EXHIBIT 10.2
LOAN AGREEMENT
by and among
ABRAXAS PETROLEUM CORPORATION
as Borrower,
THE SUBSIDIARIES OF BORROWER
THAT ARE SIGNATORIES HERETO
as Guarantors,
THE LENDERS THAT ARE SIGNATORIES HERETO
as the Lenders,
and
▇▇▇▇▇ FARGO FOOTHILL, INC.
as the Arranger and Administrative Agent
Dated as of October 28, 2004
================================================================================
LOAN AGREEMENT
THIS LOAN AGREEMENT (this "Agreement"), is entered into as of October
28, 2004, by and among, on the one hand, the lenders identified on the signature
pages hereof (such lenders, together with their respective successors and
assigns, are referred to hereinafter each individually as a "Lender" and
collectively as the "Lenders"), ▇▇▇▇▇ FARGO FOOTHILL, INC., a California
corporation, as the arranger and administrative agent for the Lenders ("Agent"),
and, on the other hand, ABRAXAS PETROLEUM CORPORATION, a Nevada corporation
("Borrower"), and the subsidiaries of Borrower that are signatories hereto
("Guarantors").
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION.
1.1 Definitions. As used in this Agreement, the following terms shall
have the following definitions: -----------
"Acceptable Commodity Hedging Agreement" means a Commodity Hedging
Agreement (i) with a counterparty rated A3 or better by Moody's and A- or better
by Standard & Poor's, or the equivalent by a rating agency acceptable to Agent,
(ii) pursuant to an agreement the terms of which are acceptable to Agent, and
(iii) the arrangements of which are otherwise reasonably acceptable to Agent.
"Account Debtor" means any Person who is or who may become obligated
under, with respect to, or on account of, an Account, chattel paper, or a
General Intangible.
"Accounts" means all of Borrower's or any Guarantor'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 in
respect thereof.
"ACH Transactions" means any cash management or related services
(including the Automated Clearing House processing of electronic funds transfers
through the direct Federal Reserve Fedline system) provided by ▇▇▇▇▇ Fargo or
its Affiliates for the account of Borrower or its Subsidiaries.
"Advances" has the meaning set forth in Section 2.1.
"Affiliate" means, as applied to any Person, any other Person who,
directly or indirectly, controls, is controlled by, or is under common control
with, such Person. For purposes of this definition, "control" means the
possession, directly or indirectly, of the power to direct the management and
policies of a Person, whether through the ownership of Stock, by contract, or
otherwise; provided, however, that, for the purposes of Section 7.14 hereof: (a)
any Person which owns directly or indirectly 10% or more of the securities
having ordinary voting power for the election of directors or other members of
the governing body of a Person or 10% or more of the partnership or other
ownership interests of a Person (other than as a limited partner of such Person)
shall be deemed to control such Person, (b) each director (or comparable
manager) of a Person shall be deemed to be an Affiliate of such Person, and (c)
each partnership or joint venture (other than joint ventures permitted under
clause (d) of the definition of Permitted Investments) in which a Person is a
partner or joint venturer shall be deemed to be an Affiliate of such Person.
"Agent" means Foothill, solely in its capacity as agent for the Lenders
hereunder, and any successor thereto.
"Agent Advances" has the meaning set forth in Section 2.3(e)(i).
"Agent's Account" means an account identified on Schedule A-1.
"Agent-Related Persons" means Agent together with its Affiliates,
officers, directors, employees, and agents.
"Agent Reserve" has the meaning set forth in Section 2.1(b).
"Agreement" has the meaning set forth in the preamble hereto.
"Applicable Prepayment Premium" 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 immediately
prior to the first anniversary of the Closing Date, 1.5% times the aggregate
amount of the Commitments (or, in the case of a partial reduction pursuant to
Section 3.6(b), the amount of the Commitment so reduced), (b) during the period
of time from and including the date that is the first anniversary of the Closing
Date up to the date that is immediately prior to the second anniversary of the
Closing Date, 1.0% times the aggregate amount of the Commitments (or, in the
case of a partial reduction pursuant to Section 3.6(b), the amount of the
Commitment so reduced), (c) during the period of time from and including the
date that is the second anniversary of the Closing Date up to the date that is
immediately prior to the third anniversary of the Closing Date, 0.5% times the
aggregate amount of the Commitments (or, in the case of a partial reduction
pursuant to Section 3.6(b), the amount of the Commitment so reduced) and (d)
thereafter, zero.
"Applicable Proceeds" means the Net Proceeds (as such term is defined
in the Senior Notes Indenture) from an Asset Sale (as such term is defined in
the Senior Notes Indenture) or the Net Loss Proceeds (as such term is defined in
the Senior Notes Indenture) from an Event of Loss (as such term is defined in
the Senior Notes Indenture) applied by Borrower to prepay the outstanding
principal amount of the Advances.
"Assignee" has the meaning set forth in Section 14.1.
"Assignment and Acceptance" means an Assignment and Acceptance in the
form of Exhibit A-1.
"Authorized Person" means any officer or other employee of Borrower or
any Guarantor.
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"Availability" means, as of any date of determination, if such date is
a Business Day, and determined at the close of business on the immediately
preceding Business Day, if such date of determination is not a Business Day, the
amount that Borrower is entitled to borrow as Advances under Section 2.1 (after
giving effect to all then outstanding Obligations (other than Bank Products
Obligations) and all sublimits and Agent Reserves applicable hereunder).
"Bank Product Agreements" means those certain agreements entered into
from time to time by Borrower or its Subsidiaries in connection with any of the
Bank Products.
"Bank Product Obligations" means all obligations, liabilities,
contingent reimbursement obligations, fees, and expenses owing by Borrower or
its Subsidiaries to ▇▇▇▇▇ Fargo or its Affiliates pursuant to or evidenced by
the Bank Product Agreements and irrespective of whether for the payment of
money, whether direct or indirect, absolute or contingent, due or to become due,
now existing or hereafter arising, and including all such amounts that Borrower
is obligated to reimburse to Lender as a result of Lender purchasing
participations or executing indemnities or reimbursement obligations with
respect to the Bank Products provided to Borrower or its Subsidiaries pursuant
to the Bank Product Agreements.
"Bank Product Reserves" means, as of any date of determination, the
amount of reserves that Agent has established (based upon ▇▇▇▇▇ Fargo's or its
Affiliate's reasonable determination of the credit exposure in respect of then
extant Bank Products) for Bank Products then provided or outstanding; provided
that the total amount of reserves that shall qualify as Bank Product Reserves at
any time shall not exceed $2,000,000.
"Bank Products" means any service or facility extended to Borrower or
its Subsidiaries by ▇▇▇▇▇ Fargo or any Affiliate of ▇▇▇▇▇ Fargo including: (a)
credit cards, (b) credit card processing services, (c) debit cards, (d) purchase
cards, (e) ACH Transactions, (f) cash management, including controlled
disbursement, accounts or services, or (g) Hedging Agreements.
"Bankruptcy Code" means (i) the United States Bankruptcy Code or (ii)
any similar legislation in a relevant jurisdiction, in each case as in effect
from time to time.
"Base Rate" means the rate of interest announced within ▇▇▇▇▇ Fargo at
its principal office in San Francisco as its "prime rate", with the
understanding that the "prime rate" is one of ▇▇▇▇▇ Fargo's base rates (not
necessarily the lowest of such rates) and serves as the basis upon which
effective rates of interest are calculated for those loans making reference
thereto and is evidenced by the recording thereof after its announcement in such
internal publication or publications as ▇▇▇▇▇ Fargo may designate.
"Base Rate Loan" means each portion of an Advance that bears interest
at a rate determined by reference to the Base Rate.
"Base Rate Margin" means 1.00 percentage point.
"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 oil or gas, as the case may be, produced by such
Oil and Gas Property, is sold.
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"Benefit Plan" means a "defined benefit plan" (as defined in Section
3(35) of ERISA) for which Borrower or any Subsidiary or ERISA Affiliate of
Borrower has been an "employer" (as defined in Section 3(5) of ERISA) within the
past six years.
"Board of Directors" means the board of directors (or comparable
managers) of any Loan Party.
"Books" means Borrower's and each Guarantor's now owned or hereafter
acquired books and records (including all of its Records indicating,
summarizing, or evidencing its assets (including the Collateral) or
liabilities), all of Borrower's and each Guarantor's Records relating to its or
their business operations or financial condition, and all of its or their goods
or General Intangibles related to such information).
"Borrower" has the meaning set forth in the preamble to this Agreement.
"Borrowing" means a borrowing hereunder consisting of Advances made on
the same day by the Lenders (or Agent on behalf thereof), or by Swing Lender in
the case of a Swing Loan, or by Agent in the case of an Agent Advance.
"Borrowing Base" has the meaning set forth in Section 2.1.
"Bridge Loan Administrative Agent" means Guggenheim Corporate Funding,
LLC, and any successor thereto.
"Bridge Loan Agreement" means the Loan Agreement, dated as of October
28, 2004, by and among Borrower, the Bridge Loan Administrative Agent and the
other lenders party thereto, as such may from time to time be amended, restated,
supplemented, replaced, modified or otherwise changed in accordance with the
terms of this Agreement.
"Bridge Loan Dispositions" means (a) a Grey Wolf Stock Sale and (b) any
sales, transfers or other dispositions of assets required or permitted under
Section 6.19 of the Bridge Loan Agreement as in effect on the Closing Date and
made in compliance with the terms thereof.
"Bridge Loan Documents" means the Bridge Loan Agreement and each other
agreement, instrument and document related thereto, as such may from time to
time be amended, restated, supplemented, replaced, modified or otherwise changed
in accordance with the terms of this Agreement.
"Bridge Loan Obligations" means all obligations owing by Borrower or
any of its Subsidiaries under the Bridge Loan Documents.
"Business Day" means any day that is not a Saturday, Sunday, or other
day on which national banks are authorized or required to close in New York
City.
"Capital Lease" means a lease that is required to be capitalized for
financial reporting purposes in accordance with GAAP.
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"Capitalized Lease Obligation" means any Indebtedness represented by
obligations under a Capital Lease.
"Capital Restructuring" means (i) the repayment in full of all of the
obligations of Borrower under the Existing Loan Agreement, (ii) the Existing
Note Redemption, (iii) the issuance of the Senior Notes pursuant to the Senior
Notes Documents, (iv) the consummation of the transactions contemplated by the
Bridge Loan Documents and (v) the consummation of the transactions contemplated
by the Grey Wolf Loan Documents.
"Cash Equivalents" means (a) marketable direct obligations issued or
unconditionally guaranteed by the United States or issued by any agency 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, (b) marketable
direct obligations issued by any state of the United States or any political
subdivision of any such state or any public instrumentality thereof maturing
within 1 year from the date of acquisition thereof and, at the time of
acquisition, having the highest rating obtainable from either S&P or Moody's,
(c) commercial paper maturing no more than 270 days from the date of acquisition
thereof and, at the time of acquisition, having a rating of A-1 or P-1, or
better, from S&P or Moody's, (d) certificates of deposit or bankers' acceptances
maturing within 1 year from the date of acquisition thereof either (i) issued by
any bank organized under the laws of the United States or any state thereof
which bank has a rating of A or A2, or better, from S&P or Moody's, or (ii)
certificates of deposit less than or equal to $100,000 in the aggregate issued
by any other bank insured by the Federal Deposit Insurance Corporation, and (e)
to the extent not otherwise included in clauses (a) through (d) above, "Cash
Equivalents" as such term is defined in the Senior Notes Indenture as in effect
on the Closing Date.
"Change of Control" means (a) any "person" or "group" (within the
meaning of Sections 13(d) and 14(d) of the Exchange Act), becomes the beneficial
owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly,
of 35%, or more, of the Stock of Borrower having the right to vote for the
election of members of the Board of Directors of Borrower, or (b) a majority of
the members of the Board of Directors of Borrower do not constitute Continuing
Directors, (c) a "Change of Control" (as defined in the Senior Notes Indenture)
shall have occurred or (d) except in connection with a transaction described in
clauses (k) or (l) of the definition of Permitted Disposition, Borrower ceases
to directly own and control 100% of the outstanding capital Stock of each of its
Restricted Subsidiaries extant as of the Closing Date.
"Closing Date" means the date of the making of the initial Advance (or
other extension of credit) hereunder.
"Code" means the New York Uniform Commercial Code, as in effect from
time to time.
"Collateral" has the meaning set forth in the Intercreditor Agreement.
"Collateral Agent " means U.S. Bank, N.A., a national banking
association, or such successor collateral agent as may be appointed pursuant to
the terms of the Intercreditor Agreement.
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"Collateral Agent's Liens" means the Liens granted by Borrower or any
Guarantor to the Collateral Agent for the benefit of the Agent and the Lender
Group under or pursuant to the Intercreditor Agreement and the other Collateral
Documents.
"Collateral Coverage Ratio" means, as of any date of determination, the
ratio of (i) the aggregate PV-10 of the Proved Developed Producing Reserves,
Proved Developed Non-Producing Reserves and Proved Undeveloped Reserves of
Borrower; provided, that the aggregate amount attributable to the PV-10 of the
Proved Developed Non-Producing Reserves and Proved Undeveloped Reserves shall
not exceed the aggregate PV-10 of the Proved Developed Producing Reserves
multiplied by 1.2222 (so that for the purpose of such calculation the amount
attributable to the PV-10 of the Proved Developed Producing Reserves shall be at
least 45% of the aggregate amount attributable to this clause (i)) to (ii) the
aggregate amount of Obligations then outstanding multiplied by 3.
"Collateral Documents" means the security agreements, the pledge
agreements, mortgages, UCC financing statements and each other agreement,
document and instrument described on Schedule 1.1, duly executed or authorized
from time to time by each applicable Loan Party, the form and substance of which
is satisfactory to Agent.
"Collections" means all cash, checks, notes, instruments, and other
items of payment (including insurance proceeds, proceeds of cash sales, rental
proceeds, and tax refunds) of Borrower or any Guarantor.
"Commitment" means, with respect to each Lender, its Commitment, and
with respect to all Lenders, all of their Commitments in each case as such
dollar amounts are set forth beside such Lender's name under the applicable
heading on Schedule C-1 or the signature page of the Assignment and Acceptance
pursuant to which such Lender became a Lender hereunder in accordance with the
provisions of Section 14.1, as such Commitments are from time to time reduced
pursuant to Section 3.6(b).
"Commitment Fee Percentage" means a per annum rate equal to (a) prior
to the Commitment Reduction Date, 0.625% and (b) on and after the Commitment
Reduction Date, 1.875%.
"Commitment Reduction Event" means (i) in the case of any Unused
Applicable Proceeds, at any time that the aggregate amount of all Unused
Applicable Proceeds since the Closing Date exceeds $10,000,000, and (ii) in the
case of the proceeds from clause (b) of the definition of Bridge Loan
Dispositions, at any time on and after the Closing Date.
"Commitment Reduction Amount" means (i) the aggregate amount equal to
the amount of Unused Applicable Proceeds after the occurrence of the Commitment
Reduction Event, and (ii) the aggregate amount equal to the proceeds from clause
(b) of the definition of Bridge Loan Dispositions applied to repay the Advances,
provided, that, in the case of either clause (i) or (ii) above, the Commitment
Reduction Amount, upon the permanent reductions in the Commitments pursuant to
Section 3.06(b), shall be reduced in an amount equal to such permanent
reductions in the Commitments.
"Commitment Reduction Date" has the meaning set forth in Section
3.6(b).
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"Commitment Termination Date" has the meaning set forth in Section
3.6(b).
"Commitment Termination Notice" has the meaning set forth in Section
3.6(b).
"Commodity Hedging Agreement" means a commodity hedging or purchase
agreement or similar arrangement entered into with the intent of protecting
against fluctuations in commodity prices or the exchange of notional commodity
obligations, either generally or under specific contingencies.
"Compliance Certificate" means a certificate substantially in the form
of Exhibit C-1 delivered by the chief financial officer of Borrower to Agent.
"Continuing Director" means (a) any member of the Board of Directors
who was a director (or comparable manager) of Borrower on the Closing Date, and
(b) any individual who becomes a member of the Board of Directors after the
Closing Date if such individual was recommended, appointed or nominated for
election to the Board of Directors by a majority of the Continuing Directors,
but excluding any such individual originally proposed for election in opposition
to the Board of Directors in office at the Closing Date in an actual or
threatened election contest relating to the election of the directors (or
comparable managers) of Borrower (as such terms are used in Rule 14a-11 under
the Exchange Act) and whose initial assumption of office resulted from such
contest or the settlement thereof.
"Contribution Agreement" means the Contribution Agreement made by the
Guarantors in favor of the Lender Group.
"Consolidated Net Interest Expense" means, with respect to Borrower and
its Restricted Subsidiaries for any period, gross cash interest expense of
Borrower and its Restricted Subsidiaries for such period determined on a
consolidated basis and in accordance with GAAP (including, without limitation,
interest expense paid to Affiliates of Borrower and its Restricted
Subsidiaries), less (i) the sum of (A) cash interest income for such period and
(B) cash gains for such period on Interest Rate Protection Agreements (to the
extent not included in cash interest income above and to the extent not deducted
in the calculation of gross cash interest expense), plus (ii) the sum of (A)
cash losses for such period on Interest Rate Protection Agreements (to the
extent not included in gross cash interest expense) and (B) the upfront cash
costs or fees for such period associated with Interest Rate Protection
Agreements (to the extent not included in gross cash interest expense), in each
case, determined on a consolidated basis and in accordance with GAAP.
"Currency Protection Agreement" means a currency swap, cap or collar
agreement or similar arrangement entered into with the intent of protecting
against fluctuations in currency values, either generally or under specific
contingencies.
"Daily Balance" means, with respect to each day during the term of this
Agreement, the amount of an Obligation owed at the end of such day.
"DDA" means any checking or other demand deposit account maintained by
Borrower.
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"Default" means an event, condition, or default that, with the giving
of notice, the passage of time, or both, would be an Event of Default.
"Defaulting Lender" means any Lender that fails to make any Advance (or
other extension of credit) that it is required to make hereunder on the date
that it is required to do so hereunder.
"Defaulting Lender Rate" means (a) the Base Rate for the first 3 days
from and after the date the relevant payment is due, and (b) thereafter, at the
interest rate then applicable to Advances that are Base Rate Loans (inclusive of
the Base Rate Margin applicable thereto).
"Designated Account" means that certain DDA of Borrower identified on
Schedule D-1.
"Dollars" or "$" means United States dollars.
"EBITDA" means, with respect to any fiscal period, Borrower's and its
Restricted Subsidiaries' consolidated net earnings (or loss), minus
extraordinary gains (including any gains related to the extinguishment or
retirement of the Existing Notes), plus interest expense, income taxes, non-cash
expenses incurred in connection with the payment of Stock compensation, non-cash
expenses incurred in connection with the issuance of warrants or options to
purchase the Stock of Borrower, and depletion depreciation and amortization for
such period, as determined in accordance with GAAP.
"Eligible Transferee" means (a) a commercial bank organized under the
laws of the United States, or any state thereof, and having total assets in
excess of $250,000,000, (b) a commercial bank organized under the laws of any
other country which is a member of the Organization for Economic Cooperation and
Development or a political subdivision of any such country and which has total
assets in excess of $250,000,000, provided that such bank is acting through a
branch or agency located in the United States, (c) a finance company, insurance
company, or other financial institution or fund that is engaged in making,
purchasing, or otherwise investing in commercial loans or securities in the
ordinary course of its business and having (together with its Affiliates) total
assets in excess of $250,000,000, (d) any Affiliate (other than individuals) of
a Lender that was party hereto as of the Closing Date including, without
limitation, a fund or account managed by such Lender or an Affiliate of such
Lender or its investment manager (a "Related Fund"), (e) so long as no Event of
Default or Unmatured Default has occurred and is continuing, any other Person
approved by Agent and Borrower, and (f) during the continuation of an Event of
Default or Unmatured Default, any other Person approved by Agent.
"Environmental Actions" means any complaint, summons, citation, notice,
directive, order, claim, litigation, investigation, judicial or administrative
proceeding, judgment, letter, or other communication from any Governmental
Authority, or any third party involving violations of Environmental Laws or
Releases of Hazardous Materials from (a) any assets, properties, or businesses
of any Loan Party or any predecessor in interest, (b) from adjoining properties
or businesses, or (c) from or onto any facilities which received Hazardous
Materials generated by any Loan Party or any predecessor in interest.
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"Environmental Law" means any applicable federal, state, foreign or
local statute, law, rule, regulation, ordinance, code, binding and enforceable
guideline, binding and enforceable written policy, or rule of common law now or
hereafter in effect and in each case as amended, or any judicial or
administrative interpretation thereof, including any judicial or administrative
order, consent decree or judgment, to the extent binding on any Loan Party,
relating to the environment, employee health and safety, or Hazardous Materials,
including CERCLA; RCRA; the Federal Water Pollution Control Act, 33 USC ss. 1251
et seq.; the Toxic Substances Control Act, 15 USC ss. 2601 et seq.; the Clean
Air Act, 42 USC ss. 7401 et seq.; the Safe Drinking Water Act, 42 USC ss. 3803
et seq.; the Oil Pollution Act of 1990, 33 USC ss. 2701 et seq.; the Emergency
Planning and the Community Right-to-Know Act of 1986, 42 USC ss. 11001 et seq.;
the Hazardous Material Transportation Act, 49 USC ss. 1801 et seq.; and the
Occupational Safety and Health Act, 29 USC ss. 651 et seq. (to the extent it
regulates occupational exposure to Hazardous Materials); and any state and local
or foreign counterparts or equivalents, in each case as amended from time to
time.
"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, or consultants, and costs of
investigation 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 Action.
"Environmental Lien" means any Lien in favor of any Governmental
Authority for Environmental Liabilities and Costs.
"Equipment" means all of Borrower's and any Guarantor's now owned or
hereafter acquired right, title, and interest with respect to equipment,
machinery, machine tools, motors, furniture, furnishings, fixtures, vehicles
(including motor vehicles), tools, parts, goods (other than consumer goods, farm
products, or Inventory), wherever located, including all attachments,
accessories, accessions, replacements, substitutions, additions, and
improvements to any of the foregoing.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute thereto.
"ERISA Affiliate" means (a) any Person subject to ERISA whose employees
are treated as employed by the same employer as the employees of Borrower under
IRC Section 414(b), (b) any trade or business subject to ERISA whose employees
are treated as employed by the same employer as the employees of Borrower under
IRC Section 414(c), (c) solely for purposes of Section 302 of ERISA and Section
412 of the IRC, any organization subject to ERISA that is a member of an
affiliated service group of which Borrower is a member under IRC Section 414(m),
or (d) solely for purposes of Section 302 of ERISA and Section 412 of the IRC,
any Person subject to ERISA that is a party to an arrangement with Borrower and
whose employees are aggregated with the employees of Borrower under IRC Section
414(o).
"ERISA Event" means (a) a Reportable Event with respect to any Benefit
Plan or Multiemployer Plan, (b) the withdrawal of a Loan Party, any of its
Subsidiaries or ERISA Affiliates from a Benefit Plan during a plan year in which
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it was a "substantial employer" (as defined in Section 4001(a)(2) of ERISA), (c)
the providing of notice of intent to terminate a Benefit Plan in a distress
termination (as described in Section 4041(c) of ERISA), (d) the institution by
the PBGC of proceedings to terminate a Benefit Plan or Multiemployer Plan, (e)
any event or condition (i) that provides a basis under Section 4042(a)(1), (2),
or (3) of ERISA for the termination of, or the appointment of a trustee to
administer, any Benefit Plan or Multiemployer Plan, or (ii) that may result in
termination of a Multiemployer Plan pursuant to Section 4041A of ERISA, (f) the
partial or complete withdrawal within the meaning of Sections 4203 and 4205 of
ERISA, of a Loan Party, any of its Subsidiaries or ERISA Affiliates from a
Multiemployer Plan, or (g) providing any security to any Plan under Section
401(a)(29) of the IRC by a Loan Party or its Subsidiaries or any of their ERISA
Affiliates.
"Event of Default" has the meaning set forth in Section 8.
"Excess Availability" means the amount, as of the date any
determination thereof is to be made, equal to Availability minus the aggregate
amount, if any, of all trade payables of Borrower and its Restricted
Subsidiaries aged in excess of historical levels with respect thereto and all
book overdrafts in excess of historical practices with respect thereto, in each
case as determined by Agent in its Permitted Discretion.
"Exchange Act" means the Securities Exchange Act of 1934, as in effect
from time to time.
"Existing Loan Agreement" means that certain Loan and Security
Agreement, dated as of January 22, 2003, by and among the Borrower, the
Guarantors, the lenders party thereto and Agent, as amended by the First
Amendment, Waiver, Consent and Partial Release, dated as of October 20, 2003, as
further amended by Amendment No. 2, dated as of February 23, 2004, and as
further amended by Amendment No. 3, dated as of June 4, 2004.
"Existing Note Redemption" has the meaning set forth in Section
3.1(bb).
"Existing Notes" means Borrower's 11-1/2% Secured Notes due 2007 issued
by Borrower pursuant to that certain Indenture, dated as of January 23, 2003,
among Borrower, the Subsidiaries of Borrower party thereto and U.S. Bank, N.A.,
as trustee for the holders of the Existing Notes.
"Fee Letter" means that certain fee letter, dated as of even date
herewith, between Borrower and Agent, in form and substance satisfactory to
Agent.
"FEIN" means Federal Employer Identification Number.
"Flow of Funds Agreement" means the Flow of Funds Agreement, dated as
of October 28, 2004, by and among Agent, the Lenders, Bridge Loan Administrative
Agent, the lenders party to the Bridge Loan Agreement, the Senior Notes Trustee,
on behalf of the holders of the Senior Notes, Grey Wolf, Grey Wolf Credit
Facility Agent and the Loan Parties regarding the transfer of funds to occur on
the Closing Date, the form and substance of which is satisfactory to Agent.
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"Foothill" means ▇▇▇▇▇ Fargo Foothill, Inc., a California corporation
formerly known as Foothill Capital Corporation.
"Funding Date" means the date on which a Borrowing occurs.
"GAAP" means generally accepted accounting principles as in effect from
time to time in the United States, consistently applied.
"General Intangibles" means all of Borrower's and any Guarantor's now
owned or hereafter acquired right, title, and interest with respect to general
intangibles (including payment intangibles, contract rights, rights to payment,
judgments, rights arising under common law, statutes, or regulations, choses or
things in action, goodwill, patents, designs, inventions, trade names, trade
secrets, d/b/a's, Internet domain names, logos, trademarks, servicemarks,
copyrights, blueprints, drawings, purchase orders, customer lists, monies due or
recoverable from pension funds, route lists, rights to payment and other rights
under any royalty or licensing agreements, infringement claims, computer
programs, information contained on computer disks or tapes, software,
literature, reports, catalogs, money, deposit accounts, insurance premium
rebates, tax refunds, and tax refund claims), and any and all supporting
obligations in respect thereof, and any other personal property other than
goods, Accounts, Investment Property, and Negotiable Collateral.
"Governing Documents" means, with respect to any Person, the
certificate or articles of incorporation, by-laws, or other organizational
documents of such Person.
"Governmental Authority" means any federal, state, local or other
governmental or administrative body, instrumentality, department, or agency or
any court, tribunal, administrative hearing body, arbitration panel, commission,
or other similar dispute-resolving panel or body.
"Grey Wolf" means Grey Wolf Exploration, Inc., an Alberta company, and
any successor thereto.
"Grey Wolf Credit Facility" means the Credit Agreement, dated as of
October 28, 2004, among Grey Wolf, the lenders party thereto and the Grey Wolf
Credit Facility Agent, as such may from time to time be amended, restated,
replaced, supplemented, modified or otherwise changed.
"Grey Wolf Credit Facility Agent" means Guggenheim Corporate Funding,
LLC, and any successor thereto.
"Grey Wolf Stock Sale" means the public or private sale, transfer or
other disposition by Borrower, Grey Wolf or a Restricted Subsidiary of Borrower
of Stock of Grey Wolf.
"Grey Wolf Loan Documents" means the Grey Wolf Credit Facility and each
other agreement, instrument and document related thereto, as such may from time
to time be amended, restated, replaced, supplemented, modified or otherwise
changed.
11
"Guarantor" has the meaning set forth in the preamble to this Agreement
and each other Person that executes a Guaranty.
"Guaranty" means that certain general continuing guaranty executed and
delivered by any Guarantor in favor of Agent, for the benefit of the Lender
Group, in form and substance satisfactory to Agent.
"Guaranteed Obligations" has the meaning set forth in Section 18.1.
"Hazardous Materials" means (a) substances that are defined or listed
in, or otherwise classified pursuant to, any applicable laws or regulations as
"hazardous substances," "hazardous materials," "hazardous wastes," "toxic
substances," or any other formulation intended to define, list, or classify
substances by reason of deleterious properties such as ignitability,
corrosivity, reactivity, carcinogenicity, reproductive toxicity, or "EP
toxicity" under Environmental Laws, (b) Hydrocarbons, including, without
limitation, oil, petroleum, or petroleum derived substances, natural gas,
natural gas liquids, synthetic gas, drilling fluids, produced waters, and other
wastes associated with the exploration, development, or production of crude oil,
natural gas, or geothermal resources, (c) any flammable substances or explosives
or any radioactive materials, and (d) asbestos in any form or electrical
equipment that contains any oil or dielectric fluid containing levels of
polychlorinated biphenyls in excess of 50 parts per million.
"Hedging Agreement" means any Currency Protection Agreement, Interest
Rate Protection Agreement or Commodity Hedging Agreement.
"Hydrocarbons" means oil, gas, coal seam gas, casinghead gas,
condensate, distillate, liquid hydrocarbons, gaseous hydrocarbons, all products
and byproducts refined, separated, settled and dehydrated therefrom and all
products and byproducts refined therefrom, including, without limitation,
kerosene, liquefied petroleum gas, refined lubricating oils, diesel fuel, drip
gasoline, natural gasoline, helium, sulfur, geothermal steam, water, carbon
dioxide, and all other minerals.
"Hydrocarbon Interests" means all rights, titles, interests and estates
now owned or hereafter acquired in and to oil and gas leases, oil, gas and
mineral leases, oil, gas and casinghead gas leases, or other liquid or gaseous
hydrocarbon leases, mineral fee or lease interests, farm-outs, 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 (a) all obligations for borrowed money, (b) all
obligations evidenced by bonds, debentures, notes, or other similar instruments
and all reimbursement or other obligations in respect of letters of credit,
bankers acceptances, interest rate swaps, or other financial products, (c) all
obligations under Capital Leases, (d) all obligations or liabilities of others
secured by a Lien on any asset of Borrower or its Restricted Subsidiaries,
irrespective of whether such obligation or liability is assumed, (e) all
obligations for the deferred purchase price of assets, including trade debt
(other than trade debt incurred in the ordinary course of business and paid in
accordance with customary trade practices), and (f) any obligation guaranteeing
12
or intended to guarantee (whether directly or indirectly guaranteed, endorsed,
co-made, discounted, or sold with recourse) any obligation of any other Person.
"Indenture Deficit" has the meaning set forth in Section 2.1(d).
"Indemnified Liabilities" has the meaning set forth in Section 11.3.
"Indemnified Person" has the meaning set forth in Section 11.3.
"Initial Reserve Report" means the report of the Petroleum Engineers
dated June 30, 2004 with respect to the Oil and Gas Properties of Borrower.
"Insolvency Proceeding" means any proceeding commenced by or against
any Person under any provision of the Bankruptcy Code or under any other state
or federal bankruptcy or insolvency law, assignments for the benefit of
creditors, formal or informal moratoria, compositions, extensions generally with
creditors, or proceedings seeking reorganization, arrangement, or other similar
relief.
"Intercreditor Agreement" means the Intercreditor, Security and
Collateral Agency Agreement, dated as of October 28, 2004, by and among the
Agent, on behalf of the Lenders, the Senior Notes Trustee, on behalf of the
holders of the Senior Notes, the Bridge Loan Administrative Agent, on behalf of
the lenders party to the Bridge Loan Agreement, and the Collateral Agent,
Borrower and each Guarantor, the form and substance of which shall be
satisfactory to Agent, as such may from time to time be amended, restated,
supplemented, modified or otherwise changed pursuant to the terms of the
Intercreditor Agreement.
"Interest Rate Protection Agreement" means an interest rate swap, cap
or collar agreement or similar arrangement entered into with the intent of
protecting against fluctuations in interest rates or the exchange of notional
interest obligations, either generally or under specific contingencies.
"Inventory" means all Borrower's and Guarantors' now owned or hereafter
acquired right, title, and interest with respect to inventory (as defined in the
Code), including extracted Hydrocarbons, and other goods held for sale or lease
or to be furnished under a contract of service, goods that are leased by
Borrower or any Guarantor as lessor, goods that are furnished by Borrower or any
Guarantor under a contract of service, and raw materials, work in process, or
materials used or consumed in Borrower's or any Guarantor's business.
"Investment" means, with respect to any Person, any investment by such
Person in any other Person (including Affiliates) in the form of loans,
guarantees, advances, or capital contributions (excluding (a) commission,
travel, and similar advances to officers and employees of such Person made in
the ordinary course of business, and (b) bona fide Accounts arising in the
ordinary course of business consistent with past practices), purchases, or other
acquisitions for consideration, of Indebtedness or Stock, and any other items
that are or would be classified as investments on a balance sheet prepared in
accordance with GAAP.
13
"Investment Property" means all of Borrower's or any Guarantor's now
owned or hereafter acquired right, title, and interest with respect to
"investment property" as that term is defined in the Code, and any and all
supporting obligations in respect thereof.
"IRC" means the Internal Revenue Code of 1986, as in effect from time
to time.
"Issuing Lender" means Foothill or any other Lender that, at the
request of Borrower and with the consent of Agent agrees, in such Lender's sole
discretion, to become an Issuing Lender for the purpose of issuing L/Cs or L/C
Undertakings pursuant to Section 2.12 (it being understood and agreed that the
Issuing Lender shall be the Issuing Lender for the Rollover Letter of Credit).
"L/C" has the meaning set forth in Section 2.12(a).
"L/C Disbursement" means a payment made by the Issuing Lender pursuant
to a Letter of Credit.
"L/C Undertaking" has the meaning set forth in Section 2.12(a).
"Lender" and "Lenders" have the respective meanings set forth in the
preamble to this Agreement, and shall include any other Person made a party to
this Agreement in accordance with the provisions of Section 14.1.
"Lender Group" means, individually and collectively, each of the
Lenders (including the Issuing Lender) and Agent.
"Lender Group Expenses" means all (a) costs or expenses (including
taxes, and insurance premiums) required to be paid by Borrower under any of the
Loan Documents that are paid or incurred by any one or more members of the
Lender Group, (b) reasonable fees and charges paid or incurred by any one or
more members of the Lender Group in connection with any one or more members of
the Lender Group's transactions with Borrower, including fees and charges for
photocopying, notarization, couriers and messengers, telecommunication, public
record searches (including tax lien and judgment searches, and searches for
liens under the Uniform Commercial Code and including searches with the patent
and trademark office, the copyright office, or the department of motor
vehicles), filing, recording, publication, appraisal (including periodic
Collateral appraisals, business valuations or examinations of Borrower's or any
Guarantors' Oil and Gas Properties to the extent of the fees and charges (and up
to the amount of any limitation) contained in this Agreement), and environmental
audits, (c) costs and expenses incurred by any one or more members of the Lender
Group in the disbursement of funds to Borrower (by wire transfer or otherwise),
(d) reasonable charges paid or incurred by any one or more members of the Lender
Group resulting from the dishonor of checks, (e) reasonable costs and expenses
paid or incurred by the Lender Group to correct any default or enforce any
provision of the Loan Documents, or in gaining possession of, maintaining,
handling, preserving, storing, shipping, selling, preparing for sale, or
advertising to sell the Collateral, or any portion thereof, irrespective of
whether a sale is consummated, (f) reasonable audit fees and expenses of any one
or more members of the Lender Group related to audit examinations of the Books
to the extent of the fees and charges (and up to the amount of any limitation)
contained in this Agreement, (g) reasonable costs and expenses of third party
14
claims or any other suit paid or incurred by any one or more members of the
Lender Group in enforcing or defending the Loan Documents or in connection with
the transactions contemplated by the Loan Documents or any one or more members
of the Lender Group's relationship with Borrower or any guarantor of the
Obligations, (h) Agent's reasonable fees and expenses (including attorneys' fees
and disbursements) incurred in advising, structuring, drafting, reviewing,
administering, or amending the Loan Documents, and (i) Agent's and each Lender's
reasonable fees and expenses (including attorneys' fees and disbursements)
incurred in terminating, enforcing (including attorneys' fees, disbursements and
expenses incurred in connection with a "workout," a "restructuring," or an
Insolvency Proceeding concerning Borrower or any of its Subsidiaries or in
exercising rights or remedies under the Loan Documents), or defending the Loan
Documents, irrespective of whether suit is brought, or in taking any Remedial
Action concerning the Collateral.
"Lender-Related Person" means, with respect to any Lender, such Lender,
together with such Lender's Affiliates, and the officers, directors, employees,
and agents of such Lender and such Affiliates.
"Letter of Credit" means an L/C or an L/C Undertaking, as the context
requires.
"Letter of Credit Usage" means, as of any date of determination, the
aggregate undrawn amount of all outstanding Letters of Credit plus 100% of the
amount of outstanding time drafts accepted by an Underlying Issuer as a result
of drawings under Underlying Letters of Credit.
"Lien" means any interest in an asset securing an obligation owed to,
or a claim by, any Person other than the owner of the asset, whether such
interest shall be based on the common law, statute, or contract, whether such
interest shall be recorded or perfected, and whether such interest shall be
contingent upon the occurrence of some future event or events or the existence
of some future circumstance or circumstances, including (a) the lien or security
interest arising from a mortgage, deed of trust, encumbrance, pledge,
hypothecation, assignment, deposit arrangement, security agreement, conditional
sale or trust receipt, or from a lease, consignment, or bailment for security
purposes and also including, purchase options, reservations, exceptions,
encroachments, easements, rights-of-way, covenants, conditions, restrictions,
leases, and other title exceptions and encumbrances affecting any Oil and Gas
Properties or Real Property and (b) production or royalty payments or the like
payable from Oil and Gas Properties.
"Loan Account" has the meaning set forth in Section 2.10.
"Loan Documents" means this Agreement, the Bank Product Agreements, the
Collateral Documents, the Contribution Agreement, the Flow of Funds Agreement,
the Fee Letter, the Guaranties, the Intercreditor Agreement, the Letters of
Credit, any note or notes executed by Borrower or any Guarantor in connection
with this Agreement and payable to a member of the Lender Group, and any other
agreement entered into, now or in the future, by Borrower or any Guarantor and
the Lender Group in connection with this Agreement.
"Loan Party" means the Borrower and any Guarantor.
15
"Material Adverse Change" means (a) a material adverse change in the
business, prospects, operations, results of operations, assets, liabilities or
condition (financial or otherwise) of Borrower, individually, or the Loan
Parties taken as a whole, (b) a material impairment of Borrower's, individually,
or the Loan Parties' taken as a whole, ability to perform its or their
obligations under the Loan Documents to which it is or they are a party or of
the Lender Group's ability to enforce the Obligations or of the Collateral
Agent's ability to realize upon the Collateral, or (c) a material impairment of
the enforceability or priority of the Collateral Agent's Liens with respect to
the Collateral as a result of an action or failure to act on the part of
Borrower or any Guarantor.
"Material Contract" means, with respect to any Person, (i) each
contract, agreement, note, indenture, mortgage, instrument, guaranty or other
evidence of indebtedness to which such Person or any of its Subsidiaries is a
party involving aggregate consideration payable to or by such Person or such
Subsidiary of $250,000 or more (other than purchase orders in the ordinary
course of the business of such Person or such Subsidiary and other than
contracts that by their terms may be terminated by such Person or Subsidiary in
the ordinary course of its business upon less than 60 days' notice without
penalty or premium) and (ii) all other contracts, agreements, notes, indentures,
mortgages, instruments, guaranties or evidences of indebtedness material to the
business, operations, condition (financial or otherwise), performance, prospects
or properties of such Person or such Subsidiary.
"Maturity Date" has the meaning set forth in Section 3.4.
"Moody's" means ▇▇▇▇▇'▇ Investors Service, Inc. and any successor
thereto.
"Mortgages" means, individually and collectively, one or more
mortgages, deeds of trust, debentures or deeds to secure debt, executed and
delivered by Borrower or any Guarantor in favor of the Collateral Agent, for the
benefit of Agent and the Lender Group, in form and substance satisfactory to the
Collateral Agent and Agent, that encumber the Real Property Collateral, the Oil
and Gas Properties and the related improvements thereto.
"Multiemployer Plan" means a "multiemployer plan" (as defined in
Section 4001(a)(3) of ERISA) to which a Loan Party, any of its Subsidiaries, or
any ERISA Affiliate has contributed, or was obligated to contribute, within the
past six years.
"Negotiable Collateral" means all of Borrower's or any Guarantor's now
owned and hereafter acquired right, title, and interest with respect to letters
of credit, letter of credit rights, instruments, promissory notes, drafts,
documents, and chattel paper (including electronic chattel paper and tangible
chattel paper), and any and all supporting obligations in respect thereof.
"Net Cash Interest Coverage Ratio" means, as of any date of
determination, the ratio of (i) EBITDA for such period to (ii) the Consolidated
Net Interest Expense for such period.
"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
16
of the appropriate crude oil and natural gas categories included in the most
recent Reserve Report provided by Borrower to Agent pursuant to Section 6.2(e),
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 Agent shall designate, and (ii) $27.43 per
barrel of oil and $4.43 per MmBTU of natural gas produced from Oil and Gas
Properties of Borrower, provided, that with respect to the volume of Borrower's
Hydrocarbons for which prices are fixed under an Acceptable Commodity Hedging
Agreement, the NYMEX Strip Price for such volume of Hydrocarbons, if greater
than the price determined above, shall be the price fixed under such Acceptable
Commodity Hedging Agreement then in effect.
"Obligations" means (a) all loans, Advances, debts, principal, interest
(including any interest that, but for the provisions of the Bankruptcy Code,
would have accrued), contingent reimbursement obligations with respect to
outstanding Letters of Credit, premiums, liabilities (including all amounts
charged to Borrower's Loan Account pursuant hereto), obligations, fees
(including the fees provided for in the Fee Letter), charges, costs, Lender
Group Expenses (including any fees or expenses that, but for the provisions of
the Bankruptcy Code, would have accrued), lease payments, guaranties, covenants,
and duties of any kind and description owing by any Loan Party to the Lender
Group pursuant to or evidenced by the Loan Documents and irrespective of whether
for the payment of money, whether direct or indirect, absolute or contingent,
due or to become due, now existing or hereafter arising, and including all
interest not paid when due and all Lender Group Expenses that Borrower is
required to pay or reimburse by the Loan Documents, by law, or otherwise, and
(b) all Bank Product Obligations. Any reference in this Agreement or in the Loan
Documents to the Obligations shall include all amendments, changes, extensions,
modifications, renewals replacements, substitutions, and supplements, thereto
and thereof, as applicable, both prior and subsequent to any Insolvency
Proceeding.
"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 oil, gas and other minerals and products produced
in association therewith, (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.
"Oil and Gas Properties" means all Hydrocarbon Interests; personal
property and/or real property now or hereafter pooled or unitized with
Hydrocarbon Interests; 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; pipelines, gathering lines,
compression facilities, tanks and processing plants; oil ▇▇▇▇▇, gas ▇▇▇▇▇, water
well, 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),
17
and water systems (for treating, disposal and injection); interests held in
royalty trusts whether presently existing or hereafter created; 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; 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 servitudes together with all additions,
substitutions, replacements, accessions and attachments to any and all of the
foregoing; oil, gas and mineral leasehold, fee and term interests, overriding
royalty interests, mineral interests, royalty interests, net profits interests,
net revenue interests, oil payments, production payments, carried interests,
leases, subleases, farm-outs and any and all other interests in Hydrocarbons; in
each case whether now owned or hereafter acquired directly or indirectly.
"Original Loan Agreement" has the meaning set forth in the recitals
hereto.
"Originating Lender" has the meaning set forth in Section 14.1(e).
"Overadvance" has the meaning set forth in Section 2.5.
"Participant" has the meaning set forth in Section 14.1(e).
"Participant Register" has the meaning set forth in Section 14.1(i).
"Pay-Off Letter" means a letter from Agent in respect of the amount
necessary to repay in full all of the existing obligations of Borrower and its
Subsidiaries under the Existing Loan Agreement and the documents related
thereto.
"PBGC" means the Pension Benefit Guaranty Corporation as defined in
Title IV of ERISA, or any successor thereto.
"Permitted Discretion" means a determination made in good faith and in
the exercise of reasonable (from the perspective of a secured asset-based
lender) business judgment.
"Permitted Dispositions" means (a) sales or other dispositions by
Borrower or its Subsidiaries of Equipment that is substantially worn, damaged,
no longer used, surplus, or obsolete in the ordinary course of Borrower's or its
Subsidiaries' business, (b) sales by Borrower or its Subsidiaries of Inventory,
including Hydrocarbons, to buyers in the ordinary course of business, (c) the
use or transfer of money or Cash Equivalents by Borrower or its Subsidiaries in
a manner that is not prohibited by the terms of this Agreement or the other Loan
Documents, (d) the licensing by Borrower or its Subsidiaries, on a non-exclusive
basis, of patents, trademarks, copyrights, and other intellectual property
rights in the ordinary course of Borrower's or its Subsidiaries' business, (e)
releases or surrenders (in accordance with the terms of the applicable lease)
and sales or other dispositions of leasehold interests in properties with no
18
Proved Reserves, (f) releases or surrenders (in accordance with the terms of the
applicable lease) and sales or other dispositions of leasehold interests in
properties with Proved Undeveloped Reserves to the extent Agent consents in its
Permitted Discretion to such releases, surrenders, sales or dispositions, (g)
Bridge Loan Dispositions, (h) Permitted PUD/PDNP Dispositions, (i) transfers or
assignments of interests in Farmout Properties (as such term is defined in the
Senior Notes Indenture) in accordance with the terms of Permitted Farmout
Agreements (as such term is defined in the Senior Notes Indenture), (j) sales or
other dispositions of properties or leasehold interests in properties with
Proved Reserves, other than farmouts, with an aggregate PV-10 attributable to
such reserves of less than $100,000, provided that the aggregate net cash
proceeds received upon the consummation of such transaction pursuant to this
clause (j) shall not exceed $500,000 in any 12 calendar month period, (k) the
liquidation, winding up or dissolution of any Restricted Subsidiary of Borrower
so long as Borrower does not and will not incur, directly or indirectly, any
liabilities or other obligations (whether contingent or otherwise) for or in
connection with any such liquidation, winding up or dissolution (other than
reasonable and ordinary course ministerial costs, expenses, and attorneys' fees
related thereto), (l) the merger or consolidation of any Restricted Subsidiary
of Borrower into any other Restricted Subsidiary of Borrower, so long as there
is no Default, Unmatured Default or Event of Default immediately before and
immediately after such transaction and (m) such other sales or other
dispositions as may be agreed to by Agent in its Permitted Discretion.
"Permitted Investments" means (a) investments in Cash Equivalents, (b)
investments in negotiable instruments for collection, (c) advances made in
connection with purchases of goods or services in the ordinary course of
business, (d) investments made in the ordinary course of, and of a nature that
is customary in, the Oil and Gas Business as a means of actively exploiting,
exploring for, acquiring, developing, processing, gathering, marketing or
transporting oil and gas through agreements, transactions, interests or
arrangements 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 the 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;
provided that for purposes of this clause (d), an investment in capital Stock,
partnership or joint venture interests (other than interests arising from
farm-outs, farm-ins or other similar operating agreements entered into in the
ordinary course of the Oil and Gas Business), limited liability company
interests or other similar equity interests in a Person shall not constitute a
Permitted Investment, (e) Investments constituting intercompany Indebtedness to
the extent permitted pursuant to Section 7.1(i), (f) Investments in the form of
a guarantee by Borrower of Wamsutter Holdings, Inc.'s obligations as the general
partner in Abraxas Wamsutter, L.P. so long as neither Wamsutter Holdings, Inc.
nor Abraxas Wamsutter, L.P. conducts any business or operations, (g) after the
consummation of the Grey Wolf Stock Sale, if Grey Wolf is no longer a Subsidiary
of Borrower or any Restricted Subsidiary, the equity or ownership interest of
Borrower in Grey Wolf, (h) other Investments by Borrower or any Restricted
Subsidiary in any Person so long as the aggregate fair market value of all such
Investments (determined in good faith by the chief financial officer of the
Company and measured as of the date each such Investment is made and without
19
giving effect to subsequent changes in value), when taken together with all
other Investments made pursuant to this clause (h) (net of returns of capital,
dividends and interest paid on Investments and sales, liquidations and
redemptions of Investments), does not exceed $500,000 after the Closing Date and
(i) other Investments as may be agreed to by Agent in its Permitted Discretion.
"Permitted Liens" means (a) Liens held by the Collateral Agent for the
benefit of Agent and the Lenders, (b) Liens for unpaid taxes that either (i) are
not yet delinquent, or (ii) do not constitute an Event of Default or an
Unmatured Default hereunder and are the subject of Permitted Protests, (c) Liens
set forth on Schedule P-1, (d) the interests of lessors under operating leases,
(e) purchase money Liens or the interests of lessors under Capital Leases to the
extent that such Liens or interests secure Permitted Purchase Money Indebtedness
and so long as such Lien attaches only to the asset purchased or acquired and
the proceeds thereof, (f) Liens arising by operation of law in favor of
warehousemen, landlords, carriers, mechanics, materialmen, laborers, or
suppliers, incurred in the ordinary course of business and not in connection
with the borrowing of money, and which Liens either (i) are for sums not yet
delinquent, or (ii) are the subject of Permitted Protests, (g) Liens arising
from deposits made in connection with obtaining worker's compensation or other
unemployment insurance, (h) Liens or deposits to secure performance of bids,
tenders, performance bonds, regulatory compliance in connection with the Oil and
Gas Business or leases incurred in the ordinary course of business and not in
connection with the borrowing of money, (i) Liens granted as security for surety
bonds, performance bonds or appeal bonds in connection with obtaining such bonds
in the ordinary course of business, (j) Liens resulting from any judgment or
award that is not an Event of Default or an Unmatured Default hereunder, (k)
Liens with respect to the Real Property (not including Oil and Gas Properties)
constituting easements, rights of way, zoning restrictions and other minor
imperfections of title that do not materially interfere with or impair the use
or operation thereof, (l) with respect to the Oil and Gas Properties,
imperfections of title as described in title opinions delivered and which are
acceptable to Agent, (m) Liens held by the Collateral Agent to secure the
obligations evidenced by the Senior Notes Documents to the extent such Liens are
subject to the Intercreditor Agreement and Liens held by the Collateral Agent to
secure the Bridge Loan Obligations to the extent such Liens are subordinated to
the Liens securing the Obligations and are subject to the terms of the
Intercreditor Agreement; provided, that (x) the Liens in favor of the holders of
the obligations evidenced by the Senior Note Documents are perfected in the same
property and assets of Borrower and its Subsidiaries as the Liens in favor of
the Collateral Agent for the benefit of Agent and Lenders, and (y) the Liens in
favor of the holders of the Bridge Loan Obligations are perfected in the same
property and assets (other than the Stock of Grey Wolf and the proceeds from the
Grey Wolf Stock Sale) of Borrower and its Subsidiaries as the Liens in favor of
the Collateral Agent for the benefit of Agent and Lenders, (n) Liens for
royalties, overriding royalties, net profit interests, reversionary interests,
operating agreements and other similar interests, properties, arrangements and
agreements as they relate to Hydrocarbon Interests of Borrower, to the extent
such Liens are customary in the Oil and Gas Business, are incurred in the
ordinary course of business, do not secure Indebtedness for borrowed money and
which secure sums which are not then required to be paid, (o) Liens in favor of
collecting or payor banks having a right of setoff, revocation, refund or
chargeback with respect to money or instruments of Borrower or any Restricted
Subsidiary on deposit with or in possession of such bank to the extent such
Liens secure Indebtedness under clause (j) of Section 7.1, (p) Liens on cash and
20
Cash Equivalents securing the performance obligations of Borrower under Hedging
Agreements so long as the aggregate amount of obligations secured by such Liens
at any time outstanding does not exceed $250,000, (q) Liens in favor of Persons
financing unpaid insurance premiums so long as such Liens are limited to
insurance policies with respect to which such premiums are financed, (r)
non-consensual statutory Liens on pipeline or pipeline facilities, Hydrocarbons
or properties and assets of Borrower or any Restricted Subsidiary of Borrower
which arise out of operation of law and are not in connection with the borrowing
of money, (s) Liens pursuant to documents governing Permitted Farmout Agreements
(as such term is defined in the Senior Notes Indenture), (t) Liens not otherwise
permitted under this Agreement incurred in the ordinary course of business of
Borrower or any Restricted Subsidiary of Borrower securing Indebtedness of
Borrower or such Restricted Subsidiary in an aggregate principal amount at any
time outstanding not to exceed $100,000 and (u) other Liens securing other
obligations of the Loan Parties to the extent permitted by Agent in its
Permitted Discretion.
"Permitted Protest" means the right of Borrower or any of its
Subsidiaries, as applicable, to protest any Lien (other than any such Lien that
secures the Obligations), taxes (other than payroll taxes or taxes that are the
subject of a United States federal tax lien), or rental payment, provided that
(a) a reserve with respect to such obligation is established on the Books in
such amount as is required under GAAP, (b) any such protest is instituted
promptly and prosecuted diligently by Borrower or any of its Subsidiaries, as
applicable, in good faith, and (c) Agent is satisfied that, while any such
protest is pending, there will be no impairment of the enforceability, validity,
or priority of any of the Collateral Agent's Liens.
"Permitted PUD/PDNP Dispositions" means releases, surrenders, sales or
other dispositions of properties or leasehold interests in properties with
Proved Developed Non-Producing Reserves and Proved Undeveloped Reserves so long
as (i) no Default, Unmatured Default or Event of Default shall have occurred and
be continuing prior to and after giving effect to such release, surrender, sale
or disposition, (ii) the ratio of (A) the net cash proceeds received by Borrower
or its Restricted Subsidiaries on the date of the consummation of such
transaction as consideration for any such release, surrender, sale or
disposition to (B) the PV-10 of the applicable Proved Developed Non-Producing
Reserves and Proved Undeveloped Reserves subject to such release, surrender,
sale or disposition, as shown on the most recent Reserve Report, equals or
exceeds 1.25 to 1.00, and (iii) the aggregate net cash proceeds received in
connection with such releases, surrenders, sales or other dispositions do not
exceed $1,000,000 after the Closing Date.
"Permitted Purchase Money Indebtedness" means, as of any date of
determination, Purchase Money Indebtedness incurred after the Closing Date in an
aggregate principal amount outstanding at any one time not in excess of $500,000
(or such greater amount as may be agreed to by Agent in its Permitted
Discretion).
"Person" means natural persons, corporations, limited liability
companies, limited partnerships, general partnerships, limited liability
partnerships, joint ventures, trusts, land trusts, business trusts, or other
organizations, irrespective of whether they are legal entities, and governments
and agencies and political subdivisions thereof.
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"Petroleum Engineers" means (i) ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇, (ii) ▇▇▇▇▇▇▇▇ &
Associates Consultants Ltd. or (iii) such other petroleum engineers of
recognized national standing as may be selected by Borrower with the prior
consent of Agent.
"Projections" means Borrower's and Guarantors' forecasted (a) balance
sheets, (b) profit and loss statements, and (c) cash flow statements, all
prepared on a basis consistent with Borrower's and Guarantors' historical
financial statements, together with appropriate supporting details and a
statement of underlying assumptions.
"Pro Rata Share" means:
(a) with respect to a Lender's obligation to make Advances and
receive payments of principal, interest, fees, costs, and expenses with respect
thereto, (x) prior to the Commitment being terminated or reduced to zero, the
percentage obtained by dividing (i) such Lender's Commitment, by (ii) the
aggregate Commitments of all Lenders and (y) from and after the time the
Commitment has been terminated or reduced to zero, the percentage obtained by
dividing (i) the aggregate unpaid principal amount of such Lender's Advances by
(ii) the aggregate unpaid principal amount of all Advances,
(b) with respect to a Lender's obligation to participate in
Letters of Credit, to reimburse the Issuing Lender, and to receive payments of
fees with respect thereto, (x) prior to the Commitment being terminated or
reduced to zero, the percentage obtained by dividing (i) such Lender's
Commitment, by (ii) the aggregate Commitments of all Lenders and (y) from and
after the time the Commitment has been terminated or reduced to zero, the
percentage obtained by dividing (i) the aggregate unpaid principal amount of
such Lender's Advances by (ii) the aggregate unpaid principal amount of all
Advances, and
(c) with respect to all other matters as to a particular Lender
(including the indemnification obligations arising under Section 16.7), the
percentage obtained by dividing (i) such Lender's Commitment by (ii) the
aggregate amount of Commitments of all Lenders; provided, however, that in the
event the Commitments have been terminated or reduced to zero, Pro Rata Share
shall be the percentage obtained by dividing (A) the principal amount of such
Lender's Advances by (B) the principal amount of all outstanding Advances.
"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.
"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.
"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.
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"Proved Undeveloped Reserves" means those Oil and Gas Properties
designated as "proved undeveloped" (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.
"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 during such months determined as
follows:
(i) 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 Borrower as set forth on Exhibit PV-10, as
such Exhibit may from time to time be amended at the request of Borrower with
the written consent of Agent, (B) the prices for fixed price contracts for such
month and (C) 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
(ii) 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.
"Purchase Money Indebtedness" means Indebtedness (other than the
Obligations, but including Capitalized Lease Obligations), incurred at the time
of, or within 20 days after (or such other period as may be agreed to by Agent
in its Permitted Discretion), the acquisition of any fixed assets for the
purpose of financing all or any part of the acquisition cost thereof.
"Qualified Capital" means (a) common Stock of Borrower or (b) other
Stock of Borrower that is not (i) Stock which, by its terms (or by the terms of
any security into which it is convertible or for which it is exchangeable), or
upon the happening of any event, matures or is mandatorily redeemable, pursuant
to a sinking fund obligation or otherwise, or is mandatorily redeemable at the
sole option of the holder thereof, in whole or in part, in either case, on or
prior to 91 days after the payment in full in cash of all Obligations after the
termination of the Commitments, or (ii) Stock that, by its terms, by the terms
of any security into which it is convertible or exchangeable, by contract or
otherwise, requires, or upon the happening of an event or passage of time would
require, the payment of dividends (other than dividends paid (A) in Qualified
Capital and/or (B) from a segregated reserve account funded solely from the
amounts paid by the purchaser or purchasers of such Stock in connection with the
issuance and sale thereof) on or prior to 91 days after the payment in full in
cash of all Obligations after the termination of the Commitments.
23
"Real Property" means any estates or interests in real property now
owned or hereafter acquired by Borrower or any Guarantor and the improvements
thereto.
"Real Property Collateral" means (i) the parcel or parcels of Real
Property identified on Parts A and C of Schedule 5.22 and (ii) any Real Property
hereafter (A) acquired by Borrower or any Guarantor in the case of Real Property
constituting Oil and Gas Properties or (B) owned in fee in the case of Real
Property not constituting Oil and Gas Properties.
"Record" means information that is inscribed on a tangible medium or
which is stored in an electronic or other medium and is retrievable in
perceivable form.
"Register" has the meaning set forth in Section 14.1(h).
"Registered Loan" has the meaning set forth in Section 2.14.
"Registered Note" has the meaning set forth in Section 2.14.
"Related Fund" has the meaning set forth in the definition of "Eligible
Transferee".
"Related Indebtedness" means (i) Indebtedness related to any fees and
expenses incurred by Borrower or any of its Subsidiaries (including, but not
limited to, those owed to any Person not an Affiliate of Borrower or any of its
Subsidiaries) in connection with any amendment (including any amendment and
restatement thereof), supplement, replacement, restatement or other modification
from time to time, including any agreements (and related instruments and
documents) extending the maturity of, refinancing, substituting, replacing or
other restructuring of all or any portion of the Indebtedness under the Loan
Documents (and related instruments and documents) or any successor or
replacement agreements (and related instruments and documents) and (ii) any
capitalized interest, fees, or other expenses incurred by Borrower or any of its
Subsidiaries whether or not charged to the Loan Account or any similar account
created under the Loan Documents.
"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 (a) clean up, remove,
remediate, contain, treat, monitor, assess, evaluate, or in any way address
Hazardous Materials in the indoor or outdoor environment, (b) 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, (c) perform any pre-remedial studies,
investigations, or post-remedial operation and maintenance activities, or (d)
conduct any other actions authorized by 42 USC ss. 9601.
"Report" has the meaning set forth in Section 16.17.
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"Reportable Event" means any of the events described in Section 4043(c)
of ERISA or the regulations thereunder other than a Reportable Event as to which
the provision of 30 days' notice to the PBGC is waived under applicable
regulations.
"Required Availability" means Excess Availability in an amount of not
less than $5,000,000.
"Required Lenders" means, at any time, Lenders whose Pro Rata Shares
aggregate at least 50.1% of the Commitments, or if the Commitments have been
terminated irrevocably, 50.1% of the Obligations (other than Bank Product
Obligations) then outstanding.
"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, and as of any other date on which a Reserve Report is
required or permitted to be obtained pursuant to this Agreement, (i) the
volumetric quantity (calculated using the same pricing assumptions as used in
the calculation of PV-10) and the PV-10 (and, solely with respect to the Reserve
Report dated December 31 of any year, the SEC Value), of the oil and gas
reserves attributable to the Oil and Gas Properties of Borrower included in the
calculation of the 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 (ii) such other
information as Agent may reasonably request, all in form and substance
satisfactory to Agent. Any reference herein to a Reserve Report without
reference to the date thereof shall, unless the context otherwise requires,
refer to the most recent Reserve Report.
"Reserve Report Delivery Date" means the date on which Agent receives
from Borrower the most recent Reserve Report required to be delivered by
Borrower in accordance with Section 6.2(e).
"Restricted Subsidiary" means each Subsidiary of Borrower or Guarantor
other than (x) Grey Wolf and (y) any other Subsidiary of Borrower or Guarantor
agreed to in writing by Agent.
"Revolver Usage" means, as of any date of determination, the sum of (a)
the then extant amount of outstanding Advances, plus (b) the then extant amount
of the Letter of Credit Usage.
"Risk Participation Liability" means, as to each Letter of Credit, all
reimbursement obligations of Borrower to the Issuing Lender with respect to an
L/C Undertaking, consisting of (a) the amount available to be drawn or which may
become available to be drawn, (b) all amounts that have been paid by the Issuing
Lender to the Underlying Issuer to the extent not reimbursed by Borrower,
whether by the making of an Advance or otherwise, and (c) all accrued and unpaid
interest, fees, and expenses payable with respect thereto.
"Rollover Letter of Credit" means that certain letter of credit
outstanding on the Closing with a stated amount of $310,991.71, issued by ▇▇▇▇▇
Fargo for the account of Borrower under the Existing Loan Agreement, and any
renewal, extension or amendment or increase in any such letter of credit
pursuant to the terms of this Agreement.
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"SEC" means the United States Securities and Exchange Commission and
any successor thereto.
"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 Account" means a "securities account" as that term is
defined in the Code.
"Senior Notes" means Borrower's Floating Rate Senior Secured Notes due
2009 issued by Borrower pursuant to the Senior Notes Indenture, as such may from
time to time be amended, restated, replaced, supplemented, modified or otherwise
changed in accordance with the terms of this Agreement.
"Senior Notes Indenture" means the Indenture, dated as of October 28,
2004, between Borrower and the Senior Notes Trustee, as such may from time to
time be amended, restated, replaced, supplemented, modified or otherwise changed
in accordance with the terms of this Agreement.
"Senior Notes Trustee" means U.S. Bank, N.A., as trustee to the holders
of the Senior Notes and any successor thereto.
"Senior Notes Documents" means the Senior Notes Indenture, the Senior
Notes and each other agreement, instrument and document related thereto, as such
may from time to time be amended, restated, replaced, supplemented, modified or
otherwise changed in accordance with the terms of this Agreement.
"Settlement" has the meaning set forth in Section 2.3(f)(i).
"Settlement Date" has the meaning set forth in Section 2.3(f)(i).
"Solvent" means, with respect to any Person on a particular date, that
such Person is not insolvent (as such term is defined in the Uniform Fraudulent
Transfer Act).
"Standard & Poor's" means Standard & Poor's Rating Services, a division
of the ▇▇▇▇▇▇-▇▇▇▇ Companies, Inc. and any successor thereto.
"Stock" means all shares, options, warrants, interests, participations,
or other equivalents (regardless of how designated) of or in a Person, whether
voting or nonvoting, including common stock, preferred stock, or any other
"equity security" (as such term is defined in Rule 3a11-1 of the General Rules
and Regulations promulgated by the SEC under the Exchange Act).
26
"Subsidiary" means, with respect to any Person, a corporation,
partnership, limited liability company, or other entity in which that Person
directly or indirectly owns or controls the shares of Stock having ordinary
voting power to elect a majority of the board of directors (or appoint other
comparable managers) of such corporation, partnership, limited liability
company, or other entity.
"Swing Lender" means Foothill or any other Lender that, at the request
of Borrower and with the consent of Agent agrees, in such Lender's sole
discretion, to become the Swing Lender hereunder.
"Swing Loan" has the meaning set forth in Section 2.3(d)(i).
"Tax Payments" has the meaning set forth in Section 6.6.
"Taxes" has the meaning set forth in Section 16.11.
"Underlying Issuer" means a third Person which is the beneficiary of an
L/C Undertaking and which has issued a letter of credit at the request of the
Issuing Lender for the benefit of Borrower.
"Underlying Letter of Credit" means a letter of credit that has been
issued by an Underlying Issuer.
"Unmatured Default" means an event, condition or default under Sections
8.2 or 8.11 that, after giving of notice by Agent to Borrower, would be an Event
of Default.
"Unused Applicable Proceeds" means the aggregate amount of Applicable
Proceeds that are not reborrowed by Borrower within 365 days of any Asset Sale
(as such term is defined in the Indenture) or Event of Loss (as such term is
defined in the Indenture) to acquire Oil and Gas Properties, Hydrocarbons or
other properties and assets necessary or useful in Borrower's Oil and Gas
Business or make capital expenditures (as certified in a certificate of the
chief executive officer of Borrower delivered to the Senior Notes Trustee and
Agent prior to the end of such 365 day period).
"Voidable Transfer" has the meaning set forth in Section 17.7.
"▇▇▇▇▇ Fargo" means ▇▇▇▇▇ Fargo Bank, National Association, a national
banking association.
1.2 Accounting Terms. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP. When used herein, the term
"financial statements" shall include the notes and schedules thereto. Whenever
the term "Borrower" is used in respect of a financial covenant or a related
definition, it shall be understood to mean Borrower and its Restricted
Subsidiaries on a consolidated basis unless the context clearly requires
otherwise.
1.3 Code. Any terms used in this Agreement that are defined in the Code
shall be construed and defined as set forth in the Code unless otherwise defined
herein.
27
1.4 Construction. Unless the context of this Agreement or any other
Loan Document clearly requires otherwise, references to the plural include the
singular, references to the singular include the plural, the term "including" is
not limiting, and the term "or" has, except where otherwise indicated, the
inclusive meaning represented by the phrase "and/or." The words "hereof,"
"herein," "hereby," "hereunder," and similar terms in this Agreement or any
other Loan Document refer to this Agreement or such other Loan Document, as the
case may be, as a whole and not to any particular provision of this Agreement or
such other Loan Document, as the case may be. Section, subsection, clause,
schedule, and exhibit references herein are to this Agreement unless otherwise
specified. Any reference in this Agreement or in the other Loan Documents to any
agreement, instrument, or document shall include all alterations, amendments,
changes, extensions, modifications, renewals, replacements, substitutions,
joinders, and supplements, thereto and thereof, as applicable (subject to any
restrictions on such alterations, amendments, changes, extensions,
modifications, renewals, replacements, substitutions, joinders, and supplements
set forth herein). Any reference herein to any Person shall be construed to
refer to and include such Person's successors and assigns. Any requirement of a
writing contained herein or in the other Loan Documents shall be satisfied by
the transmission of a Record and any Record transmitted shall constitute a
representation and warranty as to the accuracy and completeness of the
information contained therein.
1.5 Schedules and Exhibits. All of the schedules and exhibits attached
to this Agreement shall be deemed incorporated herein by reference.
2. LOAN AND TERMS OF PAYMENT.
2.1 Revolver Advances.
(a) Subject to the terms and conditions of this Agreement, and
during the term of this Agreement, each Lender with a Commitment agrees
(severally, not jointly or jointly and severally) to make advances ("Advances")
to Borrower in an amount at any one time outstanding not to exceed such Lender's
Pro Rata Share of an amount equal to the lesser of (i) the aggregate amount of
the Commitments less the Letter of Credit Usage, and (ii) the Borrowing Base
less the Letter of Credit Usage. For purposes of this Agreement, "Borrowing
Base," as of any date of determination, shall mean the result of:
(x) an amount equal to 65% of the PV-10 of the Proved
Developed Producing Reserves of Borrower that are
located in the continental 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 benefit of Agent and the Lenders, minus
(y) the sum of (i) the Bank Product Reserves, and (ii) the
aggregate amount of Agent Reserves, if any, established
by Agent under Section 2.1(b).
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(b) Anything to the contrary in this Agreement notwithstanding,
Agent may, and, at the request of the Required Lenders, shall, create reserves
against the Borrowing Base (without declaring an Event of Default) as Agent
determines, in its Permitted Discretion (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, without duplication, (A) past due or accrued taxes or other charges by a
Governmental Authority, including ad valorem, personal property and other taxes
which may have priority over the Liens of Agent in the Collateral; (B) Liens
(whether inchoate or otherwise) 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 or surety
arrangement acceptable to Agent in its Permitted Discretion); (D) without
duplication of the foregoing, amounts owing by Borrower or any Guarantor 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 may from time to time
come into the possession of any of the Lenders or their agents), which Lien or
trust, in Agent's Permitted Discretion 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 Loan Parties) in
and to such item of Collateral, proceeds or collection; (E) to the extent not
taken into account in the most recent Reserve Report delivered to Agent, amounts
which Agent determines are appropriate to account for minority interests and
other interests of Persons other than Borrower and any natural gas imbalances of
Borrower and for sales of Oil and Gas Properties; (F) unrealized losses related
to Commodities Hedging Agreements; (G) any reserves that Agent may impose as a
result of the non-compliance with Section 6.5 by any owner or operator of the
Oil and Gas Properties of Borrower; and (H) amounts owing by Borrower or any
Guarantor in connection with costs and expenses payable to any Person with a
payment priority senior to Agent's or Lenders' payment priority under Section
4.05 of the Intercreditor Agreement. Borrower and Agent 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 Borrower.
(c) The Lenders shall have no obligation to make additional
Advances hereunder to the extent such additional Advances would cause the
Revolver Usage to exceed the aggregate amount of the Commitments.
(d) Notwithstanding the foregoing, the Lenders shall have no
obligation to make Advances if, either immediately before or after giving effect
to such Advances, the Revolver Usage exceeds or will exceed the amount of
Indebtedness permitted under the Senior Notes Indenture (the amount of any such
excess is hereafter referred to as the "Indenture Deficit").
(e) Amounts borrowed pursuant to this Section may be repaid and,
subject to the terms and conditions of this Agreement, reborrowed at any time
during the term of this Agreement.
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2.2 [Intentionally Omitted]
2.3 Borrowing Procedures and Settlements.
(a) Procedure for Borrowing. Each Borrowing shall be made by an
irrevocable written request by an Authorized Person delivered to Agent (which
request must be received by Agent no later than 10:00 a.m. (California time) on
the Business Day prior to the date that is the requested Funding Date in the
case of a request for an Advance specifying (i) the amount of such Borrowing,
and (ii) the requested Funding Date, which shall be a Business Day; provided,
however, that in the case of a request for Swing Loan in an amount of
$5,000,000, or less, such notice will be timely received if it is received by
Agent no later than 10:00 a.m. (California time) on the Business Day that is the
requested Funding Date) specifying (i) the amount of such Borrowing, and (ii)
the requested Funding Date, which shall be a Business Day. At Agent's election,
in lieu of delivering the above-described written request, any Authorized Person
may give Agent telephonic notice of such request by the required time, with such
telephonic notice to be confirmed in writing within 24 hours of the giving of
such notice.
(b) Agent's Election. Promptly after receipt of a request for a
Borrowing pursuant to Section 2.3(a), Agent shall elect, in its discretion, (i)
to have the terms of Section 2.3(c) apply to such requested Borrowing, or (ii)
if the Borrowing is for an Advance, to request Swing Lender to make a Swing Loan
pursuant to the terms of Section 2.3(d) in the amount of the requested
Borrowing; provided, however, that if Swing Lender declines in its sole
discretion to make a Swing Loan pursuant to Section 2.3(d), Agent shall elect to
have the terms of Section 2.3(c) apply to such requested Borrowing.
(c) Making of Advances.
(i) In the event that Agent shall elect to have the terms of
this Section 2.3(c) apply to a requested Borrowing as described in Section
2.3(b), then promptly after receipt of a request for a Borrowing pursuant
to Section 2.3(a), Agent shall notify the Lenders, not later than 1:00 p.m.
(California time) on the Business Day immediately preceding the Funding
Date applicable thereto, by telecopy, telephone, or other similar form of
transmission, of the requested Borrowing. Each Lender shall make the amount
of such Lender's Pro Rata Share of the requested Borrowing available to
Agent in immediately available funds, to Agent's Account, not later than
10:00 a.m. (California time) on the Funding Date applicable thereto. After
Agent's receipt of the proceeds of such Advances, upon satisfaction of the
applicable conditions precedent set forth in Section 3 hereof, Agent shall
make the proceeds thereof available to Borrower on the applicable Funding
Date by transferring immediately available funds equal to such proceeds
received by Agent to Borrower's Designated Account; provided, however,
that, subject to the provisions of Section 2.3(i), Agent shall not request
any Lender to make, and no Lender shall make, any Advance if Agent shall
have actual knowledge that (1) one or more of the applicable conditions
precedent set forth in Section 3 will not be satisfied on the requested
Funding Date for the applicable Borrowing unless such condition has been
waived, or (2) the requested Borrowing would exceed the Availability on
such Funding Date.
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(ii) Unless Agent receives notice from a Lender on or prior
to the Closing Date or, with respect to any Borrowing after the Closing
Date, at least 1 Business Day prior to the date of such Borrowing, that
such Lender will not make available as and when required hereunder to Agent
for the account of Borrower the amount of that Lender's Pro Rata Share of
the Borrowing, Agent may assume that each Lender has made or will make such
amount available to Agent in immediately available funds on the Funding
Date and Agent may (but shall not be so required), in reliance upon such
assumption, make available to Borrower on such date a corresponding amount.
If and to the extent any Lender shall not have made its full amount
available to Agent in immediately available funds and Agent in such
circumstances has made available to Borrower such amount, that Lender shall
on the Business Day following such Funding Date make such amount available
to Agent, together with interest at the Defaulting Lender Rate for each day
during such period. A notice submitted by Agent to any Lender with respect
to amounts owing under this subsection shall be conclusive, absent manifest
error. If such amount is so made available, such payment to Agent shall
constitute such Lender's Advance on the date of Borrowing for all purposes
of this Agreement. If such amount is not made available to Agent on the
Business Day following the Funding Date, Agent will notify Borrower of such
failure to fund and, upon demand by Agent, Borrower shall pay such amount
to Agent for Agent's account, together with interest thereon for each day
elapsed since the date of such Borrowing, at a rate per annum equal to the
interest rate applicable at the time to the Advances composing such
Borrowing. The failure of any Lender to make any Advance on any Funding
Date shall not relieve any other Lender of any obligation hereunder to make
an Advance on such Funding Date, but no Lender shall be responsible for the
failure of any other Lender to make the Advance to be made by such other
Lender on any Funding Date.
(iii) Agent shall not be obligated to transfer to a
Defaulting Lender any payments made by Borrower to Agent for the Defaulting
Lender's benefit, and, in the absence of such transfer to the Defaulting
Lender, Agent shall transfer any such payments to each other non-Defaulting
Lender member of the Lender Group ratably in accordance with their
Commitments (but only to the extent that such Defaulting Lender's Advance
was funded by the other members of the Lender Group) or, if so directed by
Borrower and if no Default, Unmatured Default or Event of Default had
occurred and is continuing (and to the extent such Defaulting Lender's
Advance was not funded by the Lender Group), retain same to be re-advanced
to Borrower as if such Defaulting Lender had made Advances to Borrower.
Subject to the foregoing, Agent may hold and, in its Permitted Discretion,
re-lend to Borrower for the account of such Defaulting Lender the amount of
all such payments received and retained by it for the account of such
Defaulting Lender. Solely for the purposes of voting or consenting to
matters with respect to the Loan Documents, such Defaulting Lender shall be
deemed not to be a "Lender" and such Lender's Commitment shall be deemed to
be zero. This Section shall remain effective with respect to such Lender
until (x) the Obligations under this Agreement shall have been declared or
shall have become immediately due and payable, (y) the non-Defaulting
Lenders, Agent, and Borrower shall have waived such Defaulting Lender's
default in writing, or (z) the Defaulting Lender makes its Pro Rata Share
of the applicable Advance and pays to Agent all amounts owing by Defaulting
Lender in respect thereof. The operation of this Section shall not be
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construed to increase or otherwise affect the Commitment of
any Lender, to relieve or excuse the performance by such Defaulting Lender
or any other Lender of its duties and obligations hereunder, or to relieve
or excuse the performance by Borrower of its duties and obligations
hereunder to Agent or to the Lenders other than such Defaulting Lender. Any
such failure to fund by any Defaulting Lender shall constitute a material
breach by such Defaulting Lender of this Agreement and shall entitle
Borrower at its option, upon written notice to Agent, to arrange for a
substitute Lender to assume the Commitment of such Defaulting Lender, such
substitute Lender to be acceptable to Agent. In connection with the
arrangement of such a substitute Lender, the Defaulting Lender shall have
no right to refuse to be replaced hereunder, and agrees to execute and
deliver a completed form of Assignment and Acceptance Agreement in favor of
the substitute Lender (and agrees that it shall be deemed to have executed
and delivered such document if it fails to do so) subject only to being
repaid its share of the outstanding Obligations (other than Bank Product
Obligations) (including an assumption of its Pro Rata Share of the Risk
Participation Liability) without any premium or penalty of any kind
whatsoever; provided further, however, that any such assumption of the
Commitment of such Defaulting Lender shall not be deemed to constitute a
waiver of any of the Lender Groups' or Borrower's rights or remedies
against any such Defaulting Lender arising out of or in relation to such
failure to fund.
(d) Making of Swing Loans.
(i) In the event Agent shall elect, with the consent of
Swing Lender, as a Lender, to have the terms of this Section 2.3(d) apply
to a requested Borrowing as described in Section 2.3(b), Swing Lender as a
Lender shall make such Advance in the amount of such Borrowing (any such
Advance made solely by Swing Lender as a Lender pursuant to this Section
2.3(d) being referred to as a "Swing Loan" and such Advances being referred
to collectively as "Swing Loans") available to Borrower on the Funding Date
applicable thereto by transferring immediately available funds to
Borrower's Designated Account. Each Swing Loan is an Advance hereunder and
shall be subject to all the terms and conditions applicable to other
Advances, except that all payments on any Swing Loan shall be payable to
Swing Lender as a Lender solely for its own account (and for the account of
the holder of any participation interest with respect to such Swing Loan).
Subject to the provisions of Section 2.3(i), Agent shall not request Swing
Lender as a Lender to make, and Swing Lender as a Lender shall not make,
any Swing Loan if Agent has actual knowledge that (i) one or more of the
applicable conditions precedent set forth in Section 3 will not be
satisfied on the requested Funding Date for the applicable Borrowing unless
such condition has been waived, or (ii) the requested Borrowing would
exceed the Availability on such Funding Date. Swing Lender as a Lender
shall not otherwise be required to determine whether the applicable
conditions precedent set forth in Section 3 have been satisfied on the
Funding Date applicable thereto prior to making, in its sole discretion,
any Swing Loan.
(ii) The Swing Loans shall be secured by the Collateral
Agent's Liens, shall constitute Advances and Obligations hereunder, and
shall bear interest at the rate applicable from time to time to Advances
that are Base Rate Loans.
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(e) Agent Advances.
(i) Agent hereby is authorized by Borrower and the Lenders,
from time to time in Agent's sole discretion, (1) after the occurrence and
during the continuance of a Default or an Unmatured Default or Event of
Default, or (2) at any time that any of the other applicable conditions
precedent set forth in Section 3 have not been satisfied, to make Advances
to Borrower on behalf of the Lenders that Agent, in its Permitted
Discretion deems necessary or desirable (A) to preserve or protect the
Collateral, or any portion thereof, (B) to enhance the likelihood of
repayment of the Obligations (other than Bank Product Obligations), or (C)
to pay any other amount chargeable to Borrower pursuant to the terms of
this Agreement, including Lender Group Expenses and the costs, fees, and
expenses described in Section 10 (any of the Advances described in this
Section 2.3(e) shall be referred to as "Agent Advances"). Each Agent
Advance is an Advance hereunder and shall be subject to all the terms and
conditions applicable to other Advances, and all payments thereon shall be
payable to Agent solely for its own account (and for the account of the
holder of any participation interest with respect to such Agent Advance).
(ii) The Agent Advances shall be repayable by Borrower on
demand and secured by the Collateral Agent's Liens, shall constitute
Advances and Obligations hereunder, and shall bear interest at the rate
applicable from time to time to Advances that are Base Rate Loans.
(f) Settlement. It is agreed that each Lender's funded portion of
the Advances is intended by the Lenders to equal, at all times, such Lender's
Pro Rata Share of the outstanding Advances. Such agreement notwithstanding,
Agent, Swing Lender, and the other Lenders agree (which agreement shall not be
for the benefit of or enforceable by Borrower) that in order to facilitate the
administration of this Agreement and the other Loan Documents, settlement among
them as to the Advances, the Swing Loans, and the Agent Advances shall take
place on a periodic basis in accordance with the following provisions:
(i) Agent shall request settlement ("Settlement") with the
Lenders on a weekly basis, or on a more frequent basis if so determined by
Agent, (1) on behalf of Swing Lender, with respect to each outstanding
Swing Loan, (2) for itself, with respect to each Agent Advance, and (3)
with respect to Collections received, as to each by notifying the Lenders
by telecopy, telephone, or other similar form of transmission, of such
requested Settlement, no later than 2:00 p.m. (California time) on the
Business Day immediately prior to the date of such requested Settlement
(the date of such requested Settlement being the "Settlement Date"). Such
notice of a Settlement Date shall include a summary statement of the amount
of outstanding Advances, Swing Loans, and Agent Advances for the period
since the prior Settlement Date. Subject to the terms and conditions
contained herein (including Section 2.3(c)(iii)): (y) if a Lender's balance
of the Advances, Swing Loans, and Agent Advances exceeds such Lender's Pro
Rata Share of the Advances, Swing Loans, and Agent Advances as of a
Settlement Date, then Agent shall, by no later than 12:00 p.m. (California
time) on the Settlement Date, transfer in immediately available funds to
the account of such Lender as such Lender may designate, an amount such
that each such Lender shall, upon receipt of such amount, have as of the
Settlement Date, its Pro Rata Share of the Advances, Swing Loans, and Agent
Advances, and (z) if a Lender's balance of the Advances, Swing Loans, and
Agent Advances is less than such Lender's Pro Rata Share of the Advances,
Swing Loans, and Agent Advances as of a Settlement Date, such Lender shall
no later than 12:00 p.m. (California time) on the Settlement Date transfer
in immediately available funds to the Agent's Account, an amount such that
each such Lender shall, upon transfer of such amount, have as of the
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Settlement Date, its Pro Rata Share of the Advances, Swing Loans, and Agent
Advances. Such amounts made available to Agent under clause (z) of the
immediately preceding sentence shall be applied against the amounts of the
applicable Swing Loan or Agent Advance and, together with the portion of
such Swing Loan or Agent Advance representing Swing Lender's Pro Rata Share
thereof, shall constitute Advances of such Lenders. If any such amount is
not made available to Agent by any Lender on the Settlement Date applicable
thereto to the extent required by the terms hereof, Agent shall be entitled
to recover for its account such amount on demand from such Lender together
with interest thereon at the Defaulting Lender Rate.
(ii) In determining whether a Lender's balance of the
Advances, Swing Loans, and Agent Advances is less than, equal to, or
greater than such Lender's Pro Rata Share of the Advances, Swing Loans, and
Agent Advances as of a Settlement Date, Agent shall, as part of the
relevant Settlement, apply to such balance the portion of payments actually
received in good funds by Agent with respect to principal, interest and
fees payable by Borrower and allocable to the Lenders hereunder, and
proceeds of Collateral. To the extent that a net amount is owed to any such
Lender after such application, such net amount shall be distributed by
Agent to that Lender as part of such next Settlement.
(iii) Between Settlement Dates, Agent, to the extent no
Agent Advances or Swing Loans are outstanding, may pay over to Swing Lender
any payments received by Agent, that in accordance with the terms of this
Agreement would be applied to the reduction of the Advances, for
application to Swing Lender's Pro Rata Share of the Advances. If, as of any
Settlement Date, Collections received since the then immediately preceding
Settlement Date have been applied to Swing Lender's Pro Rata Share of the
Advances other than to Swing Loans, as provided for in the previous
sentence, Swing Lender shall pay to Agent for the accounts of the Lenders,
and Agent shall pay to the Lenders, to be applied to the outstanding
Advances of such Lenders, an amount such that each Lender shall, upon
receipt of such amount, have, as of such Settlement Date, its Pro Rata
Share of the Advances. During the period between Settlement Dates, Swing
Lender with respect to Swing Loans, Agent with respect to Agent Advances,
and each Lender (subject to the effect of letter agreements between Agent
and individual Lenders) with respect to the Advances other than Swing Loans
and Agent Advances, shall be entitled to interest at the applicable rate or
rates payable under this Agreement on the daily amount of funds employed by
Swing Lender, Agent, or the Lenders, as applicable.
(g) Notation. Agent shall record on its books the principal
amount of the Advances owing to each Lender, including the Swing Loans owing to
Swing Lender, and Agent Advances owing to Agent, and the interests therein of
each Lender, from time to time. In addition, each Lender is authorized, at such
Lender's option, to note the date and amount of each payment or prepayment of
34
principal of such Lender's Advances in its books and records, including computer
records, such books and records constituting conclusive evidence, absent
manifest error, of the accuracy of the information contained therein.
(h) Lenders' Failure to Perform. All Advances (other than Swing
Loans and Agent Advances) shall be made by the Lenders contemporaneously and in
accordance with their Pro Rata Shares. It is understood that (i) no Lender shall
be responsible for any failure by any other Lender to perform its obligation to
make any Advance (or other extension of credit) hereunder, nor shall any
Commitment of any Lender be increased or decreased as a result of any failure by
any other Lender to perform its obligations hereunder, and (ii) no failure by
any Lender to perform its obligations hereunder shall excuse any other Lender
from its obligations hereunder.
(i) Optional Overadvances. (i) Any contrary provision of
this Agreement (including, without limitation, Section 2.3(i)(ii))
notwithstanding, the Lenders hereby authorize Agent or Swing Lender, as
applicable, and Agent or Swing Lender, as applicable, may, but is not
obligated to, knowingly and intentionally, continue to make Advances
(including Swing Loans) to Borrower notwithstanding that an Overadvance
exists or thereby would be created. The foregoing provisions are for the
exclusive benefit of Agent, Swing Lender, and the Lenders and are not
intended to benefit Borrower in any way. The Advances and Swing Loans, as
applicable, that are made pursuant to this Section 2.3(i) shall be subject
to the same terms and conditions as any other Advance or Swing Loan, as
applicable, and the rate of interest applicable thereto shall be the rate
applicable to Advances that are Base Rate Loans under Section 2.6(c) hereof
without regard to the presence or absence of a Default or an Unmatured
Default or Event of Default.
(ii) In the event Agent obtains actual knowledge that the
Revolver Usage exceeds the amounts permitted by the preceding paragraph,
regardless of the amount of, or reason for, such excess, Agent shall notify
the Lenders as soon as practicable (and prior to making any (or any
additional) intentional Overadvances (except for and excluding amounts
charged to the Loan Account for interest, fees, or Lender Group Expenses of
Agent and the Lenders) unless Agent determines that prior notice would
result in imminent harm to the Collateral or its value), and the Lenders
thereupon shall, together with Agent, jointly determine the terms of
arrangements that shall be implemented with Borrower intended to reduce,
within a reasonable time, the outstanding principal amount of the Advances
to Borrower to an amount permitted by the preceding paragraph. In the event
Agent or any Lender disagrees over the terms of reduction or repayment of
any Overadvance, the terms of reduction or repayment thereof shall be
implemented according to the determination of the Required Lenders.
(iii) Each Lender shall be obligated to settle with Agent as
provided in Section 2.3(f) for the amount of such Lender's Pro Rata Share
of any unintentional Overadvances by Agent reported to such Lender, any
intentional Overadvances made as permitted under this Section 2.3(i), and
any Overadvances resulting from the charging to the Loan Account of
interest, fees, or Lender Group Expenses.
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2.4 Payments.
(a) Payments by Borrower.
(i) Except as otherwise expressly provided herein, all
payments by Borrower shall be made to Agent's Account for the account of
the Lender Group and shall be made in immediately available funds, no later
than 11:00 a.m. (California time) on the date specified herein. Any payment
received by Agent later than 11:00 a.m. (California time) shall be deemed
to have been received on the following Business Day and any applicable
interest or fee shall continue to accrue until such following Business Day.
(ii) Unless Agent receives notice from Borrower prior to the
date on which any payment is due to the Lenders that Borrower will not make
such payment in full as and when required, Agent may assume that Borrower
has made (or will make) such payment in full to Agent on such date in
immediately available funds and Agent may (but shall not be so required),
in reliance upon such assumption, distribute to each Lender on such due
date an amount equal to the amount then due such Lender. If and to the
extent Borrower does not make such payment in full to Agent on the date
when due, each Lender severally shall repay to Agent on demand such amount
distributed to such Lender, together with interest thereon at the
Defaulting Lender Rate for each day from the date such amount is
distributed to such Lender until the date repaid.
(b) Apportionment and Application of Payments.
(i) Except as otherwise provided with respect to Defaulting
Lenders and except as otherwise provided in the Loan Documents (including
letter agreements between Agent and individual Lenders), aggregate
principal and interest payments shall be apportioned ratably among the
Lenders (according to the unpaid principal balance of the Obligations held
by each Lender) and payments of fees and expenses shall be apportioned
ratably among the Lenders having a Pro Rata Share of the Commitment or
Obligations (other than (x) payments received while no Unmatured Default or
Event of Default has occurred and is continuing and which relate to the
payment of principal or interest of specific Obligations or which relate to
the payment of specific fees, (y) payments received from the Collateral
Agent during the existence of a Default Period which relate to the payment
of specific Obligations as set forth in Section 4.06(b) of the
Intercreditor Agreement and (z) payments received from Bridge Loan
Dispositions described in clause (b) of such definition which will be
governed by Section 4.05 of the Intercreditor Agreement, and all proceeds
of Accounts or other Collateral received by Agent, shall be applied (unless
otherwise agreed by the Required Lenders) as follows:
(A) first, to pay any Lender Group Expenses then due to
Agent under the Loan Documents, until paid in full,
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(B) second, to pay any Lender Group Expenses then due
to the Lenders under the Loan Documents, on a ratable basis, until
paid in full,
(C) third, to pay any fees then due to Agent under the
Loan Documents until paid in full,
(D) fourth, to pay any fees then due to any or all of
the Lenders under the Loan Documents, on a ratable basis, until paid
in full,
(E) fifth, to pay interest due in respect of all Agent
Advances, until paid in full,
(F) sixth, ratably to pay interest due in respect of
the Advances (other than Agent Advances) and the Swing Loans until
paid in full,
(G) seventh, to pay the principal of all Agent Advances
until paid in full,
(H) eighth, to pay the principal of all Swing Loans
until paid in full,
(I) ninth, ratably (i) to pay the principal of all
Advances until paid in full, and (ii) to Agent, to be held by Agent,
for the benefit of ▇▇▇▇▇ Fargo or its Affiliates, as applicable, as
cash collateral in an amount up to the amount of the Bank Product
Obligations until Borrower's and its Subsidiaries' obligations in
respect of the then extant Bank Products have been paid in full or the
cash collateral amount has been exhausted, and (iii) to be held by
Agent, for the ratable benefit of Issuing Lender and those Lenders
having a Commitment, as cash collateral in an amount up to 105% of the
then extant Letter of Credit Usage until paid in full,
(J) tenth, to pay the Applicable Prepayment Premium
until paid in full,
(K) eleventh, to pay any other Obligations (including
Bank Product Obligations) until paid in full, and
(L) twelfth, to Borrower (to be wired to the Designated
Account) or such other Person entitled thereto under applicable law or
under the Intercreditor Agreement.
(ii) Agent promptly shall distribute to each Lender,
pursuant to the applicable wire instructions received from each Lender in
writing, such funds as it may be entitled to receive, subject to a
Settlement delay as provided in Section 2.3(h).
(iii) In each instance, so long as no Unmatured Default or
Event of Default has occurred and is continuing, Section 2.4(b)(i) shall
not be deemed to apply to any payment by Borrower specified by Borrower to
37
be for the payment of specific Obligations then due and payable (or
prepayable) under any provision of this Agreement.
(iv) For purposes of the foregoing, "paid in full" means
payment of all amounts owing under the Loan Documents according to the
terms thereof, including loan fees, service fees, professional fees,
interest (and specifically including interest accrued after the
commencement of any Insolvency Proceeding), default interest, interest on
interest, and expense reimbursements, whether or not the same would be or
is allowed or disallowed in whole or in part in any Insolvency Proceeding.
(v) [Intentionally Omitted]
(vi) In the event of a direct conflict between the priority
provisions of this Section 2.4 and other provisions contained in any other
Loan Document, it is the intention of the parties hereto that such priority
provisions in such documents shall be read together and construed, to the
fullest extent possible, to be in concert with each other. In the event of
any actual, irreconcilable conflict that cannot be resolved as aforesaid,
the terms and provisions of this Section 2.4 shall control and govern.
(c) Indenture Deficit. If on any day an Indenture Deficit exists,
Borrower shall immediately pay to Agent an amount equal to such Indenture
Deficit to be applied to the outstanding principal of the Advances.
2.5 Overadvances. If, at any time or for any reason, the amount of the
Obligations (other than Bank Product Obligations and Related Indebtedness) owed
by Borrower to the Lender Group pursuant to Sections 2.1 and 2.12 is greater
than either the Dollar or percentage limitations set forth in Sections 2.1 or
2.12, (an "Overadvance"), Borrower immediately shall pay to Agent (unless an
Overadvance is created pursuant to Section 2.3(i) in which case such payment
shall be on demand), in cash, the amount of such excess, which amount shall be
used by Agent to reduce the Obligations in accordance with the priorities set
forth in Section 2.4(b). In addition, Borrower hereby promises to pay the
Obligations (including principal, interest, fees, costs, and expenses) in
Dollars in full to the Lender Group as and when due and payable under the terms
of this Agreement and the other Loan Documents.
2.6 Interest Rates and Letter of Credit Fee: Rates, Payments, and
Calculations.
(a) Interest Rates. Except as provided in clause (c) below, all
Obligations (except for undrawn Letters of Credit and except for Bank Product
Obligations) whether or not charged to the Loan Account pursuant to the terms
hereof shall bear interest on the Daily Balance thereof at a per annum rate
equal to the Base Rate plus the Base Rate Margin.
(b) Letter of Credit Fee. Borrower shall pay Agent (for the
ratable benefit of the Lenders, subject to any letter agreement between Agent
and individual Lenders), a Letter of Credit fee (in addition to the charges,
commissions, fees, and costs set forth in Section 2.12(e)) which shall accrue at
a rate equal to 4.0% per annum times the Daily Balance of the undrawn amount of
all outstanding Letters of Credit. (c) Default Rate. Upon the occurrence and
during the continuation of an Unmatured Default or Event of Default (and at the
election of Agent or the Required Lenders),
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(i) all Obligations (except for undrawn Letters of Credit
and except for Bank Product Obligations) whether or not charged to the Loan
Account pursuant to the terms hereof shall bear interest on the Daily
Balance thereof at a per annum rate equal to 4 percentage points above the
per annum rate otherwise applicable hereunder, and
(ii) the Letter of Credit fee provided for above shall be
increased to 4 percentage points above the per annum rate otherwise
applicable hereunder.
(d) Payment. Interest shall be due and payable, in arrears, on
the first day of each month at any time that Obligations or Commitments are
outstanding. Letter of Credit fees and all other fees payable hereunder shall be
due and payable on the date upon which such fees are due and payable hereunder.
Borrower hereby authorizes Agent, from time to time without prior notice to
Borrower, to, and Agent agrees that it may (at its sole and absolute
discretion), charge such interest and fees, all Lender Group Expenses (as and
when incurred), the charges, commissions, fees, and costs provided for in
Section 2.12(e) (as and when accrued or incurred), the fees and costs provided
for in Section 2.11 (as and when accrued or incurred), and all other payments as
and when due and payable under any Loan Document, including any amounts due and
payable to ▇▇▇▇▇ Fargo or its Affiliates in respect of Bank Products (up to the
amount of the then extant Bank Products Reserve) to Borrower's Loan Account,
which amounts thereafter shall constitute Advances hereunder and shall accrue
interest at the rate then applicable to Advances hereunder. Any interest not
paid when due shall be compounded by being charged to Borrower's Loan Account
and shall thereafter constitute Advances hereunder and shall accrue interest at
the rate then applicable to Advances that are Base Rate Loans hereunder.
(e) Computation. All interest and fees chargeable under the Loan
Documents shall be computed on the basis of a 360-day year for the actual number
of days elapsed. In the event the Base Rate is changed from time to time
hereafter, the rates of interest hereunder based upon the Base Rate
automatically and immediately shall be increased or decreased by an amount equal
to such change in the Base Rate.
(f) Intent to Limit Charges to Maximum Lawful Rate. In no event
shall the interest rate or rates payable under this Agreement, plus any other
amounts paid in connection herewith, exceed the highest rate permissible under
any law that a court of competent jurisdiction shall, in a final determination,
deem applicable. Borrower and the Lender Group, in executing and delivering this
Agreement, intend legally to agree upon the rate or rates of interest and manner
of payment stated within it; provided, however, that, anything contained herein
to the contrary notwithstanding, if said rate or rates of interest or manner of
payment exceeds the maximum allowable under applicable law, then, ipso facto, as
of the date of this Agreement, Borrower is and shall be liable only for the
payment of such maximum as allowed by law, and payment received from Borrower in
excess of such legal maximum, whenever received, shall be applied to reduce the
principal balance of the Obligations to the extent of such excess.
39
2.7 Cash Management. Borrower shall establish and maintain cash
management services in accordance with the requirements set forth in the
Collateral Documents.
2.8 Crediting Payments. The receipt of any payment item by Agent shall
not be considered a payment on account unless such payment item is a wire
transfer of immediately available federal funds made to the Agent's Account or
unless and until such payment item is honored when presented for payment. Should
any payment item not be honored when presented for payment, then Borrower shall
be deemed not to have made such payment and interest shall be calculated
accordingly. Anything to the contrary contained herein notwithstanding, any
payment item shall be deemed received by Agent only if it is received into the
Agent's Account on a Business Day on or before 11:00 a.m. (California time). If
any payment item is received into the Agent's Account on a non-Business Day or
after 11:00 a.m. (California time) on a Business Day, it shall be deemed to have
been received by Agent as of the opening of business on the immediately
following Business Day.
2.9 Designated Account. Agent is authorized to make the Advances, and
Issuing Lender is authorized to issue the Letters of Credit, under this
Agreement based upon telephonic or other instructions received from anyone
purporting to be an Authorized Person, or without instructions if pursuant to
Section 2.6(d). Borrower agrees to establish and maintain the Designated Account
with the Designated Account Bank for the purpose of receiving the proceeds of
the Advances requested by Borrower and made by Agent or the Lenders hereunder.
Unless otherwise agreed by Agent and Borrower, any Advance, Agent Advance, or
Swing Loan requested by Borrower and made by Agent or the Lenders hereunder
shall be made to the Designated Account.
2.10 Maintenance of Loan Account; Statements of Obligations. Agent
shall maintain an account on its books in the name of Borrower (the "Loan
Account") on which Borrower will be charged with all Advances (including Agent
Advances and Swing Loans) made by Agent, Swing Lender, or the Lenders to
Borrower or for Borrower's account, the Letters of Credit issued by Issuing
Lender for Borrower's account, and with all other payment Obligations hereunder
or under the other Loan Documents (including Bank Product Obligations up to the
amount of the then extant Bank Products Reserve), including, accrued interest,
fees and expenses, and Lender Group Expenses. In accordance with Section 2.8,
the Loan Account will be credited with all payments received by Agent from
Borrower or for Borrower's account. Agent shall render statements regarding the
Loan Account to Borrower, including principal, interest, fees, and including an
itemization of all charges and expenses constituting Lender Group Expenses
owing, and such statements shall be conclusively presumed to be correct and
accurate and constitute an account stated between Borrower and the Lender Group
unless, within 30 days after receipt thereof by Borrower, Borrower shall deliver
to Agent written objection thereto describing the error or errors contained in
any such statements.
2.11 Fees. Borrower shall pay to Agent the following fees and charges,
which fees and charges shall be non-refundable when paid (irrespective of
whether this Agreement is terminated thereafter) and shall be apportioned among
the Lenders in accordance with their Pro Rata Share (as determined by clause (a)
of the definition thereof):
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(a) Commitment Fee. On the first day of each month during the
term of this Agreement, a commitment fee in an amount equal to the Commitment
Fee Percentage times the result of (i) the greater of (A) the aggregate amount
of the Commitments and (B) $5,000,000, less (ii) the sum of (A) the average
Daily Balance of Advances that were outstanding during the immediately preceding
month, plus (B) the average Daily Balance of the Letter of Credit Usage during
the immediately preceding month,
(b) Fee Letter Fees. As and when due and payable under the terms
of the Fee Letter, Borrower shall pay to Agent the fees set forth in the Fee
Letter, and
(c) Audit, Appraisal, and Valuation Charges. For the separate
account of Agent, audit, appraisal, and valuation fees and charges as follows,
(i) a fee of $850 per day, per auditor (such fees for all auditors for any
single financial audit not to exceed $5,000 in the aggregate), plus
out-of-pocket expenses for each financial audit of a Loan Party performed by
personnel employed by Agent, (ii) a fee of $1,500 per day per appraiser, plus
out-of-pocket expenses, for each appraisal of the Collateral performed by
personnel employed by Agent, and (iii) the actual charges paid or incurred by
Agent if it elects to employ the services of one or more third Persons to
perform financial audits of any Loan Party, to appraise the Collateral, or any
portion thereof, to review or examine the Oil and Gas Properties of any Loan
Party or to assess any Loan Party's business valuation, provided that, (x) with
respect of clause (i) above, so long as no Unmatured Default or Event of Default
shall have occurred and be continuing, Borrower shall not be obligated to pay
for more than four (4) financial audits during any calendar year and (y) with
respect to any Reserve Report requested by Borrower or Agent (in addition to the
Reserve Reports required to be delivered semi-annually by Borrower to Agent
pursuant to Section 6.2(e)), the party requesting the issuance of such Reserve
Report shall pay the costs and expenses associated therewith in the absence of a
continuing Default, Unmatured Default or Event of Default (and during a
continuing Default, Unmatured Default or Event of Default, such Reserve Report
shall be at Borrower's sole cost and expense).
2.12 Letters of Credit.
(a) Subject to the terms and conditions of this Agreement, the
Issuing Lender agrees to issue letters of credit for the account of Borrower
(each, an "L/C") or to purchase participations or execute indemnities or
reimbursement obligations (each such undertaking, an "L/C Undertaking") with
respect to letters of credit issued by an Underlying Issuer (as of the Closing
Date, the prospective Underlying Issuer is to be ▇▇▇▇▇ Fargo) for the account of
Borrower. To request the issuance of an L/C or an L/C Undertaking (or the
amendment, renewal, or extension of an outstanding L/C or L/C Undertaking),
Borrower shall hand deliver or telecopy (or transmit by electronic
communication, if arrangements for doing so have been approved by the Issuing
Lender) to the Issuing Lender and Agent (reasonably in advance of the requested
date of issuance, amendment, renewal, or extension) a notice requesting the
issuance of an L/C or L/C Undertaking, or identifying the L/C or L/C Undertaking
to be amended, renewed, or extended, the date of issuance, amendment, renewal,
or extension, the date on which such L/C or L/C Undertaking is to expire, the
amount of such L/C or L/C Undertaking, the name and address of the beneficiary
thereof (or the beneficiary of the Underlying Letter of Credit, as applicable),
and such other information as shall be necessary to prepare, amend, renew, or
extend such L/C or L/C Undertaking. If requested by the Issuing Lender, Borrower
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also shall be an applicant under the application with respect to any Underlying
Letter of Credit that is to be the subject of an L/C Undertaking. The Issuing
Lender shall have no obligation to issue a Letter of Credit if any of the
following would result after giving effect to the requested Letter of Credit:
(i) the Letter of Credit Usage would exceed the Borrowing
Base less the amount of outstanding Advances, or
(ii) the Letter of Credit Usage would exceed $2,500,000, or
(iii) the Letter of Credit Usage would exceed the aggregate
amount of the Commitments less the then extant amount of outstanding
Advances, or
(iv) an Indenture Deficit would exist.
Borrower and the Lender Group acknowledge and agree that certain
Underlying Letters of Credit may be issued to support letters of credit that
already are outstanding as of the Closing Date. Each Letter of Credit (and
corresponding Underlying Letter of Credit) shall be in form and substance
acceptable to the Issuing Lender (in the exercise of its Permitted Discretion),
including the requirement that the amounts payable thereunder must be payable in
Dollars. If Issuing Lender is obligated to advance funds under a Letter of
Credit, Borrower immediately shall reimburse such L/C Disbursement to Issuing
Lender by paying to Agent an amount equal to such L/C Disbursement not later
than 11:00 a.m., California time, on the date that such L/C Disbursement is
made, if Borrower shall have received written or telephonic notice of such L/C
Disbursement prior to 10:00 a.m., California time, on such date, or, if such
notice has not been received by Borrower prior to such time on such date, then
not later than 11:00 a.m., California time, on the Business Day that Borrower
receives such notice, if such notice is received prior to 10:00 a.m., California
time, on the date of receipt, and, in the absence of such reimbursement, the L/C
Disbursement immediately and automatically shall be deemed to be an Advance
hereunder and, thereafter, shall bear interest at the rate then applicable to
Advances that are Base Rate Loans under Section 2.6. To the extent an L/C
Disbursement is deemed to be an Advance hereunder, Borrower's obligation to
reimburse such L/C Disbursement shall be discharged and replaced by the
resulting Advance. Promptly following receipt by Agent of any payment from
Borrower pursuant to this paragraph, Agent shall distribute such payment to the
Issuing Lender or, to the extent that Lenders have made payments pursuant to
Section 2.12(c) to reimburse the Issuing Lender, then to such Lenders and the
Issuing Lender as their interest may appear.
(b) Promptly following receipt of a notice of L/C Disbursement
pursuant to Section 2.12(a), each Lender agrees to fund its Pro Rata Share of
any Advance deemed made pursuant to the foregoing subsection on the same terms
and conditions as if Borrower had requested such Advance and Agent shall
promptly pay to Issuing Lender the amounts so received by it from the Lenders.
By the issuance of a Letter of Credit (or an amendment to a Letter of Credit
increasing the amount thereof) and without any further action on the part of the
Issuing Lender or the Loan Lenders, the Issuing Lender shall be deemed to have
granted to each Lender, and each Lender shall be deemed to have purchased, a
participation in each Letter of Credit, in an amount equal to its Pro Rata Share
of the Risk Participation Liability of such Letter of Credit, and each such
Lender agrees to pay to Agent, for the account of the Issuing Lender, such
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Lender's Pro Rata Share of any payments made by the Issuing Lender under such
Letter of Credit. In consideration and in furtherance of the foregoing, each
Lender hereby absolutely and unconditionally agrees to pay to Agent, for the
account of the Issuing Lender, such Lender's Pro Rata Share of each L/C
Disbursement made by the Issuing Lender and not reimbursed by Borrower on the
date due as provided in clause (a) of this Section, or of any reimbursement
payment required to be refunded to Borrower for any reason. Each Lender
acknowledges and agrees that its obligation to deliver to Agent, for the account
of the Issuing Lender, an amount equal to its respective Pro Rata Share pursuant
to this Section 2.12(b) shall be absolute and unconditional and such remittance
shall be made notwithstanding the occurrence or continuation of an Unmatured
Default, Event of Default or Default or the failure to satisfy any condition set
forth in Section 3 hereof. If any such Lender fails to make available to Agent
the amount of such Lender's Pro Rata Share of any payments made by the Issuing
Lender in respect of such Letter of Credit as provided in this Section, Agent
(for the account of the Issuing Lender) shall be entitled to recover such amount
on demand from such Lender together with interest thereon at the Defaulting
Lender Rate until paid in full.
(c) Borrower hereby agrees to indemnify, save, defend, and hold
the Lender Group harmless from any loss, cost, expense, or liability, including
reasonable attorneys fees and disbursements incurred by the Lender Group arising
out of or in connection with any Letter of Credit; provided, however, that
Borrower shall not be obligated hereunder to indemnify for any loss, cost,
expense, or liability that is caused by the gross negligence or willful
misconduct of the Issuing Lender or any other member of the Lender Group.
Borrower agrees to be bound by the Underlying Issuer's regulations and
interpretations of any Underlying Letter of Credit or by Issuing Lender's
interpretations of any L/C issued by Issuing Lender to or for Borrower's
account, even though this interpretation may be different from Borrower's own,
and Borrower understands and agrees that the Lender Group shall not be liable
for any error, negligence, or mistake, whether of omission or commission, in
following Borrower's instructions or those contained in the Letter of Credit or
any modifications, amendments, or supplements thereto. Borrower understands that
the L/C Undertakings may require Issuing Lender to indemnify the Underlying
Issuer for certain costs or liabilities arising out of claims by Borrower
against such Underlying Issuer. Borrower hereby agrees to indemnify, save,
defend, and hold the Lender Group harmless with respect to any loss, cost,
expense (including reasonable attorneys fees), or liability incurred by the
Lender Group under any L/C Undertaking as a result of the Lender Group's
indemnification of any Underlying Issuer; provided, however, that Borrower shall
not be obligated hereunder to indemnify for any loss, cost, expense, or
liability that is caused by the gross negligence or willful misconduct of the
Issuing Lender or any other member of the Lender Group.
(d) Borrower hereby authorizes and directs any Underlying Issuer
to deliver to the Issuing Lender all instruments, documents, and other writings
and property received by such Underlying Issuer pursuant to such Underlying
Letter of Credit and to accept and rely upon the Issuing Lender's instructions
with respect to all matters arising in connection with such Underlying Letter of
Credit and the related application.
(e) Any and all charges, commissions, fees, and costs incurred by
the Issuing Lender relating to Underlying Letters of Credit shall be Lender
Group Expenses for purposes of this Agreement and immediately shall be
reimbursable by Borrower to Agent for the account of the Issuing Lender; it
43
being acknowledged and agreed by Borrower that, as of the Closing Date, the
issuance charge imposed by the prospective Underlying Issuer is 0.825% per annum
times the face amount of each Underlying Letter of Credit, that such issuance
charge may be changed from time to time, and that the Underlying Issuer also
imposes a schedule of charges for amendments, extensions, drawings, and
renewals.
(f) If by reason of (i) any change in any applicable law, treaty,
rule, or regulation or any change in the interpretation or application thereof
by any Governmental Authority, or (ii) compliance by the Underlying Issuer or
the Lender Group with any direction, request, or requirement (irrespective of
whether having the force of law) of any Governmental Authority or monetary
authority including, Regulation D of the Federal Reserve Board as from time to
time in effect (and any successor thereto):
(i) any reserve, deposit, or similar requirement is or shall
be imposed or modified in respect of any Letter of Credit issued hereunder,
or
(ii) there shall be imposed on the Underlying Issuer or the
Lender Group any other condition regarding any Underlying Letter of Credit
or any Letter of Credit issued pursuant hereto,
and the result of the foregoing is to increase, directly or indirectly, the cost
to the Lender Group of issuing, making, guaranteeing, or maintaining any Letter
of Credit or to reduce the amount receivable in respect thereof by the Lender
Group, then, and in any such case, Agent may, at any time within a reasonable
period after the additional cost is incurred or the amount received is reduced,
notify Borrower, and Borrower shall pay on demand such amounts as Agent may
specify to be necessary to compensate the Lender Group for such additional cost
or reduced receipt, together with interest on such amount from the date of such
demand until payment in full thereof at the rate then applicable to Base Rate
Loans hereunder. The determination by Agent of any amount due pursuant to this
Section, as set forth in a certificate setting forth the calculation thereof in
reasonable detail, shall, in the absence of manifest or demonstrable error, be
final and conclusive and binding on all of the parties hereto.
(g) The parties hereto agree that the Rollover Letter of Credit
shall constitute a "Letter of Credit" issued for the account of Borrower under
this Agreement.
2.13 Capital Requirements. If, after the date hereof, any Lender
determines that (i) the adoption of or change in any law, rule, regulation or
guideline regarding capital requirements for banks or bank holding companies, or
any change in the interpretation or application thereof by any Governmental
Authority charged with the administration thereof, or (ii) compliance by such
Lender or its parent bank holding company with any guideline, request, or
directive of any such entity regarding capital adequacy (whether or not having
the force of law), the effect of reducing the return on such Lender's or such
holding company's capital as a consequence of such Lender's Commitments
hereunder to a level below that which such Lender or such holding company could
have achieved but for such adoption, change, or compliance (taking into
consideration such Lender's or such holding company's then existing policies
with respect to capital adequacy and assuming the full utilization of such
entity's capital) by any amount deemed by such Lender to be material, then such
Lender may notify Borrower and Agent thereof. Following receipt of such notice,
44
Borrower agrees to pay such Lender on demand the amount of such reduction of
return of capital as and when such reduction is determined, payable within 90
days after presentation by such Lender of a statement in the amount and setting
forth in reasonable detail such Lender's calculation thereof and the assumptions
upon which such calculation was based (which statement shall be deemed true and
correct absent manifest error). In determining such amount, such Lender may use
any reasonable averaging and attribution methods.
2.14 Registered Notes. Borrower agrees to record each Advance on the
Register referred to in Section 14.1(h). Each Advance recorded on the Register
(a "Registered Loan") may not be evidenced by promissory notes other than
Registered Notes (as defined below). Upon the registration of any Advance,
Borrower agrees, at the request of any Lender, to execute and deliver to such
Lender a promissory note, in conformity with the terms of this Agreement, in
registered form to evidence such Registered Loan, in form and substance
reasonably satisfactory to Agent and such Lender, and registered as provided in
Section 14.1(h) (a "Registered Note"), payable to the order of such Lender and
otherwise duly completed, provided that any Registered Note issued to evidence
Advances shall be issued in the principal amount of the applicable Lender's
Commitment. Once recorded on the Register, each Advance may not be removed from
the Register so long as it or they remain outstanding, and a Registered Note may
not be exchanged for a promissory note that is not a Registered Note.
3. CONDITIONS; TERM OF AGREEMENT.
3.1 Conditions Precedent to the Initial Extension of Credit. The
obligation of the Lender Group (or any member thereof) to make the initial
Advance (or otherwise to extend any credit provided for hereunder), is subject
to the fulfillment, to the satisfaction of Agent, of each of the conditions
precedent set forth below:
(a) the Collateral Agent shall have received and filed all
financing statements required by the Collateral Agent, duly executed or
otherwise authorized by Borrower or any Guarantor, and Agent shall have received
evidence reflecting the filing of all such financing statements;
(b) Agent shall have received each of the following documents, in
form and substance satisfactory to Agent, duly executed, and each such document
shall be in full force and effect:
(i) the Contribution Agreement,
(ii) the Flow of Funds Agreement,
(iii) the Fee Letter,
(iv) the Intercreditor Agreement,
(v) the Pay-Off Letter, and
(vi) the Collateral Documents;
45
(c) Agent shall have received a certificate from the Secretary of
Borrower (i) attesting to the resolutions of Borrower's Board of Directors
authorizing its execution, delivery, and performance of this Agreement and the
other Loan Documents to which Borrower is a party and authorizing specific
officers of Borrower to execute the same and (ii) certifying the names and true
signatures of the officers of Borrower authorized to sign each Loan Document to
which Borrower is a party;
(d) Agent shall have received copies of Borrower's Governing
Documents, as amended, modified, or supplemented to the Closing Date, certified
by the Secretary of Borrower;
(e) Agent shall have received a certificate of status with
respect to Borrower, dated within 10 days of the Closing Date, such certificate
to be issued by the appropriate officer of the jurisdiction of organization of
Borrower, which certificate shall indicate that Borrower is in good standing in
such jurisdiction;
(f) Agent shall have received certificates of status with respect
to Borrower, each dated within 30 days of the Closing Date, such certificates to
be issued by the appropriate officer of the jurisdictions (other than the
jurisdiction of organization of Borrower) in which its failure to be duly
qualified or licensed would constitute a Material Adverse Change, which
certificates shall indicate that Borrower is in good standing in such
jurisdictions;
(g) Agent shall have received a certificate from the Secretary of
each Guarantor (i) attesting to the resolutions of Guarantor's Board of
Directors authorizing its execution, delivery, and performance of the Loan
Documents to which Guarantor is a party and authorizing specific officers of
Guarantor to execute the same and (ii) certifying the names and true signatures
of the officers of such Guarantor authorized to sign each Loan Document to which
such Guarantor is a party;
(h) Agent shall have received copies of each Guarantor's
Governing Documents, as amended, modified, or supplemented to the Closing Date,
certified by the Secretary of Guarantor;
(i) Agent shall have received a certificate of status with
respect to Guarantor, dated within 10 days of the Closing Date, such certificate
to be issued by the appropriate officer of the jurisdiction of organization of
Guarantor, which certificate shall indicate that Guarantor is in good standing
in such jurisdiction;
(j) Agent shall have received certificates of status with respect
to Guarantor, each dated within 30 days of the Closing Date, such certificates
to be issued by the appropriate officer of the jurisdictions (other than the
jurisdiction of organization of Guarantor) in which its failure to be duly
qualified or licensed would constitute a Material Adverse Change, which
certificates shall indicate that Guarantor is in good standing in such
jurisdictions;
(k) Agent shall have received a certificate of insurance,
together with the endorsements thereto, as are required by Section 6.7, the form
and substance of which shall be satisfactory to Agent;
46
(l) Agent shall have received an opinion of the Loan Parties'
counsel in form and substance satisfactory to Agent;
(m) Agent shall have received satisfactory evidence (including a
certificate of the chief financial officer of Borrower) that all tax returns
required to be filed by Borrower have been timely filed and all taxes upon
Borrower or its properties, assets, income, and franchises (including Real
Property taxes and payroll taxes) have been paid prior to delinquency, except
such taxes that are the subject of a Permitted Protest;
(n) Borrower shall have the Required Availability after giving
effect to the initial extensions of credit hereunder;
(o) Agent shall have received a calculation of the Borrowing Base
after updating the two-year NYMEX Strip Price and rolling forward the production
volumes of Borrower and Guarantors, in each case the results of which shall be
satisfactory to Agent;
(p) Agent shall have received (i) evidence satisfactory to it
that the debt and capital structure of Borrower and its Subsidiaries after
giving effect to this Agreement, is consistent with the projections of Borrower
and its Subsidiaries previously delivered to Agent and (ii) financial reports of
Borrower and its Subsidiaries for the month ending immediately prior to the
Closing Date;
(q) Borrower shall pay all Lender Group Expenses incurred in
connection with the transactions evidenced by this Agreement;
(r) Agent shall have received (i) updated land records and/or
title searches and abstracts of Oil and Gas Properties of Borrower, the review
of which shall be satisfactory to Agent, and (ii) updated title opinions of such
Oil and Gas Properties with respect to the Hydrocarbon Interests therein of
Borrower as required by Agent in its sole discretion (of which none will be
required);
(s) Lenders shall have received the Initial Reserve Report, which
shall be satisfactory to Lenders;
(t) Agent shall have received satisfactory evidence verifying all
production taxes and royalty payments pertaining to each well comprising a part
of the Oil and Gas Properties are current;
(u) Borrower shall have entered into the Senior Notes Indenture,
the terms and conditions of which are set forth in Borrower's Offering
Memorandum, dated October 21, 2004, which Senior Notes Indenture shall be in
compliance with all applicable laws;
(v) Agent shall have received satisfactory evidence that Grey
Wolf shall have consummated the Grey Wolf Credit Facility pursuant to the terms
and conditions of the Grey Wolf Loan Documents and in compliance with all
applicable laws, and no terms or provisions set forth in the Grey Wolf Loan
Documents shall have been amended, waived or otherwise modified without the
prior written consent of Agent;
47
(w) Agent shall have received satisfactory evidence that Borrower
shall have consummated the transactions contemplated by the Bridge Loan
Documents in compliance with all applicable laws, and no terms or provisions set
forth in the Bridge Loan Documents shall have been amended, waived or otherwise
modified without the prior written consent of Agent;
(x) no Material Adverse Change shall have occurred;
(y) Agent shall have received evidence that Borrower shall have
entered into Commodity Hedging Agreements with respect to its Hydrocarbon
production with one or more counterparties rated investment grade by ▇▇▇▇▇'▇ and
Standard & Poor's, or the equivalent by a rating agency acceptable to Agent or
with a counterparty otherwise reasonably acceptable to Agent, with the aggregate
notional volumes of Hydrocarbons covered by such Commodities Hedging Agreements
constituting not less than 25% and not more than 75% of the aggregate amount of
Borrower's 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 Closing Date from Oil and Gas Properties classified as
Proved Developed Producing Reserves in the Initial Reserve Report plus the
estimated production from anticipated drilling by Borrower or its Restricted
Subsidiaries during such succeeding six months;
(z) Agent shall have received fully executed copies of each of
the Material Contracts, the Senior Notes Documents, the Bridge Loan Documents
and the agreements, documents or instruments related to the Existing Note
Redemption and the Grey Wolf Loan Documents, together with a certificate of the
Chief Executive Officer of Borrower certifying each such document as being a
true, correct, and complete copy thereof and that such agreements, documents or
instruments remain in full force and effect and that none of the Loan Parties
has breached or defaulted in any of its obligations under such agreements;
(aa) Borrower shall have received all licenses, approvals or
evidence of other actions required by any Governmental Authority in connection
with the Capital Restructuring and the execution and delivery by Borrower and
each Guarantor of this Agreement or any other Loan Document or with the
consummation of the transactions contemplated by the Capital Restructuring and
hereby and thereby;
(bb) Agent shall have received evidence that (i) Borrower shall
have deposited funds sufficient to effect a redemption or discharge, on terms
satisfactory to Agent, of the Existing Notes and shall have effected such
redemption or discharge of such Existing Notes in compliance with all applicable
laws and pursuant to documents satisfactory to Agent and (ii) immediately upon
the deposit of such funds, the trustee of the Existing Notes shall have
terminated, discharged, and released its Liens and mortgages on all of
Borrower's and its Subsidiaries' properties and assets and shall have delivered
and/or authorized the filing of UCC and PPSA termination statements, discharges
or release or mortgages and such other documentation evidencing such
termination, discharge and release (such redemption and terminations described
in clauses (i) and (ii) collectively the "Existing Note Redemption");
(cc) Agent shall have received evidence that the Collateral
Agent, for the benefit of Agent and Lenders, shall have a perfected, first
priority lien on all Collateral; and
48
(dd) all other documents and legal matters in connection with the
transactions contemplated by this Agreement and the Capital Restructuring shall
have been delivered, executed, or recorded and shall be in form and substance
satisfactory to Agent.
3.2 [Intentionally Omitted]
3.3 Conditions Precedent to all Extensions of Credit. The obligation of
the Lender Group (or any member thereof) to make all Advances (or to extend any
other credit hereunder) shall be subject to the following conditions precedent:
(a) the representations and warranties contained in this
Agreement and the other Loan Documents shall be true and correct in all material
respects on and as of the date of such extension of credit, as though made on
and as of such date (except to the extent that such representations and
warranties relate solely to an earlier date),
(b) no Default, Unmatured Default or Event of Default shall have
occurred and be continuing on the date of such extension of credit, nor shall
either result from the making thereof,
(c) no injunction, writ, restraining order, or other order of any
nature prohibiting, directly or indirectly, the extending of such credit shall
have been issued and remain in force by any Governmental Authority against
Borrower, Agent, any Lender, or any of their Affiliates, and
(d) no Material Adverse Change shall have occurred.
3.4 Term. This Agreement shall become effective upon the execution and
delivery hereof by Borrower, Guarantors, Agent, and the Lenders and shall
continue in full force and effect for a term ending on October 28, 2008 (the
"Maturity Date"). The foregoing notwithstanding, the Lender Group, upon the
election of the Required Lenders, shall have the right to terminate its
obligations under this Agreement immediately and without notice upon the
occurrence and during the continuation of an Unmatured Default or Event of
Default.
3.5 Effect of Termination. On the date of termination of this
Agreement, all Obligations (including contingent reimbursement obligations of
Borrower with respect to outstanding Letters of Credit and including all Bank
Products Obligations) immediately shall become due and payable without notice or
demand (including (a) either (i) providing cash collateral to be held by Agent
in an amount equal to 105% of the then extant Letter of Credit Usage, or (ii)
causing the original Letters of Credit to be returned to Agent and (b) providing
cash collateral, in such amounts as ▇▇▇▇▇ Fargo or its Affiliates, as
applicable, requires from its customers generally with respect to such products,
to be held by Agent for the benefit of ▇▇▇▇▇ Fargo or its Affiliates with
respect to the then extant Bank Products Obligations). No termination of this
Agreement, however, shall relieve or discharge Borrower of its duties,
Obligations, or covenants hereunder and the Collateral Agent's Liens in the
Collateral shall remain in effect until all Obligations have been fully and
finally discharged and Lenders' obligations to provide additional credit
hereunder have been terminated. When this Agreement has been terminated and all
of the Obligations have been fully and finally discharged and Lenders'
obligations to provide additional credit under the Loan Documents have been
terminated irrevocably, Agent will (and to the extent necessary), and will
49
authorize Collateral Agent to (and to the extent necessary), at Borrower's sole
expense, execute and deliver any UCC termination statements, lien releases,
mortgage releases, re-assignments of trademarks, discharges of security
interests, and other similar discharge or release documents (and, if applicable,
in recordable form) as are reasonably necessary to release, as of record, Liens
and all notices of security interests and liens previously filed with respect to
the Obligations.
3.6 Early Termination; Permanent Reductions of Commitment.
(a) Borrower has the option, at any time upon 30 days' prior
written notice to Agent, to terminate this Agreement by paying to Agent, in
cash, the Obligations (including (a) either (i) providing cash collateral to be
held by Agent in an amount equal to 105% of the then extant Letter of Credit
Usage, or (ii) causing the original Letters of Credit to be returned to Agent,
and (b) providing cash collateral, in such amounts as ▇▇▇▇▇ Fargo or its
Affiliates, as applicable, requires from its customers generally with respect to
such products, to be held by Agent for the benefit of ▇▇▇▇▇ Fargo or its
Affiliates with respect to the then extant Bank Products Obligations), in full,
together with the Applicable Prepayment Premium. If Borrower has sent a notice
of termination pursuant to the provisions of this Section, then Lenders'
obligations to extend credit hereunder shall terminate and Borrower shall be
obligated to repay the Obligations (including (a) either (i) providing cash
collateral to be held by Agent (in an interest-bearing account) in an amount
equal to 105% of the then extant Letter of Credit Usage, or (ii) causing the
original Letters of Credit to be returned to Agent, and (b) providing cash
collateral, in such amounts as ▇▇▇▇▇ Fargo or its Affiliates, as applicable,
requires from its customers generally with respect to such products, to be held
by Agent for the benefit of ▇▇▇▇▇ Fargo or its Affiliates with respect to the
then extant Bank Products Obligations), in full, together with the Applicable
Prepayment Premium, on the date set forth as the date of termination of this
Agreement in such notice.
(b) On and after the occurrence of the applicable Commitment
Reduction Event, from time to time the Pro Rata Share of the Lenders'
Commitments shall be permanently reduced in an amount equal to the applicable
Commitment Reduction Amount, if any (which, in the case of a Commitment
Reduction Amount attributable to clause (i) of the definition thereof, results
in connection with an Asset Sale (as such term is defined in the Indenture) or
Event of Loss (as such term is defined in the Indenture)) and Borrower shall pay
to Agent the Applicable Prepayment Premium on any date the Commitments are so
permanently reduced; provided, however, that on the date that the aggregate
amount of all such permanent reductions of the Commitments pursuant to this
Section 3.6(b) equals or exceeds $10,000,000 (such date hereinafter referred to
as the "Commitment Reduction Date"), Borrower may elect to terminate this
Agreement by providing irrevocable notice (the "Commitment Termination Notice")
to Agent on or prior to the Commitment Reduction Date, with such termination
being effective 90 days (or such earlier date as may be agreed upon by Agent and
Borrower) after the date of the Commitment Termination Notice (such date
hereinafter referred to as the "Commitment Termination Date"). On the Commitment
Termination Date Agents' and Lenders' obligations to extend credit hereunder
shall terminate and Borrower shall pay, in cash, the Obligations (including (1)
either (x) providing cash collateral to be held by Agent in an amount equal to
105% of the then extant Letter of Credit Usage, or (y) causing the original
Letters of Credit to be returned to Agent, and (2) providing cash collateral, in
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such amounts as ▇▇▇▇▇ Fargo or its Affiliates, as applicable, requires from its
customers generally with respect to such products, to be held by Agent for the
benefit of ▇▇▇▇▇ Fargo or its Affiliates with respect to the then extant Bank
Products Obligations) in full, together with the Applicable Prepayment Premium.
(c) In the event of the termination of this Agreement and
repayment of the Obligations at any time prior to the Maturity Date, for any
other reason, including (i) termination upon the election of the Required
Lenders to terminate after the occurrence of an Event of Default, (ii)
foreclosure and sale of Collateral, (iii) sale of the Collateral in any
Insolvency Proceeding, or (iv) 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, in
view of the impracticability and extreme difficulty of ascertaining the actual
amount of damages to Lenders or profits lost by the Lenders as a result of such
early termination, and by mutual agreement of the parties as to a reasonable
estimation and calculation of the lost profits or damages of the Lenders,
Borrower shall pay the Applicable Prepayment Premium to the Lenders, measured as
of the date of such termination or the date of the Commitment Termination
Notice; provided, however, that notwithstanding the foregoing, Borrower shall
not be obligated to pay the Applicable Prepayment Premium pursuant to clauses
(a) and (b) of this Section 3.6 if, in connection with the termination of this
Agreement pursuant to the preceding sentence, the repayment of the Obligations
at any time prior to the Maturity Date is from the proceeds received by Borrower
pursuant to (x) a public or private placement of stock (including a placement in
the form of a merger) or subordinated indebtedness of any Loan Party (other than
proceeds received pursuant to a public or private placement of stock
constituting an Asset Sale or an Event of Loss pursuant to clause (b) of this
Section 3.6), (y) a sale of assets of any Loan Party (other than proceeds
received pursuant to an Asset Sale or an Event of Loss pursuant to clause (b) of
this Section 3.6) or (z) a financing facility provided by, or consented to by,
▇▇▇▇▇ Fargo.
4. SECURITY INTERESTS; RIGHT TO INSPECT COLLATERAL.
4.1 Acknowledgement of Security Interest. Each Loan Party hereby
acknowledges the grant to the Collateral Agent, for the benefit of the Lender
Group, of the security interests in the Collateral created by the Intercreditor
Agreement and the other Collateral Documents in order to secure prompt repayment
of any and all of the Obligations or the Guaranteed Obligations (as the case may
be) in accordance with the terms and conditions of the Loan Documents and in
order to secure prompt performance by each such Loan Party of each of its
covenants and duties under the Loan Documents.
4.2 Right to Inspect Collateral. Agent and each Lender (through any of
their respective officers, employees, or agents) shall have the right, upon
notice to Borrower, which notice shall not be required upon the occurrence and
during the continuance of an Unmatured Default or Event of Default, from time to
time hereafter to inspect the Books and to check, test, and appraise the
Collateral and review and examine the Oil and Gas Properties of Borrower in
order to verify Borrower's or any Guarantor's financial condition or the amount,
quality, value, condition of, or any other matter relating to, the Collateral.
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5. REPRESENTATIONS AND WARRANTIES.
In order to induce the Lender Group to enter into this Agreement, each
Loan Party makes the following representations and warranties to the Lender
Group which shall be true, correct, and complete, in all material respects, as
of the date hereof, and shall be true, correct, and complete, in all material
respects, as of the Closing Date, and at and as of the date of the making of
each Advance (or other extension of credit) made thereafter, as though made on
and as of the date of such Advance (or other extension of credit) (except to the
extent that such representations and warranties relate solely to an earlier
date) and such representations and warranties shall survive the execution and
delivery of this Agreement:
5.1 No Encumbrances. Each Loan Party has good and indefeasible title to the
Collateral and the Real Property (other than Oil and Gas Properties constituting
Real Property) or good and defensible title to Oil and Gas Properties
constituting Real Property, free and clear of Liens except for Permitted Liens.
5.2 Equipment. All of the Equipment is used or held for use in each Loan
Party's business and is fit for such purposes.
5.3 Location of Inventory and Equipment. The Equipment is located only at
the locations identified on Schedule 5.3 other than such Equipment in transit or
temporarily removed to a location not identified therein for refurbishment or
repair. There is no location at which any Loan Party has any Inventory,
including Hydrocarbon products (except for Hydrocarbon products in transit),
other than the locations identified on Schedule 5.3 and 5.22. Schedule 5.3 and
5.22 contains a true, correct and complete list, as of the Closing Date, of each
location at which Hydrocarbon products of the Loan Parties are stored.
5.4 Inventory Records. Each Loan Party keeps correct and accurate records
itemizing and describing the type and quantity of its Inventory and the book
value thereof.
5.5 Location of Chief Executive Office; FEIN.
(a) The chief executive office of each Loan Party is located at the
address indicated on Schedule 5.5 and such Loan Party's FEIN is identified on
Schedule 5.5.
(b) Each Loan Party's organizational identification number is
identified on Schedule 5.5.
(c) No Loan Party holds any commercial tort claims as of the date
hereof, except as identified on Schedule 5.5.
5.6 Due Organization and Qualification; Subsidiaries.
(a) Each Loan Party is duly organized and existing and in good standing
under the laws of the jurisdiction of its organization and qualified to do
business in any state where the failure to be so qualified reasonably could be
expected to have a Material Adverse Change.
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(b) Set forth on Schedule 5.6(b), is a complete and accurate
description of the authorized capital Stock of Borrower, by class, and, as of
the Closing Date, a description of the number of shares of each such class that
are issued and outstanding. Other than as described on Schedule 5.6(b), there
are no subscriptions, options, warrants, or calls relating to any shares of
Borrower's capital Stock, including any right of conversion or exchange under
any outstanding security or other instrument. Borrower is not subject to any
obligation (contingent or otherwise) to repurchase or otherwise acquire or
retire any shares of its capital Stock or any security convertible into or
exchangeable for any of its capital Stock.
(c) Set forth on Schedule 5.6(c), is a complete and accurate list of
Borrower's direct and indirect Subsidiaries, showing: (i) the jurisdiction of
their organization, (ii) the number of shares of each class of common and
preferred Stock authorized for each of such Subsidiaries, and (iii) the number
and the percentage of the outstanding shares of each such class owned directly
or indirectly by Borrower. All of the outstanding capital Stock of each such
Subsidiary has been validly issued and is fully paid and non-assessable.
(d) Except as set forth on Schedule 5.6(c), there are no subscriptions,
options, warrants, or calls relating to any shares of Borrower's Subsidiaries'
capital Stock, including any right of conversion or exchange under any
outstanding security or other instrument. Neither Borrower nor any of its
Subsidiaries is subject to any obligation (contingent or otherwise) to
repurchase or otherwise acquire or retire any shares of Borrower's Subsidiaries'
capital Stock or any security convertible into or exchangeable for any such
capital Stock.
5.7 Due Authorization; No Conflict.
(a) The execution, delivery, and performance by Borrower of this
Agreement and the Loan Documents and the agreements, documents and instruments
related to the Capital Restructuring to which it is a party have been duly
authorized by all necessary action on the part of Borrower.
(b) The execution, delivery, and performance by Borrower of this
Agreement and the Loan Documents and the agreements, documents and instruments
related to the Capital Restructuring to which it is a party do not and will not
(i) violate any provision of federal, state, or local law or regulation
applicable to Borrower, the Governing Documents of Borrower, or any order,
judgment, or decree of any court or other Governmental Authority binding on
Borrower, (ii) conflict with, result in a breach of, or constitute (with due
notice or lapse of time or both) a default under any material contractual
obligation of Borrower (including, without limitation, any Material Contract of
any Loan Party), (iii) result in or require the creation or imposition of any
Lien of any nature whatsoever upon any properties or assets of Borrower, other
than Permitted Liens, or (iv) require any approval of Borrower's interestholders
or any approval or consent of any Person under any material contractual
obligation of Borrower that has not been obtained by Borrower on or prior to the
Closing Date.
(c) Other than the filing of financing statements and informational
filings with the SEC, fixture filings, and Mortgages, the execution, delivery,
and performance by Borrower of this Agreement and the Loan Documents to which
Borrower is a party do not and will not require any registration with, consent,
53
or approval of, or notice to, or other action with or by, any Governmental
Authority or other Person.
(d) This Agreement and the other Loan Documents and the agreements,
documents and instruments related to the Capital Restructuring to which Borrower
is a party, and all other documents contemplated hereby and thereby, and the
agreements, documents and instruments related to the Capital Restructuring when
executed and delivered by Borrower will be the legally valid and binding
obligations of Borrower, enforceable against Borrower in accordance with their
respective terms, except as enforcement may be limited by equitable principles
or by bankruptcy, insolvency, reorganization, moratorium, or similar laws
relating to or limiting creditors' rights generally.
(e) The Collateral Agent's Liens (created on behalf of Agent and
Lenders) are validly created, perfected, and first priority Liens, subject only
to Permitted Liens.
(f) The execution, delivery, and performance by each Guarantor of the
Loan Documents to which it is a party have been duly authorized by all necessary
action on the part of Guarantor.
(g) The execution, delivery, and performance by each Guarantor of the
Loan Documents to which it is a party do not and will not (i) violate any
provision of federal, state, or local law or regulation applicable to such
Guarantor, the Governing Documents of such Guarantor, or any order, judgment, or
decree of any court or other Governmental Authority binding on such Guarantor,
(ii) conflict with, result in a breach of, or constitute (with due notice or
lapse of time or both) a default under any material contractual obligation of
such Guarantor, (iii) result in or require the creation or imposition of any
Lien of any nature whatsoever upon any properties or assets of such Guarantor,
other than Permitted Liens, or (iv) require any approval of such Guarantor's
interestholders or any approval or consent of any Person under any material
contractual obligation of such Guarantor that has not been obtained by Borrower
on or prior to the Closing Date.
(h) The execution, delivery, and performance by each Guarantor of the
Loan Documents to which such Guarantor is a party do not and will not require
any registration with, consent, or approval of, or notice to, or other action
with or by, any Governmental Authority or other Person.
(i) The Loan Documents to which each Guarantor is a party, and all
other documents contemplated hereby and thereby, when executed and delivered by
such Guarantor will be the legally valid and binding obligations of such
Guarantor, enforceable against such Guarantor in accordance with their
respective terms, except as enforcement may be limited by such equitable
principles or by bankruptcy, insolvency, reorganization, moratorium, or similar
laws relating to or limiting creditors' rights generally.
5.8 Litigation. Other than those matters disclosed on Schedule 5.8, there
are no actions, suits, or proceedings pending or, to the best knowledge of
Borrower, threatened against Borrower or any of its Subsidiaries, as applicable,
except for (a) matters that are fully covered by insurance (subject to customary
deductibles), and (b) matters arising after the Closing Date that, if decided
54
adversely to Borrower or any of its Subsidiaries, as applicable, reasonably
could not be expected to result in a Material Adverse Change.
5.9 No Material Adverse Change. All financial statements relating to
Borrower or any Guarantor that have been delivered by Borrower to the Lender
Group have been prepared in accordance with GAAP (except, in the case of
unaudited financial statements, for the lack of footnotes and being subject to
year-end audit adjustments) and present fairly in all material respects,
Borrower's (or such Guarantor's, as applicable) financial condition as of the
date thereof and results of operations for the period then ended. There has not
been a Material Adverse Change with respect to Borrower (or any Guarantor, as
applicable) since the date of the latest financial statements submitted to the
Lender Group on or before the Closing Date.
5.10 Fraudulent Transfer.
(a) After giving effect to the Capital Restructuring, the transactions
contemplated by this Agreement, the Loan Documents, the Senior Notes Documents,
the Bridge Loan Documents and the Grey Wolf Loan Documents, Borrower
individually is, and the Loan Parties taken as a whole are, Solvent.
(b) No transfer of property is being made by any Loan Party and no
obligation is being incurred by any Loan Party in connection with the Capital
Restructuring, or the transactions contemplated by this Agreement or the other
Loan Documents with the intent to hinder, delay, or defraud either present or
future creditors of any Loan Party.
5.11 Employee Benefits. None of Borrower any of its Subsidiaries, or any of
their ERISA Affiliates maintains or contributes to any Benefit Plan. Each Loan
Party and each ERISA Affiliate has satisfied the minimum funding standards of
ERISA, the IRC, and any other applicable laws relating to employee benefits with
respect to each Benefit Plan to which it is obligated to contribute, except
where the failure to maintain such standards reasonably could not be expected to
result in a Material Adverse Change. No ERISA Event has occurred nor has any
other event occurred that may result in an ERISA Event that reasonably could be
expected to result in a Material Adverse Change. No Loan Party or any ERISA
Affiliate is required to provide security to any Benefit Plan under Section
401(a)(29) of the IRC.
5.12 Environmental Condition. Except as set forth on Schedule 5.12, (a) to
each Loan Party's knowledge, no assets of any Loan Party has ever been used by
any such Loan Party or by previous owners or operators in the disposal of, or to
produce, store, handle, treat, release, or transport, any Hazardous Materials,
where such production, storage, handling, treatment, release or transport was in
violation, in any material respect, of applicable Environmental Law, (b) to each
Loan Party's knowledge, no properties or assets of any Loan Party have ever been
designated or identified in any manner pursuant to any environmental protection
statute as a Hazardous Materials disposal site, (c) no Loan Party has received
notice that a Lien arising under any Environmental Law has attached to any
revenues or to any Real Property owned or operated by any such Loan Party, and
(d) Borrower has not received a summons, citation, notice, or directive from the
Environmental Protection Agency or any other federal or state governmental
agency concerning any action or omission by Borrower resulting in the releasing
or disposing of Hazardous Materials into the environment.
55
5.13 Brokerage Fees. No Loan Party has utilized the services of any broker
or finder in connection with Borrower's obtaining financing from the Lender
Group under this Agreement, and no brokerage commission or finders fee is
payable by any Loan Party in connection herewith.
5.14 Intellectual Property. Each Loan Party owns, or holds licenses in, all
trademarks, trade names, copyrights, patents, patent rights, and licenses that
are necessary to the conduct of its business as currently conducted. Attached
hereto as Schedule 5.14 is a true, correct, and complete listing of all material
patents, patent applications, trademarks, trademark applications, copyrights,
and copyright registrations as to which each Loan Party is the owner or is an
exclusive licensee.
5.15 Leases. Each Loan Party enjoys peaceful and undisturbed possession
under all leases material to the business of such Loan Party and to which it is
a party or under which it is operating. All of such leases are valid and
subsisting and no material default by such Loan Party exists under any of them.
There are no leases, subleases, contracts or other operating agreements that
allocate operating expenses to Borrower or any Guarantor in excess of Borrower's
or any Guarantor's working interest of record in the particular Oil and Gas
Property subject to such lease, the sublease, contract or other operating
agreement.
5.16 DDAs. Set forth on Schedule 5.16 are all of each Loan Party's DDAs,
including, with respect to each depository (i) the name and address of such
depository, and (ii) the account numbers of the accounts maintained with such
depository.
5.17 Compliance with the Law. No Loan Party has violated any laws or failed
to obtain any material license, permit, franchise or other authorization from
any Governmental Authority necessary for the ownership of any of its Oil and Gas
Properties or the conduct of its business. The Oil and Gas Properties of each
Loan Party (and assets 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 orders of all
Governmental Authorities having jurisdiction and in substantial conformity with
the provisions of all leases, subleases or other contracts comprising a part of
the Hydrocarbon Interests and other contracts and agreements forming a part of
such Oil and Gas Properties; specifically in this connection, (i) except as set
forth on Schedule 5.17, after the Closing Date, no Oil and Gas Property of any
Loan Party 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) prior to the Closing Date and (ii) none of the ▇▇▇▇▇ comprising a part of
such Oil and Gas Properties (or assets and properties utilized therewith) is
deviated from the vertical by more than the maximum permitted by applicable
laws, regulations, rules and orders of any Governmental Authority, and such
▇▇▇▇▇ are, in fact, bottomed under and are producing from, and the well bores
are wholly within, such 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 delivered pursuant to Section
3.1(r).
5.18 Complete Disclosure. All factual information (taken as a whole)
furnished by or on behalf of Borrower in writing to Agent or any Lender
(including all information contained in the Schedules hereto or in the other
56
Loan Documents) for purposes of or in connection with the Capital Restructuring
or this Agreement, the other Loan Documents, or any transaction contemplated
herein or therein is, and all other such factual information (taken as a whole)
hereafter furnished by or on behalf of Borrower in writing to Agent or any
Lender will not contain any untrue statement of a material fact, on the date as
of which such information is dated or certified and will not omit to state any
material fact necessary to make such information (taken as a whole) not
misleading in any respect at such time in light of the circumstances under which
such information was provided. On the Closing Date, the Closing Date Projections
represent, and as of the date on which any other Projections are delivered to
Agent, such additional Projections will represent Borrower's good faith best
estimate of its future performance for the periods covered thereby.
5.19 Indebtedness. Set forth on Schedule 5.19 is a true and complete list
of all Indebtedness of each Loan Party outstanding on or immediately prior to
the Closing Date that is to remain outstanding after the Closing Date and such
Schedule accurately reflects the aggregate principal amount of such Indebtedness
and the principal terms thereof.
5.20 Oil and Gas Imbalances. Except as set forth on Schedule 5.20 or on the
most recent certificate delivered pursuant to Section 6.2(e), on a net basis
there are not gas imbalances, take-or-pay oil and gas or other prepayments with
respect to Borrower's and Guarantors' 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 two
percent (2%) of the current monthly production of oil and gas from the Oil and
Gas Properties of Borrower and Guarantors in the aggregate.
5.21 Hedging Agreements. Schedule 5.21 (which schedule, so long as a
Default, Unmatured Default or Event of Default has not occurred and is not
continuing, shall be deemed to be amended by the most recent certificate
delivered by Borrower pursuant to Section 6.2(d)) sets forth, as of the Closing
Date, a true and complete list of all Hedging Agreements (including commodity
price swap agreements, forward agreements or contracts of sale which provide for
prepayment for deferred shipment or delivery of Hydrocarbons or other
commodities) of Borrower and Guarantors, the material terms thereof (including
the type, term, effective date, termination date and notional amounts or
volumes), all credit support agreements relating thereto (including any margin
required or supplied), and the counterparty to each such agreement.
5.22 Location of Real Property and Leased Premises.
(a) (i) Part A of Schedule 5.22 lists completely and correctly as of
the Closing Date all Real Property (other than Oil and Gas Properties) owned in
fee by each Loan Party and the addresses thereof, (ii) Part B of Schedule 5.22
lists completely and correctly as of the Closing Date all Real Property (other
than Oil and Gas Properties) leased by each Loan Party and the respective
addresses thereof and (iii) Part C of Schedule 5.22 lists completely and
correctly as of the Closing Date all Oil and Gas Properties with a PV-10 of at
least $50,000 that are Real Property whether leased or owned by any Loan Party
and the respective legal descriptions, addresses (if any), counties and states
thereof.
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(b) As of the Closing Date, each Loan Party has valid leasehold
interests in the leases described on Schedule 5.22 and such schedule sets forth
with respect to each such lease, the commencement date, termination date,
renewal options (if any) and annual base rents. Each such lease is valid and
enforceable in accordance with its terms in all material respects and is in full
force and effect. No consent or approval of any landlord or other third party in
connection with any such lease is necessary for any Loan Party to enter into and
execute the Loan Documents to which it is a party, except as set forth on
Schedule 5.22. To the knowledge of any Loan Party, no other party to any such
lease 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 Closing
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.
(c) Each Loan Party has good and defensible title to all of its Oil and
Gas Properties set forth on Schedule 5.22 which constitute Real Property and
good and indefeasible title to all of its Oil and Gas Properties which
constitute personal property, except for (i) 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 such Loan Party and (ii) Permitted Liens. The
quantum and nature of the interest of such Loan Party in and to the Oil and Gas
Properties as set forth in the Initial Reserve Report or the most recent Reserve
Report, as the case may be, includes the entire interest of such Loan Party in
such Oil and Gas Properties as of the date of the Initial Reserve Report or such
applicable Reserve Report delivered by Borrower to Agent pursuant to Section
6.2(e), as the case may be, and 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
such Loan Party in such Oil and Gas Properties except as expressly set forth in
the Initial Reserve Report or the most recent Reserve Report, as the case may
be. The ownership of the Oil and Gas Properties by each Loan Party 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 record 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.
(d) Each Loan Party's marketing, gathering, transportation, processing
and treating facilities and equipment, together with any marketing, gathering,
transportation, processing and treating contracts in effect between and/or among
such Loan Party and any other 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 Party.
5.23 Senior Notes Documents and Intercreditor Agreement.
(a) The Borrower's Indebtedness incurred from (i) the Advances made by
the Lenders on and after the Closing Date and (ii) the issuance of Letters of
Credit, in each case, subject to the limitations set forth in this Agreement,
does not and will not conflict with or result in a default under any Senior
Notes Document, any Bridge Loan Document, any Grey Wolf Loan Document, or the
Intercreditor Agreement.
58
(b) Other than Borrower's Indebtedness that may be incurred under the
Loan Documents, the Loan Parties have not created, incurred, assumed, permitted,
guaranteed, or otherwise become, directly or indirectly, liable with respect to
any Indebtedness permitted pursuant to clause (1) of the definition of
"Permitted Indebtedness" contained in the Senior Notes Indenture.
5.24 Material Contracts. Set forth on Schedule 5.24 is a complete and
accurate list as of the Closing Date of all Material Contracts of each Loan
Party, showing the parties and subject matter thereof 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 and, to the
knowledge of such Loan Party, all other parties thereto in accordance with its
terms, (ii) has not been otherwise amended or modified, and (iii) is not in
default due to the action of Borrower or, to the knowledge of such Loan Party,
any other party thereto.
5.25 Permits, Etc. Each Loan Party has, and is in compliance 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 and the Real Property currently owned, leased,` managed
or operated, or to be acquired, by such Person except for such permits,
licenses, authorizations, approvals, entitlements and accreditations the absence
of which could not reasonably be expected to result in a Material Adverse
Change. 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, and, to Borrower's
knowledge, there is no claim that any thereof is not in full force and effect.
5.26 Employee and Labor Matters. Except as set forth on Schedule 5.26,
there is (a) no unfair labor practice complaint pending or, to Borrower's
knowledge, 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, (b)
no strike, labor dispute, slowdown, stoppage or similar action or grievance
pending or, to the knowledge of Borrower, threatened against any Loan Party and
(c) 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 of them. Neither any Loan Party nor any ERISA Affiliate
of any Loan Party 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 each Loan Party have not been in violation of the Fair Labor Standards Act,
or any other applicable legal requirements. All material payments due from any
Loan Party on account of workers compensation, 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.
5.27 Bonds and Insurance. Schedule 5.27 contains an accurate and complete
description of all performance bonds related to operations on or pertaining to
the Oil and Gas Properties, and all material policies of insurance owned or held
by Borrower and each Restricted Subsidiary. Except as set forth on Schedule
5.27, all such policies are in full force and effect, all premiums with respect
thereto covering all periods up to and including the Closing Date have been
paid, and no notice of cancellation or termination has been received with
respect to any such policy. Such bonds and policies are sufficient for
59
compliance with all requirements of law and of all agreements to which Borrower
or any of its Restricted Subsidiaries is a party; are valid, outstanding and
enforceable policies; provide adequate coverage in at least such amounts and
against at least such risks (but including in any event public liability) as are
required by Governmental Authorities and/or usually insured or bonded against in
the same general area by companies engaged in the same or a similar business for
the assets and operations of Borrower and each of its Restricted Subsidiaries;
will remain in full force and effect through the respective dates set forth in
Schedule 5.27 without the payment of additional premiums except as set forth on
Schedule 5.27; and will not in any way be affected by, or terminate or lapse by
reason of, the transactions contemplated by this agreement. Neither Borrower nor
any of its Restricted Subsidiaries has been refused any bonds or insurance with
respect to its assets or operations, nor has its coverage been limited below
usual and customary bond or policy limits, by any bonding company or insurance
carrier to which it has applied for any such bond or insurance or with which it
has carried insurance during the last three years.
5.28 Nature of Business. Borrower is not engaged in any business other than
the Oil and Gas Business within the continental United States or any other
territory, jurisdiction (foreign or otherwise) agreed to by Agent. Except as
otherwise disclosed on Schedule 5.28, no other Loan Party (x) owns any assets or
properties used by Borrower in its Oil and Gas Business, or (y) has any
liabilities or conducts any business.
6. AFFIRMATIVE COVENANTS.
Borrower covenants and agrees that, so long as any credit hereunder
shall be available and until full and final payment of the Obligations and the
termination of this Agreement, Borrower shall and shall cause each of its
Restricted Subsidiaries to do all of the following (unless otherwise agreed to
by Agent or the Required Lenders):
6.1 Accounting System. Maintain a system of accounting that enables
Borrower to produce financial statements in accordance with GAAP and maintain
records pertaining to the Collateral that contain information as from time to
time reasonably may be requested by Agent. Borrower also shall keep a joint
interest billing and remittance system with respect to each of the Oil and Gas
Properties on which it is the operator and a reporting system that shows, among
other things, the value, revenues and profits/losses of the Oil and Gas
Properties of Borrower and its Restricted Subsidiaries, volume of production and
value of sales of Hydrocarbon production, the location and condition of the
Equipment and Borrower's positions and liability exposure under all Hedging
Agreements.
6.2 Collateral Reporting. Provide Agent (and if so requested by Agent,
with copies for each Lender) with the following documents at the following times
in form satisfactory to Agent:
(a) daily notices of any dispute or claim that, if adversely
determined, would, individually or in the aggregate, result in liability to
Borrower or its Restricted Subsidiaries in excess of $500,000;
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(b) as soon as available, but in any event within 30 days after
the end of each month, (i) a detailed aging, by total, of the Accounts,
including, among other things, lease operating expenses and royalty payments and
(ii) a summary, by vendor of each Loan Party's accounts payable and any book
overdraft;
(c) as soon as available, but in any event within 30 days after
the end of each month, a report, in form and substance satisfactory to Agent,
setting forth on a well-by-well or unit-by-unit basis and also on an aggregated
basis (i) a statement of gross and net sales proceeds of all Hydrocarbons
produced from the Oil and Gas Properties of each Loan Party and pricing
information (and in the aggregate only on a hedged and unhedged basis) relating
thereto, (ii) the volume and/or quantity of Hydrocarbon products sold for the
previous month, (iii) the severance, gross production, occupation, and/or
gathering taxes deducted from or paid out of the proceeds payable to the Loan
Parties, (iv) the operating expenses, drilling costs, and capital expenditures,
(v) the number of ▇▇▇▇▇ operated (or the numbers of pooled units), drilled or
abandoned, (vi) a statement of all funds received from the sale of Hydrocarbons
representing amounts attributable to trust fund taxes or Hydrocarbon Interests
of third parties, and (vii) such other information as Agent may reasonably
request;
(d) as soon as available, but in any event within 30 days after
the end of each month, a report, in form and substance satisfactory to Agent,
setting forth, as of the last Business Day of such month, a summary of the
hedging positions of each Loan Party under all Hedging Agreements (including,
without limitation, any contracts of sale which provide for prepayment for
deferred shipment or delivery of oil, gas or other commodities) of each Loan
Party, 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, and any new credit support agreements relating thereto;
(e) as soon as available, but in any event not later than 75 days
after June 30th and December 31st of each year, a Reserve Report, prepared under
the supervision of the chief engineer of Borrower who shall certify such Reserve
Report to be true and accurate and to have been prepared in accordance with the
procedures used in the Initial Reserve Report, and together with each such
Reserve Report, a certificate of an Authorized Person certifying that, to such
Person's knowledge (i) the information contained in the Reserve Report and any
other information delivered in connection therewith is true and correct, (ii)
Borrower owns good and defensible title to its Oil and Gas Properties evaluated
in such Reserve Report and such Oil and Gas Properties are free and clear of all
Liens except for Permitted Liens, (iii) except as set forth on an exhibit to the
certificate, on a net basis there are no gas imbalances, take-or-pay or other
prepayments with respect to its Oil and Gas Properties evaluated in such Reserve
Report which would require any such Loan Party 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, (iv) except as set
forth on an exhibit to the certificate, none of its Oil and Gas Properties have
been sold since the date of the Reserve Report most recently delivered pursuant
to this Section 6.2(e), which exhibit shall list all of its Oil and Gas
Properties sold and in such detail as is reasonably required by Agent, (v)
attached as an exhibit to the certificate is a list of its Oil and Gas
Properties added to and deleted from the Reserve Report most recently delivered
pursuant to this Section 6.2(e) and a list of all Persons disbursing proceeds to
Borrower or any Guarantor, as applicable from its Oil and Gas Properties, (vi)
all of the Oil and Gas Properties evaluated by such Reserve Report are subject
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to a Mortgage, the Collateral Agent's Liens 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 benefit of Agent and the
Lenders subject only to Permitted Liens that arise by operation of law and
securing obligations for the payment of money not delinquent, (vii) except as
set forth on an exhibit to such certificate, none of the Oil and Gas Properties
evaluated by such Reserve Report are subject to any farm-out or similar
arrangement, and (viii) 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
any Loan Party in any of the Oil and Gas Properties included on such Reserve
Report; provided, however, that, notwithstanding the foregoing semi-annual
reporting requirement of this Section 6.2(e), Borrower or Agent may have a
Reserve Report prepared more frequently than semi-annually and such Reserve
Report shall be used to update the Borrowing Base to the extent such Reserve
Report complies with the requirements set forth in this Section 6.2(e) and is
otherwise satisfactory to Agent;
(f) as soon as available, but in any event within 30 days after
the end of each quarter (or, at any time when Excess Availability is less than
$10,000,000, within 30 days after the end of each month) ending after the
Closing Date, (i) (x) a Borrowing Base Certificate, current as of the last day
of such quarter or month, as applicable, supported by schedules showing the
derivation thereof, including the calculation of the PV-10 of the Proved
Developed Producing Reserves composing the Borrowing Base and (y) a certificate,
current as of the last day of such quarter or month, as applicable, supported by
schedules showing the derivation thereof, a calculation of the PV-10 of the
Proved Developed Non-Producing Reserves and the Proved Undeveloped Reserves and
a calculation of the Collateral Coverage Ratio and, in each case of clauses (x)
and (y), containing such detail and other information as Agent may request from
time to time, provided, that (A) the information contained therein, including,
without limitation, the Borrowing Base set forth in the Borrowing Base
Certificate, shall be determined pursuant to the information set forth in the
Reserve Report most recently delivered by Borrower pursuant to Section 6.2(e),
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 volumes 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
Borrower of such report to Agent, (B) the Borrowing Base shall be effective from
and including the date such Borrowing Base Certificate is duly received by Agent
but not including the date on which a subsequent Borrowing Base Certificate is
received by Agent unless Agent disputes the eligibility of any Oil and Gas
Property for inclusion in the calculation of the Borrowing Base or the valuation
thereof by notice of such dispute to Borrower and (C) in the event of any
dispute about the eligibility of any such property included in the calculation
of the Borrowing Base or the valuation thereof, Agent's good faith judgment
shall control, and (ii) a report, with a certificate of an Authorized Person of
Borrower certifying to the completeness and accuracy of the report, discussing
(A) any change 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", (B)
any change in the working interest or net revenue interest in the Oil and Gas
Properties of any Loan Party reflected on such Reserve Report, and (C) such
other information as Agent shall reasonably consider appropriate or necessary
from the perspective of an asset-based lender;
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(g) as soon as available, but in any event not later than 45 days
after the end of each quarter, a report, certified by an Authorized Person of
Borrower: (i) setting forth the total amount actually paid by each Loan Party
during the preceding quarter for: (A) plugging and abandonment costs for
previous or ongoing plugging and abandonment operations pertaining to its Oil
and Gas Properties, and (B) general bond and supplemental bond payments
pertaining to plugging and abandonment costs; and (ii) estimating the future
payments for (A) and (B), above, for each of the succeeding two quarters; and
(h) upon request by Agent, such other reports as to the Oil and
Gas Properties, the other Collateral or the financial condition of Borrower or
any of its Restricted Subsidiaries, and, upon the reasonable request by Agent,
such other reports as to the Oil and Gas Properties or the financial condition
of Grey Wolf so long as Grey Wolf is a Subsidiary of Borrower.
6.3 Financial Statements, Reports, Certificates. Deliver to Agent, with
copies to each Lender:
(a) as soon as available, but in any event within 30 days (45
days in the case of a month that is the end of one of the first 3 fiscal
quarters in a fiscal year) after the end of each month during each of Borrower's
fiscal years,
(i) a company prepared consolidated balance sheet, income
statement, and statement of cash flow covering Borrower's and its
Subsidiaries' operations during such period,
(ii) a certificate signed by the chief financial officer of
Borrower to the effect that:
(A) the financial statements delivered hereunder have
been prepared in accordance with GAAP (except for the lack of
footnotes and being subject to year-end audit adjustments) and fairly
present in all material respects the financial condition of Borrower
and its Subsidiaries,
(B) the representations and warranties of Borrower
contained in this Agreement and the other Loan Documents are true and
correct in all material respects on and as of the date of such
certificate, as though made on and as of such date (except to the
extent that such representations and warranties relate solely to an
earlier date), and
(C) there does not exist any condition or event that
constitutes a Default, Unmatured Default or Event of Default (or, to
the extent of any non-compliance, describing such non-compliance as to
which he or she may have knowledge and what action Borrower has taken,
is taking, or proposes to take with respect thereto), and
(iii) for each month that is the date on which a financial
covenant in Section 7.20 is to be tested, a Compliance Certificate
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demonstrating, in reasonable detail, compliance at the end of such period
with the applicable financial covenants contained in Section 7.20, and
(b) as soon as available, but in any event within 90 days after
the end of each of Borrower's fiscal years,
(i) financial statements of Borrower and its Subsidiaries
for each such fiscal year, audited by independent certified public
accountants reasonably acceptable to Agent and certified, without any
qualifications (including, without limitation, (A) any going concern or
like qualification or exception or (B) any qualification as to the scope of
such audit), by such accountants to have been prepared in accordance with
GAAP (such audited financial statements to include a balance sheet, income
statement, and statement of cash flow and, if prepared, such accountants'
letter to management),
(ii) a certificate of such accountants addressed to Agent
and the Lenders stating that such accountants do not have knowledge of the
existence of any Default, Unmatured Default or Event of Default under
Section 7.20,
(c) as soon as available, but in any event within 30 days prior
to the start of each of Borrower's fiscal years, copies of Borrower's
Projections, in form and substance (including as to scope and underlying
assumptions) satisfactory to Agent, in its sole discretion, for the forthcoming
3 years, year by year, and for the forthcoming fiscal year, month by month,
certified by the chief financial officer of Borrower as being such officer's
good faith best estimate of the financial performance of Borrower during the
period covered thereby,
(d) if and when filed by Borrower,
(i) Form 10-Q quarterly reports, Form 10-K annual reports,
and Form 8-K current reports,
(ii) any other filings made by Borrower with the SEC,
(iii) copies of Borrower's federal income tax returns, and
any amendments thereto, filed with the Internal Revenue Service, and
(iv) any other information that is provided by Borrower to
its shareholders,
(e) if and when filed by any Loan Party and as requested by
Agent, satisfactory evidence of payment of applicable excise taxes in each
jurisdictions in which (i) such Loan Party conducts business or is required to
pay any such excise tax, (ii) where such Loan Party's failure to pay any such
applicable excise tax would result in a Lien on the properties or assets of such
Loan Party, or (iii) where such Loan Party's failure to pay any such applicable
excise tax reasonably could be expected to result in a Material Adverse Change,
(f) promptly after sending or receipt thereof, copies of any
material notice or other correspondence sent to, or received from, any
Governmental Authority related to the Oil and Gas Properties of any Loan Party,
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including, without limitation, notice of any new plugging and abandonment or
other performance or other assurance bond requirements related to such Oil and
Gas Properties,
(g) promptly after the commencement thereof, but in any event
within five days after the service of process with respect thereto on any Loan
Party, notice of all actions, suits or proceedings brought by or against any
Loan Party before any Governmental Authority which, if determined adversely to
such Loan Party, could result in a Material Adverse Change,
(h) as soon as Borrower has knowledge of any event or condition
that constitutes a Default or an Unmatured Default or an Event of Default,
notice thereof and a statement of the curative action that Borrower proposes to
take with respect thereto,
(i) (i) promptly after receipt or delivery thereof, copies of any
material notices that any Loan Party receives from or sends to any Person in
connection with the Senior Notes Documents or the Bridge Loan Documents and (ii)
at least 3 Business Days prior to the effective date thereof, any amendments,
modifications, waivers or other changes to any of the Senior Notes Documents or
the Bridge Loan Documents, and
(j) upon the request of Agent, any other report reasonably
requested relating to the financial condition of Borrower or any of its
Subsidiaries.
In addition to the financial statements referred to above, Borrower
agrees to deliver financial statements prepared on both a consolidated and
consolidating basis, and for it and its Restricted Subsidiaries and for Grey
Wolf so long as Grey Wolf is a Subsidiary of Borrower, and agrees that no
Subsidiary of Borrower will have a fiscal year different from that of Borrower.
Borrower agrees that its independent certified public accountants are authorized
to communicate with Agent and to release to Agent whatever financial information
concerning Borrower Agent reasonably may request. Borrower waives the right to
assert a confidential relationship, if any, it may have with any accounting firm
or service bureau in connection with any information requested by Agent pursuant
to or in accordance with this Agreement, and agrees that Agent may contact
directly any such accounting firm or service bureau in order to obtain such
information.
6.4 Guarantor Reports. Cause each Guarantor to deliver its annual
financial statements at the time when Borrower provides its audited financial
statements to Agent and copies of all federal income tax returns as soon as the
same are available and in any event no later than 30 days after the same are
required to be filed by law.
6.5 Maintenance of Properties.
(a) Maintain and preserve all of its properties which are
necessary or useful in the proper conduct to its business in good working order
and condition, ordinary wear and tear excepted, and comply at all times with the
provisions of all leases to which it is a party as lessee, so as to prevent any
loss or forfeiture thereof or thereunder.
(b) Cause to be done all things necessary to preserve and keep in
good repair, working order and efficiency all the Oil and Gas Properties of each
Loan Party and other material assets including, without limitation, all
65
equipment, machinery, facilities, and marketing, gathering, transportation and
processing assets and, from time to time, will make all the reasonably necessary
repairs, renewals and replacements so that at all times the state and conditions
of such Oil and Gas Properties and other material assets will be fully preserved
and maintained, except to the extent a portion of such assets is no longer
capable of producing Hydrocarbons in economically reasonable amounts.
(c) Promptly: (i) pay and/or discharge or cause to be paid and/or
discharged, all rentals, royalties, expenses, taxes and Indebtedness accruing
under the lease or other agreements affecting or pertaining to the Oil and Gas
Properties of each Loan Party, (ii) 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 such Oil and Gas Properties
and the accompanying elements therefrom and other material properties so long as
such properties are capable of producing Hydrocarbons and the accompanying
elements in quantities and at prices providing for continued efficient and
profitable operations of business and (iii) do all other things 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.
(d) 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
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.
(e) Operate and produce, as a reasonably prudent operator, the
Oil and Gas Properties of the Loan Parties in accordance with good engineering
practices and the following requirements: (i) the amount of Hydrocarbons
produced from any well shall not exceed in any month the lower of (A) the
maximum amount that such well is capable of producing at its maximum efficient
rate of flow and (B) the respective allowable rate of flow under applicable
orders, rules, regulations or laws, if any; (ii) 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 (iii) subject to field rules established by any Governmental
Authority 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.
(f) To the extent the interests in Oil and Gas Properties of
Borrower (other than working interests of record) are operated by Persons other
than Borrower, Borrower shall cause any owner or operator of such Oil and Gas
Properties to comply with this Section 6.5; provided, however, that it shall not
be a breach of this Section 6.5 if such owners or operators are not in
compliance with this Section 6.5 on Oil and Gas Properties of Borrower with an
aggregate PV-10 for all such Oil and Gas Properties of less than $200,000.
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6.6 Taxes. Cause all assessments, remittances, source deductions, and
taxes (including, without limitation, withholding taxes), whether real,
personal, or otherwise, due or payable by, or imposed, levied, or assessed ("Tax
Payments") against any Loan Party or any of such Loan Party's assets to be paid
in full, before delinquency or before the expiration of any extension period,
except to the extent that the validity of such Tax Payment shall be the subject
of a Permitted Protest. Each Loan Party will make timely payment or deposit of
all Tax Payments required of it by applicable laws, including those laws
concerning F.I.C.A., F.U.T.A., state disability, and local, state, and federal
income taxes, and will, upon request, furnish Agent with proof satisfactory to
Agent indicating that each such Loan Party has made such Tax Payments or
deposits. Borrower shall deliver satisfactory evidence of payment of applicable
excise taxes in each jurisdictions in which a Loan Party is required to pay any
such excise tax.
6.7 Insurance.
(a) At Borrower's expense, maintain insurance respecting its
assets wherever located, covering loss or damage by fire, theft, explosion, and
all other hazards and risks as ordinarily are insured against by other Persons
engaged in the same or similar businesses. Borrower also shall maintain public
liability insurance, as well as insurance against larceny, embezzlement, and
criminal misappropriation to the extent Borrower maintains such insurance on the
Closing Date or is otherwise required by Agent, in its reasonable discretion, to
maintain such insurance after the Closing Date to the extent the premiums
related thereto are not at levels commercially unreasonable. All such policies
of insurance shall be in such amounts and with such insurance companies as are
reasonably satisfactory to Agent. Borrower shall deliver copies of all such
policies to Agent with a satisfactory lender's loss payable endorsement naming
the Collateral Agent as sole loss payee or additional insured, as appropriate.
Each policy of insurance or endorsement shall contain a clause requiring the
insurer to give not less than 30 days' prior written notice to the Collateral
Agent in the event of cancellation of the policy for any reason whatsoever.
During the period of the drilling of ▇▇▇▇▇ and the construction of any other
improvements comprising a part of the Oil and Gas Properties of any Loan Party,
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 applicable, in such form and
amounts as is customary in the industry and worker's compensation insurance
covering all Persons employed by any Loan Party 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 any Loan
Party and such Loan Party's subcontractors with respect to whom death or bodily
injury claims could be asserted against any Loan Party. Borrower shall give
Agent prompt notice of any loss covered by such insurance.
(b) No Loan Party will take out separate insurance concurrent in
form or contributing in the event of loss with that required to be maintained
under this Section 6.7, unless the Collateral Agent is included thereon as named
insured with the loss payable to the Collateral Agent under a lender's loss
payable endorsement or its equivalent.
6.8 [Intentionally Omitted]
6.9 Compliance with Laws. Comply with the requirements of all
applicable laws, rules, regulations, and orders of any Governmental Authority,
including the Fair Labor Standards Act and the Americans With Disabilities Act
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and other than laws, rules, regulations, and orders the non-compliance with
which, individually or in the aggregate, would not result in and reasonably
could not be expected to result in a Material Adverse Change.
6.10 Leases. Pay when due all rents and other amounts payable under any
leases to which any Loan Party is a party or by which any Loan Party's
properties and assets are bound, unless such payments are the subject of a
Permitted Protest.
6.11 Brokerage Commissions. Pay any and all brokerage commission or
finders fees incurred in connection with or as a result of Borrower's obtaining
financing from the Lender Group under this Agreement. Borrower agrees and
acknowledges that payment of all such brokerage commissions or finders' fees
shall be the sole responsibility of Borrower, and Borrower agrees to indemnify,
defend, and hold Agent and the Lender Group harmless from and against any claim
of any broker or finder arising out of Borrower's obtaining financing from the
Lender Group under this Agreement.
6.12 Existence. At all times preserve and keep in full force and effect
each Loan Party's valid existence and good standing and any rights and
franchises material to each Loan Party's businesses.
6.13 Environmental. (a) Keep any property either owned or operated by
any Loan Party free of any Environmental Liens or post bonds or post bonds or
other financial assurances sufficient to satisfy the obligations or liability
evidenced by such Environmental Liens, (b) comply, in all material respects,
with Environmental Laws and provide to Agent documentation of such compliance
which Agent reasonably requests, (c) promptly notify Agent of any release of a
Hazardous Material in a quantity which is in violation of any Environmental Law
from or onto property owned or operated by any Loan Party and take any Remedial
Actions required to ▇▇▇▇▇ said release or otherwise to come into compliance with
applicable Environmental Law, and (d) promptly provide Agent with written notice
within 10 days of the receipt of any of the following: (i) notice that an
Environmental Lien has been filed against any of the real or personal property
of any Loan Party, (ii) commencement of any Environmental Action or notice that
an Environmental Action will be filed against any Loan Party, and (iii) notice
of a violation, citation, or other administrative order which reasonably could
be expected to result in a Material Adverse Change.
6.14 Disclosure Updates. Promptly and in no event later than 5 Business
Days after obtaining knowledge thereof, (a) notify Agent if any written
information, exhibit, or report furnished to the Lender Group contained any
untrue statement of a material fact or omitted to state any material fact
necessary to make the statements contained therein not misleading in light of
the circumstances in which made, and (b) correct any defect or error that may be
discovered therein or in any Loan Document or in the execution, acknowledgement,
filing, or recordation thereof.
6.15 After Acquired Properties. With respect to any Oil and Gas
Property of any Loan Party with a PV-10 of at least $50,000 acquired after the
Closing Date by Borrower or any discovery and/or confirmation of the existence
of Hydrocarbons in any property owned or leased by Borrower, promptly (and in
any event within 30 days after the acquisition thereof): (A) execute and deliver
to the Collateral Agent such amendments to the Mortgages or such other documents
as the Collateral Agent shall deem necessary or advisable to grant to the
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Collateral Agent, for the benefit of the Agent and the Lenders, a perfected
first priority 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,
financing statements in such jurisdictions as may be requested by the Collateral
Agent; and (C) deliver to the Collateral Agent title opinions and/or legal
opinions relating 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 Agent.
6.16 Protection Against Drainage. To the extent that the Oil and Gas
Properties of any Loan Party (i) are operated by Borrower or its Restricted
Subsidiaries, Borrower or its Restricted Subsidiaries shall, or shall cause its
Restricted Subsidiaries to, act as a reasonably prudent operator in an effort to
identify and prevent the occurrence of any drainage of Hydrocarbons from such
Oil and Gas Properties and (ii) are not operated by Borrower or its Restricted
Subsidiaries, Borrower shall utilize, or cause its Restricted Subsidiaries to
utilize, its property and contractual rights as a reasonably prudent owner in an
effort to identify and prevent the occurrence of any drainage of Hydrocarbons
from such Oil and Gas Properties.
6.17 Additional Collateral Reviews. Borrower shall, from time to time
upon the reasonable request of Agent, take such actions and execute and deliver
such documents and instruments as Agent shall require to ensure that Agent
shall, at all times, have received satisfactory title reviews (including, if
requested, supplemental or new title opinions addressed to it), which title
opinions shall be in form and substance acceptable to Agent in its sole
discretion and shall include opinions regarding the before payout and after
payout ownership interests held by Borrower, for all ▇▇▇▇▇ located on the Oil
and Gas Properties covered thereby as to the ownership of Oil and Gas Properties
of Borrower and its Restricted Subsidiaries.
6.18 Hedging Agreements. Maintain in effect one or more Commodities
Hedging Agreements with respect to its Hydrocarbon production with one or more
counterparties rated investment grade by ▇▇▇▇▇'▇ and Standard & Poor's, or the
equivalent by a rating agency acceptable to Agent or with a counterparty
otherwise reasonably acceptable to Agent. The aggregate notional volumes of
Hydrocarbons covered by such Commodities Hedging Agreements 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 six calendar months on a
rolling six 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 6.2(e) hereof plus the
estimated production from anticipated drilling by Borrower or its Restricted
Subsidiaries during such succeeding six months. Borrower shall use such
Commodities 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 Borrower's and its Restricted Subsidiaries'
oil and gas operations and not as a means to speculate for investment purposes
on trends and shifts in financial or commodities markets.
7. NEGATIVE COVENANTS.
Borrower covenants and agrees that, so long as any credit hereunder
shall be available and until full and final payment of the Obligations and the
termination of this Agreement, Borrower will not and will not permit any of its
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Restricted Subsidiaries to do any of the following (unless otherwise agreed to
by Agent or the Required Lenders):
7.1 Indebtedness. Create, incur, assume, permit, guarantee, or
otherwise become or remain, directly or indirectly, liable with respect to any
Indebtedness, except:
(a) Indebtedness evidenced by this Agreement and the other Loan
Documents, together with Indebtedness owed to Underlying Issuers with respect to
Underlying Letters of Credit,
(b) Indebtedness set forth on Schedule 5.19,
(c) Permitted Purchase Money Indebtedness,
(d) refinancings, renewals, or extensions of Indebtedness
permitted under clauses (b), (c), (e) and (l) of this Section 7.1 (and
continuance or renewal of any Permitted Liens associated therewith) so long as:
(i) the terms and conditions of such refinancings, renewals, or extensions do
not, in Agent's judgment, materially impair the prospects of repayment of the
Obligations by any Loan Party or materially impair any Loan Party's
creditworthiness, (ii) such refinancings, renewals, or extensions do not result
in an increase in the principal amount of, or interest rate with respect to, the
Indebtedness so refinanced, renewed, or extended, (iii) such refinancings,
renewals, or extensions do not result in a shortening of the average weighted
maturity of the Indebtedness so refinanced, renewed, or extended, nor are they
on terms or conditions that, taken as a whole, are materially more burdensome or
restrictive to such Loan Party, (iv) if the Indebtedness that is refinanced,
renewed, or extended was subordinated in right of payment to the Obligations,
then the terms and conditions of the refinancing, renewal, or extension
Indebtedness must include subordination terms and conditions that are at least
as favorable to the Lender Group as those that were applicable to the
refinanced, renewed, or extended Indebtedness and (v) if the Permitted Liens
securing the Indebtedness that is refinanced, renewed or extended was
subordinated to the Collateral Agent's Liens securing the Obligations, then the
terms and conditions of such refinancing, renewal, or extension shall include
subordination terms and conditions that are at least as favorable to the Lender
Group as those that were applicable to the Indebtedness being refinanced,
renewed or extended;
(e) Indebtedness evidenced by the Senior Notes issued pursuant to
the terms of the Senior Notes Documents, so long as all such Indebtedness and
such documents are subject to the Intercreditor Agreement;
(f) Indebtedness under Hedging Agreements incurred in the
ordinary course of business of Borrower and its Restricted Subsidiaries
consistent with prudent business practice and not for speculative purposes and
in accordance with this Agreement;
(g) Indebtedness associated with bonds or surety obligations
required by applicable law in connection with the operation of Borrower's and
its Restricted Subsidiaries' Oil and Gas Properties;
(h) Indebtedness composing Permitted Investments;
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(i) (i) intercompany Indebtedness incurred by Borrower and made
by a Guarantor that is unsecured and subject to an intercompany subordination
agreement satisfactory to Agent, (ii) intercompany Indebtedness incurred by Grey
Wolf and made by any Loan Party so long as (A) Grey Wolf is a wholly-owned
Subsidiary of Borrower, (B) such Indebtedness is evidenced by a promissory note
that is pledged to the Collateral Agent for the benefit of Agent and the
Lenders, and (C) the aggregate principal amount of all such Indebtedness owing
by Grey Wolf (x) outstanding on the Closing Date shall not exceed $6,500,000 and
(y) incurred after the Closing Date shall not exceed $1,000,000 at any time and
(iii) intercompany Indebtedness incurred by any Loan Party (other than Borrower)
and made by Borrower so long as (A) such Indebtedness is evidenced by a
promissory note that is pledged to the Collateral Agent for the benefit of Agent
and the Lenders and (B) the aggregate outstanding principal amount of all such
Indebtedness owing to Borrower shall not exceed $500,000 at any time;
(j) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument inadvertently
(except in the case of daylight overdrafts) drawn against insufficient funds in
the ordinary course of business; provided, however, that the aggregate amount of
such Indebtedness is extinguished within two (2) Business Days of incurrence and
does not at any time exceed $50,000 (or such longer period or greater amount
which may be agreed to by Agent);
(k) Indebtedness of Borrower or any of its Restricted
Subsidiaries represented by letters of credit for the account of Borrower or any
of its Restricted Subsidiaries, as the case may be, in order to provide security
for workers' compensation claims, payment obligations in connection with
self-insurance or similar requirements in the ordinary course of business, to
the extent such letters of credit are unsecured and subordinated, in form and
substance satisfactory to Agent, to the Obligations;
(l) Indebtedness evidenced by the Bridge Loan Documents, so long
as such Indebtedness and such Bridge Loan Documents are subject to the
Intercreditor Agreement or such Indebtedness and Liens securing such
Indebtedness are otherwise subordinated in a manner satisfactory to Agent; and
(m) other unsecured Indebtedness of Borrower or any of its
Restricted Subsidiaries in an aggregate principal amount at any time outstanding
not to exceed $500,000 (or such greater amount which may be agreed to by Agent).
7.2 Liens. Create, incur, assume, or permit to exist, directly or
indirectly, any Lien on or with respect to any of its assets, of any kind,
whether now owned or hereafter acquired, or any income or profits therefrom,
except for Permitted Liens (including Liens that are replacements of Permitted
Liens to the extent that the original Indebtedness is refinanced, renewed, or
extended under Section 7.1(d) and so long as the replacement Liens only encumber
those assets that secured the refinanced, renewed, or extended Indebtedness).
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7.3 Restrictions on Fundamental Changes. Other than Permitted
Dispositions:
(a) enter into any merger, consolidation, reorganization, or
recapitalization, or reclassify its Stock;
(b) liquidate, wind up, or dissolve itself (or suffer any
liquidation or dissolution); or
(c) convey, sell, lease, license, assign, transfer, or otherwise
dispose of, in one transaction or a series of transactions, all or any
substantial part of its assets.
7.4 Disposal of Assets. Other than Permitted Dispositions, convey,
sell, lease, license, assign, transfer, or otherwise dispose of any of
Borrower's assets, including, without limitation, sell, lease, license, assign,
farm-out, convey or otherwise transfer any Oil and Gas Property or any interest
in any Oil and Gas Property.
7.5 Change Name. Change any Loan Party's name, organizational
identification number, state of incorporation, FEIN, corporate structure, or
identity, or add any new fictitious name; provided, however, that Borrower may
change its name upon at least 30 days' prior written notice to Agent and
Collateral Agent of such change and so long as, at the time of such written
notification, such Loan Party provides any financing statements, fixture filings
or Mortgages necessary to perfect and continue perfected the Collateral Agent's
Liens.
7.6 Guarantee. Guarantee or otherwise become in any way liable with
respect to the obligations of any third Person except (a) by endorsement of
instruments or items of payment for deposit to the account of any Loan Party or
which are transmitted or turned over to the Collateral Agent and (b) guarantees
of Indebtedness permitted under Section 7.1.
7.7 Nature of Business. Make any change in the principal nature of its
business as described in Section 5.28.
7.8 Payments, Prepayments and Amendments.
(a) Except (i) in connection with a refinancing permitted by
Section 7.1(d), (ii) the repayment of intercompany Indebtedness permitted by
Section 7.1(i), (iii) payments permitted under clause (c) of this Section 7.8 or
(iv) (A) so long as no Event of Default has occurred or is continuing, payments
from the net proceeds received by Borrower from the issuance or sale of
Qualified Capital to permanently repay all or part of the principal amount of
the loans under the Bridge Loan Documents or (B) so long as no Default,
Unmatured Default or Event of Default has occurred or is continuing, payments
from the net proceeds received by Borrower from the issuance or sale of
Qualified Capital to permanently prepay, redeem, defease, purchase or otherwise
acquire the Senior Notes, prepay, redeem, defease, purchase, or otherwise
acquire any Indebtedness of Borrower and its Restricted Subsidiaries, including,
without limitation, the Indebtedness evidenced by the Senior Note Documents and
the Bridge Loan Documents, other than the Obligations in accordance with this
Agreement.
(b) Except in connection with a refinancing permitted by Section
7.1(d) or as otherwise permitted in accordance with the terms of the
Intercreditor Agreement, directly or indirectly, amend, modify, alter, increase,
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or change any of the terms or conditions of any agreement, instrument, document,
indenture, or other writing evidencing or concerning Indebtedness permitted
under Sections 7.1(b), (c), (e) or (l) without the prior written consent of
Agent;
(c) Directly or indirectly, by deposit of monies or otherwise,
make any payment on account of any principal of, premium, interest, fees or
other amounts payable in connection with the Indebtedness under the Senior Notes
Documents or the Bridge Loan Agreement, other than (w) any repayment permitted
under clause (a) of this Section 7.8, (x) (i) in connection with a refinancing
permitted by Section 7.1(d), (ii) fees and expenses of the Senior Notes Trustee
and the Bridge Loan Administrative Agent incurred in the ordinary course and
(iii) payments of the Bridge Loan Obligations with the proceeds of any Grey Wolf
Stock Sale, (y) in the absence of a Default Period, (i) payments from the
proceeds of the Bridge Loan Disposition described in clause (b) of such
definition to be applied in accordance with Section 4.05 of the Intercreditor
Agreement, (ii) scheduled interest payments on the Senior Notes to be paid on
June 1 and December 1 of each calendar year, commencing June 1, 2005, and (iii)
interest, fees or other amounts payable in connection with the Indebtedness
under the Bridge Loan Agreement, and (z) during the existence of a Default
Period, payments as may be permitted by the terms of the Intercreditor
Agreement;
(d) (i) Amend, modify or otherwise change its or its Restricted
Subsidiaries' Governing 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 Stock (including any
shareholders' agreement), or enter into any new agreement with respect to any of
its Stock, or (ii) amend, modify or otherwise change any Material Contract of
Borrower or its Restricted Subsidiaries, except any such amendments,
modifications or changes or any such new agreements or arrangements pursuant to
this paragraph (d) that (x) either individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Change or (y) is in connection
with the issuance or sale of Qualified Capital.
7.9 Change of Control. Cause, permit, or suffer, directly or
indirectly, any Change of Control.
7.10 Forward Sales. Except in accordance with the ordinary course of
the Oil and Gas Business, and except for Permitted Dispositions, enter into or
permit to exist any advance payment agreement or other arrangement pursuant to
which any Loan Party, having received full or substantial payment of the
purchase price for a specified quantity of Hydrocarbons upon entering 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.
7.11 Distributions. Make any distribution or declare or pay any
dividends (in cash or other property, other than Qualified Capital) on, or
purchase, acquire, redeem, or retire (for cash or other property, other than a
purchase, acquisition, redemption or retirement solely in exchange for Qualified
Capital) any of Borrower's Stock, of any class, whether now or hereafter
outstanding.
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7.12 Accounting Methods. Modify or change its method of accounting
(other than as may be required to conform to GAAP) or enter into, modify, or
terminate any agreement currently existing, or at any time hereafter entered
into with any third party accounting firm or service bureau for the preparation
or storage of any Loan Party's accounting records without said accounting firm
or service bureau agreeing to provide Agent information regarding the Collateral
or any Loan Party's financial condition.
7.13 Investments. Except for Permitted Investments, directly or
indirectly, make or acquire any Investment or incur any liabilities (including
contingent obligations) for or in connection with any Investment.
7.14 Transactions with Affiliates. Other than with respect to the
transactions contemplated by the agreement identified in Part B of Schedule 5.24
or the Existing Note Redemption, directly or indirectly enter into or permit to
exist any transaction with any Affiliate of any Loan Party except for
transactions that are (i) in the ordinary course of such Loan Party's business,
(ii) upon fair and reasonable terms, (iii) fully disclosed to Agent, and (iv) no
less favorable to such Loan Party than would be obtained in an arm's length
transaction with a non-Affiliate.
7.15 Suspension. Suspend or go out of a substantial portion of its
business.
7.16 Compensation. Increase the annual fee or per-meeting fees paid in
cash to any member of its Board of Directors during any year by more than 20%
(or such greater amount which may be agreed to by Agent) over the prior year;
pay or accrue total cash compensation, during any year, to its officers and
senior management employees in an aggregate amount in excess of 120% (or such
greater amount which may be agreed to by Agent) of that paid or accrued in the
prior year.
7.17 Use of Proceeds. Use the proceeds of the Advances for any purpose
other than (a) on the Closing Date, (i) as specified in the Flow of Funds
Agreement and (ii) to pay transactional fees, costs, and expenses incurred in
connection with this Agreement, the other Loan Documents, and the transactions
contemplated hereby and thereby, and (b) thereafter, consistent with the terms
and conditions hereof, for its lawful and permitted purposes.
7.18 Change in Location of Chief Executive Office; Equipment with
Bailees. Relocate its chief executive office to a new location without providing
30 days' prior written notification thereof to Agent.
7.19 [Intentionally Omitted]
7.20 Financial Covenants.
Net Cash Interest Coverage Ratio. At any time when Excess Availability
is less than $10,000,000, permit the Net Cash Interest Coverage Ratio of
Borrower and its Restricted Subsidiaries to be less than the amount set forth in
the following table for the applicable period set forth opposite thereto:
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Applicable Period Cash Interest Coverage Ratio
For the 4 fiscal quarters ending
at the end of each fiscal quarter 1.25 to 1.00
7.21 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 prepayments with respect to its 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 two percent (2%) of the
current aggregate monthly gas production for such monthly period from the Oil
and Gas Properties of any Loan Party.
7.22 Environmental. Permit the use, handling, generation, storage,
treatment, Release or disposal of Hazardous Materials at any Real Property
owned, operated or leased by any Loan Party, except in compliance in all
material respects with Environmental Laws.
7.23 Limitation on Leases. Create, incur, assume or suffer to exist any
obligation 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 and leases directly related to oil and gas field
operations), 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 $800,000 (or such greater amount agreed to by the Agent),
in any period of twelve consecutive calendar months in the aggregate.
8. EVENTS OF DEFAULT.
Any one or more of the following events shall constitute an event of
default (other than any event described in Section 8.2 or 8.11, which shall
constitute an event of default upon notice to Borrower by Agent of any such
event) (each, an "Event of Default") under this Agreement:
8.1 If Borrower fails to pay when due and payable, or when declared due
and payable, all or any portion of the Obligations (whether of principal,
interest (including any interest which, but for the provisions of the Bankruptcy
Code, would have accrued on such amounts), fees and charges due the Lender
Group, reimbursement of Lender Group Expenses, or other amounts constituting
Obligations);
8.2 (i) If any Loan Party fails to perform, keep, or observe any term,
provision, condition, covenant, or agreement contained in Sections 6.1, 6.4,
6.5, 6.6, 6.9 and 6.16 of this Agreement, or comparable provisions of the other
Loan Documents, and such failure continues for 15 days, (ii) if any Loan Party
fails to perform, keep, or observe any term, provision, condition, covenant or
agreement contained in Sections 6.2, 6.3 (other than clause (h) thereof), 6.8
and 6.10 of this Agreement, or comparable provisions of the other Loan
Documents, and such failure continues for 5 days, or (iii) if any Loan Party
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otherwise fails to perform, keep, or observe any other term, provision,
condition, covenant, or agreement contained in this Agreement or in any of the
other Loan Documents;
8.3 If any material portion of Borrower's or any of its Restricted
Subsidiaries' assets is attached, seized, subjected to a writ or distress
warrant, levied upon, or comes into the possession of any third Person;
8.4 If an Insolvency Proceeding is commenced by Borrower or any of its
Subsidiaries (including, without limitation, Grey Wolf so long as Grey Wolf is a
Subsidiary of Borrower);
8.5 If an Insolvency Proceeding is commenced against Borrower or any of
its Subsidiaries (including, without limitation, Grey Wolf so long as Grey Wolf
is a Subsidiary of Borrower), and any of the following events occur: (a)
Borrower or such Subsidiary consents to the institution of such Insolvency
Proceeding against it, (b) the petition commencing the Insolvency Proceeding is
not timely controverted, (c) the petition commencing the Insolvency Proceeding
is not dismissed within 45 calendar days of the date of the filing thereof;
provided, however, that, during the pendency of such period, Agent (including
any successor agent) and each other member of the Lender Group shall be relieved
of their obligations to extend credit hereunder, (d) an interim trustee is
appointed to take possession of all or any substantial portion of the properties
or assets of, or to operate all or any substantial portion of the business of,
Borrower or any of its Subsidiaries, or (e) an order for relief shall have been
entered therein;
8.6 If Borrower or any of its Restricted Subsidiaries is enjoined,
restrained, or in any way prevented by court order from continuing to conduct
all or any material part of its business affairs;
8.7 If a notice of Lien, levy, or assessment is filed of record with
respect to (a) any of Borrower's or any of its Subsidiaries' assets (other than
assets of Grey Wolf) in an amount or with respect to assets (other than their
Proved Developed Producing Reserves) in excess of $100,000, or (b) any of
Borrower's or any of its Subsidiaries' Proved Developed Producing Reserves
(other than Proved Developed Producing Reserves of Grey Wolf), by the United
States or any department, agency, or instrumentality thereof, or by any state,
county, municipal, or governmental agency, or if any taxes or debts owing at any
time hereafter to any one or more of such entities becomes a Lien, whether
▇▇▇▇▇▇ or otherwise, upon (x) any of Borrower's or any of its Subsidiaries'
assets (other than assets of Grey Wolf) in an amount or with respect to assets
(other than their Proved Developed Producing Reserves) in excess of $100,000, or
(y) any of Borrower's or any of its Subsidiaries' Proved Developed Producing
Reserves (other than Proved Developed Producing Reserves of Grey Wolf), and the
same is not paid before such payment is delinquent;
8.8 If a judgment or other claim in excess of $100,000 (to the extent
not bonded or insured by a bonding or insurance company acceptable to Agent) in
the aggregate becomes a Lien or encumbrance upon any material portion of
Borrower's or any of its Subsidiaries' (other than Grey Wolf) assets;
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8.9 If there is a continuing default under any material agreement
(including any of the Senior Notes Documents, the Bridge Loan Documents or any
Material Contract of Borrower or its Restricted Subsidiaries) to which Borrower
or any of its Restricted Subsidiaries is a party and such default (a) occurs at
the final maturity of the obligations thereunder, or (b) results in a right by
the other party thereto, irrespective of whether exercised, to accelerate the
maturity of Borrower's or its Restricted Subsidiaries' obligations thereunder,
to terminate such agreement, or to refuse to renew such agreement pursuant to an
automatic renewal right therein;
8.10 If Borrower or any of its Restricted Subsidiaries makes any
payment on account of Indebtedness that has been contractually subordinated in
right of payment to the payment of the Obligations, except to the extent such
payment is permitted by the terms of the subordination provisions applicable to
such Indebtedness and except as permitted under Section 7.8;
8.11 If any material misstatement or misrepresentation exists now or
hereafter in any warranty, representation, statement, or Record made to any
member of the Lender Group by Borrower or any of its Subsidiaries, or any
officer, employee, agent, or director of Borrower or any of its Subsidiaries;
8.12 If there is a loss, suspension or revocation of, or failure to
renew, any license or permit now held or hereafter acquired by Borrower or any
of its Restricted Subsidiaries and such loss, suspension, revocation or failure
to renew could reasonably be expected to have a Material Adverse Change;
8.13 If the obligation of any Guarantor under the applicable Guaranty
is limited or terminated by operation of law or by such Guarantor thereunder;
8.14 If the Intercreditor Agreement, the Collateral Documents or any
other agreement, instrument or document that purports to create a Lien in favor
of the Collateral Agent, for the benefit of the Agent and the Lenders, 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 on or
security interest in the Collateral covered hereby or thereby; or
8.15 Any provision of any Loan Document shall at any time for any
reason be declared by a court of competent jurisdiction to be null and void or
invalid or unenforceable, or the validity or enforceability thereof shall be
contested in a proceeding by any Loan Party, or a proceeding shall be commenced
by any Loan Party, or by any Governmental Authority having jurisdiction over any
Loan Party, seeking to establish the invalidity or unenforceability thereof, or
any Loan Party shall deny that it has any liability or obligation purported to
be created under any Loan Document.
8.16 If any Loan Party fails to perform, keep, or observe any term,
provision, condition, covenant, or agreement contained in clause (h) of Section
6.3.
9. THE LENDER GROUP'S RIGHTS AND REMEDIES.
9.1 Rights and Remedies. Upon the occurrence, and during the
continuation, of an Event of Default, the Required Lenders (at their election
but without notice of their election and without demand) may authorize and
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instruct Agent to do any one or more of the following on behalf of the Lender
Group (and Agent, acting upon the instructions of the Required Lenders, shall do
the same on behalf of the Lender Group), all of which are authorized by
Borrower:
(a) Declare all Obligations, whether evidenced by this Agreement, by
any of the other Loan Documents, or otherwise, immediately due and payable;
(b) Cease advancing money or extending credit to or for the benefit of
Borrower under this Agreement, under any of the Loan Documents, or under any
other agreement between Borrower and the Lender Group;
(c) Terminate this Agreement and any of the other Loan Documents as to
any future liability or obligation of the Lender Group, but without affecting
the Obligations;
(d) Without notice to Borrower (such notice being expressly waived),
and without constituting a retention of any collateral in satisfaction of an
obligation (within the meaning of the Code), and subject to the terms of the
Intercreditor Agreement, set off and apply to the Obligations any and all (i)
balances and deposits of Borrower held by the Lender Group, or (ii) Indebtedness
at any time owing to or for the credit or the account of Borrower held by the
Lender Group;
(e) Subject to the terms of the Intercreditor Agreement, hold, as cash
collateral, any and all balances and deposits of Borrower held by the Lender
Group, to secure the full and final repayment of all of the Obligations and
apply, to the extent permitted by applicable law, such cash collateral to repay
the Obligations; and
(f) Agent and the Lender Group shall have all other rights and remedies
available at law or in equity or pursuant to the Intercreditor Agreement and any
other Loan Document.
9.2 Remedies Cumulative. The rights and remedies of the Lender Group
under this Agreement, the other Loan Documents, and all other agreements shall
be cumulative. The Lender Group shall have all other rights and remedies not
inconsistent herewith as provided under the Code, by law, or in equity. No
exercise by the Lender Group of one right or remedy shall be deemed an election,
and no waiver by the Lender Group of any Default, Unmatured Default or Event of
Default shall be deemed a continuing waiver. No delay by the Lender Group shall
constitute a waiver, election, or acquiescence by it.
10. TAXES AND EXPENSES.
If any Loan Party fails to pay any monies (whether taxes, assessments,
remittances, source deductions, insurance premiums, or, in the case of leased
properties or assets, rents or other amounts payable under such leases) due to
third Persons, or fails to make any deposits or furnish any required proof of
payment or deposit, all as required under the terms of this Agreement, then,
Agent, in its sole discretion and without prior notice to any Loan Party, may do
any or all of the following: (a) make payment of the same or any part thereof,
(b) set up such reserves in Borrower's Loan Account as Agent deems necessary to
protect the Lender Group from the exposure created by such failure, or (c) in
the case of the failure to comply with Section 6.7 hereof, obtain and maintain
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insurance policies of the type described in Section 6.7 and take any action with
respect to such policies as Agent deems prudent. Any such amounts paid by Agent
shall constitute Lender Group Expenses and any such payments shall not
constitute an agreement by the Lender Group to make similar payments in the
future or a waiver by the Lender Group of any Unmatured Default or Event of
Default under this Agreement. Agent need not inquire as to, or contest the
validity of, any such expense, tax, or Lien and the receipt of the usual
official notice for the payment thereof shall be conclusive evidence that the
same was validly due and owing.
11. WAIVERS; INDEMNIFICATION.
11.1 Demand; Protest; etc. Borrower waives demand, protest, notice of
protest, notice of default or dishonor, notice of payment and nonpayment,
nonpayment at maturity, release, compromise, settlement, extension, or renewal
of documents, instruments, chattel paper, and guarantees at any time held by the
Lender Group on which Borrower may in any way be liable.
11.2 The Lender Group's Liability for Collateral. Borrower hereby
agrees that: (a) so long as Agent complies with its obligations, if any, under
the Code, the Lender Group shall not in any way or manner be liable or
responsible for: (i) the safekeeping of the Collateral, (ii) any loss or damage
thereto occurring or arising in any manner or fashion from any cause, (iii) any
diminution in the value thereof, or (iv) any act or default of any carrier,
warehouseman, bailee, forwarding agency, or other Person, and (b) all risk of
loss, damage, or destruction of the Collateral shall be borne by Borrower.
11.3 Indemnification. Borrower shall pay, indemnify, defend, and hold
the Agent-Related Persons, the Lender-Related Persons with respect to each
Lender, each Participant (subject to Section 14.1(e)(v)), and each of their
respective officers, directors, employees, agents, and attorneys-in-fact (each,
an "Indemnified Person") harmless (to the fullest extent permitted by law) from
and against any and all claims, demands, suits, actions, investigations,
proceedings, and damages, and all reasonable attorneys fees and disbursements
and other costs and expenses actually incurred in connection therewith (as and
when they are incurred and irrespective of whether suit is brought), at any time
asserted against, imposed upon, or incurred by any of them (a) in connection
with or as a result of or related to the execution, delivery, enforcement,
performance, amendment, waiver or administration of this Agreement, any of the
other Loan Documents, or the transactions contemplated hereby or thereby, and
(b) with respect to any investigation, litigation, or proceeding related to this
Agreement, any other Loan Document, or the use of the proceeds of the credit
provided hereunder (irrespective of whether any Indemnified Person is a party
thereto), or any act, omission, event, or circumstance in any manner related
thereto (all the foregoing, collectively, the "Indemnified Liabilities"). The
foregoing to the contrary notwithstanding, Borrower shall have no obligation to
any Indemnified Person under this Section 11.3 with respect to any Indemnified
Liability that a court of competent jurisdiction finally determines to have
resulted from the gross negligence or willful misconduct of such Indemnified
Person. This provision shall survive the termination of this Agreement and the
repayment of the Obligations. If any Indemnified Person makes any payment to any
other Indemnified Person with respect to an Indemnified Liability as to which
Borrower was required to indemnify the Indemnified Person receiving such
payment, the Indemnified Person making such payment is entitled to be
indemnified and reimbursed by Borrower with respect thereto. WITHOUT LIMITATION,
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THE FOREGOING INDEMNITY SHALL APPLY TO EACH INDEMNIFIED PERSON WITH RESPECT TO
INDEMNIFIED LIABILITIES WHICH IN WHOLE OR IN PART CAUSED BY OR ARISE OUT OF ANY
NEGLIGENT ACT OR OMISSION OF SUCH INDEMNIFIED PERSON OR OF ANY OTHER PERSON.
12. NOTICES.
Unless otherwise provided in this Agreement, all notices or demands by
Borrower or Agent to the other relating to this Agreement or any other Loan
Document shall be in writing and (except for financial statements and other
informational documents which may be sent by first-class mail, postage prepaid)
shall be personally delivered or sent by registered or certified mail (postage
prepaid, return receipt requested), overnight courier, electronic mail (at such
email addresses as Borrower or Agent, as applicable, may designate to each other
in accordance herewith), or telefacsimile to Borrower or Agent, as the case may
be, at its address set forth below:
If to Borrower: ABRAXAS PETROLEUM CORPORATION
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Fax No. ▇▇▇-▇▇▇-▇▇▇▇
with copies to: ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Incorporated
▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Fax No. ▇▇▇-▇▇▇-▇▇▇▇
If to Agent: ▇▇▇▇▇ FARGO FOOTHILL, INC.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Business Finance Division Manager
Fax No. ▇▇▇-▇▇▇-▇▇▇▇
with copies to: ▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇, Esq.
Fax No. ▇▇▇-▇▇▇-▇▇▇▇
Agent and Borrower may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other party. All notices or demands sent in accordance with this Section 12
shall be deemed received on the earlier of the date of actual receipt or 3
Business Days after the deposit thereof in the mail.
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13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
(a) THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (UNLESS
EXPRESSLY PROVIDED TO THE CONTRARY IN ANOTHER LOAN DOCUMENT IN RESPECT OF SUCH
OTHER LOAN DOCUMENT), THE CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF
AND THEREOF, AND THE RIGHTS OF THE PARTIES HERETO AND THERETO WITH RESPECT TO
ALL MATTERS ARISING HEREUNDER OR THEREUNDER OR RELATED HERETO OR THERETO SHALL
BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK, EXCEPT TO THE EXTENT THAT THE VALIDITY AND PERFECTION OR
THE PERFECTION AND EFFECT OF PERFECTION OR NON-PERFECTION OF THE SECURITY
INTEREST CREATED HEREBY OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR
COLLATERAL, ARE GOVERNED BY THE LAW OF A JURISDICTION OTHER THAN THE STATE OF
NEW YORK.
(b) THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN
CONNECTION WITH THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE TRIED AND
LITIGATED ONLY IN THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF NEW
YORK, STATE OF NEW YORK, PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT
AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT AGENT'S OPTION, IN
THE COURTS OF ANY JURISDICTION WHERE AGENT ELECTS TO BRING SUCH ACTION OR WHERE
SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND. BORROWER AND THE LENDER GROUP
WAIVE, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO
ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT
ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 13(b).
(c) BORROWER AND THE LENDER GROUP HEREBY WAIVE THEIR RESPECTIVE RIGHTS
TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY
OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING
CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR
STATUTORY CLAIMS. BORROWER AND THE LENDER GROUP REPRESENT THAT EACH HAS REVIEWED
THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS
FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF
THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
14. ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS.
14.1 Assignments and Participations.
(a) Any Lender may, with the written consent of Agent (provided
that no written consent of Agent shall be required in connection with any
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assignment and delegation by a Lender to an Eligible Transferee), assign and
delegate to one or more assignees (each an "Assignee") all, or any part of all,
of the Obligations, the Commitments and the other rights and obligations of such
Lender hereunder and under the other Loan Documents, in a minimum amount of
$1,000,000 (except such minimum amount shall not apply to any Affiliate of a
Lender or to a Related Fund or account managed by a Lender); provided, however,
that Borrower and Agent may continue to deal solely and directly with such
Lender in connection with the interest so assigned to an Assignee until (i)
written notice of such assignment, together with payment instructions,
addresses, and related information with respect to the Assignee, have been given
to Borrower and Agent by such Lender and the Assignee, (ii) such Lender and its
Assignee have delivered to Borrower and Agent a fully executed Assignment and
Acceptance, and (iii) the assignor Lender or Assignee has paid to Agent for
Agent's separate account a processing fee in the amount of $5,000. Anything
contained herein to the contrary notwithstanding, the consent of Agent shall not
be required (and payment of any fees shall not be required) if (x) such
assignment is in connection with any merger, consolidation, sale, transfer, or
other disposition of all or any substantial portion of the business or loan
portfolio of such Lender or (y) the assignee is an Affiliate of a Lender or a
Related Fund.
(b) From and after the date that Agent notifies the assignor
Lender (with a copy to Borrower) that it has received a fully executed
Assignment and Acceptance and payment (if applicable) of the above-referenced
processing fee, (i) the Assignee thereunder shall be a party hereto and, to the
extent that rights and obligations hereunder have been assigned to it pursuant
to such Assignment and Acceptance, shall have the rights and obligations of a
Lender under the Loan Documents, and (ii) the assignor Lender shall, to the
extent that rights and obligations hereunder and under the other Loan Documents
have been assigned by it pursuant to such Assignment and Acceptance, relinquish
its rights (except with respect to Section 11.3 hereof) and be released from its
obligations under this Agreement (and in the case of an Assignment and
Acceptance covering all or the remaining portion of an assigning Lender's rights
and obligations under this Agreement and the other Loan Documents, such Lender
shall cease to be a party hereto and thereto), and such assignment shall affect
a novation between Borrower and the Assignee.
(c) By executing and delivering an Assignment and Acceptance, the
assigning Lender thereunder and the Assignee thereunder confirm to and agree
with each other and the other parties hereto as follows: (1) other than as
provided in such Assignment and Acceptance, such 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 the execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or any other Loan Document furnished
pursuant hereto, (2) such assigning Lender makes no representation or warranty
and assumes no responsibility with respect to the financial condition of
Borrower or the performance or observance by Borrower of any of its obligations
under this Agreement or any other Loan Document furnished pursuant hereto, (3)
such Assignee confirms that it has received a copy of this Agreement, together
with such other documents and information as it has deemed appropriate to make
its own credit analysis and decision to enter into such Assignment and
Acceptance, (4) such Assignee will, independently and without reliance upon
Agent, such assigning Lender or any other Lender, and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking action under this Agreement, (5)
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such Assignee appoints and authorizes Agent to take such actions and to exercise
such powers under this Agreement as are delegated to Agent, by the terms hereof,
together with such powers as are reasonably incidental thereto, and (6) such
Assignee agrees that it will perform all of the obligations which by the terms
of this Agreement are required to be performed by it as a Lender.
(d) Immediately upon each Assignee's making its processing fee
payment under the Assignment and Acceptance and receipt and acknowledgment by
Agent of such fully executed Assignment and Acceptance, this Agreement shall be
deemed to be amended to the extent, but only to the extent, necessary to reflect
the addition of the Assignee and the resulting adjustment of the Commitments
arising therefrom. The Commitment allocated to each Assignee shall reduce such
Commitments of the assigning Lender pro tanto.
(e) Any Lender may at any time, with the written consent of
Agent, sell to one or more commercial banks, financial institutions, or other
Persons not Affiliates of such Lender (a "Participant") participating interests
in its Obligations owing to such Lender, the Commitment of such Lender, and the
other rights and interests of that Lender (the "Originating Lender") hereunder
and under the other Loan Documents (provided that no written consent of Agent
shall be required in connection with any sale of any such participating
interests by a Lender to an Eligible Transferee); provided, however, that (i)
the Originating Lender shall remain a "Lender" for all purposes of this
Agreement and the other Loan Documents and the Participant receiving the
participating interest in the Obligations, the Commitments, and the other rights
and interests of the Originating Lender hereunder shall not constitute a
"Lender" hereunder or under the other Loan Documents and the Originating
Lender's obligations under this Agreement shall remain unchanged, (ii) the
Originating Lender shall remain solely responsible for the performance of such
obligations, (iii) Borrower, Agent, and the Lenders shall continue to deal
solely and directly with the Originating Lender in connection with the
Originating Lender's rights and obligations under this Agreement and the other
Loan Documents, (iv) no originating Lender shall transfer or grant any
participating interest under which the Participant has the right to approve any
amendment to, or any consent or waiver with respect to, this Agreement or any
other Loan Document, except to the extent such amendment to, or consent or
waiver with respect to this Agreement or of any other Loan Document would (A)
extend the final maturity date of the Obligations hereunder in which such
Participant is participating, (B) reduce the interest rate applicable to the
Obligations hereunder in which such Participant is participating, (C) release
all or substantially all of the guaranties (except to the extent expressly
provided herein or in any of the Loan Documents) supporting the Obligations
hereunder in which such Participant is participating, (D) postpone the payment
of, or reduce the amount of, the interest or fees payable to such Participant,
or (E) change the amount or due dates of scheduled principal repayments or
prepayments or premiums in respect of the Obligations hereunder in which such
Participant is participating, and (v) all amounts payable by Borrower hereunder
shall be determined as if such Lender had not sold such participation, except
that, if amounts outstanding under this Agreement are due and unpaid, or shall
have been declared or shall have become due and payable upon the occurrence of
an Unmatured Default or Event of Default, each Participant shall be deemed to
have the right of set-off in respect of its participating interest in amounts
owing under this Agreement to the same extent as if the amount of its
participating interest were owing directly to it as a Lender under this
Agreement. The rights of any Participant only shall be derivative through the
Originating Lender with whom such Participant participates and no Participant
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shall have any rights under this Agreement or the other Loan Documents or any
direct rights as to the other Lenders, Agent, Borrower, the Collections, the
Collateral, or otherwise in respect of the Obligations. No Participant shall
have the right to participate directly in the making of decisions by the Lenders
among themselves. The provisions of this Section 14.1(e) are solely for the
benefit of the Lender Group, and Borrower shall not have any rights as a third
party beneficiary of such provisions.
(f) In connection with any such assignment or participation or
proposed assignment or participation, a Lender may disclose to a third party all
documents and information which it now or hereafter may have relating to
Borrower or Borrower's business.
(g) Any other provision in this Agreement notwithstanding, any
Lender may at any time create a security interest in, or pledge, all or any
portion of its rights under and interest in this Agreement in favor of any
Federal Reserve Bank in accordance with Regulation A of the Federal Reserve Bank
or U.S. Treasury Regulation 31 CFR ss.203.14, and such Federal Reserve Bank may
enforce such pledge or security interest in any manner permitted under
applicable law.
(h) Borrower shall maintain, or cause to be maintained, a
register (the "Register") on which it enters the name of a Lender as the
registered owner of each Advance held by such Lender. 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 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), Borrower 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. In the case of an assignment
or delegation covered by Section 14.1(a)(y), the assigning Lender shall maintain
a comparable Register on behalf of Borrower.
(i) In the event that a Lender sells participations in the
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.
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14.2 Successors. This Agreement shall bind and inure to the
benefit of the respective successors and assigns of each of the parties hereto;
provided, however, that Borrower may not assign this Agreement or any rights or
duties hereunder without the Lenders' prior written consent and any prohibited
assignment shall be absolutely void ab initio. No consent to assignment by the
Lenders shall release Borrower from its Obligations. A Lender may assign this
Agreement and the other Loan Documents and its rights and duties hereunder and
thereunder pursuant to Section 14.1 hereof and, except as expressly required
pursuant to Section 14.1 hereof, no consent or approval by Borrower is required
in connection with any such assignment.
15. AMENDMENTS; WAIVERS.
15.1 Lenders' Amendments and Waivers. No amendment or waiver of any
provision of this Agreement or any other Loan Document, and no consent with
respect to any departure by Borrower therefrom, shall be effective unless the
same shall be in writing and signed by the Required Lenders (or by Agent at the
written request of the Required Lenders) and Borrower and then any such waiver
or consent shall be effective only in the specific instance and for the specific
purpose for which given; provided, however, that no such waiver, amendment, or
consent shall, unless in writing and signed (or otherwise authorized) by all of
the Lenders affected thereby and Borrower, do any of the following:
(a) increase or extend any Commitment of any Lender,
(b) postpone or delay any date fixed by this Agreement or any
other Loan Document for any payment of principal, interest, fees, or other
amounts due hereunder or under any other Loan Document,
(c) reduce the principal of, or the rate of interest on, any loan
or other extension of credit hereunder, or reduce any fees or other amounts
payable hereunder or under any other Loan Document,
(d) change the percentage of the Commitments that is required to
take any action hereunder,
(e) amend, modify or waive this Section 15 or any provision of
the Agreement providing for consent or other action by all Lenders,
(f) [Intentionally Omitted]
(g) change the definition of "Required Lenders" or "Pro Rata
Share",
(h) [Intentionally Omitted]
(i) release Borrower or any Guarantor from any obligation for the
payment of money,
(j) change, modify or waive Section 2.1(b) or change, modify or
waive the definition of "Borrowing Base", "Basis Differential", "NYMEX Strip
Price" or "PV-10" or
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(k) amend, modify or waive any of the provisions of Sections
2.1(a), 2.3(e), 2.3(i), 2.4(b), or 16 (or change any definition of a term used
in such Section in a manner adverse to any Lender).
and, provided further, however, that no amendment, waiver or consent
shall, unless in writing and signed by Agent, Issuing Lender, or Swing Lender,
as applicable, affect the rights or duties of Agent, Issuing Lender, or Swing
Lender, as applicable, under this Agreement or any other Loan Document. The
foregoing notwithstanding, any amendment, modification, waiver, consent,
termination, or release of, or with respect to, any provision of this Agreement
or any other Loan Document that relates only to the relationship of the Lender
Group among themselves, and that does not affect the rights or obligations of
Borrower, shall not, subject to Section 14.1(a), require consent by or the
agreement of Borrower.
15.2 [Intentionally Omitted]
15.3 [Intentionally Omitted]
15.4 Replacement of Holdout Lender.
(a) If any action to be taken by the Lender Group or Agent
hereunder requires the unanimous consent, authorization, or agreement of all
Lenders, and a Lender ("Holdout Lender") fails to give its consent,
authorization, or agreement, then Agent, upon at least 5 Business Days' prior
irrevocable notice to the Holdout Lender, may permanently replace the Holdout
Lender with one or more substitute Lenders (each, a "Replacement Lender"), and
the Holdout Lender shall have no right to refuse to be replaced hereunder. Such
notice to replace the Holdout Lender shall specify an effective date for such
replacement, which date shall not be later than 15 Business Days after the date
such notice is given.
(b) Prior to the effective date of such replacement, the Holdout
Lender and each Replacement Lender shall execute and deliver an Assignment and
Acceptance Agreement, subject only to the Holdout Lender being repaid its share
of the outstanding Obligations (including an assumption of its Pro Rata Share of
the Risk Participation Liability) without any premium or penalty of any kind
whatsoever. If the Holdout Lender shall refuse or fail to execute and deliver
any such Assignment and Acceptance Agreement prior to the effective date of such
replacement, the Holdout Lender shall be deemed to have executed and delivered
such Assignment and Acceptance Agreement. The replacement of any Holdout Lender
shall be made in accordance with the terms of Section 14.1. Until such time as
the Replacement Lenders shall have acquired all of the Obligations, the
Commitments, and the other rights and obligations of the Holdout Lender
hereunder and under the other Loan Documents, the Holdout Lender shall remain
obligated to make the Holdout Lender's Pro Rata Share of Advances and to
purchased a participation in each Letter of Credit, in an amount equal to its
Pro Rata Share of the Risk Participation Liability of such Letter of Credit.
15.5 No Waivers; Cumulative Remedies. No failure by Agent or any Lender
to exercise any right, remedy, or option under this Agreement or any other Loan
Document, or delay by Agent or any Lender in exercising the same, will operate
as a waiver thereof. No waiver by Agent or any Lender will be effective unless
it is in writing, and then only to the extent specifically stated. No waiver by
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Agent or any Lender on any occasion shall affect or diminish Agent's and each
Lender's rights thereafter to require strict performance by Borrower of any
provision of this Agreement. Agent's and each Lender's rights under this
Agreement and the other Loan Documents will be cumulative and not exclusive of
any other right or remedy that Agent or any Lender may have.
16. AGENT; THE LENDER GROUP.
16.1 Appointment and Authorization of Agent. Each Lender hereby
designates and appoints Foothill as its representative under this Agreement and
the other Loan Documents and each Lender hereby irrevocably authorizes Agent to
take such action on its behalf under the provisions of this Agreement and each
other Loan Document and to exercise such powers and perform such duties as are
expressly delegated to Agent by the terms of this Agreement or any other Loan
Document, together with such powers as are reasonably incidental thereto. Agent
agrees to act as such on the express conditions contained in this Section 16.
Except as otherwise specifically provided in Sections 16.12 and 16.17, the
provisions of this Section 16 are solely for the benefit of Agent, and the
Lenders, and Borrower shall have no rights as a third party beneficiary of any
of the provisions contained herein. Any provision to the contrary contained
elsewhere in this Agreement or in any other Loan Document notwithstanding, Agent
shall not have any duties or responsibilities, except those expressly set forth
herein, nor shall Agent have or be deemed to have any fiduciary relationship
with any Lender, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or any other Loan
Document or otherwise exist against Agent; it being expressly understood and
agreed that the use of the word "Agent" is for convenience only, that Foothill
is merely the representative of the Lenders, and only has the contractual duties
set forth herein. Except as expressly otherwise provided in this Agreement,
Agent shall have and may use its sole discretion with respect to exercising or
refraining from exercising any discretionary rights or taking or refraining from
taking any actions that Agent expressly is entitled to take or assert under or
pursuant to this Agreement and the other Loan Documents. Without limiting the
generality of the foregoing, or of any other provision of the Loan Documents
that provides rights or powers to Agent, Lenders agree that Agent shall, subject
to the terms of the Intercreditor Agreement, have the right to exercise the
following powers as long as this Agreement remains in effect: (a) maintain, in
accordance with its customary business practices, ledgers and records reflecting
the status of the Obligations, the Collateral, the Collections, and related
matters, (b) 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 the Loan Documents,
(c) make Advances, for itself or on behalf of Lenders as provided in the Loan
Documents, (d) exclusively receive, apply, and distribute the Collections as
provided in the Loan Documents, (e) perform, exercise, and enforce any and all
other rights and remedies of the Lender Group with respect to Borrower, the
Obligations, the Collateral, the Collections, or otherwise related to any of
same as provided in the Loan Documents, (f) incur and pay such Lender Group
Expenses as Agent may deem necessary or appropriate for the performance and
fulfillment of its functions and powers pursuant to the Loan Documents, and (g)
enter into and perform its duties under the Intercreditor Agreement.
16.2 Delegation of Duties. Agent may execute any of its duties under
this Agreement or any other Loan Document by or through agents, employees or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
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matters pertaining to such duties. Agent shall not be responsible for the
negligence or misconduct of any agent or attorney-in-fact that it selects as
long as such selection was made without gross negligence or willful misconduct.
16.3 Liability of Agent. None of the Agent-Related Persons shall (i) be
liable for any action taken or omitted to be taken by any of them under or in
connection with this Agreement or any other Loan Document or the transactions
contemplated hereby (except for its own gross negligence or willful misconduct),
or (ii) be responsible in any manner to any of the Lenders for any recital,
statement, representation or warranty made by Borrower or any Subsidiary or
Affiliate of Borrower, or any officer or director thereof, contained in this
Agreement or in any other Loan Document, or in any certificate, report,
statement or other document referred to or provided for in, or received by Agent
under or in connection with, this Agreement or any other Loan Document, or the
validity, effectiveness, genuineness, enforceability or sufficiency of this
Agreement or any other Loan Document, or for any failure of Borrower or any
other party to any Loan Document to perform its obligations hereunder or
thereunder. No Agent-Related Person shall be under any obligation to any Lender
to ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement or any other Loan
Document, or to inspect the Books or properties of Borrower or the books or
records or properties of any of Borrower's Subsidiaries or Affiliates.
16.4 Reliance by Agent. Agent shall be entitled to rely, and shall be
fully protected in relying, upon any writing, resolution, notice, consent,
certificate, affidavit, letter, telegram, facsimile, telex or telephone message,
statement or other document or conversation believed by it to be genuine and
correct and to have been signed, sent, or made by the proper Person or Persons,
and upon advice and statements of legal counsel (including counsel to Borrower
or counsel to any Lender), independent accountants and other experts selected by
Agent. Agent shall be fully justified in failing or refusing to take any action
under this Agreement or any other Loan Document unless Agent shall first receive
such advice or concurrence of the Lenders as it deems appropriate and until such
instructions are received, Agent shall act, or refrain from acting, as it deems
advisable. If Agent so requests, it shall first be indemnified to its reasonable
satisfaction by Lenders against any and all liability and expense that may be
incurred by it by reason of taking or continuing to take any such action. Agent
shall in all cases be fully protected in acting, or in refraining from acting,
under this Agreement or any other Loan Document in accordance with a request or
consent of the Lenders and such request and any action taken or failure to act
pursuant thereto shall be binding upon all of the Lenders.
16.5 Notice of Default, Unmatured Default or Event of Default. Agent
shall not be deemed to have knowledge or notice of the occurrence of any
Default, Unmatured Default or Event of Default, except with respect to defaults
in the payment of principal, interest, fees, and expenses required to be paid to
Agent for the account of the Lenders, except with respect to Defaults, Unmatured
Defaults and Events of Default of which Agent has actual knowledge, unless Agent
shall have received written notice from a Lender or Borrower referring to this
Agreement, describing such Default, Unmatured Default or Event of Default, and
stating that such notice is a "notice of default." Agent promptly will notify
the Lenders of its receipt of any such notice or of any Unmatured Default or
Event of Default of which Agent has actual knowledge. If any Lender obtains
actual knowledge of any Unmatured Default or Event of Default, such Lender
promptly shall notify the other Lenders and Agent of such Unmatured Default or
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Event of Default. Each Lender shall be solely responsible for giving any notices
to its Participants, if any. Subject to Section 16.4, Agent shall take such
action with respect to such Default, Unmatured Default or Event of Default as
may be requested by the Required Lenders in accordance with Section 9; provided,
however, that unless and until Agent has received any such request, Agent may
(but shall not be obligated to) take such action, or refrain from taking such
action, with respect to such Default, Unmatured Default or Event of Default as
it shall deem advisable.
16.6 Credit Decision. Each Lender acknowledges that none of the
Agent-Related Persons has made any representation or warranty to it, and that no
act by Agent hereinafter taken, including any review of the affairs of Borrower
and its Subsidiaries or Affiliates, shall be deemed to constitute any
representation or warranty by any Agent-Related Person to any Lender. Each
Lender represents to Agent that it has, independently and without reliance upon
any Agent-Related Person and based on such documents and information as it has
deemed appropriate, made its own appraisal of and investigation into the
business, prospects, operations, property, financial and other condition and
creditworthiness of Borrower and any other Person (other than the Lender Group)
party to a Loan Document, and all applicable bank regulatory laws relating to
the transactions contemplated hereby, and made its own decision to enter into
this Agreement and to extend credit to Borrower. Each Lender also represents
that it will, independently and without reliance upon any Agent-Related Person
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and decisions in
taking or not taking action under this Agreement and the other Loan Documents,
and to make such investigations as it deems necessary to inform itself as to the
business, prospects, operations, property, financial and other condition and
creditworthiness of Borrower and any other Person (other than the Lender Group)
party to a Loan Document. Except for notices, reports, and other documents
expressly herein required to be furnished to the Lenders by Agent, Agent shall
not have any duty or responsibility to provide any Lender with any credit or
other information concerning the business, prospects, operations, property,
financial and other condition or creditworthiness of Borrower and any other
Person party to a Loan Document that may come into the possession of any of the
Agent-Related Persons.
16.7 Costs and Expenses; Indemnification. Agent may incur and pay
Lender Group Expenses to the extent Agent reasonably deems necessary or
appropriate for the performance and fulfillment of its functions, powers, and
obligations pursuant to the Loan Documents, including court costs, reasonable
attorneys fees and expenses, costs of collection by outside collection agencies
and auctioneer fees and costs of security guards or insurance premiums paid to
maintain the Collateral, whether or not Borrower is obligated to reimburse Agent
or Lenders for such expenses pursuant to the Loan Agreement or otherwise. Agent
is authorized and directed to deduct and retain sufficient amounts from
Collections received by Agent to reimburse Agent for such out-of-pocket costs
and expenses prior to the distribution of any amounts to Lenders. In the event
Agent is not reimbursed for such costs and expenses from Collections received by
Agent, each Lender hereby agrees that it is and shall be obligated to pay to or
reimburse Agent for the amount of such Lender's Pro Rata Share thereof. Whether
or not the transactions contemplated hereby are consummated, the Lenders shall
indemnify upon demand the Agent-Related Persons (to the extent not reimbursed by
or on behalf of Borrower and without limiting the obligation of Borrower to do
so), according to their Pro Rata Shares, from and against any and all
Indemnified Liabilities; provided, however, that no Lender shall be liable for
the payment to any Agent-Related Person of any portion of such Indemnified
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Liabilities resulting solely from such Person's gross negligence or willful
misconduct nor shall any Lender be liable for the obligations of any Defaulting
Lender in failing to make an Advance or other extension of credit hereunder.
Without limitation of the foregoing, each Lender shall reimburse Agent upon
demand for such Lender's ratable share of any costs or out-of-pocket expenses
(including attorneys fees and expenses) incurred by Agent in connection with the
preparation, execution, delivery, administration, modification, amendment, or
enforcement (whether through negotiations, legal proceedings or otherwise) of,
or legal advice in respect of rights or responsibilities under, this Agreement,
any other Loan Document, or any document contemplated by or referred to herein,
to the extent that Agent is not reimbursed for such expenses by or on behalf of
Borrower. The undertaking in this Section shall survive the payment of all
Obligations hereunder and the resignation or replacement of Agent.
16.8 Agent in Individual Capacity. Foothill and its Affiliates may make
loans to, issue letters of credit for the account of, accept deposits from,
acquire equity interests in, and generally engage in any kind of banking,
lending, trust, financial advisory, underwriting, or other business with
Borrower and its Subsidiaries and Affiliates and any other Person (other than
the Lender Group) party to any Loan Documents as though Foothill were not Agent
hereunder, and, in each case, without notice to or consent of the other members
of the Lender Group. The other members of the Lender Group acknowledge that,
pursuant to such activities, Foothill or its Affiliates may receive information
regarding Borrower or its Affiliates and any other Person (other than the Lender
Group) party to any Loan Documents that is subject to confidentiality
obligations in favor of Borrower or such other Person and that prohibit the
disclosure of such information to the Lenders, and the Lenders acknowledge that,
in such circumstances (and in the absence of a waiver of such confidentiality
obligations, which waiver Agent will use its reasonable best efforts to obtain),
Agent shall not be under any obligation to provide such information to them. The
terms "Lender" and "Lenders" include Foothill in its individual capacity.
16.9 Successor Agent. (a) Agent may resign as Agent upon 45 days'
notice to the Lenders. If Agent resigns under this Agreement, the Required
Lenders shall appoint a successor Agent for the Lenders. If no successor Agent
is appointed prior to the effective date of the resignation of Agent, Agent may
appoint, after consulting with the Lenders, a successor Agent. If Agent has
materially breached or failed to perform any material provision of this
Agreement or of applicable law, the Required Lenders may agree in writing to
remove and replace Agent with a successor Agent from among the Lenders. (b)
After all of the Obligations have been paid in full, all Letters of Credit have
either been terminated or cash collateralized and the Commitments have been
terminated, Agent agrees to resign. (c) Nothing contained in this Section 16.9
shall be construed to limit or eliminate Agent's right to resign as an Agent in
accordance with this Section 16.9. In any such event, upon the acceptance of its
appointment as successor Agent hereunder, such successor Agent shall succeed to
all the rights, powers, and duties of the retiring Agent and the term "Agent"
shall mean such successor Agent and the retiring Agent's appointment, powers,
and duties as Agent shall be terminated. After any retiring Agent's resignation
hereunder as Agent, the provisions of this Section 16 shall inure to its benefit
as to any actions taken or omitted to be taken by it while it was Agent under
this Agreement. If no successor Agent has accepted appointment as Agent by the
date which is 45 days following a retiring Agent's notice of resignation, the
retiring Agent's resignation shall nevertheless thereupon become effective and
the Lenders shall perform all of the duties of Agent hereunder until such time,
if any, as the Lenders appoint a successor Agent as provided for above.
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16.10 Lender in Individual Capacity. Any Lender and its respective
Affiliates may make loans to, issue letters of credit for the account of, accept
deposits from, acquire equity interests in and generally engage in any kind of
banking, trust, financial advisory, underwriting or other business with Borrower
and its Subsidiaries and Affiliates and any other Person (other than the Lender
Group) party to any Loan Documents as though such Lender were not a Lender
hereunder without notice to or consent of the other members of the Lender Group.
The other members of the Lender Group acknowledge that, pursuant to such
activities, such Lender and its respective Affiliates may receive information
regarding Borrower or its Affiliates and any other Person (other than the Lender
Group) party to any Loan Documents that is subject to confidentiality
obligations in favor of Borrower or such other Person and that prohibit the
disclosure of such information to the Lenders, and the Lenders acknowledge that,
in such circumstances (and in the absence of a waiver of such confidentiality
obligations, which waiver such Lender will use its reasonable best efforts to
obtain), such Lender not shall be under any obligation to provide such
information to them. With respect to the Swing Loans and Agent Advances, Swing
Lender shall have the same rights and powers under this Agreement as any other
Lender and may exercise the same as though it were not the sub-agent of Agent.
16.11 Withholding Taxes.
(a) If any Lender is a "foreign corporation, partnership or
trust" within the meaning of the IRC and such Lender claims exemption from, or a
reduction of, U.S. withholding tax under Sections 1441 or 1442 of the IRC, such
Lender agrees with and in favor of Agent and Borrower, to deliver to Agent and
Borrower:
(i) if such Lender claims an exemption from withholding tax
pursuant to its portfolio interest exception, (a) a statement of the
Lender, signed under penalty of perjury, that it is not a (I) a "bank" as
described in Section 881(c)(3)(A) of the IRC, (II) a 10% shareholder
(within the meaning of Section 881(c)(3)(B) of the IRC), or (III) a
controlled foreign corporation described in Section 881(c)(3)(C) of the
IRC, and (B) a properly completed IRS Form W-8BEN, before the first payment
of any interest under this Agreement and at any other time reasonably
requested by Agent or Borrower;
(ii) if such Lender claims an exemption from, or a reduction
of, withholding tax under a United States tax treaty, properly completed
IRS Form W-8BEN before the first payment of any interest under this
Agreement and at any other time reasonably requested by Agent or Borrower;
(iii) if such Lender claims that interest paid under this
Agreement is exempt from United States withholding tax because it is
effectively connected with a United States trade or business of such
Lender, two properly completed and executed copies of IRS Form W-8ECI
before the first payment of any interest is due under this Agreement and at
any other time reasonably requested by Agent or Borrower;
(iv) such other form or forms as may be required under the
IRC or other laws of the United States as a condition to exemption from, or
reduction of, United States withholding tax.
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Such Lender agrees promptly to notify Agent and Borrower of any change in
circumstances which would modify or render invalid any claimed exemption or
reduction.
(b) If any Lender claims exemption from, or reduction of,
withholding tax under a United States tax treaty by providing IRS Form W-8BEN
and such Lender sells, assigns, grants a participation in, or otherwise
transfers all or part of the Obligations of Borrower to such Lender, such Lender
agrees to notify Agent of the percentage amount in which it is no longer the
beneficial owner of Obligations of Borrower to such Lender. To the extent of
such percentage amount, Agent will treat such Lender's IRS Form W-8BEN as no
longer valid.
(c) If any Lender is entitled to a reduction in the applicable
withholding tax, Agent may withhold from any interest payment to such Lender an
amount equivalent to the applicable withholding tax after taking into account
such reduction. If the forms or other documentation required by subsection (a)
of this Section are not delivered to Agent, then Agent may withhold from any
interest payment to such Lender not providing such forms or other documentation
an amount equivalent to the applicable withholding tax.
(d) If the IRS or any other Governmental Authority of the United
States or other jurisdiction asserts a claim that Agent did not properly
withhold tax from amounts paid to or for the account of any Lender (because the
appropriate form was not delivered, was not properly executed, or because such
Lender failed to notify Agent of a change in circumstances which rendered the
exemption from, or reduction of, withholding tax ineffective, or for any other
reason) such Lender shall indemnify and hold Agent harmless for all amounts
paid, directly or indirectly, by Agent as tax or otherwise, including penalties
and interest, and including any taxes imposed by any jurisdiction on the amounts
payable to Agent under this Section, together with all costs and expenses
(including attorneys fees and expenses). The obligation of the Lenders under
this subsection shall survive the payment of all Obligations and the resignation
or replacement of Agent.
(e) All payments made by Borrower hereunder or under any note
will be made without setoff, counterclaim, or other defense, except as required
by applicable law other than for Taxes (as defined below). All such payments
will be made free and clear of, and without deduction or withholding for, any
present or future taxes, levies, imposts, duties, fees, assessments or other
charges of whatever nature now or hereafter imposed by any jurisdiction (other
than the United States) or by any political subdivision or taxing authority
thereof or therein (other than of the United States) with respect to such
payments (but excluding, any tax imposed by any jurisdiction or by any political
subdivision or taxing authority thereof or therein (i) measured by or based on
the net income or net profits of a Lender, or (ii) to the extent that such tax
results from a change in the circumstances of the Lender, including a change in
the residence, place of organization, or principal place of business of the
Lender, or a change in the branch or lending office of the Lender participating
in the transactions set forth herein) and all interest, penalties or similar
liabilities with respect thereto (all such non-excluded taxes, levies, imposts,
duties, fees, assessments or other charges being referred to collectively as
"Taxes"). If any Taxes are so levied or imposed, Borrower agrees to pay the full
amount of such Taxes, and such additional amounts as may be necessary so that
every payment of all amounts due under this Agreement or under any note,
including any amount paid pursuant to this Section 16.11(e) after withholding or
deduction for or on account of any Taxes, will not be less than the amount
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provided for herein; provided, however, that Borrower shall not be required to
increase any such amounts payable to Agent or any Lender (i) that is not
organized under the laws of the United States, if such Person fails to comply
with the other requirements of this Section 16.11, or (ii) if the increase in
such amount payable results from Agent's or such Lender's own willful misconduct
or gross negligence. Borrower will furnish to Agent as promptly as possible
after the date the payment of any Taxes is due pursuant to applicable law
certified copies of tax receipts evidencing such payment by Borrower.
16.12 Collateral Matters.
(a) The Lenders hereby irrevocably authorize Agent, at its option
and in its sole discretion, to release or authorize the release of any Lien on
any Collateral (i) upon the termination of the Commitments and payment and
satisfaction in full by Borrower of all Obligations, (ii) constituting property
being sold or disposed of if a release is required or desirable in connection
therewith and if Borrower certifies to Agent that the sale or disposition is
permitted under Section 7.4 of this Agreement or under the other Loan Documents
(and Agent may rely conclusively on any such certificate, without further
inquiry), (iii) constituting property in which Borrower owned no interest at the
time the security interest was granted or at any time thereafter, or (iv)
constituting property leased to Borrower under a lease that has expired or is
terminated in a transaction permitted under this Agreement. Notwithstanding the
foregoing, so long as no Unmatured Default or Event of Default shall have
occurred and be continuing, Agent shall, for the benefit and at the request of
Borrower, release or authorize the release of the Lien on Collateral in a
transaction constituting a Permitted Disposition. Except as provided above,
Agent will not execute and deliver a release or authorize the execution and
delivery of a release of any Lien on any Collateral without the prior written
authorization of (y) if the release is of all or substantially all of the
Collateral, all of the Revolving Loan Lenders or (z) otherwise, the Required
Lenders. Upon request by Agent or Borrower at any time, the Lenders will confirm
in writing Agent's authority to release or authorize the release of any such
Liens on particular types or items of Collateral pursuant to this Section 16.12;
provided, however, that (1) Agent shall not be required to execute any document
necessary to evidence such release or authorization on terms that, in Agent's
opinion, would expose Agent to liability or create any obligation or entail any
consequence other than the release of or authorization of the release of such
Lien without recourse, representation, or warranty, and (2) such release shall
not in any manner discharge, affect, or impair the Obligations or any Liens
(other than those expressly being released) upon (or obligations of Borrower in
respect of) all interests retained by Borrower, including, the proceeds of any
sale, all of which shall continue to constitute part of the Collateral.
(b) Agent shall have no obligation whatsoever to any of the
Lenders to assure that the Collateral exists or is owned by Borrower or is cared
for, protected, or insured or has been encumbered, or that the Collateral
Agent's Liens have been properly or sufficiently or lawfully created, perfected,
protected, or enforced or are 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 Agent pursuant to any of the Loan
Documents, it being understood and agreed that in respect of the Collateral, or
any act, omission, or event related thereto, subject to the terms and conditions
contained herein, Agent may act in any manner it may deem appropriate, absent
Agent's gross negligence or willful misconduct as finally determined by a court
of competent jurisdiction, in its sole discretion given Agent's own interest in
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the Collateral in its capacity as one of the Lenders and that Agent shall have
no other duty or liability whatsoever to any Lender as to any of the foregoing,
except as otherwise provided herein.
16.13 Restrictions on Actions by Lenders; Sharing of Payments.
(a) Each of the Lenders agrees that it shall not, without the
express consent of Agent, and that it shall, to the extent it is lawfully
entitled to do so, upon the request of Agent, set off against the Obligations,
any amounts owing by such Lender to Borrower or any deposit accounts of Borrower
now or hereafter maintained with such Lender. Each of the Lenders further agrees
that it shall not, unless specifically requested to do so by Agent, take or
cause to be taken any action, including, the commencement of any legal or
equitable proceedings, to foreclose any Lien on, or otherwise enforce any
security interest in, any of the Collateral the purpose of which is, or could
be, to give such Lender any preference or priority against the other Lenders
with respect to the Collateral.
(b) If, at any time or times any Lender shall receive (i) by
payment, foreclosure, setoff, or otherwise, any proceeds of Collateral or any
payments with respect to the Obligations arising under, or relating to, this
Agreement or the other Loan Documents, except for any such proceeds or payments
received by such Lender from Agent pursuant to the terms of this Agreement, or
(ii) payments from Agent in excess of such Lender's Pro Rata Share portion of
all such distributions by Agent, such Lender promptly shall (1) turn the same
over to Agent, in kind, and with such endorsements as may be required to
negotiate the same to Agent, or in immediately available funds, as applicable,
for the account of all of the Lenders and for application to the Obligations in
accordance with the applicable provisions of this Agreement, or (2) purchase,
without recourse or warranty, an undivided interest and participation in the
Obligations owed to the other Lenders so that such excess payment received shall
be applied ratably as among the Lenders in accordance with their Pro Rata
Shares; provided, however, that if all or part of such excess payment received
by the purchasing party is thereafter recovered from it, those purchases of
participations shall be rescinded in whole or in part, as applicable, and the
applicable portion of the purchase price paid therefor shall be returned to such
purchasing party, but without interest except to the extent that such purchasing
party is required to pay interest in connection with the recovery of the excess
payment.
16.14 Agency for Perfection. Agent hereby appoints each other Lender as
its agent (and each Lender hereby accepts such appointment) for the purpose of
perfecting the Collateral Agent's Liens in assets which, in accordance with
Article 9 of the Code can be perfected only by possession. Should any Lender
obtain possession of any such Collateral, such Lender shall notify the
Collateral Agent thereof, and, promptly upon the Collateral Agent's request
therefor shall deliver such Collateral to the Collateral Agent or in accordance
with the Collateral Agent's instructions.
16.15 Payments by Agent to the Lenders. All payments to be made by
Agent to the Lenders shall be made by bank wire transfer or internal transfer of
immediately available funds pursuant to such wire transfer instructions as each
party may designate for itself by written notice to Agent. Concurrently with
each such payment, Agent shall identify whether such payment (or any portion
thereof) represents principal, premium, or interest of the Obligations.
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16.16 Concerning the Collateral and Related Loan Documents. Each member
of the Lender Group authorizes and directs Agent to enter into this Agreement,
the Intercreditor Agreement and the other Loan Documents relating to the
Collateral, for the benefit of the Lender Group. Each member of the Lender Group
agrees that any action taken by Agent in accordance with the terms of this
Agreement or the other Loan Documents relating to the Collateral and the
exercise by Agent of its powers set forth therein or herein, together with such
other powers that are reasonably incidental thereto, shall be binding upon all
of the Lenders.
16.17 Field Audits and Examination Reports; Confidentiality;
Disclaimers by Lenders; Other Reports and Information. By becoming a party to
this Agreement, each Lender:
(a) is deemed to have requested that Agent furnish such Lender,
promptly after it becomes available, a copy of each field audit or examination
report (each a "Report" and collectively, "Reports") prepared by or at the
request of Agent, and Agent shall so furnish each Lender with such Reports,
(b) expressly agrees and acknowledges that Agent does not (i)
make any representation or warranty as to the accuracy of any Report, and (ii)
shall not be liable for any information contained in any Report,
(c) expressly agrees and acknowledges that the Reports are not
comprehensive audits or examinations, that Agent or other party performing any
audit or examination will inspect only specific information regarding Borrower
and will rely significantly upon the Books, as well as on representations of
Borrower's personnel,
(d) agrees, for the benefit of the Lender Group and,
notwithstanding Section 16.1, the Loan Parties, to keep all Reports and other
material, non-public information regarding Borrower and its Subsidiaries and
their operations, assets, and existing and contemplated business plans in a
confidential manner; it being understood and agreed by Borrower that in any
event such Lender may make disclosures (a) to counsel for and other advisors,
accountants, and auditors to such Lender, (b) reasonably required by any bona
fide potential or actual Assignee or Participant in connection with any
contemplated or actual assignment or transfer by such Lender of an interest
herein or any participation interest in such Lender's rights hereunder, (c) of
information that has become public by disclosures made by Persons other than
such Lender, its Affiliates, assignees, transferees, or Participants, or (d) as
required or requested by any court, governmental or administrative agency,
pursuant to any subpoena or other legal process, or by any law, statute,
regulation, or court order; provided, however, that, unless prohibited by
applicable law, statute, regulation, or court order, such Lender shall notify
Borrower of any request by any court, governmental or administrative agency, or
pursuant to any subpoena or other legal process for disclosure of any such
non-public material information concurrent with, or where practicable, prior to
the disclosure thereof, and
(e) without limiting the generality of any other indemnification
provision contained in this Agreement, agrees: (i) to hold Agent and any other
Lender preparing a Report harmless from any action the indemnifying Lender may
take or conclusion the indemnifying Lender may reach or draw from any Report in
connection with any loans or other credit accommodations that the indemnifying
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Lender has made or may make to Borrower, or the indemnifying Lender's
participation in, or the indemnifying Lender's purchase of, a loan or loans of
Borrower, and (ii) to pay and protect, and indemnify, defend and hold Agent, and
any such other Lender preparing a Report harmless from and against, the claims,
actions, proceedings, damages, costs, expenses, and other amounts (including,
attorneys fees and costs) incurred by Agent and any such other Lender preparing
a Report as the direct or indirect result of any third parties who might obtain
all or part of any Report through the indemnifying Lender.
In addition to the foregoing: (x) any Lender may from time to time
request of Agent in writing that Agent provide to such Lender a copy of any
report or document provided by Borrower to Agent that has not been
contemporaneously provided by Borrower to such Lender, and, upon receipt of such
request, Agent promptly shall provide a copy of same to such Lender, (y) to the
extent that Agent is entitled, under any provision of the Loan Documents, to
request additional reports or information from Borrower, any Lender may, from
time to time, reasonably request Agent to exercise such right as specified in
such Lender's notice to Agent, whereupon Agent promptly shall request of
Borrower the additional reports or information reasonably specified by such
Lender, and, upon receipt thereof from Borrower, Agent promptly shall provide a
copy of same to such Lender, and (z) any time that Agent renders to Borrower a
statement regarding the Loan Account, Agent shall send a copy of such statement
to each Lender.
16.18 Several Obligations; No Liability. Notwithstanding that certain
of the Loan Documents now or hereafter may have been or will be executed only by
or in favor of Agent in its capacity as such, and not by or in favor of the
Lenders, any and all obligations on the part of the Lenders to make any credit
available hereunder shall constitute the several (and not joint) obligations of
the respective Lenders on a ratable basis, according to their respective
Commitments, to make an amount of such credit not to exceed, in principal
amount, at any one time outstanding, the amount of their respective Commitments.
Nothing contained herein shall confer upon any Lender any interest in, or
subject any Lender to any liability for, or in respect of, the business, assets,
profits, losses, or liabilities of any other Lender. Each Lender shall be solely
responsible for notifying its Participants of any matters relating to the Loan
Documents to the extent any such notice may be required, and no Lender shall
have any obligation, duty, or liability to any Participant of any other Lender.
Except as provided in Section 16.7, no member of the Lender Group shall have any
liability for the acts or any other member of the Lender Group. No Lender shall
be responsible to Borrower or any other Person for any failure by any other
Lender to fulfill its obligations to make credit available hereunder, nor to
advance for it or on its behalf in connection with its Commitment, nor to take
any other action on its behalf hereunder or in connection with the financing
contemplated herein.
17. GENERAL PROVISIONS.
17.1 Effectiveness. This Agreement shall be binding and deemed
effective when executed by Borrower, Agent, and each Lender whose signature is
provided for on the signature pages hereof.
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17.2 Section Headings. Headings and numbers have been set forth herein
for convenience only. Unless the contrary is compelled by the context,
everything contained in each Section applies equally to this entire Agreement.
17.3 Interpretation. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed against the Lender Group or Borrower,
whether under any rule of construction or otherwise. On the contrary, this
Agreement has been reviewed by all parties and shall be construed and
interpreted according to the ordinary meaning of the words used so as to
accomplish fairly the purposes and intentions of all parties hereto.
17.4 Severability of Provisions. Each provision of this Agreement shall
be severable from every other provision of this Agreement for the purpose of
determining the legal enforceability of any specific provision.
17.5 Amendments in Writing. This Agreement only can be amended by a
writing signed by Agent (on behalf of the requisite Lenders) and Borrower.
17.6 Counterparts; Telefacsimile Execution. This Agreement may be
executed in any number of counterparts and by different parties on separate
counterparts, each of which, when executed and delivered, shall be deemed to be
an original, and all of which, when taken together, shall constitute but one and
the same Agreement. Delivery of an executed counterpart of this Agreement by
telefacsimile or electronic mail 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 or electronic mail 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.
17.7 Revival and Reinstatement of Obligations. If the incurrence or
payment of the Obligations by Borrower or Guarantor or the transfer to the
Lender Group of any property should for any reason subsequently be declared to
be void or voidable under any state or federal law relating to creditors'
rights, including provisions of the Bankruptcy Code relating to fraudulent
conveyances, preferences, or other voidable or recoverable payments of money or
transfers of property (collectively, a "Voidable Transfer"), and if the Lender
Group is required to repay or restore, in whole or in part, any such Voidable
Transfer, or elects to do so upon the reasonable advice of its counsel, then, as
to any such Voidable Transfer, or the amount thereof that the Lender Group is
required or elects to repay or restore, and as to all reasonable costs,
expenses, and attorneys fees of the Lender Group related thereto, the liability
of Borrower or Guarantor automatically shall be revived, reinstated, and
restored and shall exist as though such Voidable Transfer had never been made.
17.8 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.
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18. GUARANTY
18.1 Guaranty; Limitation of Liability. Each Guarantor hereby,
unconditionally and irrevocably, guarantees the punctual payment when due,
whether at stated maturity, by acceleration or otherwise, of all Obligations of
Borrower now or hereafter existing under any Loan Document, whether for
principal, interest (including, without limitation, all interest that accrues
after the commencement of any case, proceeding or other action relating to
bankruptcy, insolvency or reorganization of Borrower), fees, expenses or
otherwise (such obligations, to the extent not paid by Borrower, being the
"Guaranteed Obligations"), and agrees to pay any and all expenses (including
reasonable counsel fees and expenses) incurred by the Lender Group in enforcing
any rights under the guaranty set forth in this Section 18. Without limiting the
generality of the foregoing, each such Guarantor's liability shall extend to all
amounts that constitute part of the Guaranteed Obligations and would be owed by
Borrower to any member of the Lender Group under any Loan Document but for the
fact that they are unenforceable or not allowable due to the existence of a
bankruptcy, reorganization or similar proceeding involving Borrower.
18.2 Guaranty Absolute. Each Guarantor guarantees that the Guaranteed
Obligations will be paid strictly in accordance with the terms of the Loan
Documents, regardless of any law, regulation or order now or hereafter in effect
in any jurisdiction affecting any of such terms or the rights of Agent or the
Lenders with respect thereto. The obligations of such Guarantor under this
Section 18 are independent of the Guaranteed Obligations, and a separate action
or actions may be brought and prosecuted against such Guarantor to enforce such
obligations, irrespective of whether any action is brought against Borrower or
whether the Borrower is joined in any such action or actions. The liability of
such Guarantor under this Section 18 shall be irrevocable, absolute and
unconditional irrespective of, and such Guarantor hereby irrevocably waives any
defenses it may now or hereafter have in any way relating to, any or all of the
following:
(a) any lack of validity or enforceability of any Loan Document
or any agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or in
any other term of, all or any of the Guaranteed Obligations, or any other
amendment or waiver of or any consent to departure from any Loan Document,
including, without limitation, any increase in the Guaranteed Obligations
resulting from the extension of additional credit to Borrower or otherwise;
(c) any taking, exchange, release or non-perfection of any
Collateral, or any taking, release or amendment or waiver of or consent to
departure from any other guaranty, for all or any of the Guaranteed Obligations;
(d) any change, restructuring or termination of the corporate,
limited liability company or partnership structure or existence of Borrower; or
(e) any other circumstance (including, without limitation, any
statute of limitations) or any existence of or reliance on any representation by
98
Agent or the Lenders that might otherwise constitute a defense available to, or
a discharge of, Guarantor, Borrower or any other guarantor or surety.
This Section 18 shall continue to be effective or be reinstated, as the
case may be, if at any time any payment of any of the Guaranteed Obligations is
rescinded or must otherwise be returned by a Lender or any other Person upon the
insolvency, bankruptcy or reorganization of Borrower or otherwise, all as though
such payment had not been made.
18.3 Waiver. Each Guarantor hereby waives promptness, diligence, notice
of acceptance and any other notice with respect to any of the Guaranteed
Obligations and this Section 18 and any requirement that Agent or the Lenders
exhaust any right or take any action against Borrower or any other Person. Each
Guarantor acknowledges that it will receive direct and indirect benefits from
the financing arrangements contemplated herein and that the waiver set forth in
this Section 18.3 is knowingly made in contemplation of such benefits. Each
Guarantor hereby waives any right to revoke this Section 18, and acknowledges
that this Section 18 is continuing in nature and applies to all Guaranteed
Obligations, whether existing now or in the future.
18.4 Continuing Guaranty; Assignments. This Section 18 is a continuing
guaranty and shall (a) remain in full force and effect until the later of (i)
the cash payment in full of the Guaranteed Obligations (other than
indemnification obligations as to which no claim has been made) and all other
amounts payable under this Section 18 and (ii) the Maturity Date, (b) be binding
upon each Guarantor, its successors and assigns and (c) inure to the benefit of
and be enforceable by Agent and the Lenders and their successors, pledgees,
transferees and assigns. Without limiting the generality of the foregoing clause
(c), any Lender may pledge, assign or otherwise transfer all or any portion of
its rights and obligations under this Agreement (including, without limitation,
all or any portion of its Commitments owing to it) to any other Person, and such
other Person shall thereupon become vested with all the benefits in respect
thereof granted such Lender herein or otherwise, in each case as provided in
Section 14.1.
18.5 Subrogation. Each Guarantor will not exercise any rights that it
may now or hereafter acquire against Borrower or any other insider guarantor
that arise from the existence, payment, performance or enforcement of such
Guarantor's obligations under this Section 18, including, without limitation,
any right of subrogation, reimbursement, exoneration, contribution or
indemnification and any right to participate in any claim or remedy of Agent and
the Lenders against Borrower or any other insider guarantor or any collateral,
whether or not such claim, remedy or right arises in equity or under contract,
statute or common law, including, without limitation, the right to take or
receive from Borrower or any other insider guarantor, directly or indirectly, in
cash or other property or by set-off or in any other manner, payment or security
solely on account of such claim, remedy or right, unless and until all of the
Guaranteed Obligations and all other amounts payable under this Section 18 shall
have been paid in full in cash and the Maturity Date or earlier termination of
this Agreement shall have occurred. If any amount shall be paid to each
Guarantor in violation of the immediately preceding sentence at any time prior
to the later of the payment in full in cash of the Guaranteed Obligations and
all other amounts payable under this Section 18 and the earlier of the Maturity
Date and the early termination of this Agreement, such amount shall be held in
trust for the benefit of Agent and the Lenders and shall forthwith be paid to
Agent and the Lenders to be credited and applied to the Guaranteed Obligations
and all other amounts payable under this Section 18, whether matured or
99
unmatured, in accordance with the terms of this Agreement, or to be held as
collateral for any Guaranteed Obligations or other amounts payable under this
Section 18 thereafter arising. If (i) any Guarantor shall make payment to Agent
and the Lenders of all or any part of the Guaranteed Obligations, (ii) all of
the Guaranteed Obligations and all other amounts payable under this Section 18
shall be paid in full in cash and (iii) the Maturity Date or earlier termination
of this Agreement shall have occurred, Agent and the Lenders will, at such
Guarantor's request and expense, execute and deliver to such Guarantor
appropriate documents, without recourse and without representation or warranty,
necessary to evidence the transfer by subrogation to such Guarantor of an
interest in the Guaranteed Obligations resulting from such payment by such
Guarantor.
[Signature page to follow.]
100
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and delivered as of the date first above written.
BORROWER:
ABRAXAS PETROLEUM CORPORATION
By:
--------------------------------------------------
Title:
GUARANTORS:
SANDIA OIL & GAS CORPORATION
By:
--------------------------------------------------
Name:
Title:
SANDIA OPERATING CORP.
By:
-------------------------------------------------
Name:
Title:
EASTSIDE COAL COMPANY, INC.
By:
-------------------------------------------------
Name:
Title:
WESTERN ASSOCIATED ENERGY CORPORATION
By:
-------------------------------------------------
Name:
Title:
WAMSUTTER HOLDINGS, INC.
By:
--------------------------------------------------
Name:
Title:
101
AGENT AND LENDERS:
▇▇▇▇▇ FARGO FOOTHILL, INC.,
as Agent and as a Lender
By:
------------------------------------------------
title:
102
TABLE OF CONTENTS
Page
1. DEFINITIONS AND CONSTRUCTION.........................................1
1.1 Definitions...............................................1
1.2 Accounting Terms.........................................27
1.3 Code.....................................................27
1.4 Construction.............................................28
1.5 Schedules and Exhibits...................................28
2. LOAN AND TERMS OF PAYMENT...........................................28
2.1 Revolver Advances........................................28
2.2 [Intentionally Omitted]..................................30
2.3 Borrowing Procedures and Settlements.....................30
2.4 Payments.................................................36
2.5 Overadvances.............................................38
2.6 Interest Rates and Letter of Credit Fee: Rates,
Payments, and Calculations...............................38
2.7 Cash Management..........................................40
2.8 Crediting Payments.......................................40
2.9 Designated Account.......................................40
2.10 Maintenance of Loan Account; Statements of Obligations...40
2.11 Fees.....................................................40
2.12 Letters of Credit........................................41
2.13 Capital Requirements.....................................44
2.14 Registered Notes.........................................45
3. CONDITIONS; TERM OF AGREEMENT.......................................45
3.1 Conditions Precedent to the Initial Extension of Credit..45
3.2 [Intentionally Omitted]..................................49
3.3 Conditions Precedent to all Extensions of Credit.........49
3.4 Term.....................................................49
3.5 Effect of Termination....................................49
3.6 Early Termination; Permanent Reductions of Commitment....50
4. SECURITY INTERESTS; RIGHT TO INSPECT COLLATERAL.....................51
4.1 Acknowledgement of Security Interest.....................51
4.2 Right to Inspect Collateral..............................51
5. REPRESENTATIONS AND WARRANTIES......................................52
5.1 No Encumbrances..........................................52
5.2 Equipment................................................52
5.3 Location of Inventory and Equipment......................52
5.4 Inventory Records........................................52
5.5 Location of Chief Executive Office; FEIN.................52
5.6 Due Organization and Qualification; Subsidiaries.........52
5.7 Due Authorization; No Conflict...........................53
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5.8 Litigation...............................................54
5.9 No Material Adverse Change...............................55
5.10 Fraudulent Transfer......................................55
5.11 Employee Benefits........................................55
5.12 Environmental Condition..................................55
5.13 Brokerage Fees...........................................56
5.14 Intellectual Property....................................56
5.15 Leases...................................................56
5.16 DDAs.....................................................56
5.17 Compliance with the Law..................................56
5.18 Complete Disclosure......................................56
5.19 Indebtedness.............................................57
5.20 Oil and Gas Imbalances...................................57
5.21 Hedging Agreements.......................................57
5.22 Location of Real Property and Leased Premises............57
5.23 Senior Notes Documents and Intercreditor Agreement.......58
5.24 Material Contracts.......................................59
5.25 Permits, Etc.............................................59
5.26 Employee and Labor Matters...............................59
5.27 Bonds and Insurance......................................59
5.28 Nature of Business.......................................60
6. AFFIRMATIVE COVENANTS...............................................60
6.1 Accounting System........................................60
6.2 Collateral Reporting.....................................60
6.3 Financial Statements, Reports, Certificates..............63
6.4 Guarantor Reports........................................65
6.5 Maintenance of Properties................................67
6.6 Taxes....................................................67
6.7 Insurance................................................67
6.8 [Intentionally Omitted]..................................67
6.9 Compliance with Laws.....................................67
6.10 Leases...................................................68
6.11 Brokerage Commissions....................................68
6.12 Existence................................................68
6.13 Environmental............................................68
6.14 Disclosure Updates.......................................68
6.15 After Acquired Properties................................68
6.16 Protection Against Drainage..............................69
6.17 Additional Collateral Reviews............................69
6.18 Hedging Agreements.......................................69
7. NEGATIVE COVENANTS..................................................69
7.1 Indebtedness.............................................70
7.2 Liens....................................................71
7.3 Restrictions on Fundamental Changes......................72
7.4 Disposal of Assets.......................................72
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7.5 Change Name..............................................72
7.6 Guarantee................................................72
7.7 Nature of Business.......................................72
7.8 Payments, Prepayments and Amendments.....................72
7.9 Change of Control........................................73
7.10 Forward Sales............................................73
7.11 Distributions............................................73
7.12 Accounting Methods.......................................74
7.13 Investments..............................................74
7.14 Transactions with Affiliates.............................74
7.15 Suspension...............................................74
7.16 Compensation.............................................74
7.17 Use of Proceeds..........................................74
7.18 Change in Location of Chief Executive Office; Equipment
with Bailees.............................................74
7.19 [Intentionally Omitted]..................................74
7.20 Financial Covenants......................................74
7.21 Oil and Gas Imbalances...................................75
7.22 Environmental............................................75
7.23 Limitation on Leases.....................................75
8. EVENTS OF DEFAULT...................................................75
9. THE LENDER GROUP'S RIGHTS AND REMEDIES..............................77
9.1 Rights and Remedies......................................77
9.2 Remedies Cumulative......................................78
10. TAXES AND EXPENSES..................................................78
11. WAIVERS; INDEMNIFICATION............................................79
11.1 Demand; Protest; etc.....................................79
11.2 The Lender Group's Liability for Collateral..............79
11.3 Indemnification..........................................79
12. NOTICES.............................................................80
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER..........................81
14. ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS..........................81
14.1 Assignments and Participations...........................81
14.2 Successors...............................................85
15. AMENDMENTS; WAIVERS.................................................85
15.1 Lenders' Amendments and Waivers..........................85
15.2 [Intentionally Omitted]..................................86
15.3 [Intentionally Omitted]..................................86
15.4 Replacement of Holdout Lender............................86
15.5 No Waivers; Cumulative Remedies..........................86
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16. AGENT; THE LENDER GROUP.............................................87
16.1 Appointment and Authorization of Agent...................87
16.2 Delegation of Duties.....................................87
16.3 Liability of Agent.......................................88
16.4 Reliance by Agent........................................88
16.5 Notice of Default, Unmatured Default or Event of Default.88
16.6 Credit Decision..........................................89
16.7 Costs and Expenses; Indemnification......................89
16.8 Agent in Individual Capacity.............................90
16.9 Successor Agent..........................................90
16.10 Lender in Individual Capacity............................91
16.11 Withholding Taxes........................................91
16.12 Collateral Matters.......................................93
16.13 Restrictions on Actions by Lenders; Sharing of Payments..94
16.14 Agency for Perfection....................................94
16.15 Payments by Agent to the Lenders.........................94
16.16 Concerning the Collateral and Related Loan Documents.....95
16.17 Field Audits and Examination Reports; Confidentiality;
Disclaimers by Lenders; Other Reports and Information....95
16.18 Several Obligations; No Liability........................96
17. GENERAL PROVISIONS..................................................96
17.1 Effectiveness............................................96
17.2 Section Headings.........................................97
17.3 Interpretation...........................................97
17.4 Severability of Provisions...............................97
17.5 Amendments in Writing....................................97
17.6 Counterparts; Telefacsimile Execution....................97
17.7 Revival and Reinstatement of Obligations.................97
17.8 Integration..............................................97
18. GUARANTY............................................................98
18.1 Guaranty; Limitation of Liability........................98
18.2 Guaranty Absolute........................................98
18.3 Waiver...................................................99
18.4 Continuing Guaranty; Assignments.........................99
18.5 Subrogation..............................................99
iv