Lender agrees that
it shall make available to the Collateral Agent, upon the Collateral Agent's
demand, in Dollars in immediately available funds, the amount equal to such
Lender's Pro Rata Share of each such Collateral Agent Advance. If such funds are
not made available to the Collateral Agent by such Lender, the Collateral Agent
shall be entitled to recover such funds on demand from such Lender, together
with interest thereon for each day from the date such payment was due until the
date such amount is paid to the Collateral Agent, at the Federal Funds Rate for
3 Business Days and thereafter at the Reference Rate.
(b) The Lenders hereby irrevocably authorize the Collateral Agent, at its
option and in its discretion, to release any Lien granted to or held by the
Collateral Agent upon any Collateral upon termination of the Total Commitment
and payment and satisfaction of all
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Loans, Reimbursement Obligations, Letter of Credit Obligations, and all other
Obligations which have matured and which the Collateral Agent has been notified
in writing are then due and payable (or if the only remaining Obligations are
Letter of Credit Obligations and such Letter of Credit Obligations have been
collateralized by the deposit with the Administrative Agent of cash in an amount
equal to 110% of the greatest amount for which such Letters of Credit may be
drawn); or constituting property being sold or disposed of in the ordinary
course of any Loan Party's business and in compliance with the terms of this
Agreement and the other Loan Documents; or constituting property in which the
Loan Parties owned no interest at the time the Lien was granted or at any time
thereafter; or if approved, authorized or ratified in writing by the Lenders.
Upon request by the Collateral Agent at any time, the Lenders will confirm in
writing the Collateral Agent's authority to release particular types or items of
Collateral pursuant to this Section 10.08(b).
(c) Without in any manner limiting the Collateral Agent's authority to act
without any specific or further authorization or consent by the Lenders (as set
forth in Section 10.08(b)), each Lender agrees to confirm in writing, upon
request by the Collateral Agent, the authority to release Collateral conferred
upon the Collateral Agent under Section 10.08(b). Upon (i) receipt by the
Collateral Agent of confirmation from the Lenders of its authority to release
any particular item or types of Collateral, and upon prior written request by
any Loan Party or (ii) prior written request by any Loan Party to release any
item or types of Collateral constituting property being sold or disposed of in
compliance with this Agreement or the other Loan Documents, the Collateral Agent
shall (and is hereby irrevocably authorized by the Lenders to) execute such
documents as may be necessary to evidence the release of the Liens granted to
the Collateral Agent for the benefit of the Lenders upon such Collateral;
provided, however, that (i) the Collateral Agent shall not be required to
execute any such document on terms which, in the Collateral Agent's opinion,
would expose the Collateral Agent to liability or create any obligations or
entail any consequence other than the release of such Liens without recourse or
warranty, and (ii) such release shall not in any manner discharge, affect or
impair the Obligations or any Lien upon (or obligations of any Loan Party in
respect of) all interests in the Collateral retained by any Loan Party.
(d) The Collateral Agent shall have no obligation whatsoever to any Lender
to assure that the Collateral exists or is owned by the Loan Parties or is cared
for, protected or insured or has been encumbered or that the Lien granted to the
Collateral Agent pursuant to this Agreement or any other Loan Document has been
properly or sufficiently or lawfully created, perfected, protected or enforced
or is entitled to any particular priority, or to exercise at all or in any
particular manner or under any duty of care, disclosure or fidelity, or to
continue exercising, any of the rights, authorities and powers granted or
available to the Collateral Agent in this Section 10.08 or in any other Loan
Document, it being understood and agreed that in respect of the Collateral, or
any act, omission or event related thereto, the Collateral Agent may act in any
manner it may deem appropriate, in its sole discretion, given the Collateral
Agent's own interest in the Collateral as one of the Lenders and that the
Collateral Agent shall have no duty or liability whatsoever to any other Lender,
except as otherwise provided herein.
Section 10.09 Agency for Perfection. Each Agent and each Lender hereby
appoints each other Agent and each other Lender as agent and bailee for the
purpose of
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perfecting the security interests in and liens upon the Collateral in assets
which, in accordance with Article 9 of the Code, can be perfected only by
possession or control (or where the security interest of a secured party with
possession or control has priority over the security interest of another secured
party) and each Agent and each Lender hereby acknowledges that it holds
possession or control of any such Collateral for the benefit of the Collateral
Agent as secured party. Should any Lender obtain possession or control of any
such Collateral, such Lender shall notify the Collateral Agent thereof, and,
promptly upon the Collateral Agent's request therefor shall deliver possession
or control of such Collateral to the Collateral Agent or in accordance with the
Collateral Agent's instructions. Each Loan Party by its execution and delivery
of this Agreement hereby consents to the foregoing.
ARTICLE XI
[INTENTIONALLY OMITTED]
ARTICLE XII
MISCELLANEOUS
Section 12.01 Notices, Etc. All notices and other communications provided
for hereunder shall be in writing and shall be mailed, telecopied or delivered,
if to any Loan Party, at the following address:
KCS Energy, Inc.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇ & ▇▇▇▇▇ L.L.P.
▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
if to the Administrative Agent, to it at the following addresses:
Foothill Capital Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Business Finance Division Manager
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
and
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Foothill Capital Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Business Finance Division Manager
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
if to the Collateral Agent, to it at the following addresses:
Foothill Capital Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Business Finance Division Manager
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
and
Foothill Capital Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Business Finance Division Manager
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
or, as to each party, at such other address as shall be designated by such
party in a written notice to the other parties complying as to delivery with the
terms of this Section 12.01. All such notices and other communications shall be
effective, (i) if mailed, when received or 3 days after deposited in the mails,
whichever occurs first, (ii) if telecopied, when transmitted and confirmation
received, or (iii) if delivered, upon delivery, except that notices to any Agent
or the L/C Issuer pursuant to Articles II and III shall not be effective until
received by such Agent or the L/C Issuer, as the case may be.
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Section 12.02 Amendments, Etc. No amendment or waiver of any provision of
this Agreement or any other Loan Document, and no consent to any departure by
any Loan Party therefrom, shall in any event be effective unless the same shall
be in writing and signed by the Required Lenders or by the Collateral Agent with
the consent of the Required Lenders, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given, provided, however, that no amendment, waiver or consent shall (i)
increase the Commitment of any Lender, reduce the principal of, or interest on,
the Loans or the Reimbursement Obligations payable to any Lender, reduce the
amount of any fee payable for the account of any Lender, or postpone or extend
any date fixed for any payment of principal of, or interest or fees on, the
Loans or Letter of Credit Obligations payable to any Lender, in each case
without the written consent of any Lender affected thereby, (ii) increase the
Total Commitment without the written consent of each Lender, (iii) change the
percentage of the Commitments or of the aggregate unpaid principal amount of the
Loans that is required for the Lenders or any of them to take any action
hereunder, (iv) release all or a substantial portion of the Collateral (except
as otherwise provided in this Agreement and the other Loan Documents),
subordinate any Lien granted in favor of the Collateral Agent for the benefit of
the Lenders, or release the Borrower or any Guarantor, (v) amend, modify or
waive Section 4.04, Section 7.02(c) or this Section 12.02 of this Agreement,
(vi) amend the definition of "Availability", "Final Maturity Date", "Required
Lenders", or "Pro Rata Share", or (vii) amend the definition of "Borrowing
Base", "PV-10", "Proved Developed Producing Reserves", "Proved Developed
Non-Producing Reserves", "Proved Undeveloped Reserves", "Proved Reserves",
"NYMEX Strip Price", "Reserve Report", "Basis Differential", "Revolver A
Borrowing Base" or "Revolver A Availability" that would result in an increase of
the Borrowing Base or the Revolver A Borrowing Base (or in any definition
contained in this Agreement used in connection with the definition of the
foregoing terms that would result in an increase in the Borrowing Base or the
Revolver A Borrowing Base), in each case, without the written consent of each
Lender. Notwithstanding the foregoing, no amendment, waiver or consent shall,
unless in writing and signed by an Agent, affect the rights or duties of such
Agent (but not in its capacity as a Lender) under this Agreement or the other
Loan Documents.
Section 12.03 No Waiver; Remedies, Etc. No failure on the part of any Agent
or any Lender to exercise, and no delay in exercising, any right hereunder or
under any other Loan Document shall operate as a waiver thereof; nor shall any
single or partial exercise of any right under any Loan Document preclude any
other or further exercise thereof or the exercise of any other right. The rights
and remedies of the Agents and the Lenders provided herein and in the other Loan
Documents are cumulative and are in addition to, and not exclusive of, any
rights or remedies provided by law. The rights of the Agents and the Lenders
under any Loan Document against any party thereto are not conditional or
contingent on any attempt by the Agents and the Lenders to exercise any of their
rights under any other Loan Document against such party or against any other
Person.
Section 12.04 Expenses; Taxes; Attorneys' Fees. The Borrower will pay on
demand, all costs and expenses incurred by or on behalf of each Agent and
Highbridge (and, in the case of costs and expenses contemplated by clauses (b)
through (m) below, each Lender), regardless of whether the transactions
contemplated hereby are consummated, including, without limitation, reasonable
fees, costs, client charges and expenses of counsel for each Agent and
Highbridge (and, in the case of costs and expenses contemplated by clauses (b)
through (m)
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below, each Lender), accounting, due diligence, periodic field audits, physical
counts, valuations, investigations, searches and filings, monitoring of assets,
appraisals of Collateral, title searches and reviewing environmental
assessments, miscellaneous disbursements, examination, travel, lodging and
meals, arising from or relating to: (a) the negotiation, preparation, execution,
delivery, performance and administration of this Agreement and the other Loan
Documents (including, without limitation, the preparation of any additional Loan
Documents pursuant to Section 7.01(b) or the review of any of the agreements,
instruments and documents referred to in Section 7.01(f)), (b) any requested
amendments, waivers or consents to this Agreement or the other Loan Documents
whether or not such documents become effective or are given, (c) the
preservation and protection of any of the Lenders' rights under this Agreement
or the other Loan Documents, (d) the defense of any claim or action asserted or
brought against any Agent or any Lender by any Person that arises from or
relates to this Agreement, any other Loan Document, the Agents' or the Lenders'
claims against any Loan Party, or any and all matters in connection therewith,
(e) the commencement or defense of, or intervention in, any court proceeding
arising from or related to this Agreement or any other Loan Document, (f) the
filing of any petition, complaint, answer, motion or other pleading by any Agent
or any Lender, or the taking of any action in respect of the Collateral or other
security, in connection with this Agreement or any other Loan Document, (g) the
protection, collection, lease, sale, taking possession of or liquidation of, any
Collateral or other security in connection with this Agreement or any other Loan
Document, (h) any attempt to enforce any Lien or security interest in any
Collateral or other security in connection with this Agreement or any other Loan
Document, (i) any attempt to collect from any Loan Party, (j) all liabilities
and costs arising from or in connection with the past, present or future
operations of any Loan Party involving any damage to real or personal property
or natural resources or harm or injury alleged to have resulted from any Release
of Hazardous Materials on, upon or into such property, (k) any Environmental
Liabilities and Costs incurred in connection with the investigation, removal,
cleanup and/or remediation of any Hazardous Materials present or arising out of
the operations of any facility owned or operated by any Loan Party, (l) any
Environmental Liabilities and Costs incurred in connection with any
Environmental Lien, or (m) the receipt by any Agent or any Lender of any advice
from professionals with respect to any of the foregoing. Without limitation of
the foregoing or any other provision of any Loan Document: (x) the Borrower
agrees to pay all stamp, document, transfer, recording or filing taxes or fees
and similar impositions now or hereafter determined by any Agent or any Lender
to be payable in connection with this Agreement or any other Loan Document, and
the Borrower agrees to save each Agent and each Lender harmless from and against
any and all present or future claims, liabilities or losses with respect to or
resulting from any omission to pay or delay in paying any such taxes, fees or
impositions, (y) the Borrower agrees to pay all broker fees that may become due
in connection with the transactions contemplated by this Agreement and the other
Loan Documents, and (z) if the Borrower fails to perform any covenant or
agreement contained herein or in any other Loan Document, any Agent may itself
perform or cause performance of such covenant or agreement, and the expenses of
such Agent incurred in connection therewith shall be reimbursed on demand by the
Borrower.
Section 12.05 Right of Set-off. Upon the occurrence and during the
continuance of any Event of Default, any Agent or any Lender may, and is hereby
authorized to, at any time and from time to time, without notice to any Loan
Party (any such notice being expressly waived by the Loan Parties) and to the
fullest extent permitted by law, set off and apply any and all deposits (general
or special, time or demand, provisional or final) at any time
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held and other Indebtedness at any time owing by such Agent or such Lender to or
for the credit or the account of any Loan Party against any and all obligations
of the Loan Parties either now or hereafter existing under any Loan Document,
irrespective of whether or not such Agent or such Lender shall have made any
demand hereunder or thereunder and although such obligations may be contingent
or unmatured. Each Agent and each Lender agrees to notify such Loan Party
promptly after any such set-off and application made by such Agent or such
Lender provided that the failure to give such notice shall not affect the
validity of such set-off and application. The rights of the Agents and the
Lenders under this Section 12.05 are in addition to the other rights and
remedies (including other rights of set-off) which the Agents and the Lenders
may have under this Agreement or any other Loan Documents of law or otherwise.
Section 12.06 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining portions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.
Section 12.07 Assignments and Participations. (a) This Agreement and the
other Loan Documents shall be binding upon and inure to the benefit of each Loan
Party and each Agent and each Lender and their respective successors and
assigns; provided, however, that none of the Loan Parties may assign or transfer
any of its rights hereunder without the prior written consent of each Lender and
any such assignment without the Lenders' prior written consent shall be null and
void.
(b) Each Lender may, with the written consent of the Collateral Agent,
assign to one or more Eligible Assignees all or a portion of its rights and
obligations under this Agreement (including, without limitation, all or a
portion of its Commitments, the Loans made by it and its Pro Rata Share of
Letter of Credit Obligations); provided, however, that (i) such assignment is in
an amount which is at least $5,000,000 or a multiple of $1,000,000 in excess
thereof (or the remainder of such Lender's Commitment) (except such minimum
amount shall not apply to an assignment by a Lender to an Affiliate of such
Lender or a Related Fund), (ii) the parties to each such assignment shall
execute and deliver to the Collateral Agent, for its acceptance, an Assignment
and Acceptance, together with any promissory note subject to such assignment and
such parties shall deliver to the Collateral Agent a processing and recordation
fee of $5,000 (except the payment of such fee shall not be required in
connection with an assignment by a Lender to an Affiliate of such Lender or a
Related Fund), and (iii) no written consent of the Collateral Agent shall be
required in connection with any assignment by a Lender to an Affiliate of such
Lender or a Related Fund. Upon such execution, delivery and acceptance, from and
after the effective date specified in each Assignment and Acceptance, which
effective date shall be at least 3 Business Days after the delivery thereof to
the Collateral Agent (or such shorter period as shall be agreed to by the
Collateral Agent and the parties to such assignment), (A) the assignee
thereunder shall become a "Lender" hereunder and, in addition to the rights and
obligations hereunder held by it immediately prior to such effective date, have
the rights and obligations hereunder that have been assigned to it pursuant to
such Assignment and Acceptance and (B) the assigning Lender thereunder shall, to
the extent that rights and obligations hereunder have been assigned by it
pursuant to such Assignment and Acceptance, relinquish its rights and be
released from its obligations under this Agreement (and, in the case of an
Assignment and Acceptance
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covering all or the remaining portion of an assigning Lender's rights and
obligations under this Agreement, such Lender shall cease to be a party hereto).
(i) By executing and delivering an Assignment and Acceptance, the
assigning Lender and the assignee thereunder confirm to and agree with each
other and the other parties hereto as follows: (A) other than as provided in
such Assignment and Acceptance, the assigning Lender makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement or
any other Loan Document or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Agreement or any other Loan Document
furnished pursuant hereto; (B) the assigning Lender makes no representation or
warranty and assumes no responsibility with respect to the financial condition
of any Loan Party or any of its Subsidiaries or the performance or observance by
any Loan Party of any of its obligations under this Agreement or any other Loan
Document furnished pursuant hereto; (C) such assignee confirms that it has
received a copy of this Agreement and the other Loan Documents, together with
such other documents and information it has deemed appropriate to make its own
credit analysis and decision to enter into such Assignment and Acceptance; (D)
such assignee will, independently and without reliance upon the assigning
Lender, any Agent or any 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; (E) such assignee appoints and authorizes the Agents to take such
action as agents on its behalf and to exercise such powers under this Agreement
and the other Loan Documents as are delegated to the Agents by the terms hereof
and thereof, together with such powers as are reasonably incidental hereto and
thereto; and (F) such assignee agrees that it will perform in accordance with
their terms all of the obligations which by the terms of this Agreement and the
other Loan Documents are required to be performed by it as a Lender.
(ii) The Collateral Agent shall, on behalf of the Borrower,
maintain, or cause to be maintained at the Payment Office, a copy of each
Assignment and Acceptance delivered to and accepted by it and a register (the
"Register") for the recordation of the names and addresses of the Lenders and
the Commitments of, and principal amount of the Loans and Letter of Credit
Obligations (the "Registered Loans") owing to each Lender from time to time. The
entries in the Register shall be conclusive and binding for all purposes, absent
manifest error, and the Borrower, the Agents and the Lenders may treat each
Person whose name is recorded in the Register as a Lender hereunder for all
purposes of this Agreement. The Register shall be available for inspection by
the Borrower and any Lender at any reasonable time and from time to time upon
reasonable prior notice. In the case of any assignment not reflected in the
Register, the assigning Lender shall maintain a comparable register.
(iii) Upon its receipt of an Assignment and Acceptance executed by
an assigning Lender and an assignee, together with any promissory notes subject
to such assignment, the Collateral Agent shall, if the Collateral Agent consents
to such assignment and if such Assignment and Acceptance has been completed (i)
accept such Assignment and Acceptance and (ii) record the information contained
therein in the Register.
(iv) A Registered Loan (and the registered note, if any, evidencing
the same) may be assigned or sold in whole or in part only by registration of
such
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assignment or sale on the Register (and each registered note shall expressly so
provide). Any assignment or sale of all or part of such Registered Loan (and the
registered note, if any, evidencing the same) may be effected only by
registration of such assignment or sale on the Register, together with the
surrender of the registered note, if any, evidencing the same duly endorsed by
(or accompanied by a written instrument of assignment or sale duly executed by)
the holder of such registered note, whereupon, at the request of the designated
assignee(s) or transferee(s), one or more new registered notes in the same
aggregate principal amount shall be issued to the designated assignee(s) or
transferee(s). Prior to the registration of assignment or sale of any Registered
Loan (and the registered note, if any, evidencing the same), the Agents shall
treat the Person in whose name such Registered Loan (and the registered note, if
any, evidencing the same) is registered as the owner thereof for the purpose of
receiving all payments thereon and for all other purposes, notwithstanding
notice to the contrary.
(v) In the event that any Lender sells participations in a
Registered Loan, such Lender shall maintain a register on which it enters the
name of all participants in the Registered Loans held by it (the "Participant
Register"). A Registered Loan (and the registered note, if any, evidencing the
same) may be participated in whole or in part only by registration of such
participation on the Participant Register (and each registered note shall
expressly so provide). Any participation of such Registered Loan (and the
registered note, if any, evidencing the same) may be effected only by the
registration of such participation on the Participant Register.
(vi) Any foreign Person who purchases or is assigned or
participates in any portion of such Registered Loan shall provide the Agents (in
the case of a purchase or assignment) or the Lender (in the case of a
participation) with a completed Internal Revenue Service Form W-8BEN
(Certificate of Foreign Status) or a substantially similar form for such
purchaser, participant or any other affiliate who is a holder of beneficial
interests in the Registered Loan.
(c) Each Lender may sell participations to one or more banks or other
entities in or to all or a portion of its rights and obligations under this
Agreement and the other Loan Documents (including, without limitation, all or a
portion of its Commitments, the Loans made by it and its Pro Rata Share of the
Letter of Credit Obligations); provided, that (i) such Lender's obligations
under this Agreement (including without limitation, its Commitments hereunder)
and the other Loan Documents shall remain unchanged; (ii) such Lender shall
remain solely responsible to the other parties hereto for the performance of
such obligations, and the Borrower, the Agents and the other Lenders shall
continue to deal solely and directly with such Lender in connection with such
Lender's rights and obligations under this Agreement and the other Loan
Documents; and (iii) a participant shall not be entitled to require such Lender
to take or omit to take any action hereunder except (A) action directly
effecting an extension of the maturity dates or decrease in the principal amount
of the Loans or Letter of Credit Obligations, (B) action directly effecting an
extension of the due dates or a decrease in the rate of interest payable on the
Loans or the fees payable under this Agreement, or (C) actions directly
effecting a release of all or a substantial portion of the Collateral or any
Loan Party (except as set forth in Section 10.08 of this Agreement or any other
Loan Document). The Loan Parties agree that each participant shall be entitled
to the benefits of Section 2.08 and Section 4.05 of this Agreement
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with respect to its participation in any portion of the Commitments and the
Loans as if it was a Lender.
Section 12.08 Counterparts. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which shall be deemed to be an original, but all of which taken together shall
constitute one and the same agreement. Delivery of an executed counterpart of
this Agreement by telefacsimile shall be equally as effective as delivery of an
original executed counterpart of this Agreement. Any party delivering an
executed counterpart of this Agreement by telefacsimile also shall deliver an
original executed counterpart of this Agreement but the failure to deliver an
original executed counterpart shall not affect the validity, enforceability, and
binding effect of this Agreement. The foregoing shall apply to each other Loan
Document mutatis mutandis.
Section 12.09 GOVERNING LAW. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
(UNLESS EXPRESSLY PROVIDED TO THE CONTRARY IN ANOTHER LOAN DOCUMENT IN RESPECT
OF SUCH OTHER LOAN DOCUMENT) SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAW OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE
PERFORMED IN THE STATE OF NEW YORK.
Section 12.10 CONSENT TO JURISDICTION; SERVICE OF PROCESS AND VENUE. ANY
LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT MAY BE BROUGHT IN ▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇ IN THE COUNTY OF
NEW YORK OR OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW
YORK, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE BORROWER HEREBY
IRREVOCABLY ACCEPTS IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY,
THE JURISDICTION OF THE AFORESAID COURTS. THE BORROWER HEREBY IRREVOCABLY
CONSENTS TO THE SERVICE OF ANY AND ALL LEGAL PROCESS, SUMMONS, NOTICES, AND
DOCUMENTS IN ANY SUIT, ACTION, OR PROCEEDING BROUGHT IN THE UNITED STATES OF
AMERICA ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER
LOAN DOCUMENTS BY THE MAILING (BY REGISTERED MAIL OR CERTIFIED MAIL, POSTAGE
PREPAID) OR DELIVERING OF A COPY OF SUCH PROCESS TO THE BORROWER, AT THE
BORROWER'S ADDRESS FOR NOTICES AS SET FORTH IN SECTION 12.01. THE BORROWER
AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE
CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR
IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING HEREIN SHALL AFFECT THE RIGHT OF
THE AGENTS AND THE LENDERS TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW
OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE BORROWER IN
ANY OTHER JURISDICTION. THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE JURISDICTION OR LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN
ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT THE
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BORROWER HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY
COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT
PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO
ITSELF OR ITS PROPERTY, THE BORROWER HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN
RESPECT OF ITS OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
Section 12.11 WAIVER OF JURY TRIAL, ETC. THE BORROWER, EACH AGENT AND EACH
LENDER HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM CONCERNING ANY RIGHTS UNDER THIS AGREEMENT OR THE OTHER LOAN
DOCUMENTS, OR UNDER ANY AMENDMENT, WAIVER, CONSENT, INSTRUMENT, DOCUMENT OR
OTHER AGREEMENT DELIVERED OR WHICH IN THE FUTURE MAY BE DELIVERED IN CONNECTION
THEREWITH, OR ARISING FROM ANY FINANCING RELATIONSHIP EXISTING IN CONNECTION
WITH THIS AGREEMENT, AND AGREES THAT ANY SUCH ACTION, PROCEEDINGS OR
COUNTERCLAIM SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. THE BORROWER
CERTIFIES THAT NO OFFICER, REPRESENTATIVE, AGENT OR ATTORNEY OF ANY AGENT OR ANY
LENDER HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT ANY AGENT OR ANY LENDER
WOULD NOT, IN THE EVENT OF ANY ACTION, PROCEEDING OR COUNTERCLAIM, SEEK TO
ENFORCE THE FOREGOING WAIVERS. THE BORROWER HEREBY ACKNOWLEDGES THAT THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE AGENTS AND THE LENDERS ENTERING INTO
THIS AGREEMENT.
Section 12.12 Consent by the Agents and Lenders. Except as otherwise
expressly set forth herein to the contrary, if the consent, approval,
satisfaction, determination, judgment, acceptance or similar action (an
"Action") of any Agent or any Lender shall be permitted or required pursuant to
any provision hereof or any provision of any other agreement to which any Loan
Party is a party and to which any Agent or any Lender has succeeded thereto,
such Action shall be required to be in writing and may be withheld or denied by
such Agent or such Lender, in its sole discretion, with or without any reason,
and without being subject to question or challenge on the grounds that such
Action was not taken in good faith.
Section 12.13 No Party Deemed Drafter. Each of the parties hereto agrees
that no party hereto shall be deemed to be the drafter of this Agreement.
Section 12.14 Reinstatement; Certain Payments. If any claim is ever made
upon any Agent, any Lender or the L/C Issuer for repayment or recovery of any
amount or amounts received by such Agent, such Lender or the L/C Issuer in
payment or on account of any of the Obligations, such Agent, such Lender or the
L/C Issuer shall give prompt notice of such claim to each other Agent and Lender
and the Borrower, and if such Agent, such Lender or the L/C Issuer repays all or
part of such amount by reason of (i) any judgment, decree or order of any court
or administrative body having jurisdiction over such Agent, such Lender or the
L/C Issuer or any of its property, or (ii) any good faith settlement or
compromise of any such claim effected by such Agent, such Lender or the L/C
Issuer with any such claimant, then and in such event each Loan Party agrees
that (A) any such judgment, decree, order, settlement or
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compromise shall be binding upon it notwithstanding the cancellation of any
Indebtedness hereunder or under the other Loan Documents or the termination of
this Agreement or the other Loan Documents, and (B) it shall be and remain
liable to such Agent, such Lender or the L/C Issuer hereunder for the amount so
repaid or recovered to the same extent as if such amount had never originally
been received by such Agent, such Lender or the L/C Issuer.
Section 12.15 Indemnification.
(a) General Indemnity. In addition to the Borrower's other Obligations
under this Agreement, the Borrower agrees to, jointly and severally, defend,
protect, indemnify and hold harmless each Agent, each Lender and the L/C Issuer
and all of their respective officers, directors, employees, attorneys,
consultants and agents (collectively called the "Indemnitees") from and against
any and all losses, damages, liabilities, obligations, penalties, fees,
reasonable costs and expenses (including, without limitation, reasonable
attorneys' fees, costs and expenses) incurred by such Indemnitees, whether prior
to or from and after the Effective Date, whether direct, indirect or
consequential, as a result of or arising from or relating to or in connection
with any of the following: (i) the negotiation, preparation, execution or
performance or enforcement of this Agreement, any other Loan Document or of any
other document executed in connection with the transactions contemplated by this
Agreement, (ii) any Agent's or any Lender's furnishing of funds to the Borrower
or the L/C Issuer's issuing of Letters of Credit for the account of the Borrower
under this Agreement or the other Loan Documents, including, without limitation,
the management of any such Loans, the Reimbursement Obligations or the Letter of
Credit Obligations, (iii) any matter relating to the financing transactions
contemplated by this Agreement or the other Loan Documents or by any document
executed in connection with the transactions contemplated by this Agreement or
the other Loan Documents, or (iv) any claim, litigation, investigation or
proceeding relating to any of the foregoing, whether or not any Indemnitee is a
party thereto (collectively, the "Indemnified Matters"); provided, however, that
the Borrower shall not have any obligation to any Indemnitee under this Section
12.15(a) for any Indemnified Matter caused by or attributable to the gross
negligence or willful misconduct of such Indemnitee, as determined by a final
judgment of a court of competent jurisdiction.
(b) Environmental Indemnity. Without limiting Section 12.15(a) hereof, the
Borrower agrees to, jointly and severally, defend, indemnify, and hold harmless
the Indemnitees against any and all Environmental Liabilities and Costs and all
other claims, demands, penalties, fines, liability (including strict liability),
losses, damages, costs and expenses (including without limitation, reasonable
legal fees and expenses, consultant fees and laboratory fees), arising out of
(i) any Releases or threatened Releases (x) at any property presently or
formerly owned or operated by any Loan Party or any Subsidiary of any Loan
Party, or any predecessor in interest, or (y) of any Hazardous Materials
generated and disposed of by any Loan Party or any Subsidiary of any Loan Party,
or any predecessor in interest; (ii) any violations of Environmental Laws by any
Loan Party or any Subsidiary of any Loan Party, or any predecessor in interest;
(iii) any Environmental Action relating to any Loan Party or any Subsidiary of
any Loan Party, or any predecessor in interest; (iv) any personal injury
(including wrongful death) or property damage (real or personal) arising out of
exposure to Hazardous Materials used, handled, generated, transported or
disposed by any Loan Party or any Subsidiary of any Loan Party, or any
predecessor in interest; and (v) any breach of any warranty or representation
regarding
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environmental matters made by the Borrower in Section 6.01(r) or the breach of
any covenant made by the Borrower in Section 7.01(j). Notwithstanding the
foregoing, the Borrower shall not have any obligation to any Indemnitee under
this subsection (b) regarding any potential environmental matter covered
hereunder which is caused by or attributable to the gross negligence or willful
misconduct of such Indemnitee, as determined by a final judgment of a court of
competent jurisdiction.
(c) The indemnification for all of the foregoing losses, damages, fees,
costs and expenses of the Indemnitees are chargeable against the Loan Account.
To the extent that the undertaking to indemnify, pay and hold harmless set forth
in this Section 12.15 may be unenforceable because it is violative of any law or
public policy, the Borrower shall contribute the maximum portion which it is
permitted to pay and satisfy under applicable law, to the payment and
satisfaction of all Indemnified Matters incurred by the Indemnitees. The
indemnities set forth in this Section 12.15 shall survive the repayment of the
Obligations and discharge of any Liens granted under the Loan Documents.
Section 12.16 Records. The unpaid principal of and interest on the Loans,
the interest rate or rates applicable to such unpaid principal and interest, the
duration of such applicability, the Commitments, and the accrued and unpaid fees
payable pursuant to the Fee Letter and Section 2.06 hereof, and the Letter of
Credit Fees, shall at all times be ascertained from the records of the Agents,
which shall be conclusive and binding absent manifest error.
Section 12.17 Binding Effect. This Agreement shall become effective when it
shall have been executed by the Borrower, each Agent and each Lender and
thereafter shall be binding upon and inure to the benefit of each Loan Party,
each Agent and each Lender, and their respective successors and assigns, except
that the Loan Parties shall not have the right to assign their rights hereunder
or any interest herein without the prior written consent of each Lender, and any
assignment by any Lender shall be governed by Section 12.07 hereof.
Section 12.18 Interest. It is the intention of the parties hereto that each
Agent and each Lender shall conform strictly to usury laws applicable to it.
Accordingly, if the transactions contemplated hereby or by any other Loan
Document would be usurious as to any Agent or any Lender under laws applicable
to it (including the laws of the United States of America and the State of New
York or any other jurisdiction whose laws may be mandatorily applicable to such
Agent or such Lender notwithstanding the other provisions of this Agreement),
then, in that event, notwithstanding anything to the contrary in this Agreement
or any other Loan Document or any agreement entered into in connection with or
as security for the Obligations, it is agreed as follows: (i) the aggregate of
all consideration which constitutes interest under law applicable to any Agent
or any Lender that is contracted for, taken, reserved, charged or received by
such Agent or such Lender under this Agreement or any other Loan Document or
agreements or otherwise in connection with the Obligations shall under no
circumstances exceed the maximum amount allowed by such applicable law, any
excess shall be canceled automatically and if theretofore paid shall be credited
by such Agent or such Lender on the principal amount of the Obligations (or, to
the extent that the principal amount of the Obligations shall have been or would
thereby be paid in full, refunded by such Agent or such Lender, as applicable,
to the Borrower); and (ii) in the event that the maturity of the Obligations is
accelerated by reason of any Event of Default under this Agreement or otherwise,
or in the
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event of any required or permitted prepayment, then such consideration that
constitutes interest under law applicable to any Agent or any Lender may never
include more than the maximum amount allowed by such applicable law, and excess
interest, if any, provided for in this Agreement or otherwise shall be canceled
automatically by such Agent or such Lender, as applicable, as of the date of
such acceleration or prepayment and, if theretofore paid, shall be credited by
such Agent or such Lender, as applicable, on the principal amount of the
Obligations (or, to the extent that the principal amount of the Obligations
shall have been or would thereby be paid in full, refunded by such Agent or such
Lender to the Borrower). All sums paid or agreed to be paid to any Agent or any
Lender for the use, forbearance or detention of sums due hereunder shall, to the
extent permitted by law applicable to such Agent or such Lender, be amortized,
prorated, allocated and spread throughout the full term of the Loans until
payment in full so that the rate or amount of interest on account of any Loans
hereunder does not exceed the maximum amount allowed by such applicable law. If
at an time and from time to time (i) the amount of interest payable to any Agent
or any Lender on any date shall be computed at the Highest Lawful Rate
applicable to such Agent or such Lender pursuant to this Section 12.18 and (ii)
in respect of any subsequent interest computation period the amount of interest
otherwise payable to such Agent or such Lender would be less than the amount of
interest payable to such Agent or such Lender computed at the Highest Lawful
Rate applicable to such Agent or such Lender, then the amount of interest
payable to such Agent or such Lender in respect of such subsequent interest
computation period shall continue to be computed at the Highest Lawful Rate
applicable to such Agent or such Lender until the total amount of interest
payable to such Agent or such Lender shall equal the total amount of interest
which would have been payable to such Agent or such Lender if the total amount
of interest had been computed without giving effect to this Section 12.18.
For purposes of this Section 12.18, the term "applicable law" shall mean
that law in effect from time to time and applicable to the loan transaction
between the Borrower, on the one hand, and the Agents and the Lenders, on the
other, that lawfully permits the charging and collection of the highest
permissible, lawful non-usurious rate of interest on such loan transaction and
this Agreement, including laws of the State of New York and, to the extent
controlling, laws of the United States of America.
The right to accelerate the maturity of the Obligations does not include
the right to accelerate any interest that has not accrued as of the date of
acceleration.
Section 12.19 Confidentiality. Each Agent and each Lender agrees (on behalf
of itself and each of its affiliates, directors, officers, employees and
representatives) to use reasonable precautions to keep confidential, in
accordance with its customary procedures for handling confidential information
of this nature and in accordance with safe and sound practices of comparable
commercial finance companies, any material non-public information supplied to it
by the Loan Parties pursuant to this Agreement or the other Loan Documents (and
which at the time is not, and does not thereafter become, publicly available or
available to such Person from another source not known to be subject to a
confidentiality obligation to such Person not to disclose such information),
provided that nothing herein shall limit the disclosure of any such information
(i) to the extent required by statute, rule, regulation or judicial process,
(ii) to counsel for any Agent or any Lender, (iii) to examiners or
Securitization Parties or to the auditors or accountants of any Agent or Lender,
(iv) in connection with any litigation to which
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any Agent or any Lender is a party or (v) to any assignee or participant (or
prospective assignee or participant) so long as such assignee or participant (or
prospective assignee or participant) first agrees, in writing, to be bound by
confidentiality provisions similar in substance to this Section 12.19. Each
Agent and each Lender agrees that, upon receipt of a request or identification
of the requirement for disclosure pursuant to clause (iv) hereof, it will make
reasonable efforts to keep the Loan Parties informed of such request or
identification; provided that the each Loan Party acknowledges that each Agent
and each Lender may make disclosure as required or requested by any Governmental
Authority or representative thereof and that each Agent and each Lender may be
subject to review by Securitization Parties or other regulatory agencies and may
be required to provide to, or otherwise make available for review by, the
representatives of such parties or agencies any such non-public information.
Section 12.20 Integration. This Agreement, together with the other Loan
Documents, reflects the entire understanding of the parties with respect to the
transactions contemplated hereby and shall not be contradicted or qualified by
any other agreement, oral or written, before the date hereof.
Section 12.21 No Novation. This Agreement does not extinguish the
obligations for the payment of money outstanding under the Existing Credit
Agreement or discharge or release the obligations or the liens or priority of
any mortgage, pledge, security agreement or any other security therefor. Nothing
herein contained shall be construed as a novation of the obligations outstanding
under the Existing Credit Agreement or instruments securing the same, which
shall remain in full force and effect, except as modified hereby or by
instruments executed concurrently herewith. Nothing expressed or implied in this
Agreement shall be construed as a release or other discharge of the Borrower,
any Guarantor or any other Loan Party from any of its obligations or liabilities
under the Existing Credit Agreement or any of the security agreements, pledge
agreements, mortgages, guaranties or other loan documents executed in connection
therewith, except as amended hereby and by the other Loan Documents. The
Borrower and each other Loan Party hereby (i) confirms and agrees that each Loan
Document to which it is a party is, and shall continue to be, in full force and
effect and is hereby ratified and confirmed in all respects except that on and
after the Effective Date all references in any such Loan Document to "the Credit
Agreement", "thereto", "thereof", "thereunder" or words of like import referring
to the Existing Credit Agreement shall mean the Existing Credit Agreement as
amended and restated by this Agreement; and (ii) confirms and agrees that to the
extent that any such Loan Document purports to assign or pledge to the
Collateral Agent, for the benefit of the Lenders, or to grant to the Collateral
Agent for the benefit of the Lenders a security interest in or lien on, any
collateral as security for the Obligations of the Borrower, the Guarantors or
any other Loan Party from time to time existing in respect of the Existing
Credit Agreement and the Loan Documents, such pledge, assignment and/or grant of
the security interest or lien is hereby ratified and confirmed in all respects.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
BORROWER:
KCS ENERGY, INC.
By:
---------------------------------------
Name:
Title:
S-1
ADMINISTRATIVE AGENT, COLLATERAL
AGENT AND LENDER:
FOOTHILL CAPITAL CORPORATION
By:
---------------------------------------
Name:
Title:
S-2
LEAD ARRANGER AND LENDER:
HIGHBRIDGE/▇▇▇▇▇ SPECIAL
OPPORTUNITIES FUND, L.P.
By:Highbridge/▇▇▇▇▇ Capital Management, LLC
By:
---------------------------------------
Name:
Title:
S-3
LENDER:
ABLECO FINANCE LLC
By:
---------------------------------------
Name:
Title:
S-4
FIRST AMENDMENT
TO
AMENDED AND RESTATED CREDIT AGREEMENT
First Amendment, dated as of February 14, 2003 (this
"Amendment"), to the Amended and Restated Credit Agreement, dated as of January
14, 2003 (the "Credit Agreement"), by and among KCS ENERGY, INC., a Delaware
corporation (the "Borrower"), the lenders from time to time party hereto (each
a "Lender" and collectively, the "Lenders"), FOOTHILL CAPITAL CORPORATION, a
California corporation ("Foothill"), as collateral agent for the Lenders (in
such capacity, together with any successor collateral agent, the "Collateral
Agent"), Foothill, as administrative agent for the Lenders (in such capacity,
together with any successor administrative agent, the "Administrative Agent";
and together with the Collateral Agent, each an "Agent" and collectively, the
"Agents"), and HIGHBRIDGE/▇▇▇▇▇ SPECIAL OPPORTUNITIES FUND, L.P., a Delaware
limited partnership ("Highbridge"), as lead arranger.
The Borrower and the Required Lenders desire to amend Section 5.04(f)
of the Credit Agreement as hereinafter set forth.
Accordingly, the Borrower and the Required Lenders hereby agree as
follows:
1. Conditions Subsequent. (a) Clause (f) of Section 5.04 of the Credit
Agreement is hereby amended and restated in its entirety to read as follows:
"(f) The Borrower shall use commercially reasonable
efforts to deliver or cause to be delivered to the Collateral Agent a
landlord waiver, in form and substance satisfactory to the Collateral
Agent, with respect to the Borrower's and its Subsidiaries' principal
offices."
(b) Subclause (i) of Section 5.04(c) of the Credit Agreement is hereby
amended and restated in its entirety to read as follows:
"(i) With respect to those Oil and Gas Properties
subject to a Production Payment 2001 Lien for which a title opinion
has previously been furnished to counsel for the Lenders, within 30
days following the Effective Date; provided, however, with respect to
such Oil and Gas Properties that are located in counties in the State
of Michigan, such opinions shall be delivered on or prior to March 10,
2003."
2. Continued Effectiveness of Credit Agreement. The Borrower hereby
(i) confirms and agrees that each Loan Document to which it is a party is, and
shall continue to be, in full force and effect and is hereby ratified and
confirmed in all respects except that on and after the date hereof all
references in any such Loan Document to "the Credit
Agreement", "thereto", "thereof", "thereunder" or words of like import
referring to the Credit Agreement shall mean the Credit Agreement as amended by
this Amendment, and (ii) confirms and agrees that to the extent that any such
Loan Document purports to assign or pledge to the Collateral Agent, or to grant
to the Collateral Agent a security interest in or lien on, any collateral as
security for the Obligations of the Borrower from time to time existing in
respect of the Credit Agreement and the Loan Documents, such pledge, assignment
and/or grant of the security interest or lien is hereby ratified and confirmed
in all respects.
3. Miscellaneous.
(a) This Amendment may be executed in any number of counterparts and
by different parties hereto in separate counterparts, each of which shall be
deemed to be an original, but all of which taken together shall constitute one
and the same agreement. Delivery of an executed counterpart of this Amendment
by telefacsimile shall be equally as effective as delivery of an original
executed counterpart of this Amendment.
(b) Section and paragraph headings herein are included for convenience
of reference only and shall not constitute a part of this Amendment for any
other purpose.
(c) This Amendment shall be governed by, and construed in accordance
with, the laws of the State of New York.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
2
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed by their respective officers thereunto duly authorized
as of the day and year first above written.
KCS ENERGY, INC.
By:
-------------------------------------------
Name:
Title:
FOOTHILL CAPITAL CORPORATION
By:
-------------------------------------------
Name:
Title
HIGHBRIDGE/▇▇▇▇▇ SPECIAL
OPPORTUNITIES FUND, L.P.
By: Highbridge/▇▇▇▇▇ Capital Management, LLC
By:
-------------------------------------------
Name:
Title:
ABLECO FINANCE LLC
By:
-------------------------------------------
Name:
Title
SECOND AMENDMENT
TO
AMENDED AND RESTATED CREDIT AGREEMENT
Second Amendment, dated as of March 6, 2003 (this "Amendment"), to the
Amended and Restated Credit Agreement, dated as of January 14, 2003 (as amended
to date, the "Credit Agreement"), by and among KCS ENERGY, INC., a Delaware
corporation (the "Borrower"), the lenders from time to time party hereto (each
a "Lender" and collectively, the "Lenders"), FOOTHILL CAPITAL CORPORATION, a
California corporation ("Foothill"), as collateral agent for the Lenders (in
such capacity, together with any successor collateral agent, the "Collateral
Agent"), Foothill, as administrative agent for the Lenders (in such capacity,
together with any successor administrative agent, the "Administrative Agent";
and together with the Collateral Agent, each an "Agent" and collectively, the
"Agents"), and HIGHBRIDGE/▇▇▇▇▇ SPECIAL OPPORTUNITIES FUND, L.P., a Delaware
limited partnership ("Highbridge"), as lead arranger.
The Borrower and the Required Lenders desire to further amend Section
5.04(c) of the Credit Agreement as hereinafter set forth.
Accordingly, the Borrower and the Required Lenders hereby agree as
follows:
1. Conditions Subsequent. Subclause (i) of Section 5.04(c) of the
Credit Agreement is hereby amended and restated in its entirety to read as
follows:
"(i) With respect to those Oil and Gas Properties subject to
a Production Payment 2001 Lien for which a title opinion has
previously been furnished to counsel for the Lenders, within 30 days
following the Effective Date; provided, however, with respect to such
Oil and Gas Properties that are located in counties in the State of
Michigan, such opinions shall be delivered on or prior to April 15,
2003."
2. Continued Effectiveness of Credit Agreement. The Borrower hereby
(i) confirms and agrees that each Loan Document to which it is a party is, and
shall continue to be, in full force and effect and is hereby ratified and
confirmed in all respects except that on and after the date hereof all
references in any such Loan Document to "the Credit Agreement", "thereto",
"thereof", "thereunder" or words of like import referring to the Credit
Agreement shall mean the Credit Agreement as amended by this Amendment, and
(ii) confirms and agrees that to the extent that any such Loan Document
purports to assign or pledge to the Collateral Agent, or to grant to the
Collateral Agent a security interest in or lien on, any collateral as security
for the Obligations of the Borrower from time to time existing in respect of
the Credit Agreement and the Loan Documents, such pledge, assignment and/or
grant of the security interest or lien is hereby ratified and confirmed in all
respects.
3. Miscellaneous.
(a) This Amendment may be executed in any number of counterparts and
by different parties hereto in separate counterparts, each of which shall be
deemed to be an original, but all of which taken together shall constitute one
and the same agreement. Delivery of an
executed counterpart of this Amendment by telefacsimile shall be equally as
effective as delivery of an original executed counterpart of this Amendment.
(b) Section and paragraph headings herein are included for convenience
of reference only and shall not constitute a part of this Amendment for any
other purpose.
(c) This Amendment shall be governed by, and construed in accordance
with, the laws of the State of New York.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed by their respective officers thereunto duly authorized as of the
day and year first above written.
KCS ENERGY, INC.
By:
Name:
Title:
FOOTHILL CAPITAL CORPORATION
By:
----------------------------------------------
Name:
Title
HIGHBRIDGE/▇▇▇▇▇ SPECIAL
OPPORTUNITIES FUND, L.P.
By: Highbridge/▇▇▇▇▇ Capital Management, LLC
By:
Name:
Title:
ABLECO FINANCE LLC
By:
----------------------------------------------
Name:
Title