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EXHIBIT 10.17
REDUCING REVOLVING CREDIT AGREEMENT
REDUCING REVOLVING LINE OF CREDIT
OF UP TO $90,000,000.00
AND
REDUCING BRIDGE FINANCING
OF $25,000,000.00
AMONG
BANK ONE, TEXAS, NA
As Agent, LC Issuer and a Bank,
OTHER FINANCIAL
INSTITUTIONS AND BANKS,
As Banks,
ENERGY PARTNERS, LTD.
As Borrower
AND
BANC ONE CAPITAL MARKETS, INC.
As Lead Arranger and Sole Book Manager
March 30, 2000
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TABLE OF CONTENTS
PAGE
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ARTICLE I DEFINITIONS..............................................................................1
ARTICLE II THE LOANS AND LETTERS OF CREDIT ........................................................20
2.01 The Commitment ...........................................................................20
2.02 Notice and Manner of Borrowing ...........................................................20
2.03 Payment Procedure ........................................................................21
2.04 Payments of Interest under the Notes .....................................................21
2.05 General Provisions Relating to Interest ..................................................22
2.06 Borrowing Base Determination..............................................................23
2.07 Mandatory Prepayment Due to a Loan Excess ................................................25
2.08 Other Mandatory Prepayments ..............................................................25
2.09 Prepayment and Conversion ................................................................26
2.10 Increased Cost of Loans ..................................................................26
2.11 Change of Law.............................................................................28
2.12 Mitigation: Mandatory Assignment .........................................................28
2.13 Pro Rata Treatment and Payments ..........................................................29
2.14 Sharing of Payments and Setoffs ..........................................................29
2.15 Advances to Satisfy Obligations of the Borrower ..........................................29
2.16 Assignment of Production .................................................................29
2.17 Commitment Fee ...........................................................................30
2.18 Addition/Deletion of Borrowing Base Oil & Gas Properties .................................30
2.19 Adjustment to Aggregate Commitment Amount ................................................30
2.20 Facility LCs .............................................................................31
(A) Issuance ............................................................................31
(B) Participations ......................................................................31
(C) Notice ..............................................................................31
(D) LC Fees .............................................................................32
(E) Administration; Reimbursement by Banks ..............................................32
(F) Reimbursement by Borrower ...........................................................32
(G) Obligations Absolute ................................................................33
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(H) Actions of LC Issuer ................................................................33
(I) Indemnification .....................................................................34
(J) Banks' Indemnification ..............................................................34
(K) Rights as a Bank ....................................................................34
ARTICLE III CONDITIONS .............................................................................35
3.01 General Conditions to Initial Disbursements ..............................................35
3.02 General Conditions to all Disbursements ..................................................36
3.03 Deliveries at the Closing ................................................................36
3.04 Documents Required for Subsequent Disbursements ..........................................37
ARTICLE IV REPRESENTATIONS AND WARRANTIES .........................................................38
4.01 Existence ................................................................................38
4.02 Due Authorization ........................................................................38
4.03 Valid and Binding Obligations ............................................................39
4.04 Scope and Accuracy of Financial Statements ...............................................39
4.05 Title to Borrowing Base Oil and Gas Properties ...........................................39
4.06 Oil and Gas Leases .......................................................................39
4.07 Interest in the Borrowing Base Oil and Gas Properties ....................................39
4.08 Oil and Gas Contracts ....................................................................40
4.09 Producing ▇▇▇▇▇ ..........................................................................40
4.10 Purchasers of Production .................................................................40
4.11 Authorizations and Consents ..............................................................40
4.12 Environmental Laws .......................................................................40
4.13 Compliance with Laws, Rules, Regulations and Orders ......................................41
4.14 Liabilities, Litigation and Restrictions .................................................41
4.15 Existing Indebtedness ....................................................................42
4.16 Material Commitments .....................................................................42
4.17 Margin Stock .............................................................................42
4.18 Proper Filing of Tax Returns and Payment of Taxes Due ....................................42
4.19 ERISA ....................................................................................42
4.20 Investment Company Act Compliance ........................................................43
4.21 Public Utility Holding Company Act Compliance ............................................43
4.22 Insurance ................................................................................43
4.23 Material Misstatements and Omissions .....................................................43
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ARTICLE V AFFIRMATIVE COVENANTS ..................................................................43
5.01 Use of Funds ..............................................................................43
5.02 Maintenance and Access to Records .........................................................44
5.03 Monthly and Annual Unaudited Financial Statements .........................................44
5.04 Annual Audited Financial Statements .......................................................44
5.05 Compliance Certificate ....................................................................44
5.06 Statement of Material Adverse Change ......................................................44
5.07 Title Defects .............................................................................44
5.08 Additional Information ....................................................................45
5.09 Compliance with Laws and Payment of Assessments and Charges ...............................45
5.10 Maintenance of Existence and Good Standing ................................................45
5.11 Further Assurances ........................................................................45
5.12 Initial Expenses of the Bank ..............................................................45
5.13 Subsequent Expenses of the Agent and the Arranger .........................................45
5.14 Maintenance of Tangible Property ..........................................................46
5.15 Maintenance of Insurance ..................................................................46
5.16 Inspection of Tangible Assets/Right of Audit ..............................................46
5.17 Payment of Note and Performance of Obligations ............................................46
5.18 Borrowing Base ............................................................................46
5.19 Compliance with Environmental Laws ........................................................46
5.20 Hazardous Substances Indemnification ......................................................47
5.21 Properties Not Operated by the Borrower ...................................................47
5.22 Transactions with Affiliates ..............................................................48
5.23 Leases ....................................................................................48
5.24 Operation of Borrowing Base Oil and Gas Properties ........................................48
5.25 Assignments ...............................................................................48
5.26 Change of Purchasers of Production ........................................................48
5.27 Payment of Taxes, Etc. ....................................................................48
5.28 Notice of Litigation ......................................................................49
5.29 Notice of Events of Default ...............................................................49
5.30 Notice of Change of Principal Offices .....................................................49
5.31 Employee Benefit Plans ....................................................................49
5.32 Cash Flow Forecasts .......................................................................49
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5.33 Operating Accounts .......................................................................49
5.34 P&A Expenses .............................................................................49
5.35 Payment of Obligations ...................................................................49
5.36 Completion of Anticipated Property Sale ..................................................50
5.37 Required Hedge Agreement .................................................................50
ARTICLE VI NEGATIVE COVENANTS .....................................................................50
6.01 Other Indebtedness; Payments on Subordinated Debt ........................................50
6.02 Loans or Advances ........................................................................50
6.03 Mortgages or Pledges of Assets ...........................................................50
6.04 Sales of Assets ..........................................................................50
6.05 Dividends ................................................................................50
6.06 Payment of Accounts Payable ..............................................................51
6.07 Cancellation of Insurance ................................................................51
6.08 Investments ..............................................................................51
6.09 Changes in Structure or Business .........................................................51
6.10 Limitation on Leases .....................................................................51
6.11 Pooling or Unitization ...................................................................51
6.12 Hedge Agreements .........................................................................51
6.13 Capital Stock of Borrower ................................................................51
6.14 Margin Stock .............................................................................52
6.15 General and Administrative Expenses ......................................................52
6.16 Minimum Tangible Net Worth ...............................................................52
6.17 Current Ratio ............................................................................52
6.18 Debt Service Coverage Ratio ..............................................................52
6.19 Ratio of Credit Exposure to Present Value of Borrowing
Base Oil and Gas Properties .........................................................52
ARTICLE VII EVENTS OF DEFAULT ......................................................................52
7.01 Enumeration of Events of Default .........................................................52
7.02 Rights Upon Unmatured Event of Default ...................................................54
7.03 Rights Upon Default ......................................................................54
7.04 Remedies .................................................................................55
7.05 Right of Set-off .........................................................................56
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ARTICLE VIII THE AGENT .............................................................................56
8.01 Authorization and Action .................................................................56
8.02 Agent's Reliance, Etc. ...................................................................56
8.03 The Agent and Affiliates .................................................................57
8.04 Bank Credit Decision .....................................................................57
8.05 Agent's Indemnity ........................................................................57
8.06 Successor Agent ..........................................................................58
8.07 Notice of Default ........................................................................58
ARTICLE X MISCELLANEOUS ..........................................................................59
9.01 Security Interests in Deposits and Right of Offset or the Banker's Lien ..................59
9.02 Survival of Representations, Warranties and Covenants ....................................59
9.03 Notices and Other Communications .........................................................59
9.04 Parties in Interest ......................................................................60
9.05 Successors and Assigns; Participation; Purchasing Banks ..................................60
9.06 Renewals and Extensions ..................................................................62
9.07 No Waiver by the Agent, the Banks or the LC Issuer .......................................62
9.08 Waiver, Release, and Indemnification by the Borrower .....................................63
9.09 Governing Law ............................................................................63
9.10 Incorporation of Exhibits and Schedules ..................................................63
9.11 Survival Upon Unenforceability ...........................................................63
9.12 Rights of Third Parties ..................................................................63
9.13 Amendments or Modifications ..............................................................64
9.14 Agreement Construed as an Entirety .......................................................64
9.15 Number and Gender ........................................................................64
9.16 Agreement Supersedes All Prior Agreements ................................................65
9.17 Controlling Provision Upon Conflict ......................................................65
9.18 Time, Place and Method of Payments .......................................................65
9.19 Termination ..............................................................................65
9.20 Non-Application of Chapter 346 of Texas Finance Code .....................................65
9.21 Counterpart Execution ....................................................................66
9.22 Loan Documents Subject to Other Agreements ...............................................66
9.23 Obligations to EIF........................................................................66
9.24 Amended and Restated Agreement............................................................66
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EXHIBITS
EXHIBIT A Borrowing Base Oil and Gas Properties, composed of:
EXHIBIT ▇-▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇
▇▇▇▇▇▇▇ ▇-▇ ▇▇▇▇ ▇▇▇
EXHIBIT A-3 Pipeline
EXHIBIT A-4 EIF Override
EXHIBIT B Reducing Revolving Note
EXHIBIT C Compliance Certificate
EXHIBIT D Security Instruments
EXHIBIT E Request for Advance
EXHIBIT F Amendment to Subordination Agreement
SCHEDULES
Schedule 1.01(b) Commitment Amount and Aggregate Commitment
Schedule 1.01(c) Certain Permitted Liens
Schedule 2.06 Borrowing Base
Schedule 4.01 Information Regarding the Borrower and its Subsidiaries
Schedule 4.08 Certain Oil and Gas Contracts
Schedule 4.10 List of Purchasers of Production
Schedule 4.15 Existing Indebtedness
Schedule 4.16 Material Commitments
Schedule 4.22 Insurance Certificate
Schedule 9.05(a) Commitment Transfer Supplement
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REDUCING REVOLVING CREDIT AGREEMENT
THIS REDUCING REVOLVING CREDIT AGREEMENT (this "Agreement"), dated
March 30, 2000, is by and between ENERGY PARTNERS, LTD., a Delaware corporation
(the "Borrower"), the several banks and financial institutions from time to time
parties to this Credit Agreement (the "Banks," such term to include all
financial institutions which become parties to the Credit Agreement in
accordance with Section 9.05 hereof), BANK ONE, TEXAS, NA, a national banking
association ("Bank One") as the initial Bank, as the LC Issuer (hereinafter
defined) and as agent for the Banks (in such latter capacity and together with
its successors and permitted assigns in such capacity, the "Agent").
WITNESSETH
WHEREAS, the Borrower and Bank One entered into that certain Loan
Agreement dated June 23, 1999, as amended by the First Amendment thereto dated
August 9, 1999 and the Second Amendment thereto dated November 16, 1999 (the
"Prior Loan Agreement").
WHEREAS, Borrower has requested that Bank One and the other Banks make
available, and the Banks are willing to make available to Borrower on the terms
and conditions hereinafter set forth, loans in excess of those available to
Borrower under the Prior Loan Agreement, and such loans available under this
Agreement shall be used for, among other things, refinancing the debt owed to
Bank One under the Prior Loan Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the Banks, the LC Issuer, the Agent and the
Borrower agree as follows:
ARTICLE I.
DEFINITIONS
As used in this Agreement, the following terms shall have the meanings
indicated:
"ABR" means a fluctuating rate of interest equal to the higher of (i)
a rate per annum equal to the prime rate of interest announced from time to time
by Bank One or its parent (which is not necessarily the lowest rate charged to
any customer), changing when and as said prime rate changes, and (ii) the sum of
the Federal Funds Effective Rate most recently determined by the Agent plus
one-half percent (1/2%) per annum.
"ABR Loan" means any Loan from time to time for which interest thereon
is to be computed on the basis of the ABR, as elected by Borrower pursuant to
Section 2.04 hereof.
"Acquisition Agreement(s)" means, individually, each respective
purchase and sale agreement pursuant to which Borrower agrees to purchase and
the current owner agrees to sell each of South Timbalier 26, the Pipeline and
East Bay, and, collectively, all of such purchase and sale agreements.
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"Additional Margin" means 0.50% per annum times the number of complete
Three Month Periods that have elapsed since Closing Date.
"Affiliate" means, as applied to any Person, any other Person,
directly or indirectly, controlling, controlled by, or under common control
with, that Person. For purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling", "controlled by", and "under
common control with"), as applied to any Person, means either: (a) the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of that Person, whether through the
ownership of voting securities, by contract, or otherwise, or (b) the legal or
beneficial ownership of or voting rights with respect to twenty percent (20%) or
more of the equity interest in such Person.
"Agent" means Bank One, Texas, NA, as agent for the Banks hereunder
and under the other Loan Documents, and each successor agent.
"Aggregate Commitment Amount" means the lesser of: (a) the Borrowing
Base in effect from time to time, or (b) the amount stated as the Aggregate
Commitment Amount on Schedule 1.01(b) attached hereto, as the same may be
amended from time to time as provided in this Agreement.
"Aggregate Outstanding Credit Exposure" means, at any time, the
aggregate of the Outstanding Credit Exposure of all the Banks.
"Agreement" means this Reducing Revolving Agreement, as the same may
be amended or supplemented from time to time.
"Amendment to Subordination Agreement" means an amendment of even date
with this Agreement in the form attached hereto as Exhibit "F" by and among EIF,
Borrower, Agent, the LC Issuer and the Banks pursuant to which the Subordination
Agreement is amended.
"Anticipated Property Sale" means the sale or sales of approximately
50%, in the aggregate, of the Borrower's undivided interest in South Timbalier
26.
"Applicable Law" means that law in effect from time to time and
applicable to the Notes which lawfully permits the charging and collection of
the highest permissible lawful, non-usurious rate of interest on the Notes,
including laws of the State of Texas and laws of the United States of America;
Chapter 303 of the Texas Finance Code shall be included in the laws of the State
of Texas in determining Applicable Law; and for the purpose of applying said
Chapter 303 to the Notes, the interest ceiling applicable to the Notes under
said Chapter 303 shall be the indicated weekly rate ceiling from time to time in
effect.
"Applicable Margin" means the applicable LIBOR Margin or ABR Margin
provided for in the Pricing Grid set forth below based upon the Utilization
Percentage.
"Arranger" means Banc One Capital Markets, Inc., in its capacity as
lead arranger and sole book manager.
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"Available Aggregate Commitment" means, at any time, the Aggregate
Commitment Amount then in effect minus the Aggregate Outstanding Credit Exposure
at such time.
"Bank Parties" has the meaning given such term in Section 9.08(B).
"Bank(s)" means any of the banks signatory to this Agreement, their
successors and, upon the effective date after registration with the Agent
pursuant to Section 9.05 of a Commitment Transfer Supplement executed by a
Purchasing Bank, such Purchasing Bank.
"Borrowing" means a group of Loans made by the Banks to Borrower on a
single date.
"Borrowing Base" means the maximum loan amount with respect to the
Borrowing Base Oil and Gas Properties, as determined by the Agent and approved
by the Required Banks from time to time in accordance with Section 2.06 of this
Agreement.
"Borrowing Base Oil and Gas Properties" means those Oil and Gas
Properties of the Borrower that are subject to the liens created by the Security
Instruments executed pursuant to the Prior Loan Agreement, together with the
additional Borrowing Base Oil and Gas Properties that are described in Exhibit
"A" attached hereto and made a part hereof, as such Exhibit "A" may be amended
from time to time.
"Breakage Costs" means all reasonable losses, expenses and liabilities
(including, without limitation, any loss, expense or liability incurred by
reason of the liquidation or reemployment of deposits or other funds required by
any Bank to fund its LIBOR Loans but excluding loss of anticipated profit with
respect to any LIBOR Loans) which such Bank may sustain: (i) if for any reason
(other than a default by such Bank or the Agent) a borrowing of LIBOR Loans does
not occur on a date specified therefor in a Request for Advance; (ii) if any
repayment or conversion of any LIBOR Loans occurs on a date which is not the
last day of an Interest Period applicable thereto; (iii) if any prepayment of
any LIBOR Loans is not made on any date specified in a notice of prepayment
given by Borrower; or (iv) as a consequence of any default by the Borrower to
repay LIBOR Loans when required by the terms of this Agreement.
"Business Day" means a day other than a Saturday, Sunday or legal
holiday for commercial banks under the laws of the State of Texas, provided that
with respect to transactions under this Agreement relating to LIBOR Loans, such
day must also be a Eurodollar Business Day.
"Cash Flow" means, with respect to each calendar month, Net Income
accrued during such month plus depreciation, depletion, and amortization for the
relevant month.
"Change of Control" means an event or series of events by which the
Persons who were the shareholders of the Borrower immediately upon the closing
of the Evercore Transaction cannot alone elect at least 66.67% of the board of
directors of the Borrower.
"Closing" has the meaning provided in Section 3.01.
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"Commitment" means, as to any Bank, the obligation of such Bank to
make Loans to, and participate in Facility LCs issued upon the application of,
the Borrower in an aggregate amount at any one time outstanding not to exceed
the lesser of (i) such Bank's Commitment Amount and (ii) such Bank's Percentage
Share of the Borrowing Base then in effect.
"Commitment Amount" means at any time, for any Bank, the amount set
forth opposite such Bank's name on Schedule 1.01(b) under the heading
"Commitment Amount," as such amount may be changed as provided in this
Agreement.
"Commitment Transfer Supplement" means a Commitment Transfer
Supplement executed by Agent and a Purchasing Bank substantially in the form of
Schedule 9.05(d) and registered with the Agent pursuant to Section 9.05(d)
hereof.
"Compliance Certificate" means the certificate of the President or
Chief Financial Officer of the Borrower submitted to the Bank from time to time
pursuant to this Agreement and attesting to the financial covenants and stating,
to such officer's knowledge, whether or not an Event of Default or an Unmatured
Event of Default has occurred and is continuing and, if such an event has
occurred, the actions being taken by the Borrower, to remedy such situation and
that GAAP has been used in the preparation of the Financial Statements, which
certificate shall be in the form attached hereto as Exhibit "C".
"Consolidated Tangible Net Worth" means, as of any reporting period,
Stockholders' Equity plus Subordinated Debt, less the sum of:
(A) Goodwill, including any amounts, however designated on a
consolidated balance sheet of the Borrower and its Subsidiaries,
representing the excess of the purchase price paid for assets or
stock acquired over the value assigned thereto on the books of
the Borrower;
(B) Patents, trademarks, trade names, and copyrights;
(C) Any amount at which shares of capital stock of the Borrower
appear as an asset on the Borrower's balance sheet;
(D) Loans and advances to stockholders, directors, officers, or
employees; and
(E) Any other amount in respect of an intangible that should be
classified as an asset on a consolidated balance sheet of the
Borrower in accordance with GAAP.
"Contract Operating Fees" means the fees the Borrower receives for
providing drilling and production operations on behalf of other Persons.
"▇▇▇▇▇" means the Accounting Procedure Joint Operations Recommended by
the Council of Petroleum Accountants, with respect to onshore and offshore
operations, respectively, including the most current versions thereof and any
other recent versions thereof commonly in use.
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"Credit Extension" means the making of a Loan or the issuance of a
Facility LC hereunder.
"Credit Extension Date" means the date on which a Loan is advanced or
a Facility LC is issued.
"Current Assets" means at any time, all assets, that should in
accordance with GAAP, be classified as current assets on a consolidated balance
sheet of Borrower and its Subsidiaries, plus the then current availability under
the aggregate Commitments.
"Current Liabilities" means at any time, all liabilities that should
in accordance with GAAP, be classified as current liabilities on a consolidated
balance sheet of the Borrower and its Subsidiaries, minus the amount of Credit
Extensions under this Agreement and the amount of Subordinated Debt that are
deemed to be current in accordance with GAAP.
"Current Ratio" means the ratio derived from dividing Current Assets
by Current Liabilities.
"Debt Placement" means the issuance by the Borrower of at least
$25,000,000 of its unsecured, senior or subordinated debt on terms acceptable to
the Agent and the Required Banks.
"Debt Service" means, with respect to any reporting period, the sum of
Borrower's total interest expense plus Monthly Borrowing Base Reductions
accruing during such period.
"Debt Service Coverage Ratio" means the ratio derived from dividing
EBITDAX by Debt Service for each two-consecutive-calendar-quarter period on a
rolling two-quarter basis.
"East Bay" means those Borrowing Base Oil and Gas Properties described
on Exhibit "A-2" attached hereto.
"EBITDAX" means, for any reporting period, Borrower's earnings before
deductions for interest expense, taxes, depreciation, depletion, amortization
and dry hole costs.
"EIF" means Energy Income Fund, L.P., a Delaware limited partnership.
"EIF Override" means that certain overriding royalty interest
previously owned by EIF, to be reconveyed to Borrower prior to Closing and
included in the Borrowing Base Oil and Gas Properties, as described on Exhibit
"A-4" attached hereto.
"Environmental Laws" means (a) the following federal laws as they may
be cited, referenced and amended from time to time: the Clean Air Act, the Clean
Water Act, the Safe Drinking Water Act, the Comprehensive Environmental
Response, Compensation and Liability Act, the Endangered Species Act, the
Resource Conservation and Recovery Act, the Occupational Safety and Health Act,
the Hazardous Materials Transportation Act, the Superfund Amendments and
Reauthorization Act, the Toxic Substances Control Act, and the Oil Pollution Act
of 1990; (b) any and all environmental statutes of any state in which property
of the
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Borrower is situated, as they may be cited, referenced and amended from time to
time; (c) any rules or regulations promulgated under or adopted pursuant to the
above federal and state laws; and (d) any other federal, state or local statute
or any requirement, rule, regulation, code, ordinance or order adopted pursuant
thereto, including, without limitation, those relating to the generation,
transportation, treatment, storage, recycling, disposal, handling or release of
Hazardous Substances.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations and published interpretations
thereof.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) which together with the Borrower would be treated as a single
employer under Section 4001 of ERISA.
"Eurodollar Business Day" means a day on which dealings are carried on
in the LIBOR Market.
"Event of Default" means any of the events specified in Section 7.01
of this Agreement.
"Evercore Parties" means Evercore Capital Partners L.P., Evercore
Capital Partners (NQ) L.P., Evercore Capital Offshore Partners L.P. and Evercore
Co-Investment Partnership L.P.
"Evercore Transaction" means that certain transaction among the
Evercore Parties and Borrower, as evidenced by the Evercore Transaction
Documents. "Evercore Transaction Documents" means (i) that certain Energy
Partners, Ltd. Stock Purchase Agreement dated November 17, 1999, between
Borrower and the Evercore Parties, (ii) that certain Registration Rights
Agreement dated as of November 17, 1999, between Borrower and the Evercore
Parties, (iii) that certain Certificate of Designations of the Series A
Convertible Preferred Stock of Energy Partners, Ltd., dated November 17, 1999,
executed by Borrower, (iv) that certain Certificate of Designations of the
Series B Convertible Preferred Stock of Energy Partners, Ltd., dated November
17, 1999, executed by Borrower, (v) that certain Certificate of Designations of
the Series C Convertible Preferred Stock of Energy Partners, Ltd., dated
November 17, 1999, executed by Borrower, and (vi) that certain Stockholder
Agreement dated as of November 17, 1999, by and among Borrower, the Evercore
Parties, EIF, and the individual shareholders of Borrower.
"Facility LC" is defined in Section 2.20(A).
"Facility LC Application" is defined in Section 2.20(C).
"Facility Termination Date" means March 30, 2003.
"Federal Funds Effective Rate" means, for any day, the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers, as published by the
Federal Reserve Bank of New York for such day on the next succeeding Business
Day or, if such rate is not so published for any day
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which is a Business Day, the average of the quotations for the day of such
transactions received by the Agent from three Federal funds brokers of
recognized standing selected by it.
"Financial Statements" means the statements of the financial condition
of the indicated Person, on a consolidated basis, as at the point in time and
for the period indicated and consisting of at least a balance sheet, income
statement and statement of changes in financial position, and, when the
foregoing are audited, accompanied by the certification of such Person's
independent certified public accountants and footnotes to any of the foregoing,
all of which shall be prepared in accordance with GAAP applied on a basis
consistent with that of the preceding year, except for any inconsistency that
results from changes in GAAP from year to year.
"Floating Rate" means a per annum interest rate determined by
reference to the following schedule:
o Before Anticipated Property Sale and payment and cancellation of
Tranche B:
Tranche A:
LIBOR + 3.25% per annum or, at Borrower's option
pursuant to Section 2.04,
ABR + 1.50% per annum.
Tranche B:
LIBOR + 5.50% per annum + Additional Margin or, at
Borrower's option pursuant to Section 2.04,
ABR + 4.00% per annum + Additional Margin.
o After Anticipated Property Sale, but prior to the time the Tranche A
commitment is determined to be equal to or less than a conventional
borrowing base amount as determined by the Required Banks and Tranche
B has been repaid and cancelled:
Tranche A:
LIBOR + 3.00% per annum or, at Borrower's option
pursuant to Section 2.04,
ABR + 1.50% per annum.
Tranche B:
LIBOR + 5.50% per annum + Additional Margin or, at
Borrower's option pursuant to Section 2.04,
ABR + 4.00% per annum + Additional Margin.
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o After the Tranche A commitment is determined to be equal to or less
than a conventional borrowing base amount as determined by the
Required Banks and Tranche B has been repaid and canceled:
Tranche A:
LIBOR + Applicable Margin or, at Borrower's option
pursuant to Section 2.04,
ABR + Applicable Margin.
o After the occurrence and during the continuation of an Event of
Default, the Floating Rate determined in accordance with the forgoing
schedule shall, in each case, be increased by two percent (2%) per
annum, not to exceed the Maximum Rate.
"GAAP" means generally accepted accounting principles, applied on a
consistent basis, as set forth in Opinions of the Accounting Principles Board of
the American Institute of Certified Public Accountants and/or in statements of
the Financial Accounting Standards Board and/or their respective successors and
which are applicable as of the date of Closing, except that solely for purposes
of the definition of Financial Statements herein, changes in GAAP from time to
time (if any) shall be applied and reflected in the Financial Statements.
Accounting principles are applied on a "consistent basis" when the accounting
principles observed in a current period are comparable in all material respects
to those accounting principles applied in a preceding period.
"General and Administrative Expenses" means total expenses of
Borrower, minus (A) lease operating expenses, (B) dry-hole costs, (C)
depreciation, depletion, and amortization, (D) interest expense, (E) ▇▇▇▇▇
overhead, (F) Contract Operating Fees, (G) severance and ad valorem taxes, and
(H) state and federal income taxes.
"Hazardous Substances" means flammables, explosives, radioactive
materials, hazardous wastes, asbestos or any material containing asbestos,
polychlorinated biphenyls (PCBs), toxic substances or related materials,
petroleum and petroleum products and associated oil or natural gas exploration,
production and development wastes or any substances defined as "hazardous
substances", "hazardous materials", "hazardous wastes" or "toxic substances"
under the Comprehensive Environmental Response, Compensation and Liability Act,
as amended, the Superfund Amendments and Reauthorization Act, as amended, the
Hazardous Materials Transportation Act, as amended, the Resource Conservation
and Recovery Act, as amended, the Toxic Substances Control Act, as amended, or
any other Environmental Laws now or hereafter enacted or promulgated by any
regulatory authority or governmental body, but only to the extent any such law
is or becomes applicable to the Borrower or any of its property.
"Hedge Agreement" means any swap agreement, cap, collar, floor,
exchange transaction, forward agreement or exchange or protection agreement
related to Hydrocarbons or any option with respect to such transaction, as more
specifically provided in those certain master swap agreements on International
Swap Dealers Association forms and the schedules thereto and any confirmations
thereunder entered into by Borrower with any other Person.
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16
"Hydrocarbons" means crude oil, condensate, natural gas, natural gas
liquids and other hydrocarbons.
"Indebtedness" means, as to any Person, (a) all items of indebtedness
or liability (other than capital (including preferred stock), surplus, deferred
credits and reserves, as such) which in accordance with GAAP would be included
in determining total liabilities as shown on the liability side of a balance
sheet as at the date as of which Indebtedness is to be determined, (b)
indebtedness secured by (or for which the holder of such indebtedness has a
right, contingent or otherwise, to be secured by) any mortgage, deed of trust,
pledge, lien, security interest, or other charge or encumbrance existing on or
encumbering property owned by the Person whose Indebtedness is being determined,
whether or not the indebtedness secured thereby shall have been assumed, (c) all
indebtedness of others which such Person has directly or indirectly guaranteed,
endorsed (otherwise than for collection or deposit in the ordinary course of
business), discounted with recourse, agreed (contingently or otherwise) to
purchase or repurchase or otherwise acquire, or in respect of which such Person
has agreed to supply or advance funds (whether by way of loan, purchase of
securities or capital contribution, through a commitment to pay for property or
services regardless of the nondelivery of such property or the nonfurnishing of
such services or otherwise), or in respect of which such Person has otherwise
become directly or indirectly liable, contingently or otherwise, whether now
existing or hereafter arising, and (d) all leases (excluding Leases constituting
Oil and Gas Properties) that, in accordance with GAAP, should not be reflected
on the Borrower's balance sheet.
"Initial Note" means the reducing revolving note in the original face
amount of $200,000,000.00 dated as of the Closing, made by the Borrower payable
to the order of Bank One, in substantially the form attached hereto as Exhibit
"B," together with all deferrals, renewals, extensions, amendments,
modifications or rearrangements thereof.
"Interest Period" means as to any LIBOR Loan the period commencing on
and including the date of such Loan (or on the effective date of the election
pursuant to Section 2.04(B) by which such Loan became a LIBOR Loan) and ending
on and including the day preceding the numerically corresponding day (or if
there is no such numerically corresponding day, the last day) in the 1st, 2nd,
3rd or 6th calendar month after the date of such Loan, as selected by the
Borrower in accordance with Section 2.04(B), and after such selected month, such
period commencing on and including the day immediately following the last day of
the then ending Interest Period for such Loan and ending on and including the
day preceding the day numerically corresponding to the first day of such
Interest Period (or if there is no such numerically corresponding day, the last
day), in the 1st, 2nd, 3rd or 6th calendar month after the first day of such
Interest Period, as so selected by the Borrower; provided, however, that if any
Interest Period would otherwise end on a day immediately prior to a day that is
not a Business Day it shall be extended so as to end on the day immediately
prior to the next succeeding Business Day unless the same would fall in a
different calendar month, in which case such Interest Period shall end on the
day immediately preceding the first Business Day immediately preceding such next
succeeding Business Day.
"Investment" in any Person means any stock, bond, note or other
evidence of Indebtedness or any other security (other than current trade and
customer accounts) of, or loan to, such Person.
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"Laws" means all ordinances, statutes, rules, regulations, orders,
injunctions, writs, or decrees of any government or political subdivision or
agency thereof, or any court or similar entity established by any thereof.
"LC Fee" is defined in Section 2.20(D).
"LC Issuer" means Bank One (or any subsidiary or Affiliate of Bank One
designated by Bank One and reasonably acceptable to Borrower) in its capacity as
issuer of Facility LCs hereunder.
"LC Obligations" means, at any time, the sum, without duplication, of
(i) the aggregate undrawn stated amount under all Facility LCs outstanding at
such time plus (ii) the aggregate unpaid amount at such time of all
Reimbursement Obligations.
"LC Payment Date" is defined in Section 2.20(E). "Leases" means oil
and gas leases and all oil, gas and mineral leases constituting any part of the
Borrowing Base Oil and Gas Properties.
"LIBOR" means, with respect to each Interest Period, the rate of
interest per annum at which deposits of not less than $1,000,000.00 in United
States dollars are offered in the LIBOR Market for a period of time equal or
comparable to such Interest Period and in an amount equal to or comparable to
the principal amount of the LIBOR Loan to which such Interest Period relates as
appearing on Reuters Screen FRBD as of 11:00 AM (London time) two (2) Business
Days before the first day of the applicable Interest Period, as adjusted for
maximum statutory reserves, provided, however, that if such rate is not
available on Reuters Screen FRBD, then within five (5) Business Days of receipt
of notification, the Agent and the Borrower shall enter into good faith
negotiations for a period of fifteen (15) days (or such shorter period as is
required to agree to the alternative basis) with a view to agreeing on an
alternative basis for determining the rate of interest applicable to LIBOR
Loans, and if no alternative basis is agreed within the fifteen (15) day period,
the LIBOR Loan shall be deemed to have converted to an ABR Loan as of the end of
the last Interest Period.
"LIBOR Loan" means any Loan from time to time for which interest
thereon is to be computed at a Floating Rate based on LIBOR, as elected by
Borrower pursuant to Section 2.04 hereof.
"LIBOR Market" means the London interbank offered interest rate market
created by major London clearing banks for deposits in United States dollars.
"Limitation Period" means any period while any amount remains owing on
the Notes when interest on such amount, calculated at the applicable rate
prescribed on the Notes, plus any fees payable hereunder and deemed to be
interest under applicable Law, would exceed the Maximum Rate.
"Loan" means, singly, any advance by the Banks to the Borrower
pursuant to this Agreement and "Loans" means, cumulatively, the aggregate sum of
all money advanced by the Banks to the Borrower pursuant to this Agreement.
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"Loan Documents" means this Agreement, the Notes, the Facility LC
Applications, the Security Instruments, the Required Hedge Agreement, and all
other promissory notes, security agreements, and other instruments, documents,
and agreements executed and delivered pursuant to or in connection with this
Agreement, as such instruments, documents, and agreements may be amended,
modified, renewed, extended, or supplemented from time to time.
"Loan Excess" means, at any point in time, the amount, if any, by
which the outstanding balance on the Credit Extensions exceeds the Aggregate
Commitment Amount then in effect.
"Marketable Title" means good and indefeasible title, as set forth,
qualified and/or limited on Exhibit "A," free and clear of all mortgages, liens
and encumbrances, except for Permitted Encumbrances.
"Material Adverse Change" means any change in the business, property,
condition (financial or otherwise) or results of operations, or reasonably
foreseeable prospects of the Borrower and its Subsidiaries which has a Material
Adverse Effect.
"Material Adverse Effect" means a material adverse effect on (i) the
business, property, condition (financial or otherwise), results of operations,
or reasonably foreseeable prospects of the Borrower and its Subsidiaries taken
as a whole, (ii) the ability of the Borrower to perform its obligations under
the Loan Documents to which it is a party, or (iii) the validity or
enforceability of any of the Loan Documents or the rights or remedies of the
Agent, the Banks or the LC Issuer thereunder.
"Maximum Rate" means the maximum rate of non-usurious interest
permitted from day to day by Applicable Law, including Chapter 303 of the Texas
Finance Code (and as the same may be incorporated by reference in other Texas
statutes), but otherwise without limitation, that rate based upon the "indicated
weekly rate ceiling."
"Modify" and "Modification" are defined in Section 2.20(A).
"Monthly Borrowing Base Reduction" means the amount of the automatic
monthly reduction to the Borrowing Base, as determined from time to time in
accordance with Section 2.06 of this Agreement.
"Multi-employer Plan" means a plan described in Section 4001(a)(3) of
ERISA which covers employees of the Borrower or any ERISA Affiliate.
"Net Income" means, for any period, the net income (or loss) of the
Borrower after allowances for taxes for such period, determined in accordance
with GAAP; provided that there shall be excluded from such net income (to the
extent otherwise included therein) the following: (i) the net income of any
Person in which the Borrower has an interest (which interest does not cause the
net income of such other Person to be consolidated with the net income of the
Borrower in accordance with GAAP), except to the extent of the amount of
dividends or distributions actually paid in such period by such other Person to
the Borrower; (ii) the net income (or loss) of any Person acquired in a
pooling-of-interests transaction for any period prior to the date of such
transaction, (iii) any extraordinary gains or losses, including gains or losses
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attributable to property sales not in the ordinary course of business, (iv) the
cumulative effect of a change in accounting principles, and (v) any gains or
losses attributable to writeups or writedowns of assets.
"Note" and "Notes" means, individually, a promissory note issued by
Borrower payable to the order of a Bank evidencing the Loans made by that Bank
pursuant to Section 2.01 hereof and being substantially in the form of the note
attached as Exhibit B hereto, including the Initial Note, together with any and
all further renewals, extensions for any period, increases or rearrangements
thereof, and means collectively all of such Notes.
"Obligations" means all obligations, indebtedness, and liabilities of
the Borrower to the Banks and the LC Issuer, now existing or hereafter arising,
including, but not limited to the Indebtedness evidenced by the Notes and the
Reimbursement Obligations, whether direct, indirect, related, unrelated, fixed,
contingent, liquidated, unliquidated, joint, several, or joint and several,
including, without limitation, the obligations, indebtedness, and liabilities of
the Borrower under this Agreement and the other Loan Documents, and all interest
accruing thereon and all attorneys' fees and other expenses incurred in the
administration, enforcement or collection thereof.
"Oil and Gas Properties" means fee, leasehold or other interests in or
under mineral estates or oil, gas and other liquid or gaseous hydrocarbon leases
with respect to properties situated in the United States, including, without
limitation, overriding royalty and royalty interests, leasehold estate
interests, net profits interests, production payment interests and mineral fee
interests, together with contracts executed in connection therewith and all
tenements, hereditaments, appurtenances and properties, real or personal,
appertaining, belonging, affixed or incidental thereto.
"Outstanding Credit Exposure" means, as to any Bank at any time, the
sum of (i) the aggregate principal amount of its Loans outstanding at such time,
plus (ii) an amount equal to its Percentage Share of the LC Obligations at such
time.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"Pending Acquisition(s)" means, individually, Borrower's acquisition
of interests in any of South Timbalier 26, the Pipeline or East Bay, and
collectively, Borrower's acquisition of all of South Timbalier 26, the Pipeline
and East Bay.
"Percentage Share" means, as to any Bank, a fraction (expressed as a
percentage), the numerator of which shall be such Bank's Commitment Amount, and
the denominator of which shall be the Aggregate Commitment Amount stated on
Schedule 1.01(b) attached hereto.
"Permitted Asset Sales" means (a) sales, leases, assignments,
transfers or disposals of, in one or any series of related transactions, (i) all
or any portion of Borrower's equipment (except for items included in clause (ii)
of this definition), whether now owned or hereafter acquired, including
transfers to Subsidiaries, which, in the aggregate, do not exceed $1,000,000.00
in any twelve month period, and (ii) Borrower's offshore platforms that have
been
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abandoned or dismantled; (b) sales of Hydrocarbons in the ordinary course of
business and (c) the Anticipated Property Sale.
"Permitted Encumbrances" means:
(A) Liens for taxes, assessments, or similar charges, incurred in the
ordinary course of business that are not yet due and payable;
(B) Liens of mechanics, materialmen, warehousemen, carriers, or other
like liens, securing obligations incurred in the ordinary course
of business that are not yet due and payable;
(C) Pledges or deposits in connection with or to secure workmen's
compensation, unemployment insurance, pensions or other employee
benefits;
(D) Encumbrances consisting of covenants, zoning restrictions,
rights, easements, liens or other restrictions on the use of real
property, none of which materially impairs the use of such
property by the Borrower in the operation of its business, and
none of which is violated in any material respect by existing or
proposed operations;
(E) Liens of operators and/or co-working interest owners under joint
operating agreements or similar contractual arrangements with
respect to the Borrower's proportionate share of the expense of
exploration, development and operation of oil, gas and mineral
leasehold or fee interests owned jointly with others, to the
extent that same relate to sums not yet due;
(F) Liens securing surety or other bonds required in the normal
course of business not to exceed $500,000.00 in the aggregate at
any time in effect;
(G) The following, if the validity or amount thereof is being
contested in good faith by appropriate and lawful proceedings, so
long as levy and execution thereon have been stayed and continue
to be stayed and they do not, in the aggregate, materially
detract from the value of the property of the Borrower or any
Subsidiary, or materially impair the use thereof in the operation
of its business:
(1) Claims or liens for taxes, assessments, or charges due and
payable and subject to interest or penalty;
(2) Claims, liens, and encumbrances upon, and defects of title
to, real or personal property, including any attachment of
personal or real property or other legal process prior to
adjudication of a dispute on the merits;
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(3) Claims or liens of mechanics, materialmen, warehousemen,
carriers, or other like liens; and
(4) Adverse judgments on appeal;
(H) Liens securing payment and performance of the Obligations;
(I) Liens securing purchase money obligations included in the
definition of Permitted Indebtedness if such liens encumber only
the property for which such purchase money obligation was
incurred;
(J) Liens in favor of EIF securing the Subordinated Debt, provided
such Liens are subordinate to the Banks' Liens securing payment
and performance of the Obligations;
(K) Inchoate liens in respect of royalty owners; and
(L) Liens listed on Schedule 1.01(c) attached hereto.
"Permitted Hedge Agreement" means any Hedge Agreement which Borrower
enters into with or through a counterparty that has a credit rating of at least
"A-" by Standard and Poors or "A3" by ▇▇▇▇▇'▇ Investment Service, together with
the confirmations which Borrower may hereafter enter into with or through such
counterparty covering in the aggregate, among all such Hedge Agreements, not
more than seventy percent (70%) of the Proved Reserves attributable to
Borrower's interest in its Borrowing Base Oil and Gas Properties.
"Permitted Indebtedness" means:
(A) The Loans and Facility LCs;
(B) Unsecured current accounts payable incurred in the ordinary
course of business which are (i) not more than sixty (60) days
overdue, or (ii) being contested in good faith by appropriate
proceedings, or (iii) the subject of usual and customary review
and evaluation;
(C) Extensions of credit from suppliers or contractors who are not
Affiliates of Borrower for the performance of labor or services
or the provision of supplies or materials under applicable
contracts or agreements in connection with Borrower's oil and gas
exploration and development activities, which are not overdue or
are being contested in good faith by appropriate proceedings;
(D) Letters of credit or performance bonds required to be obtained by
the Borrower in the normal course of its business to assure the
proper plugging and abandonment of oil or gas drilling or
production locations or bonds required by any governmental agency
or instrumentality in the normal course of the Borrower's
business;
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(E) Purchase money obligations of the Borrower of up to $1,000,000 at
any time for the purchase of equipment so long as the purchase
money obligations do not exceed the fair market value of the
equipment purchased therewith;
(F) The Subordinated Debt so long as no Suspending Event of Default
(as defined in the Subordination Agreement) has occurred;
(G) Lease dated August 12, 1999, as amended, between the Borrower (as
tenant) and ▇▇ ▇▇▇▇▇▇▇ Associates, L.P. ("Landlord") covering the
Borrower's office located at ▇▇▇ ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇
and 3400, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, together with that
certain Irrevocable Straight Standby Letter of Credit No. F35362
dated August 12, 1999 which has an expiry date of August 12, 2000
in the amount of $135,000 issued at the request of the Borrower
by Whitney National Bank for the benefit of Landlord to secure
the Borrower's obligations under such lease;
(H) Income taxes payable that are not overdue;
(I) Accrued abandonment liabilities;
(J) Indebtedness arising out of Permitted Hedge Agreements and/or the
Required Hedge Agreement; and
(K) Other indebtedness incurred by the Borrower not to exceed, in the
aggregate at any time outstanding, $1,000,000.
"Person" means an individual, company, corporation, partnership, joint
venture, limited liability company, trust, association, unincorporated
organization or a government or any agency or political subdivision thereof.
"Pipeline" means that certain Borrowing Base Oil and Gas Property
pipeline described on Exhibit "A-3" attached hereto.
"Plan" means, at any time, any employee benefit plan which is covered
by ERISA and in respect of which the Borrower or any ERISA Affiliate is (or, if
such plan were terminated at such time, would under Section 4069 of ERISA be
deemed to be) an "employer" as defined in Section 3(5) of ERISA.
"Present Worth" means, at any time and from time to time, the before
income tax future cash flow from the sale of oil and gas to be produced from the
Proved Reserves attributable to the Borrowing Base Oil and Gas Properties, as
set forth in the most recent Reserve Report delivered from Borrower to Agent
pursuant to Section 2.06, discounted to present value at the rate of nine
percent (9%) per annum, and adjusted to incorporate the following additional
criteria: (1) the Hydrocarbon prices used shall be those stated in Agent's then
current Hydrocarbon pricing guidelines, adjusted for Permitted Hedge Agreements
that are in place, and
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(2) not more than one-third (1/3) of such present value shall be based upon
Proved Reserves in non-producing categories.
"Pricing Grid" means the following table:
UTILIZATION PERCENTAGE LIBOR MARGIN ABR MARGIN COMMITMENT FEE
---------------------- ------------ ---------- --------------
> 90% 2.25% .75% .50%
> 75% < or = to 90% 2.00% .50% .50%
> 50% < or = to 75% 1.75% .25% .375%
> 35% < or = to 50% 1.50% 0 .375%
< or = to 35% 1.25% 0 .375%
"Production Revenue" means revenues of the Borrower from the sale of
its oil and gas production minus any applicable oil and gas production taxes and
royalties.
"Prior Loan Agreement" has the meaning stated therefor in the first
recital of this Agreement.
"Prohibited Transaction" means any transaction set forth in Section
406 of ERISA or Section 4975 of the Internal Revenue Code of 1954, as amended
from time to time.
"Purchasing Bank" shall have the meaning assigned to that term in
Section 9.05 hereof.
"Proved Reserves" means the estimated quantities of crude oil,
condensate, natural gas liquids and natural gas which geological and engineering
data demonstrate with reasonable certainty to be recoverable by primary
producing mechanisms in future years from known reservoirs underlying lands or
interests therein constituting Oil and Gas Properties, under existing economic
and operating conditions. Reserves which can be produced economically through
application of improved recovery techniques (i.e., fluid injection) will be
included in Proved Reserves when successful testing by a pilot project or the
operation of an installed program in the reservoir provides support for the
engineering analysis on which the pilot project or installed program was based.
In general, the economic productivity of the estimated proved reserves is
supported by actual production or a conclusive formation test; however, in
certain instances proved reserves are assigned to reservoirs on the basis of a
combination of electrical and other type logs and core analyses which indicate
these reservoirs are analogous to similar reservoirs in the same field which are
producing or have demonstrated the ability to produce on a formation test.
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"Reimbursement Obligations" means, at any time, the aggregate of all
obligations of the Borrower then outstanding under Section 2.20 to reimburse the
LC Issuer for amounts paid by the LC Issuer in respect of any one or more
drawings under Facility LCs.
"Reportable Event" means any of the events set forth in Section 4043
of ERISA.
"Request for Advance" means the written or verbal (confirmed in
writing within one (1) Business Day) request by the Borrower to the Agent for an
advance by the Banks pursuant to this Agreement, which Request for Advance shall
be signed by an authorized officer of the Borrower and shall include a statement
of the amount requested to be advanced, the date of the requested advance and
such other information as the Agent in its reasonable discretion deems
necessary.
"Required Banks" means, at any time, Banks holding at least sixty-six
and two-thirds percent (66 2/3%) of the Aggregate Commitment Amount or, if the
Aggregate Commitment Amount has been terminated, Banks having at least sixty-six
and two-thirds percent (66 2/3%) of the Aggregate Outstanding Credit Exposure.
"Required Hedge Agreement" means a commodities swap between Borrower
and a counterparty that has a credit rating of at least "A-" by Standard and
Poors or "A3" by ▇▇▇▇▇'▇ Investment Service, conducted pursuant to a current
form of Master Agreement promulgated by the International Swap Dealer's
Association ("ISDA") together with the corresponding ISDA Schedule and
Confirmation(s) (or other form of agreement acceptable to Agent and the Required
Banks) pursuant to which Borrower has hedged for a period of fourteen (14)
months from the Closing a notional quantity of: (a) 7,700 barrels of oil per day
for the period prior to the completion of the Anticipated Property Sale, and (b)
6,600 barrels of oil per day for the period from and after the completion of the
Anticipated Property Sale; at a weighted average fixed price equal to or greater
than Twenty-Three and 80/100 Dollars ($23.80) per barrel.
"Required Number" means: in the case of notices hereunder (i) relative
to borrowings, prepayments, elections of LIBOR Loans, selections of Interest
Periods for, or other transactions in respect of, LIBOR Loans: by 10:00 a.m.,
Central Standard Time on the third Business Day prior to the proposed activity;
or (ii) relative to all transactions in respect of ABR Loans: the same Business
Day by 1:00 p.m., Central Standard Time; it being understood, however, that in
the case of notices involving transactions in respect of more than one type of
Loan (such as a change in type of Loan in accordance with Section 2.04(B)),
"Required Number" means that number of days, as indicated above in respect of
the Loans involved, which would constitute the longest applicable period of
time.
"Reserve Report" means a report prepared by an independent petroleum
engineer or firm of engineers reasonably satisfactory to the Agent regarding the
Proved Reserves attributable to the Borrowing Base Oil and Gas Properties, using
the criteria and parameters required by and acceptable to the Securities and
Exchange Commission, and incorporating the present cost of appropriate plugging
and abandonment obligations to be incurred in the future, taking into account
any plugging and abandonment fund required to be accrued or established by
Borrower out of cash flow from the Borrowing Base Oil and Gas Properties covered
by such report with respect to such future obligations.
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"Scheduled Monthly Capital Expenditure" means $3,333,000.00 each month
for the months of April and May, 2000, provided that if the Anticipated Property
Sale occurs during May 2000, it shall mean $2,667,000.00 for May, and if the
Anticipated Property Sale occurs during April 2000 it shall mean $2,667,000.00
for each of April and May 2000; and for each month thereafter, it means the
actual capital expenditures incurred by Borrower during such month, minus the
"Excess Actual Capital Expenditures," as hereinafter defined. For purposes of
this definition, the following additional terms shall have the meanings
prescribed herein: (a) the "Base Amount" means $3,333,000.00 for each month from
June 2000 until the effective date of the Anticipated Property Sale, and
$2,667,000.00 for each month from the effective date of the Anticipated Property
Sale and thereafter; provided that the Base Amount for the month in which the
effective date of the Anticipated Property Sale occurs shall be the sum of the
product of $3,333,000.00 times a fraction, the numerator of which is the number
of days in the month prior to, but not including, the effective date of the
Anticipate Property Sale and the denominator of which is the total number of
days in such month, plus the product of $2,667,000.00 times a fraction, the
numerator of which is the number of days in the month from and including the
effective date of the Anticipated Property Sale until the end of such month
divided by the total number of days in such month; and provided further, that if
the Anticipated Property Sale occurs prior to June 1, 2000, the Base Amount
shall mean $2,667,000.00 for each month from and after June 2000; (b)
"Cumulative Actual Capital Expenditures" means the sum, at the end of each month
beginning with June 2000, of the actual capital expenditures incurred by
Borrower for all such months beginning with June 2000; (c) "Cumulative Base
Amount" means the sum, at the end of each month beginning with June 2000, of the
Base Amount applicable to all such months beginning with June 2000; and (d)
"Excess Actual Capital Expenditures" means, as of the end of each month
beginning with June 2000, the amount (if any) by which Actual Cumulative Capital
Expenditures exceeds the Cumulative Base Amount.
"Security Instruments" means the security instruments described on
Exhibit "D," in form and substance satisfactory to the Agent, to be executed by
Borrower pursuant to Section 3.01, and any and all other instruments or
documents hereafter executed in connection with or as security for the payment
of the Notes.
"South Timbalier 26" means those Borrowing Base Oil and Gas Properties
described on Exhibit "A-1"attached hereto.
"Stockholders' Equity" means, at any time, the sum of the following
accounts set forth on a consolidated balance sheet of the Borrower, prepared in
accordance with GAAP: (A) the par or stated value of all outstanding capital
stock (common and preferred); (B) capital surplus; and (C) retained earnings.
"Subordinated Debt" means (i) debt of Borrower to EIF in an amount not to exceed
$10,000,000.00 plus accrued interest pursuant to that certain Financing
Agreement dated April 15, 1998 (as amended), and (ii) additional debt of
Borrower to EIF incurred for the sole purpose of curing any Events of Default
under this Agreement and on terms substantially similar to the debt described in
clause (i) of this definition, provided that all of such debt described in this
definition shall be subordinate and inferior to Borrower's Obligations under
this Agreement.
"Subordination Agreement" means a subordination agreement dated June
23, 1999, originally by and among EIF, Borrower and Bank One pertaining to the
Subordinated Debt
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and EIF's liens and security interests in the Borrowing Base Oil & Gas
Properties (including the overriding royalty interests therein owned by EIF), as
amended.
"Subsidiary" means, as to any Person, any corporation in which such
Person, directly or indirectly through its Subsidiaries, owns more than fifty
percent (50%) of the stock of any class or classes having by the terms thereof
the ordinary voting power to elect a majority of the directors of such
corporation, and any partnership, association, joint venture, or other entity in
which such Person, directly or indirectly through its Subsidiaries, has more
than a fifty percent (50%) equity interest at the time.
"Three Month Period" means each period of three consecutive months,
the first of which begins on the Closing Date and ends on the same date of the
third calendar month thereafter, and each subsequent one of which ends on the
same date of the third calendar month after the prior such period ended.
"Tranche A" and "Tranche A Commitment" mean that part of the Aggregate
Commitment Amount, which constitutes a reducing revolving line of credit in the
amount of $90,000,000.00 as of the Closing, as it is reduced from time to time
pursuant to Schedule 2.06 and Section 2.06 hereof, under which the Borrower may
borrow, repay and reborrow from time to time until the Facility Termination
Date, as more fully set forth in Section 2.01 and subject to all of the terms
and conditions of this Agreement.
"Tranche B" and "Tranche B Commitment" mean that part of the Aggregate
Commitment Amount which constitutes a reducing bridge financing in the amount of
$25,000,000.00 as of the Closing, as it is reduced from time to time pursuant to
Schedule 2.06 and Section 2.06 hereof, under which the Borrower may borrow in
one or more advances and repay, but may not reborrow thereunder, for use only to
provide funding for the acquisition of interests in South Timbalier 26 together
with the Pipeline, and/or East Bay.
"Tranche B Termination Date" means March 30, 2001.
"Transfer Order Letters" means the letters in lieu of division or
transfer orders, in form acceptable to the Agent.
"Unmatured Event of Default" means any event or occurrence which
solely with the lapse of time or the giving of notice or both will ripen into an
Event of Default.
"Utilization Percentage" means the percentage of the Tranche A
Commitment represented by the aggregate principal amount of all Credit
Extensions outstanding under Tranche A.
Undefined Terms. Undefined financial accounting terms used in this
Agreement shall be defined according to GAAP.
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ARTICLE II.
THE LOANS AND LETTERS OF CREDIT
2.01 The Commitment. From and including the date of this Agreement and
prior to the Facility Termination Date, each Bank severally agrees, on the terms
and conditions set forth in this Agreement, to (i) make Loans to the Borrower
and (ii) participate in Facility LCs issued upon the request of the Borrower,
provided that, after giving effect to the making of each Loan and the issuance
of each Facility LC, such Bank's Outstanding Credit Exposure shall not exceed
its Commitment. Subject to the terms of this Agreement, the Borrower may borrow,
repay and reborrow under the Tranche A component of the Aggregate Commitment
Amount at any time prior to the Facility Termination Date. All Commitments to
extend credit hereunder shall expire on the Facility Termination Date.
Subject to the terms of this Agreement, the Borrower may borrow and
repay, but may not reborrow, the amounts available under the Tranche B component
of the Commitments at any time prior to the Tranche B Termination Date. The
Commitments to extend credit, insofar as they relate to Tranche B, shall expire
on the Tranche B Termination Date.
The LC Issuer will issue Facility LCs hereunder on the terms and
conditions set forth in Section 2.20.
2.02 Notice and Manner of Borrowing.
(a) The amount and date of each Credit Extension shall be designated
by Borrower's execution of a Request for Advance to be received by the Agent at
least the Required Number of, but not more than ten (10), Business Days prior to
the date of such Credit Extension, which date shall be a Business Day. The Agent
shall promptly advise the Banks and, if applicable, the LC Issuer, of any
Request for Advance given pursuant to this Section 2.02, of each Bank's
Percentage Share of any requested Borrowing and, if applicable, the amount
requested for any Facility LC by telephone, confirmed promptly in writing, or
telecopier. Upon satisfaction of the applicable conditions set forth in Article
III, each Borrowing shall be made at the office of the Agent, and shall be
funded prior to 3:00 o'clock p.m., Houston, Texas time, on the day so requested
in immediately available funds in the amount so requested.
(b) Each Bank shall make each Loan to be made by it hereunder on the
date of the proposed Borrowing by wire transfer of immediately available funds
to the Agent in Houston, Texas, not later than 11:00 a.m., Houston, Texas time,
and upon fulfillment of the applicable conditions set forth in Article III, the
Agent will make such funds available to Borrower as Borrower shall direct to the
Agent from time to time or, if a Borrowing shall not occur on such date because
any condition precedent herein specified shall not have been met, return the
amounts so received to the respective Banks as soon as practicable. Unless the
Agent shall have received notice from a Bank prior to the date of any proposed
Borrowing that such Bank will not make available to the Agent such Bank's
Percentage Share of such Borrowing, the Agent may assume that such Bank has made
its Percentage Share available to the Agent on the date of such Borrowing in
accordance with this paragraph (b) and the Agent may, in reliance upon such
assumption, make available to Borrower on such date a corresponding amount. If,
and to the
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extent that, such Bank shall not have made its Percentage Share available to the
Agent, such Bank and Borrower severally agree to repay to the Agent forthwith on
demand such corresponding amount together with interest thereon, for each day
from the date such amount is made available to Borrower until the date such
amount is repaid to the Agent at (i) in the case of Borrower, the interest rate
applicable at the time to the Loans comprising such Borrowing and (ii) in the
case of such Bank, the Federal Funds Effective Rate. If such Bank shall repay to
the Agent such corresponding amount, such amount shall constitute such Bank's
Loan as part of such Borrowing for purposes of this Agreement.
2.03 Payment Procedure. All payments and prepayments made by Borrower
under this Agreement shall be made to the Agent at its office specified in
Section 9.03 for the account of the Banks in immediately available funds before
11:00 a.m., Houston, Texas time, on the date that such payment is required to
be made. The Agent will promptly thereafter cause to be distributed like funds
relating to such payments or prepayments ratably to the Banks (and if the
payment relates to amounts owed to a particular Bank only, in like funds to such
Bank), in each case, to be applied in accordance with the terms of this
Agreement. Borrower hereby authorizes the Agent, if and to the extent payment or
prepayment (including prepayments required pursuant to Section 2.11 hereof) is
not made when due hereunder or under the Notes or any other Loan Document, to
charge from time to time against Borrower's account with the Agent any amount so
due. Any payment received and accepted by the Agent (or any branch or Affiliate
thereof) after such time shall be considered for all purposes (including the
calculation of interest, to the extent permitted by law) as having been made on
the next following Business Day.
2.04 Payments of Interest under the Notes. Subject to the terms and
provisions of this Agreement, interest on the Loan, calculated at the Floating
Rate, shall be due and payable as follows:
(A) Interest on ABR Loans shall be calculated on the basis of a
365/366-day year, as applicable, and on LIBOR Loans on the basis of a
360-day year, in each case counting the actual number of days elapsed.
Interest on the outstanding principal balance of the Loans shall accrue for
each day at either a Floating Rate based on ABR for such day for ABR Loans,
or a Floating Rate based on LIBOR for the Interest Period which includes
such day for LIBOR Loans, all as elected and specified (including
specification as to length of Interest Period, as permitted by the
definition of that term, with respect to any election of a Floating Rate
based on LIBOR) by the Borrower in accordance with Section 2.04(B);
provided that:
(1) In the absence of an election by the Borrower of a Floating
Rate based on LIBOR, or, having made such election, but upon the
Required Number of days prior to the end of the then current Interest
Period the Borrower fails or is not entitled under the terms of this
Agreement to elect to continue a Floating Rate based on LIBOR and
specify the applicable Interest Period therefor, then upon the
expiration of such then current Interest Period, interest on the Loans
shall accrue for each day at a Floating Rate based on ABR for such
day, until the Borrower, pursuant to Section 2.04(B), elects a
different Floating Rate and specifies the Interest Period for the
Loans.
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(2) Interest accruing on any LIBOR Loan during any Interest
Period shall be payable on the first Business Day of the next Interest
Period except that interest will be payable on the Facility
Termination Date on any LIBOR Loan with an Interest Period ending on
the Facility Termination Date; provided that all accrued interest on
any LIBOR Loan converted or prepaid pursuant to Section 2.11 shall be
paid immediately upon such prepayment or conversion.
(B) By at least the Required Number of days prior to the advance of
any Loan hereunder, the Borrower shall select the initial Floating Rate to
be charged on such Loan, and from time to time thereafter the Borrower may
elect, on at least the Required Number of days irrevocable prior written
(or verbal, promptly confirmed by written) notice to the Agent, an initial
Floating Rate for any additional Loan, or to change the Floating Rate on
any Loan to any other Floating Rate (including, when applicable, the
selection of the Interest Period); provided that; (i) the Borrower shall
not select an Interest Period that extends beyond the Facility Termination
Date; (ii) except as otherwise provided in Section 2.11 no such change from
a Floating Rate based on LIBOR to another Floating Rate shall become
effective on a day other than the day, which must be a Business Day, next
following the last day of the Interest Period last effective for such LIBOR
Loan; (iii) any elections made by the Borrower pursuant to this Section
2.04(B) shall be in the amount of $1,000,000, plus any additional increment
of $1,000,000, or such lesser amount as constitutes the balance of all
Loans then outstanding hereunder; (iv) notwithstanding anything herein to
the contrary, the Borrower may not make any election under this Section
2.04(B) that would result in Loans outstanding based on more than six (6)
different LIBORs without the consent of the Required Banks to do so; and
(v) the first day of each Interest Period as to a LIBOR Loan shall be a
Business Day.
(C) Interest on ABR Loans shall be paid quarterly in arrears on the
first Business Day of each calendar quarter (for the immediately preceding
quarter) commencing with the quarter following any quarter during which
interest begins to accrue at a Floating Rate based on ABR, as elected by
Borrower pursuant to Section 2.04(B), and on the date the principal of such
Loans shall be due (on the stated Facility Termination Date, on
acceleration, or otherwise).
2.05 General Provisions Relating to Interest. It is the intention of
the parties hereto to comply strictly with the usury Laws of the State of Texas
and the United States of America and, in this connection, there shall never be
collected, charged or received on any sums advanced hereunder interest in excess
of the Maximum Rate. For purposes of Chapter 303 of the Texas Finance Code, as
amended, the Borrower agrees that the maximum rate to be charged shall be the
"indicated (weekly) rate ceiling" as defined in said Chapter, provided that the
Bank may also rely to the extent permitted by applicable Laws of the State of
Texas or the United States of America, on alternative maximum rates of interest
under other applicable Laws of the State of Texas or the United States of
America applicable to the Loans, if greater. Notwithstanding anything herein or
in the Notes to the contrary, during any Limitation Period, the interest rate to
be charged on amounts evidenced by the Notes shall be the Maximum Rate and the
obligation of the Borrower for any fees payable hereunder and deemed to be
interest under applicable Law shall be suspended. During any period or periods
of time following a Limitation Period, to the extent permitted by applicable
Laws of the State of Texas or the United
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States of America, the interest rate to be charged hereunder shall remain at the
Maximum Rate until such time as there has been paid to each Bank (a) the amount
of interest in excess of the Maximum Rate that such Bank would have received
during the Limitation Period had the interest rate remained at the relevant
rates specified in the Note, and (b) all interest and fees otherwise due to such
Bank but for the effect of such Limitation Period.
If under any circumstances the aggregate amounts paid on the Notes or
under this Agreement include amounts which by Law are deemed interest and which
would exceed the amount permitted if the Maximum Rate were in effect, the
Borrower stipulates that such payment and collection will have been and will be
deemed to have been, to the extent permitted by applicable Laws of the State of
Texas or the United States of America, the result of mathematical error on the
part of both the Borrower and the Banks, and each Bank shall promptly refund the
amount of such excess (to the extent only of such interest payments above the
Maximum Rate which could lawfully have been collected and retained) upon
discovery of such error by such Bank or notice thereof from the Borrower.
2.06 Borrowing Base Determination. Notwithstanding the following
provisions of this Section, the Borrowing Base shall be as set forth on Schedule
2.06 attached hereto, as further reduced from time to time by the mandatory
prepayments made pursuant to Section 2.08 hereof, from the date of Closing until
the earlier of: (a) October 1, 2000, (b) the occurrence of an Event of Default,
or (c) any unscheduled Borrowing Base redetermination initiated by the Agent and
approved by the Required Banks based on a substantive, adverse change in
economic conditions generally applicable to independent producers operating in,
and/or oil and gas properties located in, the Texas/Louisiana Gulf Coast and/or
the Gulf of Mexico Outer Continental Shelf. Thereafter, the Borrowing Base shall
be determined pursuant to the following provisions of this Section. On or before
September 1, 2000, the Borrower shall furnish to the Agent information
sufficient to update to an effective date of June 1, 2000, the most recent
petroleum engineering reports provided to the Agent prior to Closing relative to
the Proved Reserves attributable to the Borrowing Base Oil and Gas Properties.
Upon receipt of such report, the Agent shall, in the normal course of business
make a determination of the Borrowing Base and the Monthly Borrowing Base
Reduction which shall become effective upon approval by the Required Banks and
subsequent written notification from the Agent to the Borrower, and which,
subject to the other provisions of this Agreement, shall be the basis on which
the Borrowing Base shall thereafter be calculated until the effective date of
the next redetermination of the Borrowing Base and the Monthly Borrowing Base
Reduction as set forth in this Section. Thereafter, on or before each April 1
and October 1 until the Facility Termination Date, beginning April 1, 2001, the
Borrower shall furnish to the Agent a report, in form and substance satisfactory
to the Agent, which report shall set forth, as of each preceding January 1 or
July 1, as applicable, the Proved Reserves attributable to the Borrowing Base
Oil and Gas Properties. Each report to be provided on or before each April 1
shall be a complete report relating to the Proved Reserves attributable to the
Borrowing Base Oil and Gas Properties prepared by an independent petroleum
engineer or firm of engineers reasonably satisfactory to the Agent. Each report
to be provided on or before each October 1 shall simply update the previous
complete report, and may be prepared by the Borrower's own engineers and shall
be certified by the President or Chief Financial Officer of the Borrower. Upon
receipt of each such report, the Agent shall, in the normal course of business,
make a determination of the Borrowing Base and the Monthly Borrowing Base
Reduction which shall become effective upon approval by the Required Banks
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and subsequent written notification from the Agent to the Borrower, and which,
subject to the other provisions of this Agreement, shall be the basis on which
the Borrowing Base shall thereafter be calculated until the effective date of
the next redetermination of the Borrowing Base and the Monthly Borrowing Base
Reduction as set forth in this Section 2.06. The Agent may, subject to approval
of the Required Banks, and must, upon the request of the Required Banks,
redetermine the Borrowing Base and the Monthly Borrowing Base Reduction at any
time, and from time to time, which redetermination shall become effective upon
approval by the Required Banks and subsequent written notification from the
Agent to the Borrower and which, subject to the other provisions of this
Agreement, shall be the basis on which the Borrowing Base shall thereafter be
calculated until the effective date of the next redetermination of the Borrowing
Base and the Monthly Borrowing Base Reduction, as set forth in this Section. The
Agent may request in writing that the Borrower provide a Reserve Report
regarding the Proved Reserves attributable to the Borrowing Base Oil and Gas
Properties with an effective date not more than ninety (90) days prior to
Borrower's delivery of such Reserve Report to Agent, and such Reserve Report
shall be delivered to Agent within ninety (90) days after Borrower's receipt of
such written request.
The Borrower shall have the right to request, by written notice to
Agent, one unscheduled redetermination of the Borrowing Base and Monthly
Borrowing Base Reduction between any two scheduled redeterminations thereof,
subject to contemporaneously providing to Agent a Reserve Report with an
effective date not more than ninety (90) days prior to the date of such notice.
If at any time the Required Banks cannot otherwise agree on a
redetermination of the Borrowing Base and/or the Monthly Borrowing Base
Reduction, respectively, then the Borrowing Base and/or the Monthly Borrowing
Base Reduction, as applicable, shall be set on the basis of the Agent's
calculation of the "weighted arithmetic average" (as hereinafter calculated) of
the Borrowing Base and the Monthly Borrowing Base Reduction, as determined by
each individual Bank and communicated to Agent in writing. However, the amount
of the Borrowing Base shall never be increased and the amount of the Monthly
Borrowing Base Reduction shall never be decreased at any time without the
unanimous consent of the Banks, notwithstanding anything else herein to the
contrary. For purposes of this paragraph, the "weighted arithmetic average" of
the Borrowing Base shall be determined by first multiplying the Borrowing Base
proposed in writing to Agent by each Bank by such Bank's Percentage Share, and
then adding the results of each such calculation, with the resultant sum being
the Borrowing Base. Likewise, the "weighted arithmetic average" of the Monthly
Borrowing Base Reduction shall be determined by first multiplying the Monthly
Borrowing Base Reduction proposed in writing to Agent by each Bank by such
Bank's Percentage Share, and then adding the results of each such calculation,
with the resultant sum being the Monthly Borrowing Base Reduction.
The Borrowing Base shall represent the Required Banks' approval of the
Agent's determination, in accordance with its customary lending practices, of
the maximum loan amount with respect to the Borrowing Base Oil and Gas
Properties and the Borrower acknowledges, for purposes of this Agreement, such
determination by the Agent as being the maximum loan amount with respect to the
Borrowing Base Oil and Gas Properties. In making any redetermination of the
Borrowing Base and the Monthly Borrowing Base Reduction, the Agent and the Banks
shall apply the parameters and other credit factors consistently applied then
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generally being utilized by the Agent and each such Bank, respectively, for
Borrowing Base redeterminations for other similarly situated borrowers. The
Borrower, Required Banks and the Agent acknowledge that (a) due to the
uncertainties of the oil and gas extraction process, the Borrowing Base Oil and
Gas Properties are not subject to evaluation with a high degree of accuracy and
are subject to potential rapid deterioration in value, and (b) for this reason
and the difficulties and expenses involved in liquidating and collecting against
the Borrowing Base Oil and Gas Properties, the Agent's determination of the
maximum loan amount with respect to the Borrowing Base Oil and Gas Properties
contains an equity cushion, which equity cushion is acknowledged by the Borrower
as essential for the adequate protection of the Banks.
2.07 Mandatory Prepayment Due to a Loan Excess. In the event that a
Loan Excess exists, the Borrower shall: (a) immediately, in the case of a Loan
Excess resulting from a Monthly Borrowing Base Reduction, or (b) within sixty
(60) days after receipt of written notice from Agent of the redetermined
Borrowing Base, in the case of a Loan Excess resulting from a Borrowing Base
determination, (i) prepay the principal of the Note in an aggregate amount at
least equal to such Loan Excess or (ii) add to the Borrowing Base Oil and Gas
Properties additional Oil and Gas Properties of the Borrower sufficient in
value, as determined pursuant to Section 2.06, to increase the Borrowing Base to
equal the unpaid principal amount of the Notes.
2.08 Other Mandatory Prepayments.
(A) On each date on which the Borrower sells any of its Oil and Gas
Properties (including, without limitation, any of those included within the
Anticipated Property Sale), the Borrowing Base will be automatically
reduced to the loan value (determined in accordance with the procedures for
determining the Borrowing Base) of the remaining Borrowing Base Oil and Gas
Properties, and the Borrower shall be required to make the prepayment, if
any, required pursuant to Section 2.07.
(B) On the date that the Borrower receives the net proceeds from any
Anticipated Property Sale, the Tranche B Commitment will be automatically
and permanently reduced by, and the Borrower shall immediately prepay the
outstanding Tranche B Loans by, an amount equal to the excess, if any, of
(i) the aggregate amount of such net proceeds, over (ii) the amount of the
prepayment of Tranche A loans required pursuant to Section 2.08(A).
(C) On each date on which the Borrower completes the Debt Placement or
issues any capital securities, the Tranche B Commitment will be
automatically and permanently reduced by, and the Borrower shall
immediately prepay the outstanding Tranche B Loans by, an amount equal to
the net proceeds of such Debt Placement or issuance.
(D) Except to the extent otherwise provided in Section 2.07(a), if on
any date the Outstanding Credit Exposure under Tranche A exceeds the amount
of the then effective Tranche A Commitment, the Borrower shall be required
to immediately prepay the Tranche A Loans by the amount of such excess.
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(E) Except to the extent otherwise provided in Section 2.07(a), if on
any date the sum of the aggregate principal amount of the Loans outstanding
under Tranche B exceeds the amount of the then effective Tranche B
Commitment, the Borrower shall be required to immediately prepay the
Tranche B Loans by the amount of such excess.
2.09 Prepayment and Conversion. Upon the Required Number of days
written notice to the Agent, the Borrower may, without the payment of penalty or
premium, prepay the principal of the Loans or voluntarily convert the applicable
Floating Rate of any Loan prior to the termination of the applicable Interest
Period in whole or in part, from time to time. Any partial payment or conversion
of ABR Loans shall be made in the sum of not less than $1,000,000, and any
partial payment or conversion of LIBOR Loans shall be made in the sum of not
less than $1,000,000 or any $1,000,000 increment in addition thereto. With
respect to any such prepayment or conversion of any LIBOR Loan the Borrower
agrees to pay to the Banks upon the request of the Agent such amount or amounts
as will compensate the Banks for Breakage Costs, excluding, however, any such
Breakage Costs resulting from a payment or prepayment made more than sixty (60)
days prior to the Agent's request for payment of Breakage Costs. The payment of
any such Breakage Costs to the Banks shall be made within thirty (30) days of a
request therefor from Agent. If LIBOR cannot be determined on the date of such
prepayment, the Agent shall calculate LIBOR by interpolating LIBOR in effect
immediately prior to the prepayment and LIBOR in effect immediately after the
prepayment.
2.10 Increased Cost of Loans.
(A) Notwithstanding any other provisions herein, if as a result of any
regulatory change after the date hereof
(1) the basis of taxation of payments to any Bank of the
principal of, or interest on, any LIBOR Loan or any other amounts due
under this Agreement in respect of any such LIBOR Loan (except for
taxes imposed on the overall net income or receipts of such Bank, and
franchise or other taxes imposed generally on such Bank), by the
jurisdiction (or any political subdivision therein) in which the Bank
has its principal office (if such other taxes do not specifically
affect the cost to the Bank of making the Loans) is changed;
(2) any reserve, special deposit, or similar requirement
(including without limitation any reserve requirement under
regulations of the Board of Governors of the Federal Reserve System)
against assets of, deposits with, or for the account of, or credit
extended by such Bank, is imposed, increased, modified, or deemed
applicable; or
(3) any other condition affecting this Agreement or any LIBOR
Loan is imposed on such Bank or (in the case of LIBOR Loans) the LIBOR
Market;
and the result of any of the foregoing is to increase the actual
direct cost to such Bank of making or maintaining any such LIBOR Loan
(and such increase shall not have been compensated by a corresponding
increase in the interest rate applicable to the respective Loans) by
an amount deemed by such Bank to be
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material (such increases in cost and reductions in amounts receivable
being herein called "Increased Costs"), then the Borrower shall pay
such Bank, within thirty (30) days after its written demand, such
additional amount or amounts as will compensate such Bank for those
Increased Costs. No Bank will demand to be compensated by Borrower for
such Increased Costs unless such Bank generally makes such demands to
its other LIBOR Loan customers who are similarly situated. A
certificate of such Bank setting forth the basis for the determination
of such amount necessary to compensate such Bank as aforesaid
(including a representation by such Bank that it is generally making
demands as required by the preceding sentence), accompanied by
documentation showing reasonable support for such increased costs or
reduced sums received by such Bank, shall be delivered to the Borrower
and shall be conclusive, save for manifest error, as to such
determination and such amount. The affected Bank shall notify the
Borrower, as promptly as practicable after such Bank obtains knowledge
of any Increased Costs or other sums payable pursuant to this Section
2.10 and determines to request compensation therefor, or any event
occurring after the Closing which will entitle such Bank to
compensation pursuant to this Section; provided that, notwithstanding
anything herein to the contrary, the Borrower shall not be obligated
for the payment of any Increased Costs or other sums payable pursuant
to this Section 2.10 to the extent such Increased Costs or other sums
accrued more than 90 days prior to the date upon which the Borrower
was given such notice. If the Borrower is required to indemnify or pay
additional amounts pursuant to this Section 2.10, then the Bank will
take such action as in the reasonable judgment of the Bank (i) will
eliminate or reduce any such additional payment which may thereafter
accrue and (ii) is not otherwise commercially unreasonable. The Bank
shall use its reasonable efforts to obtain in a timely fashion any
refund, deduction or credit of any taxes paid or reimbursed by the
Borrower pursuant to this Section 2.10. If the Bank receives a benefit
in the nature of a refund, deduction or credit (including a refund in
the form of a deduction from or credit against taxes that are
otherwise payable by the Bank) of any taxes with respect to which the
Borrower has made a payment under Section 2.10, the Bank agrees to
reimburse the Borrower to the extent of the benefit of such refund,
deduction or credit promptly after the Bank reasonably determines that
such refund deduction or credit has become final; provided, however,
that nothing contained in this paragraph shall require the Bank to
make available its tax returns (or any other information relating to
its taxes which it deems to be confidential) or to attempt to obtain
any such refund, deduction or credit, which attempt would be
inconsistent with any reporting position otherwise taken by the Bank
on its tax returns.
(B) Notwithstanding the foregoing provisions of this Section 2.10, in
the event that by reason of any regulatory change any Bank either (i)
incurs Increased Costs based on, or measured by, the excess above a
specified level of the amount of a category of deposits or other
liabilities of such Bank that includes deposits by reference to which the
interest rate on LIBOR Loans is determined as provided in this Agreement or
a category of extensions of credit or other assets of such Bank that
includes LIBOR Loans or (ii) becomes subject to restrictions on the amount
of such a category of liabilities or assets
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that it may hold, then, if such Bank so elects by written notice to the
Borrower, the obligation of such Bank to make or convert Loans of any other
type into LIBOR Loans hereunder shall be suspended until the earlier of the
date such regulatory change ceases to be in effect or the date the Borrower
and such Bank agree upon an alternative method of determining the interest
rate payable by the Borrower on LIBOR Loans, and all LIBOR Loans of such
Bank then outstanding shall be converted into an ABR Loan (if not otherwise
prohibited under the terms of this Agreement) at such Bank's option.
2.11 Change of Law. Notwithstanding any other provision herein, in the
event that any change in any applicable law or in the interpretation or
administration thereof shall make it unlawful for the Banks to (i) honor any
commitment it may have hereunder to make any LIBOR Loan, then such commitment
shall terminate, or (ii) maintain any LIBOR Loan, then all LIBOR Loans of the
Banks then outstanding shall be repaid and converted to ABR Loans (unless the
Banks' obligations to fund Loans hereunder has been suspended by any other
provisions of this Agreement) at the Borrower's option in accordance with the
election procedures set forth in Section 2.04(B); provided, however, that prior
to the effective date of such election, interest shall be calculated at the ABR.
Any remaining commitment of the Banks hereunder to make LIBOR Loans (but not
other Loans) shall be suspended so long as they are prohibited by any applicable
law. Upon the occurrence of any such change, the Agent shall promptly notify the
Borrower thereof, and shall furnish to the Borrower in writing evidence thereof
certified by the Agent.
Any repayment or conversion of any LIBOR Loan which is required under
this Section 2.11 or under 2.04(B) shall be effected by payment thereof,
together with accrued interest thereon, on demand, and concurrently there shall
occur the borrowing of the corresponding ABR Loan as provided herein.
If any repayment to the Banks of any LIBOR Loan (including conversions
thereof) is made under this Section 2.11 on a day other than a day otherwise
scheduled for a payment of principal of or interest on such Loan, the Borrower
shall pay to the Banks upon its request of the Agent such amount or amounts as
will compensate the Banks for Breakage Costs, excluding, however, any such
Breakage Costs resulting from a prepayment or conversion made more than sixty
(60) days prior to the Agent's request for payment of Breakage Costs. The
payment of any such Breakage Costs to the Banks shall be made within thirty (30)
days of a request therefor from Agent.
2.12 Mitigation: Mandatory Assignment. Each Bank shall use reasonable
efforts to avoid or mitigate any increased cost or suspension of the
availability of an interest rate under Sections 2.09 through 2.10 above, to the
greatest extent practicable (including transferring the Loans to another lending
office or Affiliate of a Bank) unless, in the opinion of such Bank, such efforts
would be likely to have an adverse effect upon it. In the event a Bank makes a
request to the Borrower for additional payments in accordance with Sections 2.09
or 2.10, then, provided that no Event of Default or Unmatured Event of Default
has occurred and is continuing at such time, the Borrower may, at its own
expense and in its sole discretion, require such Bank to transfer and assign in
whole (but not in part), without recourse, all of its interests, rights and
obligations under this Agreement to an assignee which shall assume such assigned
obligations (which assignee may be another Bank, if a Bank accepts such
assignment); provided that (a) such assignment shall not conflict with any law,
rule or regulation or order of any court or other
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governmental authority and (b) the Borrower or such assignee shall have paid to
the Agent for the account of the assigning Bank in immediately available funds
the principal of and interest accrued to the date of such payment on the portion
of the Loans hereunder held by such assigning Bank and all other amounts owed to
such assigning Bank hereunder, including amounts owed pursuant to Sections 2.09
and 2.10 hereof.
2.13 Pro Rata Treatment and Payments. Each Borrowing by Borrower from
the Banks hereunder, each payment by Borrower on account of any fee hereunder
and any reduction of the Commitments of the Banks shall be made pro rata
according to the respective Percentage Shares of the Banks. Each payment
(including each prepayment) by Borrower on account of principal of and interest
on the Loans shall be made pro rata according to the respective outstanding
principal amounts of the Loans then held by the Banks. The Agent shall
distribute such payments to the Banks promptly upon receipt in like funds as
received.
2.14 Sharing of Payments and Setoffs. Each Bank agrees that if it
shall, through the exercise of a right of banker's lien, setoff or counterclaim
against Borrower (pursuant to Section 9.01 or otherwise), including, but not
limited to, a secured claim under Section 506 of Title 11 of the United States
Code or other security or interest arising from, or in lieu of, such secured
claim, received by such Bank under any applicable bankruptcy, insolvency or
other similar law or otherwise, or by similar means, obtain payment (voluntary
or involuntary) in respect of any Loan or Loans (other than pursuant to Section
2.10) as a result of which the unpaid principal portion of its Loans shall be
proportionately less than the unpaid principal portion of the Loans of any other
Bank, it shall simultaneously purchase from such other Banks at face value a
participation in the Loans of such other Banks, so that the aggregate unpaid
principal amount of Loans and participations in Loans held by each Bank shall be
in the same proportion to the aggregate unpaid principal amount of all Loans
then outstanding as the principal amount of its Loans prior to such exercise of
banker's lien, setoff, counterclaim or other event was to the principal amount
of all Loans outstanding prior to such exercise of banker's lien, setoff,
counterclaim or other event; provided, however, that if any such purchase or
purchases or adjustments shall be made pursuant to this Section 2.14 and the
payment giving rise thereto shall thereafter be recovered, such purchase or
purchases or adjustments shall be rescinded to the extent of such recovery and
the purchase price or prices or adjustment restored without interest.
2.15 Advances to Satisfy Obligations of the Borrower. The Agent or any
Bank may, but shall not be obligated to, make advances hereunder for the benefit
of the Banks and apply same to the satisfaction of any condition, warranty,
representation or covenant of the Borrower contained in this Agreement, and the
funds so advanced and applied shall be part of the Loan proceeds advanced under
this Agreement and evidenced by the Notes.
2.16 Assignment of Production. Certain of the Security Instruments
covering the Borrowing Base Oil and Gas Properties contain an assignment unto
and in favor of Agent for the benefit of the Banks of all oil, gas and other
minerals produced and to be produced from or attributable to the Borrowing Base
Oil and Gas Properties together with all of the revenues and proceeds
attributable to such production, and such Security Instruments further provide
that all such revenues and proceeds which may be so collected by Agent for the
benefit of the Banks pursuant to the assignment shall be applied to the payment
of the Notes and the satisfaction of all other Indebtedness to be secured by
such Security Instruments. The Borrower hereby appoints
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the Agent as its agent and attorney-in-fact until this Agreement has been
terminated in accordance with Section 9.19 hereof for purposes of completing the
Transfer Order Letters delivered to the Agent pursuant to Section 3.01 hereof,
which power is coupled with an interest and is not revocable.
2.17 Commitment Fee. As consideration for the commitment of the Banks
to make Credit Extensions to the Borrower through the Facility Termination Date
pursuant to this Agreement, the Borrower agrees to pay to the Agent for the
account of the Banks within five (5) Business Days of receipt of the Agent's
statement as to quarterly periods ending March 31, June 30, September 30 and
December 31 of each year (except the first period shall be for a period of time
from the Closing to June 30, 2000) during the period commencing on the date of
this Agreement to and including the Facility Termination Date and at the
Facility Termination Date, a commitment fee equal to the percentage per annum
specified in the Pricing Grid based on the Utilization Percentage (computed on
the basis of a year of 360 days) multiplied by an amount equal to the daily
average excess, if any, of the Aggregate Commitment Amount over the Outstanding
Credit Exposure, throughout the period from the date of this Agreement or
previous calculation date provided above, whichever is later, to the relevant
calculation date or the Facility Termination Date, as the case may be.
2.18 Addition/Deletion of Borrowing Base Oil & Gas Properties. The
Borrower may, from time to time upon written notice to the Agent, propose to add
Oil and Gas Properties of the Borrower to the Borrowing Base Oil and Gas
Properties. Any such proposal to add Oil and Gas Properties of the Borrower to
the Borrowing Base Oil and Gas Properties shall be accompanied by a Reserve
Report applicable to such properties that conforms to the requirements of
Section 2.06, and evidence sufficient to establish that the Borrower has
Marketable Title to such Oil and Gas Properties, and any such addition shall
become effective at such time as: (a) the Agent, with the approval of the Banks,
has made a determination of the amount by which the Borrowing Base would be
increased as the result of such addition and (b) the conditions set forth in
Article III hereof, to the extent they are applicable to such additional Oil and
Gas Properties of the Borrower, have been satisfied. In determining the increase
in the Borrowing Base pursuant to this Section, the Agent and the Banks shall
apply the parameters and other credit factors consistently applied then
generally being utilized by the Agent and each such Bank, respectively, for
Borrowing Base determinations for other similarly situated borrowers
2.19 Adjustment to Aggregate Commitment Amount. At any time that
Borrower proposes to increase the Borrowing Base by adding additional Oil and
Gas Properties to the Borrowing Base Oil and Gas Properties pursuant to Section
2.18, Borrower may also request that Banks increase the amount of the Aggregate
Commitment Amount. At any time that Borrower makes such a request it shall
promptly provide Agent with such financial information as Agent may request to
assist the Agent in evaluating such request. Following the receipt of such
information from Borrower, the Agent shall, with the unanimous approval of the
Banks and in the normal course of its business, make a redetermination of the
Aggregate Commitment Amount, which shall become effective upon written
notification from the Agent to Borrower of the new Aggregate Commitment Amount.
The Borrower may upon written notice to Agent, not sooner than one hundred
eighty (180) days subsequent to the last such action by Borrower, amend the
definition of the Aggregate Commitment Amount by reducing the amount set forth
in such definition. Upon such reduction, the Banks shall not be obligated to
make Credit
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Extensions in excess of such reduced Aggregate Commitment Amount. If and when
the Banks increase the Aggregate Commitment Amount at Borrower's request, the
commitment fee, as determined pursuant to Section 2.17 of this Agreement, shall
be calculated using such increased amount for all of the calculation period in
which such Aggregate Commitment Amount was increased.
2.20 Facility LCs.
(A) Issuance. The LC Issuer hereby agrees, on the terms and conditions
set forth in this Agreement, to issue standby letters of credit (each, a
"Facility LC") and to renew, extend, increase, decrease or otherwise modify
each Facility LC ("Modify," and each such action a "Modification"), from
time to time from and including the date of this Agreement and prior to the
Facility Termination Date upon the request of the Borrower; provided that
immediately after each such Facility LC is issued or Modified, (i) the
aggregate amount of the outstanding LC Obligations shall not exceed
$5,000,000.00 and (ii) the Aggregate Outstanding Credit Exposure shall not
exceed the Aggregate Commitment Amount. No Facility LC shall have an expiry
date later than the earlier of (x) the fifth Business Day prior to the
Facility Termination Date and (y) one year after its issuance.
(B) Participations. Upon the issuance or Modification by the LC Issuer
of a Facility LC in accordance with this Section 2.20, the LC Issuer shall
be deemed, without further action by any party hereto, to have
unconditionally and irrevocably sold to each Bank, and each Bank shall be
deemed, without further action by any party hereto, to have unconditionally
and irrevocably purchased from the LC Issuer, a participation in such
Facility LC (and each Modification thereof) and the related LC Obligations
in proportion to its Percentage Share.
(C) Notice. Subject to Section 2.20(A), the Borrower shall give the LC
Issuer notice prior to 10:00 a.m. (Houston, Texas time) at least five
Business Days prior to the proposed date of issuance or Modification of
each Facility LC, specifying the beneficiary, the proposed date of issuance
(or Modification) and the expiry date of such Facility LC, and describing
the proposed terms of such Facility LC and the nature of the transactions
proposed to be supported thereby. Upon receipt of such notice, the LC
Issuer shall promptly notify the Agent, and the Agent shall promptly notify
each Bank, of the contents thereof and of the amount of such Bank's
participation in such proposed Facility LC. The issuance or Modification by
the LC Issuer of any Facility LC shall, in addition to the conditions
precedent set forth in Article III (the satisfaction of which the LC Issuer
shall have no duty to ascertain), be subject to the conditions precedent
that such Facility LC shall be satisfactory to the LC Issuer and that the
Borrower shall have executed and delivered such application agreement
and/or such other instruments and agreements relating to such Facility LC
as the LC Issuer shall have reasonably requested (each, a "Facility LC
Application"). In the event of any conflict between the terms of this
Agreement and the terms of any Facility LC Application, the terms of this
Agreement shall control.
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(D) LC Fees. The Borrower shall pay to the Agent, for the account of
the Banks ratably in accordance with their respective Percentage Shares,
with respect to each Facility LC, a letter of credit fee at a rate equal to
the then otherwise applicable LIBOR Margin per annum on the average daily
undrawn stated amount under such Facility LC, such fee to be payable in
arrears on or before the first Business Day of each calendar month (each
such fee described in this sentence an "LC Fee"). The Borrower shall also
pay to the LC Issuer for its own account (x) at the time of issuance of
each Facility LC, a fronting fee calculated at the rate of fifteen (15)
basis points per annum, and (y) documentary and processing charges in
connection with the issuance or Modification of and draws under Facility
LCs in accordance with the LC Issuer's standard schedule for such charges
as in effect from time to time.
(E) Administration; Reimbursement by Banks. Upon receipt from the
beneficiary of any Facility LC of any demand for payment under such
Facility LC, the LC Issuer shall notify the Agent and the Agent shall
promptly notify the Borrower and each other Bank as to the amount to be
paid by the LC Issuer as a result of such demand and the proposed payment
date (the "LC Payment Date"). The responsibility of the LC Issuer to the
Borrower and each Bank shall be only to determine that the documents
(including each demand for payment) delivered under each Facility LC in
connection with such presentment shall be in conformity in all material
respects with such Facility LC. The LC Issuer shall endeavor to exercise
the same care in the issuance and administration of the Facility LCs as it
does with respect to letters of credit in which no participations are
granted, it being understood that in the absence of any gross negligence or
willful misconduct by the LC Issuer, each Bank shall be unconditionally and
irrevocably liable without regard to the occurrence of any Default or any
condition precedent whatsoever, to reimburse the LC Issuer on demand for
(i) such Bank's Percentage Share of the amount of each payment made by the
LC Issuer under each Facility LC to the extent such amount is not
reimbursed by the Borrower pursuant to Section 2.20(F) below, plus (ii)
interest on the foregoing amount to be reimbursed by such Bank, for each
day from the date of the LC Issuer's demand for such reimbursement (or, if
such demand is made after 11:00 a.m. (Houston, Texas time) on such date,
from the next succeeding Business Day) to the date on which such Bank pays
the amount to be reimbursed by it, at a rate of interest per annum equal to
the Federal Funds Effective Rate for the first three days and, thereafter,
at a rate of interest equal to the Floating Rate based on ABR.
(F) Reimbursement by Borrower. The Borrower shall be irrevocably and
unconditionally obligated to reimburse the LC Issuer on or before the
applicable LC Payment Date for any amounts to be paid by the LC Issuer upon
any drawing under any Facility LC, without presentment, demand, protest or
other formalities of any kind; provided that neither the Borrower nor any
Bank shall hereby be precluded from asserting any claim for direct (but not
consequential) damages suffered by the Borrower or such Bank to the extent,
but only to the extent, caused by (i) the willful misconduct or gross
negligence of the LC Issuer in determining whether a request presented
under any Facility LC issued by it complied with the terms of such Facility
LC or (ii) the LC Issuer's failure to pay under any Facility LC issued by
it after the presentation to it of a request strictly complying with the
terms and conditions of such Facility LC. All such
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amounts paid by the LC Issuer and remaining unpaid by the Borrower shall
bear interest, payable on demand, for each day until paid at a rate per
annum equal to (x) the rate applicable to ABR Loans for such day if such
day falls on or before the applicable LC Payment Date and (y) the sum of 2%
plus the rate applicable to ABR Loans for such day if such day falls after
such LC Payment Date. The LC Issuer will pay to each Bank ratably in
accordance with its Percentage Share all amounts received by it from the
Borrower for application in payment, in whole or in part, of the
Reimbursement Obligation in respect of any Facility LC issued by the LC
Issuer, but only to the extent such Bank has made payment to the LC Issuer
in respect of such Facility LC pursuant to Section 2.20(E). Subject to the
terms and conditions of this Agreement (including without limitation the
submission of a Request for Advance in compliance with Section 2.02 and the
satisfaction of the applicable conditions precedent set forth in Article
III), the Borrower may request a Loan hereunder for the purpose of
satisfying any Reimbursement Obligation.
(G) Obligations Absolute. The Borrower's obligations under this
Section 2.20 shall be absolute and unconditional under any and all
circumstances and irrespective of any setoff, counterclaim or defense to
payment which the Borrower may have or have had against the LC Issuer, any
Bank or any beneficiary of a Facility LC. The Borrower further agrees with
the LC Issuer and the Banks that the LC Issuer and the Banks shall not be
responsible for, and the Borrower's Reimbursement Obligation in respect of
any Facility LC shall not be affected by, among other things, the validity
or genuineness of documents or of any endorsements thereon, even if such
documents should in fact prove to be in any or all respects invalid,
fraudulent or forged, or any dispute between or among the Borrower, any of
its Affiliates, the beneficiary of any Facility LC or any financing
institution or other party to whom any Facility LC may be transferred or
any claims or defenses whatsoever of the Borrower or of any of its
Affiliates against the beneficiary of any Facility LC or any such
transferee. The LC Issuer shall not be liable for any error, omission,
interruption or delay in transmission, dispatch or delivery of any message
or advice, however transmitted, in connection with any Facility LC. The
Borrower agrees that any action taken or omitted by the LC Issuer or any
Bank under or in connection with each Facility LC and the related drafts
and documents, if done without gross negligence or willful misconduct,
shall be binding upon the Borrower and shall not put the LC Issuer or any
Bank under any liability to the Borrower. Nothing in this Section 2.20(G)
is intended to limit the right of the Borrower to make a claim against the
LC Issuer for damages as contemplated by the proviso to the first sentence
of Section 2.20(F).
(H) Actions of LC Issuer. The LC Issuer shall be entitled to rely, and
shall be fully protected in relying, upon any Facility LC, draft, writing,
resolution, notice, consent, certificate, affidavit, letter, cablegram,
telegram, telecopy, telex or teletype message, statement, order or other
document believed by it to be genuine and correct and to have been signed,
sent or made by the proper Person or Persons, and upon advice and
statements of legal counsel, independent accountants and other experts
selected by the LC Issuer. The LC Issuer shall be fully justified in
failing or refusing to take any action under this Agreement unless it shall
first have received such advice or concurrence of the Required Banks as it
reasonably deems appropriate or it shall first be indemnified to its
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reasonable satisfaction by the Banks against any and all liability and
expense which may be incurred by it by reason of taking or continuing to
take any such action. Notwithstanding any other provision of this Section
2.20, the LC Issuer shall in all cases be fully protected in acting, or in
refraining from acting, under this Agreement in accordance with a request
of the Required Banks, and such request and any action taken or failure to
act pursuant thereto shall be binding upon the Banks and any future holders
of a participation in any Facility LC.
(I) Indemnification. The Borrower hereby agrees to indemnify and hold
harmless each Bank, the LC Issuer and the Agent, and their respective
directors, officers, agents and employees from and against any and all
claims and damages, losses, liabilities, costs or expenses which such Bank,
the LC Issuer or the Agent may incur (or which may be claimed against such
Bank, the LC Issuer or the Agent by any Person whatsoever) by reason of or
in connection with the issuance, execution and delivery or transfer of or
payment or failure to pay under any Facility LC or any actual or proposed
use of any Facility LC, including, without limitation, any claims, damages,
losses, liabilities, costs or expenses which the LC Issuer may incur by
reason of or in connection with (i) the failure of any other Bank to
fulfill or comply with its obligations to the LC Issuer hereunder (but
nothing herein contained shall affect any rights the Borrower may have
against any defaulting Bank) or (ii) by reason of or on account of the LC
Issuer issuing any Facility LC which specifies that the term "Beneficiary"
included therein includes any successor by operation of law of the named
Beneficiary, but which Facility LC does not require that any drawing by any
such successor Beneficiary be accompanied by a copy of a legal document,
satisfactory to the LC Issuer, evidencing the appointment of such successor
Beneficiary; provided that the Borrower shall not be required to indemnify
any Bank, the LC Issuer or the Agent for any claims, damages, losses,
liabilities, costs or expenses to the extent, but only to the extent,
caused by (x) the willful misconduct or gross negligence of the LC Issuer
in determining whether a request presented under any Facility LC complied
with the terms of such Facility LC or (y) the LC Issuer's failure to pay
under any Facility LC after the presentation to it of a request strictly
complying with the terms and conditions of such Facility LC. Nothing in
this Section 2.20(I) is intended to limit the obligations of the Borrower
under any other provision of this Agreement.
(J) Banks' Indemnification. Each Bank shall, ratably in accordance
with its Percentage Share, indemnify the LC Issuer, its affiliates and
their respective directors, officers, agents and employees (to the extent
not reimbursed by the Borrower) against any cost, expense (including
reasonable counsel fees and disbursements), claim, demand, action, loss or
liability (except such as result from such indemnitees' gross negligence or
willful misconduct or the LC Issuer's failure to pay under any Facility LC
after the presentation to it of a request strictly complying with the terms
and conditions of the Facility LC) that such indemnitees may suffer or
incur in connection with this Section 2.20 or any action taken or omitted
by such indemnitees hereunder.
(K) Rights as a Bank. In its capacity as a Bank, the LC Issuer shall
have the same rights and obligations as any other Bank.
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ARTICLE III.
CONDITIONS
The obligation of the Banks to make the Credit Extensions is subject
to the following conditions precedent:
3.01 General Conditions to Initial Disbursements. At the time of the
initial Credit Extensions (the "Closing"):
(A) The legal structure, organization and ownership of Borrower shall
be satisfactory to the Agent, the Banks and their respective counsel;
(B) With respect to any Acquisition Agreement for which the Banks are
funding Loans, the proceeds of which will be used by Borrower to pay any
part of the purchase price required by such Acquisition Agreement, the
material terms and conditions of such Acquisition Agreement shall be
acceptable to the Agent and the Arranger, the representations and
warranties therein shall be accurate in all material respects as of the
date of the closing thereof, the conditions therein shall have been
satisfied (or waived with the consent of the Agent, which consent shall not
be unreasonably withheld), and the transaction contemplated by such
Acquisition Agreement shall have unconditionally closed prior to or
contemporaneously with such funding by the Banks;
(C) The Agent shall have received prior to closing a satisfactory
third party engineering report dated effective as of January 1, 2000 on the
Oil and Gas Properties owned and to be acquired by the Borrower pursuant to
the Acquisition Agreements (the "Initial Report"); such Initial Report
shall be in form and substance reasonably satisfactory to the Agent and the
Arranger and shall be issued by Netherland ▇▇▇▇▇▇ & Associates, ▇▇▇▇▇ ▇▇▇▇▇
Company, ▇▇ ▇▇▇▇▇ Petroleum Consultants, or another independent petroleum
engineering firm reasonably acceptable to the Agent and the Arranger, and
it shall not differ in any material respect from the engineering
information previously provided by Borrower to Agent;
(D) That certain Development Note executed by the Borrower and made
payable to EIF dated as of April 15, 1998, as amended, shall have a current
outstanding principal balance of not more than $10,000,000, and its
maturity date must have been extended to a date not earlier than July 1,
2001;
(E) The Agent shall have received all environmental reports available
to the Borrower with respect to the Borrowing Base Oil and Gas Properties
and the Oil and Gas Properties to be acquired pursuant to the Acquisition
Agreements, and shall be reasonably satisfied with the contents thereof and
the Borrower's plans with respect thereto;
(F) Marketable Title to the EIF Override shall have been conveyed to
Borrower; and
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(G) The notes, liens and security interests held by Bank One
under the Prior Loan Agreement shall have been assigned and transferred
to Bank One, as Agent under this Agreement, for the benefit of the
Banks and LC Issuer.
3.02 General Conditions to all Disbursements. At the time of
the Closing and at each subsequent Credit Extension:
(A) No Event of Default shall have occurred and be continuing,
and no Unmatured Event of Default shall have occurred;
(B) The representations and warranties contained in Article IV
of this Agreement shall be true and correct in all material respects as
though such representations and warranties had been made on such date,
except such as are expressly limited to a prior date, which shall have
been true and correct in all material respects as of such prior date;
(C) The Agent and the Banks shall have been, and shall
continue to be, satisfied, in their good faith discretion, that the
Borrower holds Marketable Title to the Borrowing Base Oil and Gas
Properties, and that such ownership includes record title to an
undivided net revenue interest in the production from each such
Borrowing Base Oil and Gas Property that is not less than, as well as
an undivided working interest in each Borrowing Base Oil and Gas
Property that is not greater than (unless there is a corresponding
increase in the net revenue interest attributed to such party therein),
the net revenue interest therein and the working interest therein,
respectively, attributed to the Borrower on Exhibit "A," subject to the
limitations and qualifications on such exhibit (or attributed to
Borrower in any Security Instrument applicable to any Oil and Gas
Property that is added to the Borrowing Base Oil and Gas Properties in
connection with any subsequent funding after the Closing);
(D) No Material Adverse Change shall have occurred since the
date of the latest audited Financial Statements provided to the Agent;
(E) All of the Security Instruments previously delivered with
respect to the Borrowing Base Oil and Gas Properties shall have
remained in full force and effect; and
(F) All legal matters incidental thereto shall be reasonably
satisfactory to each Bank's designated legal counsel.
3.03 Deliveries at the Closing. The Borrower shall have duly
delivered or caused to be delivered to the Agent, prior to or contemporaneously
with the Closing, the following:
(A) The Initial Note;
(B) Each of the Security Instruments covering any Borrowing
Base Oil and Gas Properties not already covering by valid and
continuing Security Instruments in favor of Agent;
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(C) Transfer Order Letters applicable to the production of oil
and gas from the Borrowing Base Oil and Gas Properties;
(D) The results of a Uniform Commercial Code search showing
all financing statements and other documents or instruments on file
against the Borrower in the Offices of the Secretaries of State of the
State of Texas, the State of Delaware, the State of Louisiana and each
State in which any of the Borrowing Base Oil and Gas Properties are
located or deemed to be located, and the counties and/or parishes in
which the Borrower maintains its principal place of business and in
which any of the Borrowing Base Oil and Gas Properties are located,
such search to be as of a date no more than ten (10) days prior to the
date of Closing.
(E) A certified (as of the date of the Closing) copy of
resolutions of the Borrower's Board of Directors authorizing the
execution, delivery, and performance of this Agreement, the Notes, and
each other document to be delivered pursuant hereto;
(F) A certificate (dated the date of the Closing) of the
Borrower's corporate secretary as to the incumbency and signatures of
the officers of the Borrower signing this Agreement, the Notes, and
each other document to be delivered pursuant hereto;
(G) A copy, certified as of the most recent date practicable
by the Secretary of State of the state in which Borrower is
incorporated, of the Borrower's certificate of incorporation, together
with a certificate (dated the date of the Closing) of the Borrower's
corporate secretary to the effect that such certificate of
incorporation has not been amended since the date of the aforesaid
certification;
(H) Certificates, as of the most recent dates practicable, of
the aforesaid Secretaries of State, the Secretary of State of each
state in which the Borrower is qualified as a foreign corporation, and
the department of revenue or taxation of each of the foregoing states,
as to the good standing of the Borrower;
(I) A Compliance Certificate, dated the date of the Closing;
(J) The Amendment to Subordination Agreement;
(K) Payment of the Agent's attorneys' fees upon receipt of a
reasonably detailed invoice pursuant to Section 5.12 hereof; and
(L) A legal opinion or opinions of outside counsel to the
Borrower, addressed to Agent, the Banks, the Arranger and the LC
Issuer, in form and substance reasonably satisfactory to the Agent,
covering, among other matters reasonably requested by Agent or its
counsel, the matters addressed in Sections 4.01, 4.02, 4.03, 4.14,
4.17, 4.20 and 4.21 hereof, and also regarding the enforceability of
the Acquisition Agreements and their compliance with all Applicable
Law.
3.04 Documents Required for Subsequent Disbursements. As of
the time of funding any additional advances to Borrower that have been approved
by the Banks pursuant to Section 2.01 and are made in conjunction with the
addition of Oil and Gas Properties owned by
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the Borrower to the Borrowing Base Oil and Gas Properties, the Borrower shall
have duly delivered to the Agent: (i) the Security Instruments that are
necessary or appropriate, in the reasonable opinion of the Agent, relating to
such additional Oil and Properties, and (ii) Transfer Order Letters applicable
to the production of oil and gas from the such additional Borrowing Base Oil and
Gas Properties.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
To induce the Agent and the Banks to enter into this Agreement
and to make the Credit Extensions hereunder, Borrower represents and warrants to
the Agent and the Banks that:
4.01 Existence. The Borrower is a corporation, duly organized,
legally existing, and in good standing under the Laws of the State of Delaware;
each Subsidiary is a corporation or limited liability company duly organized,
validly existing, and in good standing under the Laws of its state of
incorporation or organization; the Borrower and its Subsidiaries have the lawful
power to own their properties and to engage in the businesses they conduct, and
each is duly qualified and in good standing as a foreign corporation or limited
liability company in the jurisdictions wherein the nature of the business
transacted by it or property owned by it makes such qualification necessary; the
states in which the Borrower and each Subsidiary are incorporated or organized
and qualified to do business are set forth in Schedule 4.01; the addresses of
all places of business of the Borrower and its Subsidiaries are as set forth in
Schedule 4.01; neither the Borrower nor any Subsidiary has changed its name,
been the surviving company in a merger, acquired any business, or changed its
principal executive office within five (5) years and one (1) month prior to the
date hereof, except as disclosed on Schedule 4.01; the Borrower has no
Subsidiaries other than the Subsidiaries named in Schedule 4.01; and all of the
authorized, issued and outstanding shares of capital stock or membership
interests of each Subsidiary is owned by the Borrower. Borrower is qualified
under applicable Minerals Management Service regulations to act as the operator
of the Leases where required.
4.02 Due Authorization. Upon execution of the Loan Documents
and the Subordination Agreement, the execution and delivery by the Borrower of
this Agreement and the borrowings hereunder; the execution and delivery by the
Borrower of the Notes, the Security Instruments, and the Transfer Order Letters;
and the repayment by the Borrower of the Indebtedness evidenced by the Notes and
interest and fees provided in the Notes and this Agreement are (a) within the
corporate power of the Borrower; (b) have been duly authorized by all necessary
corporate action, and (c) do not and will not (i) require the consent of any
regulatory authority or governmental body, (ii) contravene or conflict with any
provision of Law or of the articles of incorporation or bylaws of the Borrower,
(iii) contravene or conflict with any indenture, instrument or other agreement
to which the Borrower is a party or by which its property may be presently bound
or encumbered, or (iv) result in or require the creation or imposition of any
mortgage, lien, pledge, security interest, charge or other encumbrance in, upon
or of any of the properties or assets of the Borrower under any such indenture,
instrument or other agreement, other than under any of the Security Instruments.
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4.03 Valid and Binding Obligations. This Agreement, the Notes,
and the Security Instruments when duly executed and delivered, will be legal,
valid and binding obligations of and enforceable against the Borrower, in
accordance with their respective terms (subject to any applicable bankruptcy,
insolvency or other Laws of general application affecting creditors' rights,
general equitable principles, whether considered in a proceeding in equity or at
law, and judicial decisions interpreting any of the foregoing).
4.04 Scope and Accuracy of Financial Statements. All Financial
Statements submitted and to be submitted to the Agent hereunder are and will be
complete and correct in all material respects, are and will be prepared in
accordance with GAAP consistently applied, and do and will fairly reflect the
financial condition and the results of the operations of the Borrower in all
material respects as of the dates and for the period stated therein (subject
only to normal year-end audit adjustments with respect to such unaudited interim
statements of the Borrower), and no Material Adverse Change has occurred since
the effective date of the latest audited Financial Statements of Borrower
delivered to Agent.
4.05 Title to Borrowing Base Oil and Gas Properties. The
Borrower has Marketable Title to the working and net revenue interests in the
Borrowing Base Oil and Gas Properties as set forth on Exhibit "A", free and
clear of all mortgages, liens and encumbrances, except for Permitted
Encumbrances and any other exceptions, limitations or qualifications expressly
disclosed on Exhibit "A."
4.06 Oil and Gas Leases. The Leases which constitute any part
of the Borrowing Base Oil and Gas Properties are in full force and effect as to
those portions within the Borrowing Base Oil and Gas Properties, are valid,
subsisting leases as to those portions within the Borrowing Base Oil and Gas
Properties to which they pertain and all rentals, royalties and other amounts
due and payable in accordance with the terms of the Leases as to those portions
within the Borrowing Base Oil and Gas Properties, overriding royalties, net
profits or other production burdens have been duly paid or provided for; the
obligations to be performed under the Leases as to those portions within the
Borrowing Base Oil and Gas Properties have been duly performed; and the Borrower
is not aware of any default by any third party under any of the Leases with
respect to such third party's obligations.
4.07 Interest in the Borrowing Base Oil and Gas Properties.
Except as otherwise set forth on Exhibit "A" hereto, with respect to each of the
Borrowing Base Oil and Gas Properties, the ownership of the Borrower in such
property will, with respect to the ▇▇▇▇▇, units and/or tracts of land described
in Exhibit "A" hereto in connection with such property, (i) entitle the Borrower
to receive (subject to the terms and provisions of this Agreement) a decimal
share of the oil and gas produced from, or allocated to, such ▇▇▇▇▇, units
and/or tracts equal to not less than the decimal share set forth in Exhibit "A"
in connection with such ▇▇▇▇▇, units and/or tracts, and (ii) cause the Borrower
to be obligated to bear a decimal share of the cost of exploration, development
and operation of such ▇▇▇▇▇, units and/or tracts of land not greater than the
decimal share set forth in Exhibit "A" in connection with such ▇▇▇▇▇, units
and/or tracts, unless any increase in the Borrower's share of costs is
accompanied by a pro-rata increase in the Borrower's share of revenue. Except as
set forth in the instrument and agreements, if any, more particularly described
in Exhibit "A" hereto, all such shares of production which the Borrower is
entitled to receive, and shares of expenses which the Borrower is obligated to
bear, are not
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subject to change, except for changes attributable to future elections by the
Borrower not to participate in operations proposed pursuant to customary forms
of applicable joint operating agreements, and except for changes attributable to
changes in participating areas under any federal units wherein participating
areas may be formed, enlarged or contracted in accordance with the rules and
regulations of the applicable governmental authority.
4.08 Oil and Gas Contracts. Except as set forth on Schedule
4.08 attached hereto, the Borrower is not obligated, by virtue of any prepayment
under any contract providing for the sale by the Borrower of Hydrocarbons which
contains a "take-or-pay" clause or under any similar prepayment agreement or
arrangement, including, without limitation, "gas balancing agreements", to
deliver a material amount of Hydrocarbons produced from the Borrowing Base Oil
and Gas Properties at some future time without then or thereafter receiving full
payment therefor (i.e., in the case of oil, not in excess of sixty (60) days,
and in the case of gas, not in excess of ninety (90) days). Except as set forth
on Schedule 4.08 attached hereto, the Borrowing Base Oil and Gas Properties are
not subject to any contractual, or other arrangement for the sale of crude oil
which cannot be canceled on ninety (90) days' (or less) notice, unless the price
provided for therein is equal to or greater than the prevailing market price in
the vicinity. The Borrowing Base Oil and Gas Properties are not subject to any
gas sales contract that contains any material terms which are not customary in
the industry within the region in which the Borrowing Base Oil and Gas
Properties affected thereby are located. The Borrowing Base Oil and Gas
Properties are not subject to any regulatory refund obligation and no facts
exist which might cause the same to be imposed.
4.09 Producing ▇▇▇▇▇. All producing ▇▇▇▇▇ located on the
Borrowing Base Oil and Gas Properties have been, during all times that such were
under the direction or control of the Borrower and, to the knowledge of the
Borrower, at all other times, drilled, operated and produced in conformity with
all applicable Laws, rules, regulations and orders of all regulatory authorities
having jurisdiction, are subject to no penalties on account of past production,
and are bottomed under and are producing from, and the well bores are wholly
within, the Borrowing Base Oil and Gas Properties, or on Oil and Gas Properties
which have been pooled, unitized or communitized with the Borrowing Base Oil and
Gas Properties.
4.10 Purchasers of Production. The persons who are purchasing
the Borrower's interests in oil and gas produced from the Borrowing Base Oil and
Gas Properties as of the calendar month during which the initial Loans are made
hereunder are identified on Schedule 4.10 attached hereto.
4.11 Authorizations and Consents. No authorization, consent,
approval, exemption, franchise, permit or license of, or filing with, any
governmental or public authority or any third party is required to authorize, or
is otherwise required in connection with the valid execution and delivery by the
Borrower of this Agreement, the Notes, and the Security Instruments, or any
other instrument contemplated hereby, the repayment by the Borrower of advances
against the Notes and interest and fees provided in the Notes and this
Agreement, or the performance by the Borrower of its obligations under any of
the foregoing.
4.12 Environmental Laws. Except to the extent that the failure
to do so would not have and would not be expected to have a Material Adverse
Effect, the Borrower (a) is and
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has in the past been in compliance with all Environmental Laws and all permits,
requests and notifications relating to health, safety or the environment
applicable to the Borrower or any of its properties, assets, operations and
businesses; (b) has obtained and adhered to and currently possesses all
necessary permits and other approvals, including interim status under the
Federal Resource Conservation and Recovery Act, necessary to store, dispose of
and otherwise handle Hazardous Substances and to operate its properties, assets
and businesses; (c) has reported, to the extent required by all federal, state
and local statutes, Laws, ordinances, regulations, rules, permits, judgments,
orders and decrees, all past and present sites owned and/or operated by the
Borrower where any Hazardous Substance has been released, treated, stored or
disposed of and (d) has not used, stored, or Released any Hazardous Substance in
excess of amounts allowed by Environmental Law. There is (x) no location on any
property currently or previously owned or operated by the Borrower where
Hazardous Substances are known to have entered or are likely to enter into the
soil or groundwater or such property, other than immaterial releases of oil or
natural gas in the ordinary course of business none of which releases (i) either
individually, or in the aggregate, has had or may be expected to have a Material
Adverse Effect or (ii) has violated or may be expected to violate any
Environmental Laws, except for any such violation that has not had and would not
be expected to have a Material Adverse Effect, and (y) no on-site or off-site
location to which the Borrower has released or transported Hazardous Substances
or arranged for the transportation or disposal of Hazardous Substances, which is
or is likely to be the subject of any federal, state, local or foreign
enforcement action or any investigation which could lead to any material claims
against any such entity for any clean-up cost, remedial work, damage to natural
resources, common law or legal liability, including, but not limited to, claims
under Comprehensive Environmental Response, Compensation, and Liability Act. For
the purposes of this Section, references to "the Borrower" shall include all
predecessors, successors-in-interest of the Borrower; provided, that with
respect to the Borrower's properties or assets, the foregoing representations as
to predecessors and successors-in-interest are limited to the knowledge of the
Borrower.
4.13 Compliance with Laws, Rules, Regulations and Orders.
Except to the extent that the failure to comply would not materially interfere
with the conduct of the business of the Borrower or any Subsidiary, the Borrower
and its Subsidiaries have each complied with all applicable Laws with respect
to: (1) the conduct of its business; and (2) the use, maintenance, and operation
of the Borrowing Base Oil and Gas Properties and personal properties owned or
leased by it in the conduct of its business; except as expressly set forth on
Exhibit "A" hereto, the Borrower and its Subsidiaries possess all licenses,
approvals, registrations, permits and other authorizations necessary to enable
it to carry on its business in all material respects as now conducted, and all
such licenses, approvals, registrations, permits and other authorizations are in
full force and effect; and the Borrower has no reason to believe that the
Borrower or any of its Subsidiaries will be unable to obtain the renewal of any
such licenses, approvals, registrations, permits and other authorizations.
4.14 Liabilities, Litigation and Restrictions. Except as
disclosed in the Financial Statements, the Borrower and its Subsidiaries do not
have any liabilities, direct or contingent, which may materially and adversely
affect it, its business or assets. There is no litigation or other action of any
nature pending before any court, governmental instrumentality, regulatory
authority or arbitral body or, to the knowledge of the Borrower threatened
against or affecting the Borrower or its Subsidiaries which might reasonably be
expected to result in any
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material, adverse change in the Borrower or its Subsidiaries, or the business or
assets of either. To the best of the Borrower's knowledge, no unduly burdensome
restriction, restraint or hazard exists by contract or Law that would have a
Material Adverse Effect.
4.15 Existing Indebtedness. All Indebtedness of the Borrower
and any Subsidiary consisting of liability to repay borrowed money or to pay
money to become due on capital leases as of the Closing is described in Schedule
4.15; and neither the Borrower nor any Subsidiary is in default with respect to
any of its existing Indebtedness.
4.16 Material Commitments. Except as described in Schedule
4.16 hereto, (a) neither the Borrower nor any Subsidiary has any material leases
(other than oil and gas leases), contracts or commitments of any kind
(including, without limitation, employment agreements; collective bargaining
agreements; powers of attorney; distribution arrangements; patent license
agreements; contracts for future purchase or delivery of goods or rendering of
services; bonuses, pension and retirement plans; or accrued vacation pay,
insurance and welfare agreements); (b) to the best of the Borrower's knowledge,
all parties to all such material leases, contracts, and other commitments to
which the Borrower or any Subsidiary is a party have complied with the
provisions of such leases, contracts, and other commitments; and (c) to the best
of the Borrower's knowledge, no party is in default under any thereof and no
event has occurred that but for the giving of notice or the passage of time, or
both, would constitute a default, except for defaults and events that have not
had and would not be expected to have a Material Adverse Effect.
4.17 Margin Stock. The Borrower is not engaged principally, or
as one of its important activities, in the business of extending credit for the
purpose of purchasing or carrying margin stock (within the meaning of
Regulations T, U, or X of the Board of Governors of the Federal Reserve System),
and no part of the proceeds of any extension of credit under this Agreement will
be used to purchase or carry any such margin stock or to extend credit to others
for the purpose of purchasing or carrying margin stock. Neither the Borrower nor
any Person acting on its behalf has taken any action that might cause the
transactions contemplated by this Agreement or the Notes to violate Regulations
T, U, or X or to violate the Securities Exchange Act of 1934, as amended.
4.18 Proper Filing of Tax Returns and Payment of Taxes Due.
Except as otherwise permitted herein, the Borrower has filed all federal, state,
and local tax returns and other reports required by any applicable Laws to have
been filed prior to the date hereof, has paid or caused to be paid all taxes,
assessments, and other governmental charges that are due and payable prior to
the date hereof, and has made adequate provision for the payment of such taxes,
assessments, or other charges accruing but not yet payable; the Borrower has no
knowledge of any material deficiency or additional assessment in connection with
any taxes, assessments, or charges not provided for on its books.
4.19 ERISA. The Borrower is in compliance in all material
respects with all applicable provisions of ERISA. Neither a Reportable Event nor
a Prohibited Transaction has occurred and is continuing with respect to any
plan; no notice of intent to terminate a plan has been filed, nor has any plan
been terminated; no circumstances exist which constitute grounds under Section
4042 of ERISA entitling the PBGC to institute proceedings to terminate, or
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appoint a trustee to administrate a plan, nor has the PBGC instituted any such
proceedings; neither the Borrower nor any ERISA Affiliate has completely or
partially withdrawn under Sections 4201 or 4204 of ERISA from a Multi-Employer
Plan; the Borrower and each ERISA Affiliate has met its minimum funding
requirements under ERISA with respect to all of its plans and the present value
of all vested benefits under each plan exceeds the fair market value of all plan
assets allocable to such benefits, as determined on the most recent valuation
date of the plan and in accordance with the provisions of ERISA and the
regulations thereunder for calculating the potential liability of the Borrower
or any ERISA Affiliate to the PBGC or the plan under Title IV of ERISA; and
neither the Borrower nor any ERISA Affiliate has incurred any liability to the
PBGC under ERISA.
4.20 Investment Company Act Compliance. Neither the Borrower
nor any Subsidiary is directly or indirectly controlled by, or acting on behalf
of, any, Person which is an "Investment Company," within the meaning of the
Investment Company Act of 1940, as amended.
4.21 Public Utility Holding Company Act Compliance. The
Borrower is not a "holding company", or an "affiliate" of a "holding company" or
of a "subsidiary company" of a "holding company", within the meaning of the
Public Utility Holding Company Act of 1935, as amended.
4.22 Insurance. The Borrower maintains insurance with respect
to the properties and business of the Borrower providing coverage for such
liabilities, casualties, risks and contingencies and in such amounts as is
customary in the industry. The insurance coverage reflected on the Certificate
of Insurance attached hereto as Schedule 4.22 is in full force and effect, and
all premiums due thereon have been paid.
4.23 Material Misstatements and Omissions. No representation
or warranty by or with respect to the Borrower or any Subsidiary contained
herein or in any certificate or other document furnished by the Borrower or any
Subsidiary pursuant hereto contains any untrue statement of a material fact or
omits to state a material fact necessary to make such representation or warranty
not misleading in light of the circumstances under which it was made.
ARTICLE V.
AFFIRMATIVE COVENANTS
Borrower covenants so long as any Indebtedness of the Borrower
to any Bank remains unpaid under this Agreement, or any Obligations of the
Borrower to any Bank remain unsatisfied, or any Bank remains obligated to make
advances hereunder, to:
5.01 Use of Funds. Use funds advanced under the Tranche B
Commitment solely for purposes of making the Acquisition or any component
thereof, and use funds advanced under the Tranche A Commitment to (A) refinance
existing debt owed to Bank One under the Prior Loan Agreement, (B) fund
acquisitions of Oil and Gas Properties, (C) fund Borrower's working capital
needs, (D) fund a loan in an amount not to exceed [$1,300,000.00] from
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Borrower to EPL Pipeline L.L.C. to provide the funds necessary to enable EPL
Pipeline L.L.C. to purchase the Pipeline, and (E) fund permitted payments of
Subordinated Debt.
5.02 Maintenance and Access to Records. Keep adequate records
in accordance with good accounting practices, of all of the transactions of the
Borrower so that at any time, and from time to time, such records present fairly
the financial condition of the Borrower which may be readily determined and, at
the Agent's reasonable request, make all financial records and records relating
to the Borrowing Base Oil and Gas Properties available for the Agent's
inspection and permit the Agent to make and take away copies thereof.
5.03 Monthly and Annual Unaudited Financial Statements.
Deliver to the Agent, on or before the forty-fifth (45th) day after the end of
each calendar month, unaudited Financial Statements of the Borrower, as at the
end of such period and from the beginning of such fiscal year to the end of the
respective period, as applicable, which Financial Statements shall be certified
by the president or chief financial officer of the Borrower, as being true and
correct, subject to changes resulting from year-end audit adjustments.
5.04 Annual Audited Financial Statements. Deliver to the
Agent, on or before the one hundred twentieth (120th) day after the close of
each fiscal year of the Borrower a copy of annual audited Financial Statements
of the Borrower, together with the report and opinion thereon of KPMG or such
other firm of independent certified public accountants acceptable to the Agent
at its reasonable discretion.
5.05 Compliance Certificate. At the time of delivery of the
certified but unaudited Financial Statements pursuant to Section 5.03 above, and
the delivery of the annual audited Financial Statements pursuant to Section 5.04
above, deliver to the Agent a Compliance Certificate.
5.06 Statement of Material Adverse Change. Deliver to the
Agent, promptly upon any officer of the Borrower having knowledge of any
Material Adverse Change (or any event or circumstance that would result in any
such Material Adverse Change), a statement of the President, Chief Financial
Officer, or the Treasurer of the Borrower, setting forth the change in condition
or event or circumstance likely to result in any such change and the steps being
taken by the Borrower with respect to such change in condition or event or
circumstance.
5.07 Title Defects. Cure any title defects to the Borrowing
Base Oil and Gas Properties material in value, in the reasonable opinion of the
Agent, and, in the event any title defects are not cured in a timely manner, pay
all related costs and fees incurred by the Agent for the account of the Banks to
do so; provided, however, the Borrower may remove any of its Oil and Gas
Properties from the determination of the Borrowing Base so long as the
Indebtedness evidenced by the Revolving Notes is less than or equal to the
Borrowing Base (determined by the Banks in accordance with Section 2.06
exclusive of such Oil and Gas Properties).
5.08 Additional Information. Furnish to the Agent all
information, if any, filed with the SEC by the Borrower and all information
routinely provided by the Borrower to its shareholders, generally. Furnish to
the Agent, promptly upon the Agent's reasonable request, such additional
financial or other information concerning the assets, liabilities, operations,
and
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transactions of the Borrower, including, without limitation, information
concerning title to any of the Borrowing Base Oil and Gas Properties.
5.09 Compliance with Laws and Payment of Assessments and
Charges. Materially comply with all applicable statutes and government
regulations, including, without limitation, ERISA, and pay all taxes,
assessments, governmental charges, claims for labor, supplies, rent and other
obligations which, if unpaid, might become a lien other than a Permitted
Encumbrance against its property, except any of the foregoing being contested in
good faith and as to which accruals satisfactory to the Agent, in its reasonable
discretion, have been provided.
5.10 Maintenance of Existence and Good Standing. Maintain the
Borrower's corporate existence and good standing in the jurisdiction of its
organization, and maintain the Borrower's qualification and good standing in all
other jurisdictions wherein the property now owned or hereafter acquired or
business now or hereafter conducted by Borrower necessitates same, other than
those jurisdictions wherein the failure to so qualify will not have a material
adverse effect on the Borrower.
5.11 Further Assurances. Promptly cure any defects in the
execution and delivery of this Agreement, the Notes, the Security Instruments,
the Transfer Order Letters, or any other instrument referred to herein or
executed in connection with the Notes, and upon the reasonable request of the
Agent promptly execute and deliver to the Agent all such other and further
instruments as may be reasonably required or desired by the Agent from time to
time in compliance with the covenants and agreements made in this Agreement.
5.12 Initial Expenses of the Bank. Pay prior to or at Closing
all documented reasonable fees and expenses of ▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P., the
special legal counsel for the Agent incurred directly and solely in connection
with the preparation of this Agreement, the Notes, the Security Instruments, the
Transfer Order Letters, and any other instrument referred to herein or executed
directly and solely in connection with the Notes, the satisfaction of the
conditions precedent set forth in Article III of this Agreement and the
consummation of the transactions contemplated in this Agreement.
5.13 Subsequent Expenses of the Agent and the Arranger. Upon
request, promptly reimburse the Agent and the Arranger and any Bank for all
documented amounts reasonably expended, advanced or incurred by the Agent, the
Arranger or any such Bank to collect the Notes or to enforce the rights of the
Agent, the Arranger or such Banks under this Agreement, the Notes, the Security
Instruments, the Transfer Order Letters, or any other instrument referred to
herein or executed in connection with the Notes, which amounts shall be deemed
compensatory in nature and liquidated as to amount upon notice to the Borrower
by the Agent and which amounts will include, but not be limited to, (a) all
court costs, (b) reasonable attorneys' fees, (c) fees of auditors and
accountants, (d) investigation expenses, (e) internal fees of the Agent's
in-house legal counsel, (f) fees and expenses incurred in connection with the
Agent's and any such Bank's participation as a member of the creditors committee
in a case commenced under Title 11 of the United States Code or other similar
Law of the United States, the State of Texas or any other jurisdiction, (g) fees
and expenses incurred in connection with lifting the automatic stay prescribed
in Sections 362 Title 11 of the United States Code, and (h) fees and expenses
incurred in connection with any action pursuant to Sections 1129 Title 11 of the
United States
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Code, reasonably incurred by the Agent and/or any such Bank in connection with
the collection of any sums due under this Agreement, together with interest at
the Floating Rate per annum, calculated on a basis of a year of three hundred
sixty (360) days on each such amount from the date of notification to the
Borrower that the same was expended, advanced or incurred by the Agent and/or
any such Bank until, but not including, the date it is repaid to the Agent or
such Bank, with the obligations under this Section 5.13, surviving the
non-assumption of this Agreement in a case commenced under Title 11 of the
United States Code or other similar Law of the United States, the State of Texas
or any other jurisdiction and being binding upon the Borrower or a trustee,
receiver or liquidator of any such party appointed in any such case.
5.14 Maintenance of Tangible Property. Maintain all of its
tangible property relating to the Borrowing Base Oil and Gas Properties in good
repair and condition and make all necessary replacements thereof and operate
such property in a good and workmanlike manner in accordance with standard
industry practices, unless the failure to do so would not have a material
adverse effect on the Borrower or the value of any Borrowing Base Oil and Gas
Property.
5.15 Maintenance of Insurance. Continue to maintain, or cause
to be maintained, insurance with respect to the properties and business of the
Borrower against such liabilities, casualties, risks and contingencies and in
such amounts as is customary in the industry and furnish to the Agent annually
after the execution of this Agreement certificates evidencing such insurance.
5.16 Inspection of Tangible Assets/Right of Audit. Permit any
authorized representative of the Agent or any Bank to visit and inspect (at the
risk of the Agent, such Bank and/or such representative) any tangible asset of
the Borrower, and/or to audit the books and records of the Borrower during
normal business hours, at the expense of the Agent or such Bank and during
normal business hours following reasonable advance notice.
5.17 Payment of Note and Performance of Obligations. Pay the
Notes according to the reading, tenor and effect thereof, as modified hereby,
and do and perform every act and discharge all of the Obligations provided to be
performed and discharged hereunder.
5.18 Borrowing Base. Maintain a Borrowing Base such that the
amount of the Outstanding Credit Exposure will not, at any time other than
during applicable grace periods expressly set forth elsewhere in this Agreement,
exceed the Borrowing Base.
5.19 Compliance with Environmental Laws. To the extent
necessary to avoid a Material Adverse Effect, comply with any and all
requirements of Law, including, without limitation, Environmental Laws, (a)
applicable to any natural or environmental resource or media located on, above,
within, in the vicinity of, related to or affected by any Borrowing Base Oil and
Gas Properties or any other property of the Borrower, or (b) applicable to the
performance or conduct of its operations, including, without limitation, all
permits, licenses, registrations, approvals and authorizations, and, in this
regard, comply with, and require all employees, crew members, agents,
contractors and subcontractors (pursuant to appropriate contractual provisions)
and future lessees (pursuant to appropriate lease provisions) of the Borrower
while such Persons are acting within the scope of their relationship with the
Borrower, to so comply with, all applicable requirements of Law, including,
without limitation, applicable Environmental Laws,
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and other applicable requirements with respect to the property of the Borrower,
and the operation thereof necessary or appropriate to enable the Borrower to
fulfill its obligations under all applicable requirements of Law, including,
without limitation, Environmental Laws, applicable to the use, generation,
handling, storage, treatment, transport and disposal of any Hazardous Substances
now or hereafter located or present on or under any such property.
5.20 Hazardous Substances Indemnification. INDEMNIFY AND HOLD
THE AGENT, THE ARRANGER AND THE BANKS HARMLESS FROM AND AGAINST ANY AND ALL
CLAIMS, LOSSES, DAMAGES, LIABILITIES, FINES, PENALTIES, CHARGES, ADMINISTRATIVE
AND JUDICIAL PROCEEDINGS AND ORDERS, JUDGMENTS, REMEDIAL ACTIONS, REQUIREMENTS
AND ENFORCEMENT ACTIONS OF ANY KIND, AND ALL COSTS AND EXPENSES INCURRED IN
CONNECTION THEREWITH (INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES AND
EXPENSES), ARISING DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, OUT OF (a) THE
PRESENCE OF ANY HAZARDOUS SUBSTANCES ON, UNDER OR FROM ITS PROPERTY, WHETHER
PRIOR TO OR DURING THE TERM HEREOF, OR (b) ANY ACTIVITY CARRIED ON OR UNDERTAKEN
ON OR OFF ITS PROPERTY, WHETHER PRIOR TO OR DURING THE TERM HEREOF, AND WHETHER
BY THE BORROWER, OR ANY PREDECESSOR IN TITLE OR ANY EMPLOYEES, AGENTS,
CONTRACTORS OR SUBCONTRACTORS OF THE BORROWER, OR ANY PREDECESSOR IN TITLE, OR
ANY THIRD PERSONS AT ANY TIME OCCUPYING OR PRESENT ON SUCH PROPERTY, IN
CONNECTION WITH THE HANDLING, TREATMENT, REMOVAL, STORAGE, DECONTAMINATION,
CLEANUP, TRANSPORTATION OR DISPOSAL OF ANY HAZARDOUS SUBSTANCES AT ANY TIME
LOCATED OR PRESENT ON OR UNDER SUCH PROPERTY; WITH THE FOREGOING INDEMNITY
FURTHER APPLYING TO ANY RESIDUAL CONTAMINATION ON OR UNDER THE PROPERTY OF THE
BORROWER, OR ANY PROPERTY OF ANY OTHER PERSON, OR AFFECTING ANY NATURAL
RESOURCES, AND TO ANY CONTAMINATION OF ANY PROPERTY OR NATURAL RESOURCES ARISING
IN CONNECTION WITH THE GENERATION, USE, HANDLING, STORAGE, TRANSPORTATION OR
DISPOSAL OF ANY HAZARDOUS SUBSTANCES, IRRESPECTIVE OF WHETHER ANY OF SUCH
ACTIVITIES WERE OR WILL BE UNDERTAKEN IN ACCORDANCE WITH APPLICABLE REQUIREMENTS
OF LAW, INCLUDING, WITHOUT LIMITATION, ENVIRONMENTAL LAWS, AND SURVIVING
SATISFACTION OF ALL INDEBTEDNESS OF THE BORROWER TO THE AGENT AND THE BANKS AND
THE TERMINATION OF THIS AGREEMENT, UNLESS ALL SUCH INDEBTEDNESS HAS BEEN
SATISFIED WHOLLY IN CASH FROM THE BORROWER AND NOT BY WAY OF REALIZATION AGAINST
ANY PROPERTY OR THE CONVEYANCE OF ANY PROPERTY OF THE BORROWER IN LIEU THEREOF,
PROVIDED THAT THE CLAIMS AND OTHER ACTIONS OF ANY KIND AGAINST THE AGENT, THE
ARRANGER OR THE BANKS WHICH GIVE RISE TO SUCH INDEMNITY ARE NOT BARRED BY THE
APPLICABLE STATUTE OF LIMITATIONS AT THE TIME SUCH CLAIMS OR ACTIONS ARE
INSTITUTED AND SUCH INDEMNITY SHALL NOT EXTEND TO ANY ACT OR OMISSION BY THE
AGENT, THE ARRANGER OR THE BANKS WITH RESPECT TO THE RELEVANT PROPERTY
SUBSEQUENT TO THE AGENT, THE ARRANGER OR ANY BANK BECOMING THE OWNER OF, TAKING
POSSESSION OF TO THE EXCLUSION OF THE BORROWER OR ASSUMING OPERATIONS OF ANY
PROPERTY PREVIOUSLY OWNED BY THE BORROWER AND WITH RESPECT TO WHICH PROPERTY
SUCH CLAIM, LOSS, DAMAGE, LIABILITY, FINE, PENALTY, CHARGE, PROCEEDING, ORDER,
JUDGMENT, ACTION OR REQUIREMENT ARISES SUBSEQUENT TO THE ACQUISITION OF TITLE
THERETO, TAKING POSSESSION THEREOF OR ASSUMPTION OF OPERATIONS THEREON BY THE
AGENT, THE ARRANGER OR ANY BANK.
5.21 Properties Not Operated by the Borrower. With regard to
all of the Borrower's covenants in this Article V that relate to Oil and Gas
Properties, if any, for which Borrower is not the operator, to the extent that
the performance of such covenants can only be carried out through the operator,
the Borrower shall exercise reasonable diligence under the terms of the
applicable operating agreements to cause the operators to satisfy such
covenants, but shall not be directly responsible for doing so.
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5.22 Transactions with Affiliates. Conduct all transactions
with any Affiliate of the Borrower on an arm's-length basis (provided that such
transactions are otherwise permitted by the terms of this Agreement).
5.23 Leases. Keep and continue all Leases comprising the
Borrowing Base Oil and Gas Properties and related contracts and agreements
relating thereto in full force and effect in accordance with the terms thereof
and not permit the same to lapse or otherwise become impaired for failure to
comply with the obligations thereof, whether express or implied; provided,
however, that this provision shall not prevent the Borrower from abandoning and
releasing any such Leases upon their termination as the result of cessation of
production in paying quantities that did not result from the Borrower's failure
to maintain such production as a reasonably prudent operator.
5.24 Operation of Borrowing Base Oil and Gas Properties.
Operate or, to the extent that the right of operation is vested in others,
exercise all reasonable efforts to require the operator to operate the Borrowing
Base Oil and Gas Properties and all ▇▇▇▇▇ drilled thereon and that may hereafter
be drilled thereon, continuously and in a good and workmanlike manner in
accordance with the best usage of the field and in accordance with all Laws of
the State in which the Borrowing Base Oil and Gas Properties are situated and
the United States of America, as well as all rules, regulations, and Laws of any
governmental agency having jurisdiction to regulate the manner in which the
operation of the Borrowing Base Oil and Gas Properties shall be carried on, and
comply with all terms and conditions of the Leases it now holds, and any
assignment or contract obligating the Borrower in any way with respect to the
Borrowing Base Oil and Gas Properties; but nothing herein shall be construed to
empower the Borrower to bind the Agent or any Bank to any contract obligation,
or render the Agent or any Bank in any way responsible or liable for bills or
obligations incurred by the Borrower.
5.25 Assignments. Upon request of the Bank, execute and
deliver written notices of assignments to any persons, corporations or other
entities owing or which may in the future owe to the Borrower monies or accounts
arising in connection with any of the following matters: (a) any oil, gas or
mineral production from the Borrowing Base Oil and Gas Properties; (b) any gas
contracts, processing contracts or other contracts relating to the Borrowing
Base Oil and Gas Properties; or (c) the operation of or production from any part
of the Borrowing Base Oil and Gas Properties.
5.26 Change of Purchasers of Production. On or before each
anniversary of the Closing, and at any other time that the Agent may so request
in writing, the Borrower shall notify the Agent in writing of the identity and
address of each then-current purchaser of production from the Borrowing Base Oil
and Gas Properties and, if requested by the Agent, shall provide the Agent with
Transfer Order Letters executed by the Borrower and addressed to such purchasers
of production.
5.27 Payment of Taxes, Etc. The Borrower and its Subsidiaries
will each pay or cause to be paid when due, all taxes, assessments, and charges
or levies imposed upon it or on any of its property or which it is required to
withhold and pay, except where contested in good faith by appropriate
proceedings with adequate reserves therefor having been set aside on its books,
provided, however, that the Borrower and its Subsidiaries shall each pay or
cause to be
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paid all such taxes, assessments, charges, or levies forthwith whenever
foreclosure on any lien that may have attached (or security therefor) appears
imminent.
5.28 Notice of Litigation. The Borrower and its Subsidiaries
will each give immediate notice to the Agent of: (1) any litigation or
proceeding in which it is a party if an adverse decision therein would require
it to pay more than $250,000.00 or deliver assets the value of which exceeds
such sum (whether or not the claim is considered to be covered by insurance);
and (2) the institution of any other suit or proceeding involving the Borrower
that might materially and adversely affect its operations, financial condition,
property, or business prospects.
5.29 Notice of Events of Default. The Borrower and its
Subsidiaries will each notify the Agent immediately if it becomes aware of the
occurrence of any Event of Default or of any fact, condition, or event that only
with the giving of notice or passage of time or both, would become an Event of
Default or if it becomes aware of any Material Adverse Change (including,
without limitation, proceedings in bankruptcy, insolvency, reorganization, or
the appointment of a receiver or trustee), or of the failure of the Borrower to
observe any of its undertakings hereunder or under the Security Instruments.
5.30 Notice of Change of Principal Offices. The Borrower and
its Subsidiaries will each notify the Agent thirty (30) days in advance of any
change in the location of their principal offices.
5.31 Employee Benefit Plans. Fund its Plan(s) in accordance
with no less than the minimum funding standards of 29 U.S.C.A. Sections
1082 (Section 302 of ERISA); furnish the Agent, promptly after the filing or
receiving of the same, with copies of any reports or other statements filed
with, or notices or other communications received from, the United States
Department of Labor, the PBGC, or the Internal Revenue Service with respect to
any such Plan; promptly advise the Agent of the occurrence of any Reportable
Event or Prohibited Transaction with respect to any such Plan and the action the
Borrower proposes to take with respect thereto; and promptly advise the Agent
when the Borrower knows or has reason to believe that the PBGC or the Borrower
has instituted or will institute proceedings under Title IV of ERISA to
terminate any such Plan and the action the Borrower proposes to take with
respect thereto.
5.32 Cash Flow Forecasts. On or before the forty-fifth (45th)
day after the end of each fiscal quarter prior to the Facility Termination Date,
the Borrower shall prepare and submit to the Agent a monthly cash flow forecast
in a form reasonably acceptable to the Agent.
5.33 Operating Accounts. Maintain its primary operating
accounts with the Agent.
5.34 P&A Expenses. Develop and implement a plan reasonably
satisfactory to Agent, with the consent of the Required Banks, for managing
Borrower's expenses associated with well and platform plugging and abandonment
expenses.
5.35 Payment of Obligations. Promptly pay (or renew and
extend) all of its Indebtedness (subject to Section 6.01 in the case of
Subordinated Debt), as it becomes due (unless such Indebtedness is contested in
good faith by appropriate proceedings).
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5.36 Completion of Anticipated Property Sale. Complete all
components of the Anticipated Property Sale as of a date not later than October
1, 2000, for a net, aggregate sales price of at least $38,000,000.00.
5.37 Required Hedge Agreement. Enter into the Required Hedge
Agreement(s) and provide evidence thereof satisfactory to Agent on or before
5:00 PM local time in Houston, Texas, on April 3, 2000.
ARTICLE VI.
NEGATIVE COVENANTS
Without the prior written consent of the Agent and the
Required Banks and so long as any part of the principal or interest on the Notes
shall remain unpaid or any Bank remains obligated to make advances hereunder,
the Borrower covenants that it will not:
6.01 Other Indebtedness; Payments on Subordinated Debt. Incur,
create, assume or suffer to exist any Indebtedness, whether by way of loan or
the issuance or sale of securities except Permitted Indebtedness. The Borrower
shall not make any payments on Subordinated Debt, provided, however, that the
Borrower may make, as and when due, Contingent Payments (as defined in the
Subordination Agreement) so long as, prior to a Contingent Payment being made,
the Borrower has satisfied the Payment Conditions (as defined in the
Subordination Agreement).
6.02 Loans or Advances. Make or agree to make or allow to
remain outstanding any loans or advances to any Person, except advances or
extensions of credit in the form of accounts receivable incurred in the ordinary
course of business, and except for the intercompany loan to EPL Pipeline L.L.C.
in an amount not to exceed [$1,300,000.00] to provide funding for the
acquisition of the Pipeline by EPL Pipeline L.L.C.
6.03 Mortgages or Pledges of Assets. Create, incur, assume or
permit to exist, any mortgage, pledge, security interest, lien or encumbrance on
any of its properties or assets (now owned or hereafter acquired), except for
Permitted Encumbrances.
6.04 Sales of Assets. Except for Permitted Asset Sales, sell,
lease, assign, transfer or otherwise dispose of, in one or any series of related
transactions, all or any portion of its Oil and Gas Properties or other material
assets, whether now owned or hereafter acquired, including transfers to
Subsidiaries, nor enter into any arrangement, directly or indirectly, with any
Person to sell and rent or lease back as lessee such property or any part
thereof which is intended to be used for substantially the same purpose or
purposes as the property sold or transferred.
6.05 Dividends. Declare or pay any distribution on, or
purchase, redeem or otherwise acquire for value, any interest in the Borrower,
except for the payment on the "Series A Preferred Stock," the "Series B
Preferred Stock" and the "Series C Preferred Stock" (as such terms are defined
in the Evercore Transaction Documents) of: (a) "in kind" dividends to become due
at any time, and (b) cash dividends to become due at any time after December 31,
2001, but only to the extent that such dividends are required to be paid by the
terms of the Evercore
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Transaction Documents and such payment would not result in an Event of Default
or Unmatured Event of Default under any other provisions of this Agreement.
6.06 Payment of Accounts Payable. Allow any account payable to
remain unpaid more than sixty (60) days after due date, except such as are (i)
being contested in good faith and as to which adequate provision or accrual has
been made, or (ii) the subject of usual and customary review and evaluation.
6.07 Cancellation of Insurance. Allow any insurance policy
required to be carried hereunder to be terminated or lapse or expire without
provision for adequate renewal thereof.
6.08 Investments. Make Investments in or purchase or otherwise
acquire all or substantially all of the assets of any Person, or any shares of
stock of, or similar interest in, any other Person, if the result of such action
would impair the ability of the Borrower to perform any of its Obligations
pursuant to this Agreement, including, without limitation, the obligation to
repay the Indebtedness evidenced by the Notes, except that the Borrower may
invest in instruments that are investment grade, short-term commercial paper.
6.09 Changes in Structure or Business. Consolidate or merge
with or purchase (for cash or securities) all or substantially all of the assets
or capital stock of any corporation, firm, association or enterprise, or allow
any such entity to be merged into the Borrower, or change the basic business
operations of the Borrower.
6.10 Limitation on Leases. Incur or otherwise become obligated
to make payments on operating and capital leases not incurred in the ordinary
course of business.
6.11 Pooling or Unitization. Voluntarily pool or unitize all
or any part of the Borrowing Base Oil and Gas Properties where the pooling or
unitization would result in the diminution of the Borrower's net revenue
interest in production from the pooled or unitized lands, without the Required
Banks' prior consent, which will not be unreasonably withheld. Any unitization,
pooling or communization or other action or instrument in violation of this
Section 6.11 shall be of no force or effect against any Bank.
6.12 Hedge Agreements. Except for Permitted Hedge Agreements
and the Required Hedge Agreement, enter into or become obligated under any
contract for sale for future delivery of Hydrocarbons other than normal
production contracts entered into in the Borrower's normal course of business
(whether or not the subject Hydrocarbons are to be delivered), forward contract,
Hedging Agreement, futures contract or any other similar agreement, without the
prior written consent of the Required Banks, acting in their discretion.
6.13 Capital Stock of Borrower. Neither the Borrower nor any
Subsidiary will: (a) issue, redeem, purchase, or retire any of its capital stock
or grant or issue or purchase or retire for any consideration any warrant,
right, or option pertaining thereto or other security convertible into any of
the foregoing, or (b) permit any transfer, sale, redemption, retirement, or
other change in the ownership of the outstanding capital stock of the Borrower
or any Subsidiary, without the prior written consent of the Required Banks,
acting in their discretion; except for: (x) the issuance or transfer of the
Borrower's capital stock which does not result in a Change of Control,
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and (y) any transfer, sale, redemption, retirement, conversion or other change
in the ownership of the Series A Preferred Stock, the Series B Preferred Stock
and the Series C Preferred Stock as required or permitted by the terms of that
certain Stockholder Agreement referred to in clause (vi) of the definition of
Evercore Transaction Documents.
6.14 Margin Stock. Neither the Borrower nor any Subsidiary
will directly or indirectly apply any part of the proceeds of the Loans to the
purchasing or carrying of any "margin stock" within the meaning of Regulation U
of the Board of Governors of the Federal Reserve System, or any regulations,
interpretations or rulings thereunder.
6.15 General and Administrative Expenses. Pay, incur, or
otherwise become obligated to pay General and Administrative Expenses which
exceed eight percent (8%) of Borrower's Production Revenue during any fiscal
quarter beginning with the quarter commencing July 1, 2000, and continuing
through the end of the fiscal quarter during which the Anticipated Property Sale
is completed, and thereafter, such percentage shall be increased from eight
percent (8%) to ten percent (10%).
6.16 Minimum Tangible Net Worth. Permit Consolidated Tangible
Net Worth to be not less than $50,000,000.00, plus 75% of Borrower's positive
Net Income, if any, accrued during each calendar quarter subsequent to October
31, 1999, calculated cumulatively as of the end of each fiscal quarter of
Borrower beginning with the quarter ending December 31, 1999, with no reduction
for negative Net Income during any such quarter, and 100% of any increase in
shareholder's equity resulting from the sale or issuance of stock in Borrower
subsequent to the consummation of the Evercore Transaction.
6.17 Current Ratio. Permit as of the end of any fiscal month
its Current Ratio to be less than 1.10 to 1.00.
6.18 Debt Service Coverage Ratio. Permit, as of the end of any
fiscal quarter, its Debt Service Coverage Ratio to be less than 1.50 to 1.0,
calculated on a rolling two-quarter basis, except that the initial calculation
of such ratio shall be made based on a single quarter with regard to the quarter
ending as of June 30, 2000.
6.19 Ratio of Credit Exposure to Present Value of Borrowing
Base Oil and Gas Properties. Permit the sum of the Outstanding Credit Exposure
plus the outstanding balance of all other loans and capital leases that Borrower
is obligated to repay to exceed at any time ninety percent (90%) of the Present
Worth of the Borrowing Base Oil and Gas Properties.
ARTICLE VII.
EVENTS OF DEFAULT
7.01 Enumeration of Events of Default. Any of the following
events shall be considered an Event of Default as that term is used herein:
(a) Default shall be made by the Borrower in the payment of
any installment of principal or interest (including, without limitation, any
mandatory prepayments payable pursuant to either Section 2.07 or 2.08 of this
Agreement) on the Notes, any LC Fee or any other
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monetary obligation (other than Reimbursement Obligations) payable hereunder
when due, including without limitation, any other fee due to Agent, LC Issuer or
any Bank hereunder within five (5) days after such payment was due, or in the
payment of any Reimbursement Obligation within one Business Day after the same
becomes due;
(b) Default shall be made by the Borrower in the due
observance or performance of any affirmative covenant required in this
Agreement, the Notes, the Facility LC Applications or the Security Instruments
and such default continues for more than thirty (30) days after the earlier of:
(i) Borrower having knowledge thereof, or (ii) Borrower receiving written notice
thereof from the Agent;
(c) Default shall be made by the Borrower in the due
observance or performance of any negative covenant required in this Agreement,
the Notes, the Facility LC Applications or the Security Instruments;
(d) Any representation or warranty herein made by the Borrower
proves to have been untrue in any respect material to the Borrower, or any
representation, statement (including Financial Statements), certificate or data
furnished or made by the Borrower to the Agent in connection herewith proves to
have been untrue in any respect material to the Borrower as of the date the
facts therein set forth were stated or certified;
(e) Default shall be made by the Borrower (as principal or
other surety) in payment or performance of any bond, debenture, note or other
evidence of Indebtedness for borrowed money, or under any credit agreement, loan
agreement, indenture, promissory note or similar agreement or instrument
executed in connection with any of the foregoing; and such default shall remain
unremedied for in excess of the period of grace, if any, with respect thereto,
with the effect of accelerating the maturity of any such material Indebtedness
in an aggregate amount of $100,000.00 or more;
(f) The Borrower discontinues its usual business or applies
for or consents to the appointment of a receiver, trustee or liquidator of it or
all or a substantial part of its assets, or (ii) files a voluntary petition
commencing a case under Title 11 of the United States Code, seeking liquidation,
reorganization or rearrangement or taking advantage of any bankruptcy,
insolvency, debtor's relief or other similar Law of the United States the State
of Texas or any other jurisdiction, or (iii) makes a general assignment for the
benefit of creditors, or (iv) is unable, or admits in writing its inability to
pay its debts generally as they become due, or (v) files an answer admitting the
material allegations of a petition filed against it in any case commenced under
Title 11 of the United States Code or any reorganization, insolvency,
conservatorship or similar proceeding under any bankruptcy, insolvency, debtor's
relief or other similar Law of the United States, the State of Texas or any
other jurisdiction;
(g) An order, judgment or decree shall be entered against the
Borrower by any court of competent jurisdiction or by any other duly authorized
authority, on the petition of a creditor or otherwise, granting relief under
Title 11 of the United States Code or under any bankruptcy, insolvency, debtor's
relief or other similar Law of the United States, the State of Texas or any
other jurisdiction, approving a petition seeking reorganization or an
arrangement of its debts or appointing a receiver, trustee, conservator,
custodian or liquidator of it or all or any
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substantial part of its assets, and the failure to have such order, judgment or
decree dismissed within thirty (30) days of its entry;
(h) the Borrower has concealed, removed, or permitted to be
concealed or removed, any part of its property, with intent to hinder, delay or
defraud its creditors or any of them; or has made or suffered a transfer of any
of its property which would be characterized as a fraudulent conveyance under
bankruptcy or similar Laws; or has made any transfer of its property to or for
the benefit of a creditor at a time when other creditors similarly situated have
not been paid; or has suffered or permitted, while insolvent, any creditor to
obtain a lien upon any of its property through legal proceedings or distraint
which is not vacated within thirty (30) days from the date thereof; or
(i) the Liens under the Security Instruments cease to be
perfected or cease to be first priority Liens subject to only Permitted
Encumbrances.
7.02 Rights Upon Unmatured Event of Default. At any time that
there exists an Unmatured Event of Default, any obligation of the Banks and the
LC Issuer to make Credit Extensions shall be suspended unless and until the
Agent, with the approval of the Required Banks and the LC Issuer, shall
reinstate the same in writing, the Unmatured Event of Default shall have been
waived by the Agent, with approval of the Required Banks and the LC Issuer or
the relevant Unmatured Event of Default shall have been remedied prior to
ripening into an Event of Default.
7.03 Rights Upon Default. Upon the happening of an Event of
Default specified in Subsections 7.01 (f) or (g), the obligations of the Banks
and the LC Issuer to make Credit Extensions hereunder shall automatically
terminate and all Obligations then outstanding hereunder and the interest
accrued thereon shall automatically become immediately due and payable without
any election or action on the part of the Agent, any Bank or the LC Issuer. Upon
the happening and during the continuation of any other Event of Default, the
Agent may, or upon the request of the Required Banks, the Agent shall terminate
or suspend the obligations of the Banks and the LC Issuer to make Credit
Extensions hereunder, or declare the Obligations to be immediately due and
payable, or both, and upon such declaration with respect to the Obligations they
shall become immediately due and payable. In either case, the entire principal
and interest shall thereupon become immediately due and payable, without notice
(including, without limitation, notice of intent to accelerate maturity or
notice of acceleration of maturity) and without presentment, demand, protest,
notice of protest or other notice of default or dishonor of any kind, except as
provided to the contrary elsewhere herein, all of which are hereby expressly
waived by the Borrower.
If, within thirty (30) days after acceleration of the maturity
of the Obligations or termination of the obligations of the Banks and LC Issuer
to make Credit Extensions hereunder as the result of any Event of Default (other
than any Event of Default specified in subsections 7.01(f) or (g)) and before
any judgement or decree for the payment of the Obligations due shall have been
obtained or entered, the Required Banks (in their sole discretion) shall direct
with respect to the Obligations relating to the Loans or the LC Issuer (in its
sole discretion) shall direct with respect to Obligations relating to Facility
LCs, the Agent shall, by notice to the Borrower, rescind and annul such
acceleration and/or termination.
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7.04 Remedies. After any acceleration, as provided for in
Section 7.03, the Agent, the Banks and the LC Issuer shall have, in addition to
the rights and remedies given them by this Agreement and the Security
Instruments, all those allowed by all applicable Laws, including, but without
limitation, the Uniform Commercial Code as enacted in any jurisdiction in which
any Borrowing Base Oil and Gas Properties may be located. Without limiting the
generality of the foregoing, the Agent may, or upon the request of the Required
Banks shall, immediately without demand of performance and without other notice
(except as specifically required by this Agreement or the Security Instruments)
or demand whatsoever to the Borrower, all of which are hereby expressly waived,
and without advertisement, sell at public or private sale or otherwise realize
upon, in ▇▇▇▇▇▇ County, Texas, or in any other place where the Borrowing Base
Oil and Gas Properties may be located, or in such other place or places as the
Agent may designate, the whole or, from time to time, any part of the Borrowing
Base Oil and Gas Properties, or any interest which the Borrower may have
therein. After deducting from the proceeds of sale or other disposition of the
Borrowing Base Oil and Gas Properties all expenses (including all reasonable
expenses for legal services), the Bank shall apply such proceeds toward the
satisfaction of the Obligations. Any remainder of the proceeds after
satisfaction in full of the Obligations shall be distributed as required by
applicable Laws. Notice of any sale or other disposition shall be given to the
Borrower at least five (5) days before the time of any public sale or of the
time after which any intended private sale or other disposition of the Borrowing
Base Oil and Gas Properties is to be made, which the Borrower hereby agrees
shall be reasonable notice of such sale or other disposition. The Borrower
agrees to assemble, or to cause to be assembled, at its own expense, documents
evidencing its ownership of the Borrowing Base Oil and Gas Properties and such
other documents or items as the Agent may reasonably request at such place or
places as the Agent shall designate. At any such sale or other disposition, the
Agent and/or any Bank, to the extent permissible under applicable Laws, may
purchase the whole or any part of the Borrowing Base Oil and Gas Properties,
free from any right of redemption on the part of the Borrower, which right is
hereby waived and released. Without limiting the generality of any of the rights
and remedies conferred upon the Agent for the benefit of the Banks under this
paragraph, the Agent may, to the full extent permitted by the applicable Laws:
(A) Enter upon the premises of the Borrower (and, to the
extent necessary in the judgment of the Agent, exclude therefrom the
Borrower or any Affiliate thereof) and take immediate possession of the
Borrowing Base Oil and Gas Properties, either personally or by means of
a receiver appointed by a court of competent jurisdiction, using all
necessary force to do so;
(B) At the Agent's option, use, operate, manage, and control
the Borrowing Base Oil and Gas Properties in any lawful manner;
(C) Collect and receive all rents, income, revenue, earnings,
issues, and profits therefrom for the benefit of the Banks; and
(D) Maintain, repair, renovate, alter, or remove the Borrowing
Base Oil and Gas Properties as the Banks may determine in their
discretion.
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7.05 Right of Set-off. Upon the occurrence of any Event of
Default, each Bank may, and is hereby authorized by the Borrower, at any time
and from time to time, to the fullest extent permitted by applicable Laws,
without advance notice to the Borrower (any such notice being expressly waived
by the Borrower), set-off and apply any and all deposits (general or special,
time or demand, provisional or final) at any time held and any other
indebtedness at any time owing by such Bank to or for the credit or the account
of the Borrower against any or all of the Obligations of the Borrower now or
hereafter existing, whether or not such Obligations have matured and
irrespective of whether such Bank may have exercised any other rights that they
have or may have with respect to such Obligations, including, without
limitation, any acceleration rights. Each Bank agrees promptly to notify the
Borrower after any such set-off and application, provided that the failure to
give such notice shall not affect the validity of such set-off and application.
The rights of each Bank under this Section 7.05 are in addition to the other
rights and remedies (including, without limitation, other rights of set-off)
which the Banks may have.
ARTICLE VIII.
THE AGENT
8.01 Authorization and Action. Each Bank hereby irrevocably
appoints and authorizes the Agent to act on its behalf and to exercise such
powers under this Agreement and the other Loan Documents as are specifically
delegated to or required of the Agent by the terms hereof and thereof, together
with such powers as are reasonably incidental thereto. As to any matters not
expressly provided for by this Agreement or the other Loan Documents (including,
without limitation, enforcement or collection of the Notes), the Agent shall not
be required to exercise any discretion or take any action, but shall be required
to act or to refrain from acting (and, as between the Agent and the Banks, shall
be fully protected in so acting or refraining from acting) upon the instructions
of the Required Banks, and such instructions shall be binding upon all Banks and
all holders of Notes; provided, however, that the Agent shall not be required to
take any action which exposes such Agent to personal liability or which is
contrary to this Agreement, the other Loan Documents or applicable law.
8.02 Agent's Reliance, Etc. Neither the Agent nor any of its
directors, officers, agents or employees shall be liable to any Bank for any
action taken or omitted to be taken by it or them under or in connection with
this Agreement or the other Loan Documents (i) with the consent or at the
request of the Required Banks or (ii) in the absence of its or their own gross
negligence or willful misconduct (it being the express intention of the parties
that the Agent and its directors, officers, agents and employees shall have no
liability for actions and omissions under this Section 8.02 resulting from their
sole ordinary or contributory negligence). Without limitation of the generality
of the foregoing, the Agent: (i) may treat the payee of each Note as the holder
thereof until the Agent receives written notice of the assignment or transfer
thereof signed by such payee and in form satisfactory to the Agent; (ii) may
consult with legal counsel (including counsel for Borrower or any of its
Subsidiaries), independent public accountants and other experts selected by it
and shall not be liable for any action taken or omitted to be taken in good
faith by it in accordance with the advice of such counsel, accountants or
experts; (iii) makes no warranty or representation to any Bank and shall not be
responsible to any Bank for any statements, warranties or representations made
in or in connection with this Agreement or
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the other Loan Documents; (iv) except as otherwise expressly provided herein,
shall not have any duty to ascertain or to inquire as to the performance or
observance of any of the terms, covenants or conditions of this Agreement or the
other Loan Documents or to inspect the property (including the books and
records) of Borrower and its Subsidiaries; (v) shall not be responsible to any
Bank for the due execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or the other Loan Documents or any other
instrument or document furnished pursuant hereto or thereto; and (vi) shall
incur no liability under or in respect of this Agreement or the other Loan
Documents by acting upon any notice, consent, certificate or other instrument or
writing (which may be by telegram, telecopier, cable or telex) reasonably
believed by it to be genuine and signed or sent by the proper party or parties;
and (vii) the provisions of this Section 8.02 shall survive the termination of
this Agreement and/or the payment or assignment of any of the Indebtedness under
this Agreement.
8.03 The Agent and Affiliates. With respect to its Commitment,
the Credit Extensions made by it and the Note issued to it as a Bank, the Agent
shall have the same rights and powers under this Agreement or the other Loan
Documents as any other Bank and may exercise the same as though it were not the
Agent. The term "Bank" or "Banks" shall, unless otherwise expressly indicated,
include the Agent in its individual capacity. The Agent and its affiliates may
accept deposits from, lend money to, act as trustee under indentures of, and
generally engage in any kind of business with Borrower, any of its respective
Subsidiaries and any Person who may do business with or own securities of
Borrower, any of its respective Subsidiaries, all as if the Agent were not the
Agent and without any duty to account therefor to the Banks.
8.04 Bank Credit Decision. Each Bank acknowledges and agrees
that it has, independently and without reliance upon the Agent or any other Bank
and based on the Financial Statements referred to in Section 5.04 and such other
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement. Each Bank also acknowledges
and agrees that it will, independently and without reliance upon the Agent or
any other Bank and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement and the other Loan Documents.
8.05 Agent's Indemnity. The Agent shall not be required to
take any action hereunder or to prosecute or defend any suit in respect of this
Agreement or the other Loan Documents unless indemnified to the Agent's
satisfaction by the Banks against loss, cost, liability and expense. If any
indemnity furnished to the Agent shall become impaired, it may call for
additional indemnity and cease to do the acts indemnified against until such
additional indemnity is given. In addition, the Banks agree to indemnify the
Agent (to the extent not reimbursed by Borrower), ratably according to the
respective principal amounts of the Notes then held by each of them (or if no
Notes are at the time outstanding, ratably according to either (i) the
respective amounts of their Commitments, or (ii) if no Commitments are
outstanding, the respective amounts of the Commitments immediately prior to the
time the Commitments ceased to be outstanding), from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever which may be
imposed on, incurred by, or asserted against the Agent in any way relating to or
arising out of this Agreement or any action taken or omitted by the Agent under
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this Agreement or the other Loan Documents (including, without limitation, any
action taken or omitted under Article II of this Agreement); provided, that no
Bank shall be liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from the Agent's gross negligence or willful misconduct. Each Bank
agrees, however, that it expressly intends, under this Section 8.05, to
indemnify the Agent ratably as aforesaid for all such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses and
disbursements arising out of or resulting from the Agent's ordinary or
contributory negligence. Without limitation of the foregoing, each Bank agrees
to reimburse the Agent promptly upon demand for its ratable share of any
out-of-pocket expenses (including reasonable counsel fees) incurred by the Agent
in connection with the preparation, execution, administration, or enforcement
of, or legal advice in respect of rights or responsibilities under, this
Agreement and the other Loan Documents to the extent that the Agent is not
reimbursed for such expenses by Borrower. The provisions of this Section 8.05
shall survive the termination of this Agreement and/or the payment or assignment
of any of the Indebtedness under this Agreement.
8.06 Successor Agent. The Agent may resign at any time by
giving written notice thereof to the Banks and Borrower and may be removed as
Agent under this Agreement and the other Loan Documents at any time with or
without cause by the Required Banks. Upon any such resignation or removal, the
Required Banks with the concurrence of Borrower shall have the right to appoint
a successor Agent. If no successor Agent shall have been so appointed by the
Required Banks, and shall have accepted such appointment, within 30 calendar
days after the retiring Agent's giving of notice of resignation or the Required
Banks' removal of the retiring Agent, then the retiring Agent may, on behalf of
the Banks and with the concurrence of Borrower, appoint a successor Agent. Upon
the acceptance of any appointment as Agent hereunder and under the other Loan
Documents by a successor Agent, such successor Agent shall thereupon succeed to
and become vested with all the rights, powers, privileges and duties of the
retiring Agent, and the retiring Agent shall be discharged from its duties and
obligations under this Agreement and the other Loan Documents. After any
retiring Agent's resignation or removal as Agent hereunder and under the other
Loan Documents, the provisions of this Article VIII shall inure to its benefit
as to any actions taken or omitted to be taken by it while it was Agent under
this Agreement and the other Loan Documents.
8.07 Notice of Default. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Unmatured Event of Default or Event
of Default hereunder unless the Agent shall have received notice from a Bank or
Borrower referring to this Agreement, describing such Unmatured Event of Default
or Event of Default and stating that such notice is a "notice of default." If
the Agent receives such a notice, the Agent shall give notice thereof to the
Banks; provided, however, if such notice is received from a Bank, the Agent also
shall give notice thereof to Borrower. The Agent shall be entitled to take
action or refrain from taking action with respect to such Unmatured Event of
Default or Event of Default as provided in Section 8.01 and Section 8.02.
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ARTICLE IX.
MISCELLANEOUS
9.01 Security Interests in Deposits and Right of Offset or the
Banker's Lien. The Borrower hereby transfers, assigns, pledges and grants to
each Bank a security interest (as security for the payment and/or performance of
the Obligations of the Borrower, with such interest of each Bank to be
retransferred, reassigned and/or released by such Bank at the expense of the
Borrower upon payment in full and/or complete performance by the Borrower of all
such Obligations) and the right, exercisable at such time as any obligation
hereunder shall mature, whether by acceleration of maturity or otherwise, of
offset or banker's lien against all funds or other property of the Borrower now
or hereafter or from time to time on deposit with or in the possession of such
Bank, including, without limitation, all certificates of deposit and other
depository accounts.
9.02 Survival of Representations, Warranties and Covenants.
All representations and warranties of the Borrower and all covenants and
agreements herein made shall survive the execution and delivery of the Notes and
this Agreement and shall remain in force and effect so long as any debt is
outstanding under the Notes, or any renewal or extension of this Agreement or
the Notes, or the Banks remain obligated to make advances hereunder.
9.03 Notices and Other Communications. Notices, requests and
communications hereunder shall be in writing and shall be sufficient in all
respects if delivered to the relevant address indicated below (including
delivery by registered or certified United States mail, facsimile, telex,
telegram or hand):
(A) If to the
Borrower: ENERGY PARTNERS, LTD.
▇▇▇ ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: Chief Executive Officer
with a copy
to: Evercore Partners
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
with a copy
to: Energy Income Fund, L.P.
c/o Associated Energy Managers, Inc.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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(B) If to the
Agent or
the Banks: BANK ONE, TEXAS, N.A.
▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Any party may, by proper written notice hereunder to the
other, change the individuals or addresses to which such notices to it shall
thereafter be sent. Notwithstanding anything to the contrary herein, although
the Agent will use reasonable commercial efforts to provide EIF with a copy of
any notice to Borrower of an Event of Default pursuant to Sections 7.01(a) and
(b) of this Agreement, any inadvertent failure by the Agent to provide EIF with
a copy of any such notice shall in no way waive, impair, or diminish the Banks'
rights and remedies upon an Event of Default against the Borrower hereunder or
under applicable law.
9.04 Parties in Interest. All covenants and agreements herein
contained by or on behalf of the Borrower shall be binding upon the Borrower and
its successors and assigns and inure to the benefit of the Agent and the Banks
and their respective successors and assigns.
9.05 Successors and Assigns; Participation; Purchasing Banks.
(a) Whenever in this Agreement any of the parties hereto is
referred to, such reference shall be deemed to include the successors and
permitted assigns of such party; and all covenants, promises and agreements by
or on behalf of Borrower, the Agent or the Banks that are contained in this
Agreement shall bind and inure to the benefit of their respective successors and
permitted assigns. Borrower may not assign or transfer any of its rights or
obligations hereunder without the written consent of all the Banks.
(b) Each Bank may, without the consent of Borrower, sell
participation to one or more banks or other financial institutions in all or a
portion of its rights and obligations under this Agreement and the other Loan
Documents (including, without limitation, all or a portion of its Commitment,
the Loans owing to it, and the Notes held by it); provided, however, that (i)
the selling Bank's obligations under this Agreement and the other Loan Documents
shall remain unchanged, (ii) such Bank shall remain solely responsible to the
other parties hereto for the performance of such obligations, (iii) Borrower,
the Agent, and the other Banks shall continue to deal solely and directly with
the selling Bank in connection with such Bank's rights and obligations under
this Agreement and the other Loan Documents, (iv) the selling Bank shall remain
the holder of its Note(s) for all purposes of this Agreement, and (v) no
participant under any such participation shall have any right to approve any
amendment or waiver of any provision of this Agreement or any Note, or any
consent to any departure by the Borrower therefrom, except to the extent that
such amendment, waiver or consent would reduce to the principal of, or interest
on, the Notes or any fees or other amounts payable hereunder, in each case to
the extent subject to such participation, or postpone any regularly scheduled
payment of principal of, or interest on, the Notes or any fees or other amounts
payable hereunder, in each case to the extent subject to such participation.
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(c) With the prior written consent of Borrower and the Agent,
each Bank may assign to one or more banks or other entities (a "Purchasing
Bank"), all or a portion of its interests, rights and obligations under this
Agreement and the other Loan Documents (including, without limitation, all or a
portion of its Commitment and the same portion of the Loans at the time owing to
it and the Notes held by it); provided, however, that (i) each such assignment
shall be of a constant, and not a varying, percentage of all the assigning
Bank's rights and obligations under this Agreement and the other Loan Documents,
(ii) after giving effect to such assignment, the Purchasing Bank's Commitment
must be at least $5,000,000 (either solely as the result of such assignment or
as the result of multiple assignments from two or more assigning Banks), (iii)
the parties to each such assignment shall execute and deliver to the Agent a
Commitment Transfer Supplement together with any Notes subject to such
Commitment Transfer Supplement, (iv) the assigning Bank shall pay to Agent an
assignment fee of $3,500, (v) an assigning Bank shall not assign a portion of
such Bank's Commitment in an amount less than an amount equal to the lesser of
such Bank's Commitment hereunder and $2,500,000 and (vi) if the assigning Bank
has retained any Commitment hereunder, such assigning Bank's Commitment shall be
at least $5,000,000 after giving effect to such assignment. Upon such execution
and delivery, from and after the effective date specified in each Commitment
Transfer Supplement, which effective date shall be at least five Business Days
after the execution thereof (x) the Purchasing Bank thereunder shall be a party
hereto and, to the extent herein provided in such, have the rights and
obligations of a Bank hereunder and (y) the assignor Bank thereunder shall, to
the extent provided in such assignment, be released from its obligations under
this Agreement and the other Loan Documents (and, in the case of a Commitment
Transfer Supplement covering all of the remaining portion of an assigning Bank's
rights and obligations under this Agreement and the other Loan Documents, such
Bank shall cease to be a party hereto). Such Commitment Transfer Supplement
shall be deemed to amend this Agreement to the extent, and only to the extent,
necessary to reflect the addition of such Purchasing Bank and the resulting
adjustment of Percentage Shares arising from the purchase by such Purchasing
Bank of all or a portion of the rights and obligations of such assigning Bank
under this Agreement, the Notes and the other Loan Documents.
(d) The Agent shall maintain at its office a copy of each
Commitment Transfer Supplement delivered to it and a register for the
recordation of the names and addresses of the Banks and the Commitment Amount
of, and principal amount of the Loans owing to, each Bank from time to time (the
"Register"). The entries in the Register shall be conclusive, in the absence of
manifest error, and Borrower, the Agent, and the Banks may treat each Person
whose name is recorded in the Register as a Bank hereunder for all purposes of
this Agreement. The Register shall be available for inspection by Borrower or
any Bank at any reasonable time and from time to time upon reasonable prior
notice.
(e) Upon its receipt of a Commitment Transfer Supplement
executed by an assigning Bank and a Purchasing Bank together with any Notes
subject to such Commitment Transfer Supplement and the written consent to such
Commitment Transfer Supplement, the Agent shall (i) accept such Commitment
Transfer Supplement, (ii) record the information contained therein in the
Register and (iii) give prompt notice thereof to the Banks and Borrower. Within
five (5) Business Days after receipt of such notice, Borrower shall, at its own
expense, execute and deliver to the Agent, in exchange for the surrendered
Notes, replacement Notes dated as of the effective date of such surrendered
Notes and otherwise substantially in the form
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of the Notes replaced thereby payable to the order of such Purchasing Bank in an
amount equal to the Commitment assumed by it pursuant to such Commitment
Transfer Supplement and, if the assigning Bank has retained any Commitment
hereunder, replacement Notes dated as of the effective date of the surrendered
Notes and otherwise substantially in the form of the Notes replaced thereby
payable to the order of the assigning Bank in an amount equal to the Commitment
of such assigning Bank retained by it hereunder. Such replacement Notes shall be
in an aggregate principal amount equal to the aggregate principal amount of such
surrendered Notes. Contemporaneously with the delivery of the replacement Notes,
the canceled Notes shall be returned to Borrower marked "Replaced."
(f) Each Bank agrees to hold any confidential information
which it may receive from the Borrower pursuant to this Agreement in confidence,
except for disclosure (i) to its Affiliates and to other Banks and their
respective Affiliates, (ii) to legal counsel, accountants, and other
professional advisors to such Bank, (iii) to regulatory officials, (iv) to any
Person as requested pursuant to or as required by law, regulation, or legal
process, (v) to any Person in connection with any legal proceeding to which such
Bank is a party, (vi) to such Bank's direct or indirect contractual
counterparties in swap agreements or to legal counsel, accountants and other
professional advisors to such counterparties, and (vii) permitted by this
Section. Notwithstanding any other provision herein, any Bank may, in connection
with any assignment or participation or proposed assignment or participation
pursuant to this Section 9.05, disclose to the assignee or participant or
proposed assignee or participant, any information relating to Borrower or any
other Subsidiary of Borrower furnished to such Bank by or on behalf of Borrower
or any other Subsidiary of Borrower; provided, that prior to any such
disclosure, each such assignee or participant or proposed assignee or
participant shall agree to preserve the confidentiality of any confidential
information relating to Borrower and any of its Subsidiaries received from such
Bank to the same extent as required by this Section.
(g) Assignment to Federal Reserve Bank. Notwithstanding any
other language in this Agreement, any Bank may at any time assign all or any
portion of its rights under this Agreement and the Notes to a Federal Reserve
Bank as collateral in accordance with Regulation A and the applicable operating
circular of such Federal Reserve Bank.
9.06 Renewals and Extensions. All provisions of this Agreement
relating to the Notes shall apply with equal force and effect to each and all
promissory notes hereafter executed which in whole or in part represent a
renewal, extension, amendment, modification or rearrangement of any part of the
Indebtedness originally represented by the Notes.
9.07 No Waiver by the Agent, the Banks or the LC Issuer. No
course of dealing on the part of the Agent, the Banks or the LC Issuer, their
officers or employees, nor any failure or delay by the Agent, any Bank or the LC
Issuer with respect to exercising any of its rights, powers or privileges under
this Agreement, the Notes, the Facility LC Applications, the Security
Instruments, or any other instrument referred to herein or executed in
connection with the Notes shall operate as a waiver thereof. The rights and
remedies of the Agent, the Banks and the LC Issuer under this Agreement, the
Notes, the Facility LC Applications, the Security Instruments, or any other
instrument referred to herein or executed in connection with the Notes shall be
cumulative and the exercise or partial exercise of any such right or remedy
shall not preclude the exercise of any other right or remedy.
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No Credit Extensions hereunder shall constitute a waiver of
any of the covenants or warranties of the Borrower contained herein or of any of
the conditions to the Banks' or the LC Issuer's obligation to make further
Credit Extensions hereunder. In the event that the Borrower is unable to satisfy
any such covenant, warranty or condition, no such Credit Extension shall have
the effect of precluding the Banks or the LC Issuer from thereafter declaring
such inability to be an Event of Default as hereinabove provided.
9.08 Waiver, Release, and Indemnification by the Borrower. To
the maximum extent permitted by applicable Laws, the Borrower:
(A) Waives (1) protest of all commercial paper at any time
held by any Bank on which the Borrower is in any way liable; (2) except
as the same may herein be specifically granted, notice of acceleration
and intention to accelerate; and (3) notice and opportunity to be
heard, after acceleration in the manner provided in Section 7.03,
before exercise by Agent, any Bank or the LC Issuer of the remedies of
self-help, set-off, or of other summary procedures permitted by any
applicable Laws or by any agreement with the Borrower, and, except
where required hereby or by any applicable Laws, notice of any other
action taken by Agent, any Bank or the LC Issuer;
(B) Releases Agent, each Bank and the LC Issuer and their
respective officers, employees, directors, attorneys, and agents
(collectively, the "Bank Parties") from all claims for loss or damage
caused by any act or omission on the part of any of them except willful
misconduct or gross negligence; and
(C) Agrees to indemnify and hold the Bank Parties harmless
from and against all claims, damages, liabilities and expenses, known
or unknown, accrued and unaccrued, unless attributable to the Bank
Parties' own gross negligence or willful misconduct, that may now or
hereafter be asserted against any of the Bank Parties in connection
with or arising out of any investigation, litigation or proceeding
directly or indirectly relating to or arising out of any of the
transactions contemplated by this Agreement.
9.09 GOVERNING LAW. THIS AGREEMENT AND THE NOTE SHALL BE
DEEMED TO BE CONTRACTS MADE UNDER AND SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF TEXAS.
9.10 Incorporation of Exhibits and Schedules. The Exhibits and
Schedules attached to this Agreement are incorporated herein for all purposes
and shall be considered a part of this Agreement.
9.11 Survival Upon Unenforceability. In the event any one or
more of the provisions contained in this Agreement, the Notes, the Security
Instruments, or in any other instrument referred to herein or executed in
connection with the Notes shall, for any reason, be held to be invalid, illegal
or unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision hereof or of any other instrument referred
to herein or executed in connection herewith.
9.12 Rights of Third Parties. All provisions herein are
imposed solely and exclusively for the benefit of the Agent, the Banks, the LC
Issuer and Borrower and no other
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Person shall have standing to require satisfaction of such provisions in
accordance with their terms or be entitled to assume that any Bank will refuse
to make advances in the absence of strict compliance with any or all thereof.
Any or all of such provisions may be freely waived in whole or in part by the
Agent, the Banks and the LC Issuer at any time if in their discretion they deem
it advisable to do so.
9.13 Amendments or Modifications. Subject to the provisions of
this Section, the Required Banks (or the Agent with the consent in writing of
the Required Banks) and the Borrower may enter into agreements supplemental
hereto for the purpose of adding or modifying any provisions to the Loan
Documents or changing in any manner the rights of the Banks or the Borrower
hereunder or waiving any Event of Default hereunder; provided, however, that no
such supplemental agreement shall, without the consent of all of the Banks:
(i) Extend the final maturity of any Loan, postpone any regularly
scheduled payment of principal of any Loan, forgive all or any
portion of the principal amount thereof, or reduce the rate or
extend the time of payment of interest or fees thereon.
(ii) Reduce the percentage specified in the definition of Required
Banks.
(iii) Extend the Facility Termination Date, or reduce the amount or
extend the payment date for, the mandatory payments required
under Sections 2.07 or 2.08, or increase the Aggregate
Commitment Amount or the Commitment of any Bank hereunder, or
permit the Borrower to assign its rights under this Agreement.
(iv) Amend the requirement that the Borrowing Base may be increased
and the Monthly Borrowing Base Reduction may be decreased only
with the consent of all Banks.
(v) Release any guarantor of any Loan or, except as provided in
the Security Instruments, release all or substantially all of
the Borrowing Base Oil and Gas Properties.
(vi) Amend this Section 9.13.
No amendment of any provision of this Agreement relating to the Agent
shall be effective without the written consent of the Agent.
9.14 Agreement Construed as an Entirety. This Agreement, for
convenience only, has been divided into Articles and Sections and it is
understood that the rights, powers, privileges, duties and other legal relations
of the parties hereto shall be determined from this Agreement as an entirety and
without regard to the aforesaid division into Articles and Sections and without
regard to headings prefixed to said Articles or Sections.
9.15 Number and Gender. Whenever the context requires,
reference herein made to the single number shall be understood to include the
plural and likewise the plural shall be understood to include the singular.
Words denoting sex shall be construed to include the
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masculine, feminine, and neuter, when such construction is appropriate, and
specific enumeration shall not exclude the general, but shall be construed as
cumulative.
9.16 AGREEMENT SUPERSEDES ALL PRIOR AGREEMENTS. THIS
AGREEMENT, TOGETHER WITH THE NOTES, THE FACILITY LC APPLICATIONS, THE SECURITY
INSTRUMENTS, AND ANY OTHER WRITTEN INSTRUMENTS EXECUTED PURSUANT TO THIS
AGREEMENT REPRESENT, COLLECTIVELY, THE FINAL AGREEMENT BETWEEN THE PARTIES
HERETO WITH RESPECT TO THE SUBJECT HEREOF AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES
AND SHALL SUPERSEDE ANY PRIOR AGREEMENT BETWEEN THE PARTIES HERETO, WHETHER
WRITTEN OR ORAL, RELATING TO THE SUBJECT HEREOF. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
9.17 Controlling Provision Upon Conflict. In the event of a
conflict between the provisions of this Agreement and those of the Notes, the
Facility LC Applications, the Security Instruments or any other instrument
referred to herein or executed in connection with the Notes, the provisions of
this Agreement shall control; provided if any of the Facility LC Applications or
Security Instruments contain any representations, warranties, or covenants of
the Borrower that are in addition to or are more restrictive on the Borrower
than those set forth in this Agreement, such additional or more restrictive
representations, warranties, and covenants shall control.
9.18 Time, Place and Method of Payments. All payments required
pursuant to this Agreement or the Notes shall be made in immediately available
funds; shall be deemed received by the Agent on the next Business Day following
receipt if such receipt is after 4:00 p.m., on any Business Day, and shall be
made at the principal banking quarters of the Agent in Houston, Texas.
9.19 Termination. This Agreement and the Aggregate Commitment
Amount may be canceled by the Borrower without premium or penalty prior to the
Facility Termination Date upon at least thirty (30) days' prior written notice,
provided, that the Obligations that are then due and payable are paid and
performed in full to the satisfaction of the Agent and the Banks; provided,
however that any such cancellation hereunder shall not terminate any
obligations, representations or warranties of the Borrower to the Agent and/or
the Banks hereunder and under other Loan Documents that survive beyond the
Facility Termination Date. Upon the earlier to occur of the (i) the Facility
Termination Date, and (ii) cancellation of this Agreement and the Aggregate
Commitment Amount prior thereto in accordance with this Section 9.19 and upon
payment and performance in full of the Obligations that are due and payable to
the satisfaction of the Banks, the Agent agrees, at the Borrower's request and
sole cost and expense, to execute and deliver any such lien release documents
and other documentation reasonably requested by the Borrower to release or
terminate the Agent's liens and security interests hereunder and under the other
Loan Documents.
9.20 Non-Application of Chapter 346 of Texas Finance Code. The
provisions of Chapter 346 of the Texas Finance Code are specifically declared by
the parties hereto not to
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be applicable to this Agreement or any of the other Security Instruments or to
the transactions contemplated hereby.
9.21 Counterpart Execution. This Agreement may be executed as
one instrument signed by all parties or in separate counterparts hereof, each of
which counterparts shall be considered an original and all of which shall be
deemed to be one instrument, and any signed counterpart shall be deemed
delivered by the party signing it if sent to any other party hereto by
electronic facsimile transmission.
9.22 Loan Documents Subject to Other Agreements. Agent and
each Bank hereby acknowledge that they are aware of the terms and provisions of
that certain Farmout Agreement and those four certain Partial Assignments of
Operating Rights described in the Consent Letter dated June 9, 1999 from
Borrower to Chevron U.S.A. Inc. and Kewanee Industries, Inc., and executed by
Kewanee Industries, Inc. on June 11, 1999 and by Chevron U.S.A. Inc. on June 17,
1999. In reliance on that certain Officer's Certificate of the president of
Borrower dated June 23, 1999 relating to such Consent Letter, which Borrower
agrees Agent and each Bank are entitled to rely on, Agent and each Bank agree
and acknowledge that this Agreement and all other Loan Documents, insofar as
they pertain to the Oil and Gas Properties covered by the foregoing Farmout
Agreement and Assignments, shall be subject and subordinate to any existing
liens, encumbrances or privileges in favor of Chevron or Kewanee by operation of
law or such agreements between Borrower and such parties. Agent and each Bank
also acknowledge that this Agreement and all of the Loan Documents are subject
to the terms and provisions of that certain Asset Purchase Agreement (the
"Purchase Agreement") dated June 23, 1998, effective April 1, 1998, executed by
and between Shell Offshore Inc., et al., Borrower and Union Oil Company of
California d/b/a Spirit Energy 76 ("Spirit"), insofar as this Agreement and the
Loan Documents pertain to the Oil and Gas Properties covered by such Purchase
Agreement.
9.23 Obligations to EIF. Agent and each Bank hereby
acknowledge and agree that Borrower is required pursuant to the terms of that
certain Financing Agreement dated April 15, 1998 by and between Borrower and
EIF, as amended, to execute and deliver additional mortgage supplements to EIF
covering any and all additional interests that it earns or has earned pursuant
to the terms of the Farmout Agreement dated June 9, 1998, by and between Chevron
U.S.A. Inc., Kewanee Industries, Inc. and Borrower. Agent and each Bank hereby
agree that Borrower's execution and delivery of such additional mortgage
supplements to EIF shall not constitute a breach of any representation, warranty
or covenant contained in this Agreement or any of the Security Instruments and
shall not constitute a default hereunder or under any of the Security
Instruments; provided that such additional mortgage supplements shall be subject
to the Subordination Agreement.
9.24 Amended and Restated Agreement. This Agreement amends,
extends, rearranges and restates the Prior Loan Agreement. The Prior Loan
Agreement and all Loan Documents and Security Instruments (as defined in the
Prior Loan Agreement) referred to therein have, as of the Closing, been assigned
from Bank One, Texas, N.A., as the sole lender under the Prior Loan Agreement,
to Bank One, Texas, N.A., as Agent hereunder, for the benefit of the Banks and
the LC Issuer, pursuant to an Assignment of Notes and Liens delivered in
satisfaction of Section 3.01(G) of this Agreement. All Security Instruments (as
defined and
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executed pursuant to the Prior Loan Agreement) shall also constitute Security
Instruments as defined in this Agreement, and they shall continue to secure all
Obligations of Borrower to the Agent, the Banks and the LC Issuer hereunder.
IN WITNESS WHEREOF, this Agreement is executed as of the date
first above written.
BORROWER
ENERGY PARTNERS, LTD.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, President
BANK
BANK ONE, TEXAS, N.A.
As Agent, as a Bank and as LC Issuer
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Vice President
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