EXECUTION COPY
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$200,000,000
AMENDED AND RESTATED
CREDIT AGREEMENT
AMONG
THE MERIDIAN RESOURCE CORPORATION,
AS BORROWER,
THE SEVERAL LENDERS
FROM TIME TO TIME PARTIES HERETO,
FORTIS CAPITAL CORP.,
AS ADMINISTRATIVE AGENT, SOLE LEAD ARRANGER AND BOOKRUNNER,
COMERICA BANK,
AS SYNDICATION AGENT,
AND
UNION BANK OF CALIFORNIA, N. A.
AS DOCUMENTATION AGENT
DATED AS OF DECEMBER 23, 2004
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TABLE OF CONTENTS
Page
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SECTION 1 DEFINITIONS...................................................................................... 1
1.1. Defined Terms.................................................................................... 1
1.2. Other Definitional Provisions.................................................................... 19
SECTION 2 AMOUNT AND TERMS OF REVOLVING CREDIT COMMITMENTS................................................. 20
2.1. Revolving Credit Commitments..................................................................... 20
2.2. Procedure for Revolving Credit Borrowing......................................................... 20
2.3. Repayment of Loans; Evidence of Debt............................................................. 21
SECTION 3 LETTERS OF CREDIT................................................................................ 22
3.1. The L/C Commitment............................................................................... 22
3.2. Procedure for Issuance of Letters of Credit...................................................... 22
3.3. Fees, Commissions and Other Charges.............................................................. 23
3.4. L/C Participations............................................................................... 23
3.5. Reimbursement Obligation of the Borrower......................................................... 24
3.6. Obligations Absolute............................................................................. 25
3.7. Letter of Credit Payments........................................................................ 25
3.8. L/C Applications................................................................................. 25
SECTION 4 GENERAL PROVISIONS............................................................................... 25
4.1. Interest Rates and Payment Dates................................................................. 25
4.2. Computation of Interest and Fees................................................................. 26
4.3. Conversion and Continuation Options.............................................................. 26
4.4. Minimum Amounts Maximum Number of Tranches....................................................... 27
4.5. Optional Prepayments and Commitment Reductions................................................... 27
4.6. Commitment Fee; Administrative Agent's Fee; Other Fees........................................... 29
4.7. Inability to Determine Interest Rate............................................................. 29
4.8. Pro Rata Treatment and Payments.................................................................. 29
4.9. Computation of Borrowing Base.................................................................... 30
4.10. Borrowing Base Compliance........................................................................ 33
4.11. Illegality....................................................................................... 33
4.12. Requirements of Law.............................................................................. 33
4.13. Taxes............................................................................................ 34
4.14. Indemnity........................................................................................ 35
4.15. Change of Lending Office......................................................................... 36
4.16. Collateral Security.............................................................................. 37
SECTION 5 REPRESENTATIONS AND WARRANTIES................................................................... 38
5.1. Financial Condition.............................................................................. 38
5.2. No Change........................................................................................ 38
5.3. Corporate Existence; Compliance with Law......................................................... 39
5.4. Corporate Power; Authorization; Enforceable Obligations.......................................... 39
5.5. No Legal Bar..................................................................................... 39
AMENDED AND RESTATED CREDIT AGREEMENT
i
5.6. No Material Litigation........................................................................... 40
5.7. No Default....................................................................................... 40
5.8. Ownership of Property; Liens..................................................................... 40
5.9. Intellectual Property............................................................................ 40
5.10. No Burdensome Restrictions....................................................................... 41
5.11. Taxes............................................................................................ 41
5.12. Federal Reserve Regulations...................................................................... 41
5.13. ERISA............................................................................................ 41
5.14. Investment Company Act; Other Regulations........................................................ 41
5.15. Subsidiaries..................................................................................... 42
5.16. Purpose of Loans................................................................................. 42
5.17. Environmental Matters............................................................................ 42
5.18. No Material Misstatements........................................................................ 43
5.19. Insurance........................................................................................ 43
5.20. Future Commitments............................................................................... 43
5.21. Security Documents............................................................................... 44
5.22. Immaterial Subsidiaries.......................................................................... 44
SECTION 6 CONDITIONS PRECEDENT............................................................................. 44
6.1. Conditions to Closing Date....................................................................... 44
6.2. Conditions to Each Extension of Credit........................................................... 48
6.3. Determinations Under Section 6................................................................... 48
SECTION 7 AFFIRMATIVE COVENANTS............................................................................ 49
7.1. Financial Statements............................................................................. 49
7.2. Certificates; Other Information.................................................................. 49
7.3. Payment of Obligations........................................................................... 50
7.4. Conduct of Business and Maintenance of Existence; Compliance with Law and Contractual Obligations 51
7.5. Maintenance of Property; Insurance............................................................... 51
7.6. Inspection of Property; Books and Records; Discussions........................................... 51
7.7. Notices.......................................................................................... 51
7.8. Environmental Laws............................................................................... 52
7.9. Additional Collateral............................................................................ 52
7.10. Maintenance and Operation of Property............................................................ 53
7.11. Further Assurances............................................................................... 54
SECTION 8 NEGATIVE COVENANTS............................................................................... 54
8.1. Financial Covenant Conditions.................................................................... 54
8.2. Limitation on Indebtedness....................................................................... 55
8.3. Limitation on Liens.............................................................................. 56
8.4. Limitation on Guarantee Obligations.............................................................. 58
8.5. Limitation on Fundamental Change................................................................. 58
8.6. Limitation on Sale of Assets..................................................................... 59
8.7. Limitation on Dividends.......................................................................... 60
8.8. Limitation on Investments, Loans and Advances.................................................... 60
AMENDED AND RESTATED CREDIT AGREEMENT
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8.9. Limitation on Optional Payments and Modifications of Debt Instruments, Other Documents........... 62
8.10. Limitation on Transactions with Affiliates....................................................... 62
8.11. Limitation on Sales and Leasebacks............................................................... 62
8.12. Limitation on Changes in Fiscal Year............................................................. 62
8.13. Limitation on Negative Pledge Clauses............................................................ 62
8.14. Limitation on Lines of Business.................................................................. 63
8.15. Forward Sales.................................................................................... 63
8.16. Hedging Agreements............................................................................... 63
8.17. Limitation on Leases............................................................................. 63
8.18. Limitation on Immaterial Subsidiaries............................................................ 63
SECTION 9 EVENTS OF DEFAULT................................................................................ 63
SECTION 10 THE ADMINISTRATIVE AGENT; OTHERS................................................................ 67
10.1. Appointment...................................................................................... 67
10.2. Delegation of Duties............................................................................. 67
10.3. Exculpatory Provisions........................................................................... 67
10.4. Reliance by Administrative Agent................................................................. 67
10.5. Notice of Default................................................................................ 68
10.6. Non-Reliance on Administrative Agent and Other Lenders........................................... 68
10.7. Indemnification.................................................................................. 69
10.8. Administrative Agent in Its Individual Capacity.................................................. 69
10.9. Successor Administrative Agent................................................................... 69
10.10. Issuing Lender................................................................................... 70
10.11. Others........................................................................................... 70
SECTION 11 MISCELLANEOUS................................................................................... 70
11.1. Amendments and Waivers........................................................................... 70
11.2. Notices.......................................................................................... 71
11.3. No Waiver; Cumulative Remedies................................................................... 72
11.4. Survival of Representations and Warranties....................................................... 72
11.5. Payment of Expenses and Taxes.................................................................... 72
11.6. Successors and Assigns; Participations and Assignments........................................... 73
11.7. Adjustments; Set-off............................................................................. 76
11.8. Counterparts..................................................................................... 77
11.9. Severability..................................................................................... 77
11.10. Integration...................................................................................... 77
11.11. GOVERNING LAW.................................................................................... 77
11.12. Submission To Jurisdiction; Waivers.............................................................. 77
11.13. Acknowledgments.................................................................................. 78
11.14. WAIVERS OF JURY TRIAL............................................................................ 78
11.15. Production Proceeds.............................................................................. 78
11.16. Release of Mortgaged Properties.................................................................. 79
11.17. Limitation on Interest........................................................................... 79
11.18. Existing Indebtedness............................................................................ 79
11.19. USA Patriot Act Notice........................................................................... 80
AMENDED AND RESTATED CREDIT AGREEMENT
iii
SCHEDULES
1.1(a) Commitments
1.1(b) [Reserved]
1.1(c) [Reserved]
1.1(d) Immaterial Subsidiaries
5.15 Subsidiaries
5.17 Environmental Matters
5.18(c) List of ▇▇▇▇▇
5.20 Future Commitments
8.2 Existing Indebtedness
8.3 Existing Liens
8.4 Guarantee Obligations
8.8 Existing Investments
11.2 Addresses for Notices
EXHIBITS
A Form of Revolving Credit Note
B Form of Amendment and Confirmation of Guarantee
C-1 Form of Amendment of Pledge Agreement
C-2 Form of Amendment of Security Agreement
D [Reserved]
E [Reserved]
F Form of Closing Certificate
G Form of Assignment and Acceptance
AMENDED AND RESTATED CREDIT AGREEMENT
iv
AMENDED AND RESTATED CREDIT AGREEMENT, dated as of December 23, 2004 (this
"Agreement"), among THE MERIDIAN RESOURCE CORPORATION, a Texas corporation (the
"Borrower"), the several banks, financial institutions and other entities from
time to time parties to this Agreement (collectively, the "Lenders"), Fortis
Capital Corp. ("Fortis"), as administrative agent for the Lenders (in such
capacity, the "Administrative Agent"), and as sole lead arranger (in such
capacity, the "Sole Lead Arranger") and bookrunner (in such capacity, a
"Bookrunner"), COMERICA BANK, as syndication agent (in such capacity, the
"Syndication Agent"), and UNION BANK OF CALIFORNIA, N. A., as documentation
agent (in such capacity, the "Documentation Agent).
WITNESSETH:
WHEREAS, the Borrower is, as of the date hereof, party to a Credit
Agreement dated as of August 13, 2002 (as heretofore amended or otherwise
modified, the "Existing Credit Facility"), with the lenders from time to time
parties thereto, and Societe Generale, as administrative agent, and pursuant
hereto the Borrower and the Administrative Agent desire to refinance the
indebtedness and obligations arising under the Existing Credit Facility, and the
indebtedness and liens arising under the Existing Credit Facility have been
assigned to the Administrative Agent and the Lenders, so that all indebtedness
and obligations arising hereunder shall be secured by such liens and security
interests as were created pursuant to the Existing Credit Facility and such
other liens as provided for herein, and the terms of Borrower's financing shall
hereafter be exclusively as set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
hereinafter set forth, the parties hereby agree as follows:
SECTION 1
DEFINITIONS
1.1. Defined Terms. As used in this Agreement, the following terms shall
have the following meanings:
"ABR" - for any day, a rate per annum (rounded upwards, if
necessary, to the next 1/16 of 1%) equal to the greatest of (a) the Prime Rate
in effect on such day and (b) the Federal Funds Effective Rate in effect on such
day plus 1/2 of 1%. For purposes hereof: "Prime Rate" shall mean the rate of
interest per annum publicly announced from time to time by Fortis as its prime
rate in effect at its principal office in New York City (the Prime Rate not
being intended to be the lowest rate of interest charged by Fortis in connection
with extensions of credit to debtors); and "Federal Funds Effective Rate" shall
mean, 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 on the next succeeding Business Day by the Federal
Reserve Bank of New York, or, if such rate is not so published for any day which
is a Business Day, the average of the quotations for the day of such
transactions received by the Administrative Agent from three federal funds
brokers of recognized standing selected by it. Any change in the ABR due to a
change in the Prime Rate or the Federal Funds Effective Rate
AMENDED AND RESTATED CREDIT AGREEMENT
1
shall be effective as of the opening of business on the effective day of such
change in the Prime Rate or the Federal Funds Effective Rate, respectively.
"ABR Loans" - Loans the rate of interest applicable to which is
based upon the ABR.
"Additional Mortgage" - additional mortgages and deeds of trust on
Oil and Gas Properties consisting of additional properties made by any Loan
Party in favor of, or for the benefit of, the Administrative Agent for the
benefit of the Lenders, as the same may be amended, supplemented or otherwise
modified from time to time.
"Administrative Agent" - as defined in the Preamble to this
Agreement.
"Affiliate" - as to any Person, any other Person (other than a
Subsidiary) which, directly or indirectly, is in control of, is controlled by,
or is under common control with, such Person. For purposes of this definition,
"control" of a Person means the power, directly or indirectly, either to (a)
vote 10% or more of the securities having ordinary voting power for the election
of directors of such Person or (b) direct or cause the direction of the
management and policies of such Person, whether by contract or otherwise.
"Aggregate Revolving Credit Exposure" - as to any Lender at any
time, an amount equal to the sum of (a) the aggregate principal amount of all
Loans made by such Lender then outstanding and (b) such Lender's Commitment
Percentage of the Letter of Credit Outstandings at such time. For purposes of
the foregoing, and for the avoidance of doubt, Loans shall not include the
contingent obligations of the Borrower or any Affiliate thereof owed to a Lender
in connection with Commodity Hedging Agreements.
"Agreement" - this Credit Agreement, as further amended,
supplemented or otherwise modified from time to time.
"Applicable Margin" - for any day with respect to Eurodollar Loans
and ABR Loans, the applicable per annum rate set forth below opposite the
Borrowing Base Usage in effect on any such day:
Eurodollar ABR
Borrowing Base Usage Margin Margin
-------------------- ------ ------
Less than or equal to 50% 1.50% .50%
Greater than 50% and less than or equal to 75% 1.75% 0.75%
Greater than 75% and less than or equal to 90% 2.00% 1.00%
Greater than 90% 2.25% 1.25%
As used herein, "Borrowing Base Usage" on any day means the percentage
equivalent to the ratio of (i) the sum of the aggregate principal amount of the
Loans then outstanding and Letter of Credit Outstandings on such day to (ii) the
Borrowing Base in effect on such day.
AMENDED AND RESTATED CREDIT AGREEMENT
2
"Assignee" - as defined in subsection 11.6(c).
"Assignment" - the assignment agreement whereby Societe Generale and
Fortis assign their interests in the Existing Credit Facility and the Loan
Documents relating thereto to the Lenders.
"Assignment of Liens" - the assignment agreement whereby Societe
Generale, as administrative agent under the Existing Credit Facility, assigns
its Liens securing the Borrower's Obligations under the Existing Credit Facility
to the Administrative Agent for the ratable benefit of the Lenders and the Hedge
Parties.
"Available Commitment" - as to any Lender at any time, an amount
equal to the excess, if any, of (a) the amount of such Lender's Revolving Credit
Commitment over (b) such Lender's Aggregate Revolving Credit Exposure.
"Bookrunner" - as defined in the Preamble to this Agreement.
"Borrower" - as defined in the preamble to this Agreement.
"Borrower Redetermination Notice" - a notice from the Borrower to
the Administrative Agent requesting that the Administrative Agent redetermine
the Borrowing Base, which notice may be sent by the Borrower at any time,
provided that no more than one such notice may be delivered by the Borrower
between Scheduled Redetermination Dates.
"Borrowing Base" - at any time of determination, the amount then in
effect as determined in accordance with Section 4.9.
"Borrowing Base Availability" - as to any Lender at any time, an
amount equal to the excess, if any, of (a) such Lender's Commitment Percentage
of the Borrowing Base in effect at such time over (b) such Lender's Aggregate
Revolving Credit Exposure.
"Borrowing Base Deficiency" - as defined in subsection 4.10.
"Borrowing Base Usage" - as defined under the definition of
Applicable Margin.
"Borrowing Date" - any Business Day specified in a notice pursuant
to subsection 2.2 or 3.2 as a date on which the Borrower requests the Lenders to
make Loans or the Issuing Lender to issue a Letter of Credit hereunder.
"Business Day" - any day that is not a Saturday, Sunday or other day
on which commercial banks in New York City are authorized or required by law to
remain closed; provided that, when used in connection with a Eurodollar Loan,
the term "Business Day" shall also exclude any day on which banks are not open
for dealings in dollar deposits in the London interbank market.
"Capital Lease" - any lease of property, real or personal, the
obligations of the lessee in respect of which are required in accordance with
GAAP to be capitalized on a balance sheet of the lessee.
AMENDED AND RESTATED CREDIT AGREEMENT
3
"Capital Stock" - any and all shares, interests, participations or
other equivalents (however designated) of capital stock of a corporation,
including, without limitation, any preferred stock of a corporation, any and all
equivalent ownership interests in a Person (other than a corporation) and any
and all warrants or options to purchase any of the foregoing.
"Cash Equivalents" - (a) securities with maturities of one year or
less from the date of acquisition issued or fully guaranteed or insured by the
United States Government or any agency thereof, (b) certificates of deposit and
eurodollar time deposits with maturities of one year or less from the date of
acquisition and overnight bank deposits of any Lender or of any commercial bank
(i) having capital and surplus in excess of $500,000,000 or (ii) which has a
short-term commercial paper rating which satisfies the requirements set forth in
clause (d) below, (c) repurchase obligations of any Lender or of any commercial
bank satisfying the requirements of clause (b) of this definition, having a term
of not more than 30 days with respect to securities issued, fully guaranteed or
insured by the United States Government or any agency thereof, (d) commercial
paper of a domestic issuer rated at least A-2 by Standard and Poor's Ratings
Group ("S&P") or P-2 by ▇▇▇▇▇'▇ Investors Service, Inc. ("Moody's"), (e)
securities with maturities of one year or less from the date of acquisition
issued or fully guaranteed by any state, commonwealth or territory of the United
States, by any political subdivision or taxing authority of any such state,
commonwealth or territory or by any foreign government, the securities of which
state, commonwealth, territory, political subdivision, taxing authority or
foreign government (as the case may be) are rated at least A by S&P or A by
Moody's, (f) securities with maturities of one year or less from the date of
acquisition backed by standby letters of credit issued by any Lender or any
commercial bank satisfying the requirements of clause (b) of this definition or
(g) shares of money market mutual or similar funds which invest exclusively in
assets satisfying the requirements of clauses (a) through (f) of this
definition.
"Change in Control" - (a) any Person or "group" (within the meaning
of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended)
(i) shall have acquired beneficial ownership of 35% or more of any outstanding
class of Capital Stock having ordinary voting power in the election of directors
of the Borrower or (ii) shall obtain the power (whether or not exercised) to
elect a majority of the Borrower's directors; or (b) the Board of Directors of
the Borrower shall not consist of a majority of Continuing Directors.
"Continuing Directors" shall mean the directors of the Borrower on the Closing
Date and each other director, if such other director's nomination for election
to the Board of Directors of the Borrower is recommended by a majority of the
then Continuing Directors.
"Closing Date" - the date on which the conditions precedent set
forth in subsection 6.1 shall be satisfied.
"Code" - the Internal Revenue Code of 1986, as amended from time to
time.
"Commitment Fee Rate" - for any day, a rate per annum equal to
..375%.
"Commitment Percentage" - as to any Lender at any time, the
percentage which such Lender's Revolving Credit Commitment then constitutes of
the aggregate Revolving Credit Commitments (or, at any time after the Revolving
Credit Commitments shall have expired or terminated, the percentage which such
Lender's Aggregate Revolving Credit Exposure then
AMENDED AND RESTATED CREDIT AGREEMENT
4
outstanding constitutes of the Aggregate Revolving Credit Exposure then
outstanding for all of the Lenders).
"Commitment Period" - the period from and including the date hereof
to but not including the Termination Date or such earlier date on which the
Commitments shall terminate as provided herein.
"Commitments" - the collective reference to the Revolving Credit
Commitments and the L/C Commitment.
"Commodity Hedging Agreement" - a commodity hedging or purchase
agreement or similar arrangement entered into with the intent of protecting
against fluctuations in commodity prices or the exchange of notional commodity
obligations, either generally or under specific contingencies.
"Commonly Controlled Entity" - an entity, whether or not
incorporated, which is under common control with the Borrower within the meaning
of Section 4001 of ERISA or is part of a group which includes the Borrower and
which is treated as a single employer under Section 414 of the Code.
"Consolidated Interest Expense" - with respect to the Borrower and
its Subsidiaries on a consolidated basis for any period, the sum of (i) gross
interest expense (including all cash and accrued interest expense) of the
Borrower and its Subsidiaries for such period on a consolidated basis, including
to the extent included in interest expense in accordance with GAAP (x) the
amortization of debt discounts and other fees related to credit facilities of
the Borrower and its Subsidiaries, and (y) the portion of any payments or
accruals with respect to Capital Leases allocable to interest expense and (ii)
capitalized interest of the Borrower and its Subsidiaries on a consolidated
basis; provided however, that to the extent otherwise included in gross interest
expense, "Consolidated Interest Expense" shall be reduced by (A) such amounts as
are attributable to dividends payable with respect to the Series C Preferred
Stock, (B) upfront fees payable to the Administrative Agent pursuant to the Fee
Letter and (C) other fees and expenses payable or reimbursed to the
Administrative Agent, the Lenders or any other Person pursuant to Sections
4.6(c) or 11.5 of this Agreement or any other Loan Document or pursuant to the
terms of any amendment to any of the Loan Documents or waiver of any term
thereof.
"Consolidated Lease Expense" - for any period, the aggregate amount
of fixed and contingent rentals payable by the Borrower and any of its
Subsidiaries, determined on a consolidated basis in accordance with GAAP, for
such period with respect to leases (other than oil and gas leases) of real and
personal property which are not capitalized under GAAP.
"Consolidated Net Income" - for any period, net income of the
Borrower and its Subsidiaries determined on a consolidated basis in accordance
with GAAP.
"Consolidated Tangible Net Worth" means, at any date of
determination, all assets of the Borrower and its Subsidiaries as of such date,
minus intangible assets, minus the liabilities of the Borrower and its
Subsidiaries, and all determined in accordance with GAAP on a consistent basis
with the latest financial statements. For purposes of this definition,
"intangible assets" shall include patents, copyrights, licenses, franchises,
good will, trade names, and trade
AMENDED AND RESTATED CREDIT AGREEMENT
5
secrets but shall exclude oil, gas, or other mineral leases, all leases required
to be capitalized under GAAP, the impact of ceiling test write-downs and the
non-cash impact of Commodity Hedging Agreements and other comprehensive income.
"Continuing 70% Test" - as defined in subsection 4.16(d).
"Continuing 75% Test" - as defined in subsection 4.16(a)(ii).
"Contractual Obligation" - as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
property is bound.
"Control" - the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of a Person, whether
through the ability to exercise voting power, by contract or otherwise.
"Default" - any of the events specified in Section 8, whether or not
any requirement for the giving of notice, the lapse of time, or both, or any
other condition, has been satisfied.
"Disposition" - the sale, issuance, conveyance, transfer, lease or
other disposition (including, without limitation, through a sale and leaseback
transaction or as a result of casualty or condemnation) of any Property.
"Disqualified Stock" - any Capital Stock that, by its terms (or by
the terms of any security into which it is convertible or for which it is
exchangeable) or upon the happening of any event, matures or is mandatorily
redeemable for any consideration other than Capital Stock, pursuant to a sinking
fund obligation or otherwise, is convertible or is exchangeable for Indebtedness
or Disqualified Stock or redeemable for any consideration other than Capital
Stock at the option of the holder thereof, in whole or in part on or prior to
the date that is one year after the earlier of (x) the Termination Date or (y)
the date on which there are no Loans or other obligations hereunder outstanding
and the Commitments are terminated.
"Dollars" and "$" - dollars in lawful currency of the United States
of America.
"Domestic Subsidiary" - any Subsidiary organized under the laws of
any jurisdiction within the United States of America (including territories
thereof).
"EBITDA" - with respect to the Borrower and its Subsidiaries, for
any period, Consolidated Net Income for that period, plus, without duplication
and to the extent deducted from revenues in determining Consolidated Net Income
for that period, the sum of (a) the aggregate amount of Consolidated Interest
Expense for that period, (b) the aggregate amount of letter of credit fees paid
during that period, (c) the aggregate amount of income tax expense for that
period, (d) all amounts attributable to depreciation, depletion and amortization
for that period, and (e) all non-cash expenses (including without limitation,
non-cash charges and expenses relating to (i) full cost ceiling test write-downs
and (ii) Commodity Hedging Agreements) during that period, and minus to the
extent added to revenues in determining
AMENDED AND RESTATED CREDIT AGREEMENT
6
Consolidated Net Income for that period, all non-cash income during that period,
in each case determined in accordance with GAAP and without duplication of
amounts.
"Environmental Laws" - any and all laws, rules, orders, regulations,
statutes, ordinances, codes, decrees, or other legally enforceable requirement
(including, without limitation, common law) of any foreign government, the
United States, or any state, local, municipal or other Governmental Authority,
regulating, relating to or imposing liability or standards of conduct concerning
protection of the environment or of human health, as has been, is now, or may at
any time hereafter be, in effect.
"Environmental Permits" - any and all permits, licenses,
registrations, notifications, approvals, exemptions and any other authorization
required under any Environmental Law.
"ERISA" - the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Eurocurrency Reserve Requirements" - for any day as applied to a
Eurodollar Loan, the aggregate (without duplication) of the rates (expressed as
a decimal) of reserve requirements in effect on such day (including, without
limitation, basic, supplemental, marginal and emergency reserves under any
regulations of the Board of Governors of the Federal Reserve System or other
Governmental Authority having jurisdiction with respect thereto) dealing with
reserve requirements prescribed for eurocurrency funding (currently referred to
as "Eurocurrency Liabilities" in Regulation D of such Board) maintained by a
member bank of such System.
"Eurodollar Base Rate" - with respect to each day during each
Interest Period pertaining to a Eurodollar Loan, the rate per annum equal to the
rate per annum for Dollar deposits with a maturity comparable to such Interest
Period which appears on the Telerate British Bankers Assoc. Interest Settlement
Rates Page at approximately 10:00 a.m., London time, two Business Days prior to
the commencement of such Interest Period; provided that if there shall no longer
exist a Telerate British Bankers Assoc. Interest Settlement Rates Page (or if
such page is not available on the relevant Business Day), the Eurodollar Base
Rate shall mean an interest rate per annum equal to the average (rounded upward,
if necessary, to the next 1/16th of 1%) of the respective rates per annum
notified to the Administrative Agent by each of the Reference Banks as the
average of the rates at which Dollar deposits (in an amount comparable to the
amount of the Lenders' Eurodollar Loan to be outstanding during such Interest
Period and for a maturity comparable to such Interest Period) are offered to
such Reference Bank in immediately available funds by prime banks in the London
interbank market at approximately 11:00 a.m., London time, two Business Days
prior to the commencement of such Interest Period. "Telerate British Bankers
Assoc. Interest Settlement Rates Page" shall mean the display designated as Page
3750 on Teleratesystem Incorporated (or such other replacement page thereof used
to display London interbank offered rates of major banks).
"Eurodollar Loans" - Loans the rate of interest applicable to which
is based upon the Eurodollar Rate.
AMENDED AND RESTATED CREDIT AGREEMENT
7
"Eurodollar Rate" - with respect to each day during each Interest
Period pertaining to a Eurodollar Loan, a rate per annum determined for such day
in accordance with the following formula (rounded upward to the nearest 1/100th
of 1%):
Eurodollar Base Rate
--------------------------------------------------
1.00 - Eurocurrency Reserve Requirements
"Event of Default" - any of the events specified in Section 9,
provided that any requirement for the giving of notice, the lapse of time, or
both, or any other condition, has been satisfied.
"Existing Mortgages" - the collective reference to every Mortgage,
Collateral Assignment, Security Agreement, Fixture Filing and Financing
Statement, and to every Deed of Trust, Mortgage, Assignment, Security Agreement
and Financing Statement from the Borrower and its Subsidiaries to Agent or
Trustee named therein, including all such prior instruments still in effect, as
amended prior to the Closing Date.
"Extension of Credit" - as to any Lender, the making of, or the
issuance of, or participation in, a Loan by such Lender, or the issuance of, or
participation in, a Letter of Credit by such Lender.
"Fee Letter" means the fee letter agreement dated December 23, 2004
between the Borrower and Fortis.
"Financial Letter of Credit" means a Letter of Credit qualifying as
a "financial guarantee-type letter of credit" under 12 C.F.R. Part 3, Appendix
A, Section 3(b)(1)(i) or any successor U.S. Comptroller of the Currency
regulation and issued by an Issuing Bank under the terms of this Agreement.
"Foreign Subsidiary" - any Subsidiary which is organized and
existing under the laws of any jurisdiction outside of the United States of
America.
"Fortis Subordinated Debt" - the Indebtedness evidenced by the
Subordinated Credit Agreement dated as of January 5, 2001, as subsequently
amended through the Closing Date, between Fortis Capital Corp. and the Borrower.
"GAAP" - generally accepted accounting principles in the United
States of America in effect from time to time, provided that for purposes of
determining compliance with the covenants contained in Section 8, "GAAP" shall
mean generally accepted accounting principles in the United States of America as
in effect on the date hereof and applied on a basis consistent with the
application used in the financial statements referred to in subsection 5.1.
"Governmental Authority" - any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
AMENDED AND RESTATED CREDIT AGREEMENT
8
"Guarantee Agreement" - the Guarantee Agreement dated August 13,
2002, as amended by the Amendment and Confirmation of Guarantee to be executed
and delivered by each Guarantor substantially in the form of Exhibit B, as the
same may be amended, modified or supplemented from time to time.
"Guarantee Obligation" - as to any Person (the "guaranteeing
person"), any obligation of (a) the guaranteeing person or (b) another Person
(including, without limitation, any bank under any letter of credit) to induce
the creation of which the guaranteeing person has issued a reimbursement,
counterindemnity or similar obligation, in either case guaranteeing or in effect
guaranteeing any Indebtedness, leases, dividends or other obligations (the
"primary obligations") of any other third Person (the "primary obligor") in any
manner, whether directly or indirectly, including, without limitation, any
obligation of the guaranteeing person, whether or not contingent, (i) to
purchase any such primary obligation or any property constituting direct or
indirect security therefor, (ii) to advance or supply funds (1) for the purchase
or payment of any such primary obligation or (2) to maintain working capital or
equity capital of the primary obligor or otherwise to maintain the net worth or
solvency of the primary obligor, (iii) to purchase property, securities or
services primarily for the purpose of assuring the owner of any such primary
obligation of the ability of the primary obligor to make payment of such primary
obligation or (iv) otherwise to assure or hold harmless the owner of any such
primary obligation against loss in respect thereof; provided, however, that the
term Guarantee Obligation shall not include endorsements of instruments for
deposit or collection in the ordinary course of business. The amount of any
Guarantee Obligation of any guaranteeing person shall be deemed to be the lower
of (a) an amount equal to the stated or determinable amount of the primary
obligation in respect of which such Guarantee Obligation is made and (b) the
maximum amount for which such guaranteeing person may be liable pursuant to the
terms of the instrument embodying such Guarantee Obligation, unless such primary
obligation and the maximum amount for which such guaranteeing person may be
liable are not stated or determinable, in which case the amount of such
Guarantee Obligation shall be such guaranteeing person's maximum reasonably
anticipated liability in respect thereof as determined by the Borrower in good
faith. Obligations of the Borrower or any Subsidiary pursuant to indemnities
which (a) are granted in the ordinary course of business, including, without
limitation, (i) such obligations in connection with stock purchase agreements or
asset purchase and sale agreements and (ii) such obligations in connection with
the conduct of the Oil and Gas Business in the ordinary course of business and
(b) do not cover Indebtedness of the types described in clauses (a) through (f)
of the definition of Indebtedness, shall not constitute "Guarantee Obligations"
for purposes of this Agreement.
"Guarantor" - each of the Borrower's direct or indirect Domestic
Subsidiaries, other than the Immaterial Subsidiaries.
"Hedge Parties" - a Lender or an Affiliate of a Lender that enters
into a Hedging Agreement with the Borrower or any of its Subsidiaries.
"Hedging Agreement" - any Interest Rate Protection Agreement,
Commodity Hedging Agreement, foreign currency exchange agreement, commodity
price protection agreement or other interest or currency exchange rate or
commodity price hedging arrangement concluded by the Borrower with a Lender or
an Affiliate of a Lender.
AMENDED AND RESTATED CREDIT AGREEMENT
9
"Hydrocarbon Interests" - all rights, titles, interests and estates
now owned or hereafter acquired in and to oil and gas leases, oil, gas and
mineral leases, or other liquid or gaseous hydrocarbon leases, mineral fee or
lease interests, farm-outs overriding royalty and royalty interests, net profit
interests, oil payments, production payment interests and similar mineral
interests, including any reserved or residual interest of whatever nature.
"Hydrocarbons" - oil, gas, casinghead gas, condensate, distillate,
liquid hydrocarbons, gaseous hydrocarbons, all products refined, separated,
settled and dehydrated therefrom and all products refined therefrom, including,
without limitation, kerosene, liquefied petroleum gas, refined lubricating oils,
diesel fuel, drip gasoline, natural gasoline, helium, sulfur and all other
minerals.
"Immaterial Subsidiaries" - the Subsidiaries of the Borrower listed
on Schedule 1.1(d).
"Indebtedness" - of any Person at any date, without duplication, (a)
all indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services (other than current trade liabilities incurred in
the ordinary course of business and payable in accordance with customary
practices and accrued current liabilities incurred in the ordinary course of
business), (b) any other indebtedness of such Person which is evidenced by a
note, bond, debenture or similar instrument, (c) all obligations of such Person
under Capital Leases, (d) all obligations of such Person in respect of letters
of credit and acceptances issued or created for the account of such Person, (e)
all obligations of such Person under Commodity Hedging Agreements and Interest
Rate Protection Agreements, (f) all obligations of others of the type referred
to in clauses (a) through (e) above and which are secured by any Lien on any
property owned by such Person even though such Person has not assumed or
otherwise become liable for the payment thereof, except that the amount of any
nonrecourse obligation shall be deemed to be the lesser of the value of the
property securing such obligation and the amount of such obligation so secured,
(g) all Guarantee Obligations with respect to the items described in clauses (a)
through (e) above, and (h) obligations of such Person to purchase or repurchase
securities, accounts or other Property arising out of or in connection with the
sale of the same or substantially similar securities or Property; provided, that
for the purposes of subsection 8.1(b) only, the definition of Indebtedness shall
not include the obligations described in clause (e) above, and provided further,
that Indebtedness shall not include any amounts due or payable in connection
with the Series C Preferred Stock, whether as dividends at any date, or upon
redemption or repurchase of any shares thereof after the Termination Date.
"Insolvency" - with respect to any Multiemployer Plan, the condition
that such Plan is insolvent within the meaning of Section 4245 of ERISA.
"Insolvent" - pertaining to a condition of Insolvency.
"Interest Payment Date" - (a) as to any ABR Loan, the last day of
each March, June, September and December, commencing December 31, 2004 and the
Termination Date, (b) as to any Eurodollar Loan having an Interest Period of
three months or less, the last day of such Interest Period, and (c) as to any
Eurodollar Loan having an Interest Period longer than three
AMENDED AND RESTATED CREDIT AGREEMENT
10
months, each day which is three months, or a whole multiple thereof, after the
first day of such Interest Period and the last day of such Interest Period.
"Interest Period" - with respect to any Eurodollar Loan:
(i) initially, the period commencing on the borrowing or
conversion date, as the case may be, with respect to such Eurodollar Loan
and ending one, two, three or six (or, to the extent available to all of
the Lenders, nine or twelve) months thereafter, as selected by the
Borrower in its notice of borrowing or notice of conversion, as the case
may be, given with respect thereto; and
(ii) thereafter, each period commencing on the last day of the
next preceding Interest Period applicable to such Eurodollar Loan and
ending one, two, three or six (or, to the extent available to all of the
Lenders, nine or twelve) months thereafter, as selected by the Borrower by
irrevocable notice to the Administrative Agent not less than three
Business Days prior to the last day of the then current Interest Period
with respect thereto;
(iii) provided that, all of the foregoing provisions relating
to Interest Periods are subject to the following:
(1) if any Interest Period pertaining to a Eurodollar
Loan would otherwise end on a day that is not a Business Day, such
Interest Period shall be extended to the next succeeding Business
Day unless the result of such extension would be to carry such
Interest Period into another calendar month in which event such
Interest Period shall end on the immediately preceding Business Day;
(2) any Interest Period pertaining to a Eurodollar Loan
that begins on the last Business Day of a calendar month (or on a
day for which there is no numerically corresponding day in the
calendar month at the end of such Interest Period) shall end on the
last Business Day of a calendar month;
(3) the Borrower shall select Interest Periods so as not
to require a payment or prepayment of any Eurodollar Loan during an
Interest Period for such Loan; and
(4) any Interest Period that would otherwise extend
beyond the Termination Date shall end on the Termination Date.
"Interest Rate Protection Agreement" - an interest rate swap, cap or
collar agreement or similar arrangement entered into with the intent of
protecting against fluctuations in interest rates or the exchange of notional
interest obligations, either generally or under specific contingencies.
"Investments" - as defined in subsection 8.8.
AMENDED AND RESTATED CREDIT AGREEMENT
11
"Issuing Lender" - Fortis or any of its respective Affiliates, in
its capacity as issuer of a Letter of Credit, and any other Lender to whom
Fortis or any of its respective Affiliates assigns (with the prior written
consent of the Required Lenders) its obligations to issue Letters of Credit
hereunder.
"L/C Application" - as defined in subsection 3.2.
"L/C Commitment" - the Issuing Lender's obligation to issue Letters
of Credit pursuant to Section 3 of this Agreement.
"L/C Participating Interest" - with respect to any Letter of Credit
(a) in the case of the Issuing Lender with respect thereto, its interest in such
Letter of Credit and any L/C Application relating thereto after giving effect to
the granting of participating interests therein, if any, pursuant hereto and (b)
in the case of each Participating Lender, its undivided participating interest
in such Letter of Credit and any L/C Application relating thereto.
"Lender Redetermination Notice" - a notice from the Required Lenders
to the Borrower giving notice of their election to redetermine the Borrowing
Base, which notice may be sent by the Required Lenders at any time they so
elect, provided that such an election (excluding any mandatory redetermination
of the Borrowing Base made in connection with the issuance of Subordinated
Indebtedness pursuant to subsection 4.9(d)(iii)) can be made by the Required
Lenders no more than once between Scheduled Redetermination Dates.
"Letters of Credit" - as defined in subsection 3.1(a).
"Letter of Credit Outstandings" - at any time, the sum of (a) the
aggregate amount available for drawing under Letters of Credit then outstanding
and (b) the aggregate amount of drawings under Letters of Credit which have not
then been reimbursed pursuant to subsection 3.5.
"Lien" - any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), charge or other security
interest or any preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including, without limitation, any
conditional sale or other title retention agreement and any Capital Lease having
substantially the same economic effect as any of the foregoing), but excluding
set-off arrangements under Hedging Agreements.
"Loan" - as defined in subsection 2.1(a).
"Loan Documents" - the collective reference to this Agreement, any
Notes, the L/C Applications, the Fee Letter, the Guarantee Agreement, the
Security Documents and any Hedging Agreement between the Borrower or any of its
Subsidiaries and any Lender or any Affiliate of any Lender (including, any
Hedging Agreement between the Borrower or any of its Subsidiaries and any
commercial bank or other financial institution that was at the time such Hedging
Agreement was entered into a Lender or an Affiliate of a Lender).
"Loan Parties" - the collective reference to the Borrower, each
Guarantor and any other Subsidiary from time to time party to any Loan Document.
AMENDED AND RESTATED CREDIT AGREEMENT
12
"Material Adverse Effect" - a material adverse effect on (a) the
business, assets, liabilities, property, condition (financial or otherwise) or
prospects of the Borrower and its Subsidiaries taken as a whole, (b) the ability
of the Borrower or any of the other Loan Parties to perform their respective
obligations under the Loan Documents, or (c) the validity or enforceability of
this or any of the other Loan Documents or the rights and remedies of the
Administrative Agent or the Lenders hereunder or thereunder.
"Material Environmental Amount" - an amount not covered by insurance
that is payable by the Borrower or any of its Subsidiaries in excess of
$5,000,000 for remedial costs, compliance costs, compensatory damages, punitive
damages, fines, penalties or any combination thereof.
"Materials of Environmental Concern" - any gasoline or petroleum
(including crude oil or any fraction thereof) or petroleum products or any
hazardous or toxic substances, materials, or wastes, defined or regulated as
such in or under any Environmental Law, including, without limitation, asbestos
or asbestos containing material, polychlorinated biphenyls, urea-formaldehyde
insulation, and any other substance that is regulated under any Environmental
Law.
"Mortgage Amendment" - the Mortgage Amendment to be entered into on
the initial Borrowing Date to amend the Existing Mortgages, in form and
substance reasonably acceptable to the Borrower, the Lenders and the
Administrative Agent.
"Mortgaged Property" - all of the Oil and Gas Properties and other
collateral purported to be subject to the Lien of the Mortgages.
"Mortgage" - collectively, (i) the Existing Mortgages, as amended by
the Mortgage Amendments, and (ii) each other mortgage (including without
limitation, the Additional Mortgage), deed of trust, assignment, security
agreement or mortgage executed by the Borrower or any other Loan Party and in
form and substance reasonably satisfactory to the Administrative Agent which
purports to create a Lien in favor of the Administrative Agent, in each case as
amended, supplemented or otherwise modified from time to time.
"Multiemployer Plan" - a Plan which is a multiemployer plan as
defined in Section 400 1(a)(3) of ERISA.
"Net Proceeds" - with respect to any Disposition by the Borrower or
any Subsidiary, an amount equal to the gross proceeds in cash (including cash
equivalents and any cash payments received by way of deferred payment of
principal pursuant to a note or installment receivable or purchase price
adjustment receivable or otherwise, but only as and when received) of such
Disposition, net of attorneys' fees, accountants' fees, brokerage, consultant
and other fees, underwriting commissions and other fees and expenses actually
incurred in connection with such Disposition.
"Non-Excluded Taxes" - as defined in subsection 4.13(a).
"Non-U.S. Lender" - as defined in subsection 4.13(b).
AMENDED AND RESTATED CREDIT AGREEMENT
13
"Notes" - as defined in subsection 2.3(e).
"Obligations" - the collective reference to the unpaid principal of
and interest on the Loans and the Reimbursement Obligations and all other
obligations and liabilities of the Borrower (including, without limitation,
amounts owing under any Loan Document and interest accruing at the then
applicable rate provided in this Agreement after the maturity of the Loans and
interest accruing at the then applicable rate provided in this Agreement after
the filing of any petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to the Borrower, whether or not a
claim for post-filing or post-petition interest is allowed in such proceeding)
to the Administrative Agent or any of the Lenders.
"Oil and Gas Business" - (a) the acquisition, exploration,
exploitation, development, operation and disposition of interests in Oil and Gas
Properties and Hydrocarbons, (b) the gathering, marketing, treating, processing,
storage, selling and transporting of any production from such interests or Oil
and Gas Properties, including, without limitation, the marketing of Hydrocarbons
obtained from unrelated Persons; (c) any business relating to or arising from
exploration for or development, production, treatment, processing, storage,
transportation or marketing of oil, gas and other minerals and products produced
in association therewith (d) any business relating to oilfield sales and
service, and (e) any activity that is ancillary or necessary or desirable to
facilitate the activities described in clauses (a) through (d) of this
definition.
"Oil and Gas Properties" - Hydrocarbon Interests; the Properties now
or hereafter pooled or unitized with Hydrocarbon Interests; all presently
existing or future unitization, pooling agreements and declarations of pooled
units and the units created thereby (including without limitation all units
created under orders, regulations and rules of any Governmental Authority having
jurisdiction) which may affect all or any portion of the Hydrocarbon Interests;
all pipelines, gathering lines, compression facilities, tanks and processing
plants; all interests held in royalty trusts whether presently existing or
hereafter created; all Hydrocarbons in and under and which may be produced,
saved, processed or attributable to the Hydrocarbon Interests, the lands covered
thereby and all hydrocarbons in pipelines, gathering lines, tanks and processing
plants and all rents, issues, profits, proceeds, products, revenues and other
incomes from or attributable to the Hydrocarbon Interests; all tenements,
hereditaments, appurtenances and Properties in any way appertaining, belonging,
affixed or incidental to the Hydrocarbon Interests, and all rights, titles,
interests and estates described or referred to above, including any and all real
property, now owned or hereafter acquired, used or held for use in connection
with the operating, working or development of any of such Hydrocarbon Interests
or Property and including any and all surface leases, rights-of-way, easements
and servitude together with all additions, substitutions, replacements,
accessions and attachments to any and all of the foregoing; all oil, gas and
mineral leasehold and fee interests, all overriding royalty interests, mineral
interests, royalty interests, net profits interests, net revenue interests, oil
payments, production payments, carried interests and any and all other interests
in Hydrocarbons; in each case whether now owned or hereafter acquired directly
or indirectly.
"Participants" - as defined in subsection 11.6(b).
AMENDED AND RESTATED CREDIT AGREEMENT
14
"Participating Lender" - with respect to any Letter of Credit, any
Lender (other than the Issuing Lender with respect to such Letter of Credit)
with respect to its L/C Participating Interest in such Letter of Credit.
"PBGC" - the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA.
"Performance Letter of Credit" - a Letter of Credit qualifying as a
"performance-based standby letter of credit" under 12 C.F.R. Part 3, Appendix A,
Section 3(b)(2)(i) or any successor U.S. Comptroller of the Currency regulation
and issued by an Issuing Lender under the terms of this Agreement.
"Permitted Business Acquisition" - the formation of a new Subsidiary
or any acquisition of all or substantially all the assets of, or shares of
capital stock, partnership interests, joint venture interests, limited liability
company interests or other similar equity interests in, a Person or division or
line of business of a Person (or any subsequent investment made in a Person
previously acquired in a Permitted Business Acquisition), if immediately after
giving effect thereto: (a) no Default or Event of Default shall have occurred
and be continuing or would result therefrom, (b) all transactions related
thereto shall be consummated in accordance with applicable laws, (c) such
acquired or newly formed corporation, partnership, association or other business
entity shall be a Guarantor and all of the Capital Stock of such acquired or
newly formed corporation, partnership, association or other business entity are
owned directly by the Borrower or a domestic Wholly-Owned Subsidiary and all
actions required to be taken, if any, with respect to such acquired or newly
formed Subsidiary under subsection 7.9 shall have been taken, (d)(i) the
Borrower shall be in compliance, on a pro forma basis after giving effect to
such acquisition or formation, with the covenants contained in subsection 8.1
recomputed as at the last day of the most recently ended fiscal quarter of the
Borrower as if such acquisition had occurred on the first day of each relevant
period for testing such compliance, and the Borrower shall have delivered to the
Administrative Agent an officers' certificate to such effect, together with all
relevant financial information for such Person or assets and (ii) any acquired
or newly formed Subsidiary (including its direct and indirect Subsidiaries)
shall not be liable for any Indebtedness or Guarantee Obligations (except for
Indebtedness and Guarantee Obligations permitted by subsections 8.2 and 8.4) and
(e) any acquired or newly formed Subsidiary (including its direct and indirect
Subsidiaries) shall not have any liabilities (contingent or otherwise, and
including, without limitation, liabilities under Environmental Laws and
liabilities with respect to any Plan) other than (x) Indebtedness and Guarantee
Obligations permitted by subsections 8.2 and 8.4 and (y) such liabilities which
could not have a Material Adverse Effect, and the Borrower shall have delivered
to the Administrative Agent a certificate, signed by a Responsible Officer, that
to the best of such officer's knowledge, the conditions set forth in this clause
(e) have been met.
"Permitted Business Investments" - investments made in the ordinary
course of, and of a nature that is or shall have become customary in, the Oil
and Gas Business as a means of actively exploiting, exploring for, acquiring,
developing, processing, gathering, marketing or transporting oil and gas through
agreements, transactions, interests or arrangements which permit one to share
risks or costs, comply with regulatory requirements regarding local ownership or
satisfy other objectives customarily achieved through the conduct of Oil and Gas
Business jointly with third parties, including, without limitation, the entry
into operating agreements,
AMENDED AND RESTATED CREDIT AGREEMENT
15
working interests, royalty interests, mineral leases, processing agreements,
farm-out and farm-in agreements, division orders, contracts for the sale,
transportation or exchange of oil or natural gas, unitization and pooling
declarations and agreements and area of mutual interest agreements, production
sharing agreements or other similar or customary agreements, transactions,
properties, interests, and investments and expenditures in connection therewith;
provided that an investment in capital stock, partnership interests, joint
venture interests, limited liability company interests or other similar equity
interests in a Person shall not constitute a Permitted Business Investment.
"Permitted Liens" - as defined in Section 8.3.
"Person" - an individual, partnership, corporation, business trust,
joint stock company, trust, unincorporated association, joint venture, limited
liability company, Governmental Authority or other entity of whatever nature.
"Plan" - at a particular time, any employee benefit plan which is
subject to Title IV of ERISA and in respect of which the Borrower or a Commonly
Controlled Entity 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.
"Pledge Agreement" - the Pledge Agreement dated August 13, 2002, as
amended by the Amendment of Pledge Agreement to be executed and delivered by
each of the Loan Parties, substantially in the form of Exhibit C-1, as the same
may be amended, modified or supplemented from time to time.
"Pledged Securities" - the Capital Stock of each direct and indirect
Subsidiary of the Borrower listed on Schedule 5.15 which is a Guarantor, and
each other Subsidiary of the Borrower (whether now formed or hereafter acquired)
whose Capital Stock is pledged to the Lenders pursuant to the Pledge Agreement
or subsection 7.9.
"Pledgors" - the Borrower and each of its Subsidiaries which is a
party to the Pledge Agreement on the initial Borrowing Date or which becomes a
party to a pledge agreement pursuant to subsection 7.9.
"Preferred Stock" - with respect to any Person, shares of such
Person which shall be entitled to preference or priority over any other shares
of such corporation in respect of either the payment of dividends or the
distribution of assets upon liquidation.
"Present Value" - the present value of the Oil and Gas Properties
owned by the Borrower and its Subsidiaries, as set forth on the most recent
Reserve Report delivered pursuant to Section 4.9.
"Properties" - any kind of facility, fixture, property or asset,
whether real, personal or mixed, or tangible or intangible owned, leased or
operated by the Borrower or any Subsidiary.
"Proved Reserves" - the estimated quantities of crude oil,
condensate, natural gas and natural gas liquids that adequate geological and
engineering data demonstrate with
AMENDED AND RESTATED CREDIT AGREEMENT
16
reasonable certainty to be recoverable in future years from proved reservoirs
under existing economic and operating conditions (i.e., prices and costs as of
the date the estimate is made).
"Redeemable Preferred Stock" - any Preferred Stock which (a) the
issuer undertakes to redeem at a fixed or determinable date or dates (other than
pursuant to the exercise of an option to redeem by the issuer, if the failure to
exercise such option would not materially adversely affect the business,
consolidated financial position or consolidated results of operations of the
issuer and its subsidiaries taken as a whole), whether by operation of a sinking
fund or otherwise, or upon the occurrence of a condition not solely within the
control of the issuer, or (b) is redeemable at the option of the holder.
"Redetermination Date" - each date that the redetermined Borrowing
Base becomes effective subject to the notice requirements specified in
subsection 4.9.
"Reference Banks" - four major banks in the London interbank market
selected by the Administrative Agent.
"Register" - as defined in subsection 11.6(d).
"Regulation U" - Regulation U of the Board of Governors of the
Federal Reserve System as in effect from time to time.
"Regulations T and X" means the corresponding regulation of the
Board of Governors of the Federal Reserve System as from time to time in effect
and any successor or other regulation or official interpretation of said Board
of Governors, and all official rulings and interpretations thereunder or
thereof.
"Reimbursement Obligations" - the obligation of the Borrower to
reimburse the Issuing Lender pursuant to subsection 3.5 for amounts drawn under
Letters of Credit issued by the Issuing Lender in accordance with the terms of
this Agreement and the related L/C Applications.
"Reorganization" - with respect to any Multiemployer Plan, the
condition that such plan is in reorganization within the meaning of Section 4241
of ERISA.
"Reportable Event" - any of the events set forth in Section 4043(b)
of ERISA, other than those events as to which the thirty day notice period is
waived under subsections .13, .14, .16, .18, .19 or .20 of PBGC Reg. Section
2615.
"Required Lenders" - at any time while no Loans are outstanding,
Lenders having at least sixty-six and two-thirds percent (66-2/3%) of the
aggregate Revolving Credit Commitments, and, at any time while Loans are
outstanding, Lenders holding at least sixty-six and two-thirds percent (66-2/3%)
of the outstanding aggregate principal amount of the Loans (without regard to
any sale by a Lender of a participation in any Loan under Section 11.6(b).
"Requirement of Law" - as to any Person, the certificate or articles
of incorporation and by-laws or other organizational or governing documents of
such Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other
AMENDED AND RESTATED CREDIT AGREEMENT
17
Governmental Authority, in each case applicable to or binding upon such Person
or any of its Property or to which such Person or any of its Property is
subject.
"Reserve Report" - a report in form and substance reasonably
satisfactory to the Administrative Agent and with attachments with respect to
the Oil and Gas Properties of the Borrower and its Subsidiaries (a) for the
reserve reports required to be delivered on or before March 15 of each year with
respect to the immediately preceding year ended December 31, prepared by the
Borrower and audited by ▇.▇. ▇▇▇▇▇ & Company Inc. or another independent
engineering firm selected by the Borrower and reasonably satisfactory to the
Administrative Agent and (b) for all other reports, except as otherwise provided
in Section 4.9, prepared by engineers employed by the Borrower and certified by
a Responsible Officer of the Borrower.
"Responsible Officer" - of any Loan Party, the chief executive
officer or the president of such Loan Party or, with respect to financial
matters, the chief financial officer or treasurer of such Loan Party.
"Revolving Credit Commitment" - as to any Lender, the obligation of
such Lender to make Loans to the Borrower hereunder in an aggregate principal
amount at any one time outstanding not to exceed the amount set forth opposite
such Lender's name on Schedule 1.1(a) (which amount, with respect to the
Lenders, shall equal $200,000,000), as such amount may be reduced from time to
time in accordance with the provisions of this Agreement.
"Revolving Credit Loans" - as defined in subsection 2.1(a).
"Revolving Credit Note" - as defined in subsection 2.3(e).
"Scheduled Redetermination Dates" - April 30 and October 31 of each
year.
"Security Agreement" - the Security Agreement dated August 13, 2002,
as amended by the Amendment of Security Agreement to be executed and delivered
by each of the Loan Parties, substantially in the form of Exhibit C-2, as the
same may be amended, modified or supplemented from time to time.
"Security Documents" - the collective reference to the Pledge
Agreement, the Mortgages, the Security Agreement, and all other security
documents hereafter delivered to the Administrative Agent granting a Lien on any
asset or assets of any Person to secure the obligations and liabilities of the
Borrower hereunder and under any of the other Loan Documents or to secure any
guarantee of any such obligations and liabilities.
"Series C Preferred Stock" - the Borrower's Series C Redeemable
Convertible Preferred Stock issued pursuant to the terms and conditions of the
Private Placement Memorandum dated March 25, 2002 and the Series C Preferred
Stock Designation.
"Series C Preferred Stock Designation" - the Statement of
Designation describing the terms and conditions of the Series C Preferred Stock.
"Single Employer Plan" - any Plan which is covered by Title IV of
ERISA, but which is not a Multiemployer Plan.
AMENDED AND RESTATED CREDIT AGREEMENT
18
"Sole Lead Arranger" - as defined in the Preamble to this Agreement.
"Subordinated Indebtedness" - any Indebtedness of the Borrower
contractually subordinated to the prior payment in full of the Loans,
Reimbursement Obligations and any other obligations hereunder in a manner
acceptable to the Required Lenders as evidenced by their written approval.
"Subsidiary" - as to any Person, a corporation, partnership or other
entity of which more than 50% of the total voting power of shares of stock or
other equity ownership interests having ordinary voting power (other than stock
or such other ownership interests having such power only by reason of the
happening of a contingency) to vote in the election of directors, a managing
general partner, or majority of general partners or other managers or trustees
thereof, is at the time owned or controlled, directly or indirectly by such
Person or one or more of the other Subsidiaries of such Person (or a combination
thereof). Unless otherwise qualified, all references to a "Subsidiary" or to
"Subsidiaries" in this Agreement shall refer to any direct or indirect
Subsidiary or Subsidiaries of the Borrower.
"Syndication Agent" - as defined in the Preamble to this Agreement.
"Termination Date" - December 23, 2008.
"Tranche" - the collective reference to Eurodollar Loans the then
current Interest Periods with respect to all of which begin on the same date and
end on the same later date (whether or not such Loans shall originally have been
made on the same day); Tranches may be identified as "Eurodollar Tranches"
"Transferee" - as defined in subsection 11.6(f).
"Type" - as to any Loan, its nature as an ABR Loan or a Eurodollar
Loan.
"Uniform Customs" - the Uniform Customs and Practice for Documentary
Credits (1993 Revision), International Chamber of Commerce Publication No. 500,
as the same may be amended from time to time.
"Wholly-Owned Subsidiary" - a Subsidiary of the Borrower, all of the
outstanding Capital Stock of which (other than directors' qualifying shares) is
owned, directly or indirectly, by the Borrower or one or more other Wholly-Owned
Subsidiaries of the Borrower; provided that each of the Persons listed on
Schedule 1.1(d) shall be deemed not to be Wholly-Owned Subsidiaries.
1.2. Other Definitional Provisions. (a) Unless otherwise specified
therein, all terms defined in this Agreement shall have the defined meanings
when used in any Loan Document or any certificate or other document made or
delivered pursuant hereto or thereto.
(b) As used herein and in any Loan Document, and any certificate or
other document made or delivered pursuant hereto or thereto, accounting terms
relating to the Borrower or any Subsidiary of the Borrower not defined in
subsection 1.1 and accounting terms partly defined in subsection 1.1, to the
extent not defined, shall have the respective meanings
Amended and Restated Credit Agreement
19
given to them under GAAP. References in this Agreement or any other Loan
Document to financial statements shall be deemed to include all related
schedules and notes thereto.
(c) The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and Section, subsection,
Schedule and Exhibit references are to this Agreement unless otherwise
specified.
(d) The meanings given to terms defined herein shall be equally applicable
to both the singular and plural forms of such terms.
(e) References in this Agreement or any other Loan Document to knowledge
of any Loan Party of events or circumstances shall be deemed to refer to events
or circumstances of which a Responsible Officer has knowledge or should have had
knowledge.
SECTION 2
AMOUNT AND TERMS OF REVOLVING CREDIT COMMITMENTS
2.1. Revolving Credit Commitments. (a) Subject to the terms and conditions
hereof, including, without limitation, the satisfaction of the conditions
precedent set forth in Section 6 hereof, each Lender severally agrees to make
revolving credit loans ("Revolving Credit Loans" or "Loans") to the Borrower
from time to time during the Commitment Period in an aggregate principal amount
at any one time outstanding not to exceed the amount of such Lender's Revolving
Credit Commitment, provided that no Lender shall make any Revolving Credit Loans
if, after giving effect thereto, the sum of such Lender's Revolving Credit Loans
and Commitment Percentage of Letter of Credit Outstandings (in each case, after
giving effect to the Loans requested to be made and the Letters of Credit
requested to be issued on such date) exceeds the lesser of (i) such Lender's
Revolving Credit Commitment and (ii) such Lender's Commitment Percentage of the
Borrowing Base then in effect. During the Commitment Period, the Borrower may
use the Revolving Credit Commitments by borrowing, prepaying the Revolving
Credit Loans in whole or in part, and reborrowing, all in accordance with the
terms and conditions hereof.
(b) The Revolving Credit Loans may from time to time be (i)
Eurodollar Loans, (ii) ABR Loans or (iii) a combination thereof, as determined
by the Borrower and notified to the Administrative Agent in accordance with
subsections 2.2 and 4.3, provided that no Revolving Credit Loan shall be made as
a Eurodollar Loan after the day that is one month prior to the Termination Date.
2.2. Procedure for Revolving Credit Borrowing. The Borrower may borrow
under the Revolving Credit Commitments during the Commitment Period on any
Business Day, provided that the Borrower shall give the Administrative Agent
irrevocable notice (which notice must be received by the Administrative Agent
prior to 10:00 a.m., New York City time, (a) three Business Days prior to the
requested Borrowing Date, if all or any part of the requested Revolving Credit
Loans initially are to be Eurodollar Loans or (b) one Business Day prior to the
requested Borrowing Date, otherwise), specifying (i) the amount to be borrowed,
(ii) the requested Borrowing Date, (iii) whether the borrowing is to be of
Eurodollar Loans, ABR Loans
Amended and Restated Credit Agreement
20
or a combination thereof and (iv) if the borrowing is to be entirely or partly
of Eurodollar Loans, the respective amounts of each such Type of Loan and the
respective lengths of the initial Interest Periods therefor. Each borrowing
under the Revolving Credit Commitments shall be in an amount equal to (x) in the
case of ABR Loans, $5,000,000 or a whole multiple of $1,000,000 in excess
thereof (or, if the then Available Commitments, or the amount of outstanding
Eurodollar Loans after any repayment of any Eurodollar Loans, are less than
$5,000,000, such lesser amount) and (y) in the case of Eurodollar Loans,
$5,000,000 or a whole multiple of $1,000,000 in excess thereof. Upon receipt of
any such notice from the Borrower, the Administrative Agent shall promptly
notify each Lender thereof. Each Lender will make the amount of its pro rata
share of each borrowing available to the Administrative Agent for the account of
the Borrower at the office of the Administrative Agent specified in subsection
11.2 prior to 11:00 A.M., New York City time, on the Borrowing Date requested by
the Borrower in funds immediately available to the Administrative Agent. Such
borrowing will then be made available to the Borrower by the Administrative
Agent crediting the account of the Borrower on the books of such office with the
aggregate of the amounts made available to the Administrative Agent by the
Lenders and in like funds as received by the Administrative Agent.
2.3. Repayment of Loans; Evidence of Debt. (a) The Borrower hereby
unconditionally promises to pay to the Administrative Agent for the account of
each Lender the then unpaid principal amount of each Loan of such Lender on the
Termination Date (or such earlier date on which the Loans become due and payable
pursuant to Section 9). The Borrower hereby further agrees to pay interest on
the unpaid principal amount of the Loans from time to time outstanding from the
date hereof to but not including the date the Loans are paid in full at the
rates per annum, and on the dates, set forth in subsection 4.1.
(b) Each Lender shall maintain in accordance with its usual practice
an account or accounts evidencing indebtedness of the Borrower to such Lender
resulting from each Loan of such Lender from time to time, including the amounts
of principal and interest payable and paid to such Lender from time to time
under this Agreement.
(c) The Administrative Agent shall maintain the Register pursuant to
subsection 11.6(d), and a subaccount therein for each Lender, in which shall be
recorded (i) the amount of each Loan made hereunder, the Type thereof and each
Interest Period applicable thereto, (ii) the amount of any principal or interest
due and payable or to become due and payable from the Borrower to each Lender
hereunder and (iii) both the amount of any sum received by the Administrative
Agent hereunder from the Borrower and each Lender's share thereof.
(d) The entries made in the Register and the accounts of each Lender
maintained pursuant to subsection 2.3(b) shall, to the extent permitted by
applicable law, be prima facie evidence of the existence and amounts of the
obligations of the Borrower therein recorded; provided, however, that the
failure of the Administrative Agent or any Lender to maintain the Register or
any such account, or any error therein, shall not in any manner affect the
obligation of the Borrower to repay (with applicable interest) the Loans made to
such Borrower by such Lender in accordance with the terms of this Agreement.
Amended and Restated Credit Agreement
21
(e) The Borrower agrees that, upon the request to the Administrative
Agent by any Lender, the Borrower will execute and deliver to such Lender a
promissory note of the Borrower evidencing the Revolving Credit Loans of such
Lender, substantially in the form of Exhibit A with appropriate insertions as to
date and principal amount (a "Revolving Credit Note" or "Note").
SECTION 3
LETTERS OF CREDIT
3.1. The L/C Commitment. (a) Subject to the terms and conditions hereof,
including, without limitation, the satisfaction of the conditions precedent set
forth in Section 6 hereof, the Issuing Lender, in reliance on the agreements of
the other Lenders set forth in subsection 3.4(a), agrees to issue letters of
credit (the "Letters of Credit") for the account of the Borrower on any Business
Day during the Commitment Period in such form as may be approved from time to
time by the Issuing Lender; provided that the Issuing Lender shall not issue any
Letter of Credit if, after giving effect to such issuance and after giving
effect to any Loans requested to be made or Letters of Credit requested to be
issued on such date, (i) the Letter of Credit Outstandings would exceed
$10,000,000 or (ii) the sum of the Revolving Credit Loans and Letter of Credit
Outstandings would exceed the lesser of (x) the Revolving Credit Commitments and
(y) the Borrowing Base then in effect. Each Letter of Credit shall (i) be issued
to support obligations of the Borrower or any of its Subsidiaries, contingent or
otherwise, which finance the working capital and business needs of the Borrower
and its Subsidiaries, and (ii) shall expire no later than the earlier of (x) one
year (or such later date agreed to by the Issuing Lender) after the date of
issuance and (y) five Business Days prior to the Termination Date, provided that
any Letter of Credit with a one-year tenor may provide for the extension thereof
for additional one-year periods (which shall in no event extend beyond the date
referred to in clause (y) above). Each Letter of Credit shall be denominated in
Dollars.
(b) Each Letter of Credit shall be subject to the Uniform Customs
and, to the extent not inconsistent therewith, the laws of the State of New
York.
(c) The Issuing Lender shall not at any time be obligated to issue
any Letter of Credit hereunder if such issuance would conflict with, or cause
the Issuing Lender or any Participating Lender to exceed any limits imposed by,
any applicable Requirement of Law.
3.2. Procedure for Issuance of Letters of Credit. The Borrower may from
time to time request that the Issuing Lender issue a Letter of Credit by
delivering to the Issuing Lender and the Administrative Agent at their
respective addresses for notices specified herein a letter of credit application
in the Issuing Lender's then customary form (an "L/C Application") completed to
the satisfaction of the Issuing Lender, and such other certificates, documents
and other papers and information as may be customary and as the Issuing Lender
may reasonably request. Upon receipt of any L/C Application, the Issuing Lender
will process such L/C Application and the certificates, documents and other
papers and information delivered to it in connection therewith in accordance
with its customary procedures and, upon receipt by the Issuing Lender of
confirmation from the Administrative Agent that issuance of such Letter of
Credit will not contravene subsection 3.1, the Issuing Lender shall promptly
issue the Letter of Credit requested thereby (but in no event shall the Issuing
Lender be required to issue any Letter of Credit earlier
Amended and Restated Credit Agreement
22
than three Business Days after its receipt of the L/C Application therefor and
all such other certificates, documents and other papers and information relating
thereto) by issuing the original of such Letter of Credit to the beneficiary
thereof or as otherwise may be agreed by the Issuing Lender and the Borrower.
The Issuing Lender shall furnish a copy of such Letter of Credit to the Borrower
and the Administrative Agent promptly following the issuance thereof, and,
thereafter, the Administrative Agent shall promptly furnish a copy thereof to
the Lenders.
3.3. Fees, Commissions and Other Charges. (a) The Borrower shall pay to
the Administrative Agent, for the account of (i) the Issuing Lender and the
Participating Lenders, a letter of credit commission with respect to each Letter
of Credit, computed for the period from the date such Letter of Credit is issued
to the date upon which the next payment is due under this subsection (and,
thereafter, from the date of payment under this subsection to the date upon
which the next payment is due under this subsection) at the rate per annum equal
to (A) for Financial Letters of Credit, the Applicable Margin in effect from
time to time for Eurodollar Loans of the daily aggregate amount available to be
drawn under such Financial Letter of Credit during such period or (B) for
Performance Letters of Credit, the Applicable Margin in effect from time to time
for Eurodollar Loans of the daily aggregate amount available to be drawn under
such Performance Letter of Credit during such period, and (ii) the Issuing
Lender, a letter of credit commission with respect to each Letter of Credit in
an amount equal to .125% per annum of the daily aggregate amount available to be
drawn under such Letter of Credit. The letter of credit commissions payable
pursuant to clause (i) and (ii) above shall be payable quarterly in arrears on
the last day of each March, June, September and December, commencing December
31, 2004, and on the Termination Date.
(b) In addition to the foregoing fees and commissions, the Borrower
shall pay or reimburse the Issuing Lender for such normal and customary costs
and expenses as are incurred or charged by the Issuing Lender in issuing,
effecting payment under, amending, negotiating or otherwise administering any
Letter of Credit.
(c) The Administrative Agent shall, promptly following its receipt
thereof, distribute to the Issuing Lender and the Participating Lenders all fees
and commissions received by the Administrative Agent for their respective
accounts pursuant to this subsection.
3.4. L/C Participations. (a) Effective on the date of issuance of each
Letter of Credit issued after the Closing Date, the Issuing Lender irrevocably
agrees to grant and hereby grants to each Participating Lender, and each
Participating Lender irrevocably agrees to accept and purchase and hereby
accepts and purchases from the Issuing Lender, on the terms and conditions
hereinafter stated, for such Participating Lender's own account and risk an
undivided interest equal to such Participating Lender's Commitment Percentage in
the Issuing Lender's obligations and rights under each Letter of Credit issued
by the Issuing Lender and the amount of each draft paid by the Issuing Lender
thereunder. Each Participating Lender unconditionally and irrevocably agrees
with the Issuing Lender that, if a draft is paid under any Letter of Credit for
which such Issuing Lender is not reimbursed in full by the Borrower in
accordance with the terms of this Agreement, such Participating Lender shall pay
to the Administrative Agent, for the account of the Issuing Lender, upon demand
at the Administrative Agent's address specified in subsection 11.2, an amount
equal to such Participating Lender's Commitment Percentage of the amount of such
draft, or any part thereof, which is not so reimbursed. On the date that any
Amended and Restated Credit Agreement
23
Assignee becomes a Lender party to this Agreement in accordance with subsection
11.6, participating interests in any outstanding Letters of Credit held by the
transferor Lender from which such Assignee acquired its interest hereunder shall
be proportionately reallotted between such Assignee and such transferor Lender.
Each Participating Lender hereby agrees that its obligation to participate in
each Letter of Credit, and to pay or to reimburse the Issuing Lender for its
participating share of the drafts drawn or amounts otherwise paid thereunder, is
absolute, irrevocable and unconditional and shall not be affected by any
circumstances whatsoever (including, without limitation, the occurrence or
continuance of any Default or Event of Default), and that each such payment
shall be made without offset, abatement, withholding or other reduction
whatsoever.
(b) If any amount required to be paid by any Participating Lender to
the Issuing Lender pursuant to subsection 3.4(a) in respect of any unreimbursed
portion of any draft paid by the Issuing Lender under any Letter of Credit is
paid to the Issuing Lender within three Business Days after the date such
payment is due, such Participating Lender shall pay to the Administrative Agent,
for the account of the Issuing Lender, on demand, an amount equal to the product
of (i) such amount, times (ii) the daily average Federal Funds Effective Rate
during the period from and including the date such draft is paid to the date on
which such payment is immediately available to the Issuing Lender, times (iii) a
fraction the numerator of which is the number of days that elapse during such
period and the denominator of which is 360. If any such amount required to be
paid by any Participating Lender pursuant to subsection 3.4(a) is not in fact
made available to the Administrative Agent, for the account of the Issuing
Lender, by such Participating Lender within three Business Days after the date
such payment is due, the Issuing Lender shall be entitled to recover from such
Participating Lender, on demand, such amount with interest thereon calculated
from such due date at the rate per annum applicable to ABR Loans hereunder. A
certificate of the Issuing Lender submitted to any Participating Lender with
respect to any amounts owing under this subsection shall be conclusive in the
absence of manifest error.
(c) Whenever, at any time after the Issuing Lender has paid a draft
under any Letter of Credit and has received from any Participating Lender its
pro rata share of such payment in accordance with subsection 3.4(a), the Issuing
Lender receives any reimbursement on account of such unreimbursed portion, or
any payment of interest on account thereof, the Issuing Lender will pay to the
Administrative Agent, for the account of such Participating Lender, its pro rata
share thereof provided, however, that in the event that any such payment
received by the Issuing Lender shall be required to be returned by the Issuing
Lender, such Participating Lender shall return to the Administrative Agent for
the account of the Issuing Lender, the portion thereof previously distributed to
it.
3.5. Reimbursement Obligation of the Borrower. If any draft shall be
presented for payment under any Letter of Credit, the Issuing Lender shall
notify the Borrower and the Administrative Agent of the date and the amount
thereof. The Borrower agrees to reimburse the Issuing Lender (whether with its
own funds or with proceeds of the Revolving Credit Loans) on each date on which
the Issuing Lender pays a draft so presented under any Letter of Credit for the
amount of (i) such draft so paid and (ii) any taxes, fees, charges or other
costs or expenses incurred by the Issuing Lender in connection with such
payment. Each such payment shall be made to the Issuing Lender at its address
for notices specified herein in lawful money of the United States of America and
in immediately available funds. Interest shall be payable on any
Amended and Restated Credit Agreement
24
and all amounts remaining unpaid by the Borrower under this subsection from the
date of payment of the applicable draft until payment in full thereof, (x) for
the period commencing on the date of payment of the applicable draft to the date
which is 3 days thereafter, at the rate which would be payable on ABR Loans at
such time and (y) thereafter, at the rate which would be payable on ABR Loans at
such time plus 2%.
3.6. Obligations Absolute. The Borrower's obligations under this Section 3
shall be absolute and unconditional under any and all circumstances and
irrespective of any set-off, counterclaim or defense to payment which the
Borrower or any other Person may have or have had against the Issuing Lender or
any other Lender or any beneficiary of a Letter of Credit. The Borrower also
agrees with the Issuing Lender that the Issuing Lender shall not be responsible
for, and the Borrower's obligations under subsection 3.5 shall not be affected
by, among other things, the validity or genuineness of documents or of any
endorsements thereon, even though such documents shall in fact prove to be
invalid, fraudulent or forged, or any dispute between or among the Borrower and
any beneficiary of any Letter of Credit or any other party to which such Letter
of Credit may be transferred or any claims whatsoever of the Borrower against
any beneficiary of such Letter of Credit or any such transferee. The Issuing
Lender 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 Letter of Credit, except for errors or
omissions caused by the Issuing Lender's gross negligence or willful misconduct.
The Borrower agrees that any action taken or omitted by the Issuing Lender under
or in connection with any Letter of Credit or the related drafts or documents,
if done in the absence of gross negligence or willful misconduct and in
accordance with the standards of care specified in the Uniform Commercial Code
of the State of New York, including, without limitation, Article V thereof,
shall be binding on the Borrower and shall not result in any liability of such
Issuing Lender to the Borrower.
3.7. Letter of Credit Payments. Without limitation of subsection 3.6, the
responsibility of the Issuing Lender to the Borrower in connection with any
draft presented for payment under any Letter of Credit shall, in addition to any
payment obligation expressly provided for in such Letter of Credit, be limited
to determining that the documents (including each draft) delivered under such
Letter of Credit in connection with such presentment are in conformity with such
Letter of Credit.
3.8. L/C Applications. To the extent that any provision of any L/C
Application, including any reimbursement provisions contained therein, related
to any Letter of Credit is inconsistent with the provisions of this Section 3,
the provisions of this Section 3 shall prevail.
SECTION 4
GENERAL PROVISIONS
4.1. Interest Rates and Payment Dates. (a) Each Eurodollar Loan shall bear
interest for each day during each Interest Period with respect thereto at a rate
per annum equal to the Eurodollar Rate determined for such Interest Period plus
the Applicable Margin in effect on such day.
Amended and Restated Credit Agreement
25
(b) Each ABR Loan shall bear interest for each day at a rate per
annum equal to the ABR in effect on such day plus the Applicable Margin in
effect on such date.
(c) If all or a portion of (i) any principal of any Loan, (ii) any
interest payable thereon, (iii) any commitment fee or (iv) any other amount
payable hereunder shall not be paid when due (whether at the stated maturity, by
acceleration or otherwise), the principal of the Loans and any such overdue
interest, commitment fee or other amount shall bear interest at a rate per annum
which is (x) in the case of principal, the rate that would otherwise be
applicable thereto pursuant to the foregoing provisions of this subsection plus
2% or (y) in the case of any such overdue interest, commitment fee or other
amount, the ABR plus the Applicable Margin in effect on such date plus 2%, in
each case from the date of such non-payment until such overdue principal,
interest, commitment fee or other amount is paid in full (as well after as
before judgment).
(d) Interest shall be payable in arrears on each Interest Payment
Date, provided that interest accruing pursuant to subsection 4.1(c) shall be
payable from time to time on demand.
4.2. Computation of Interest and Fees. (a) Whenever, in the case of ABR
Loans, it is calculated on the basis of the Prime Rate, interest shall be
calculated on the basis of a 365- (or 366-, as the case may be) day year for the
actual days elapsed; and, otherwise, interest and fees shall be calculated on
the basis of a 360-day year for the actual days elapsed. The Administrative
Agent shall as soon as practicable notify the Borrower and the Lenders of each
determination of a Eurodollar Rate. Any change in the interest rate on a Loan
resulting from a change in the ABR or the Eurocurrency Reserve Requirements
shall become effective as of the opening of business on the day on which such
change becomes effective. The Administrative Agent shall as soon as practicable
notify the Borrower and the Lenders of the effective date and the amount of each
such change in interest rate.
(b) Each determination of an interest rate by the Administrative
Agent pursuant to any provision of this Agreement shall be conclusive and
binding on the Borrower and the Lenders in the absence of manifest error. The
Administrative Agent shall, at the request of the Borrower, deliver to the
Borrower a statement showing the quotations and calculations used by the
Administrative Agent in determining any interest rate pursuant to subsection
4.1(a).
4.3. Conversion and Continuation Options. (a) The Borrower may elect from
time to time to convert Eurodollar Loans to ABR Loans by giving the
Administrative Agent at least one Business Day's prior irrevocable notice of
such election, provided that any such conversion of Eurodollar Loans may only be
made on the last day of an Interest Period with respect thereto. The Borrower
may elect from time to time to convert ABR Loans to Eurodollar Loans by giving
the Administrative Agent at least three Business Days' prior irrevocable notice
of such election. Any such notice of conversion to Eurodollar Loans shall
specify the length of the initial Interest Period or Interest Periods therefor.
Upon receipt of any such notice the Administrative Agent shall promptly notify
each Lender thereof. All or any part of outstanding Eurodollar Loans and ABR
Loans may be converted as provided herein, provided that (i) no Loan may be
converted into a Eurodollar Loan when any Event of Default has occurred and is
continuing and the Administrative Agent has or the Required Lenders have
determined that such a conversion is not
Amended and Restated Credit Agreement
26
appropriate and (ii) no Loan may be converted into a Eurodollar Loan after the
date that is one month prior to the Termination Date.
(b) Any Eurodollar Loans may be continued as such upon the
expiration of the then current Interest Period with respect thereto by the
Borrower giving notice to the Administrative Agent, in accordance with the
applicable provisions of the term "Interest Period" set forth in subsection 1.1,
of the length of the next Interest Period to be applicable to such Loans,
provided that no Eurodollar Loan may be continued as such (i) when any Event of
Default has occurred and is continuing and the Administrative Agent has or the
Required Lenders have determined that such a continuation is not appropriate or
(ii) after the date that is one month prior to the Termination Date and
provided, further, that if the Borrower shall fail to give such notice or if
such continuation is not permitted such Loans shall be automatically converted
to ABR Loans on the last day of such then expiring Interest Period.
4.4. Minimum Amounts Maximum Number of Tranches. All borrowings,
conversions and continuations of Loans hereunder and all selections of Interest
Periods hereunder shall be in such amounts and be made pursuant to such
elections so that, after giving effect thereto, the aggregate principal amount
of the Loans comprising each Eurodollar Tranche shall be equal to $5,000,000 or
a whole multiple of $1,000,000 in excess thereof. In no event shall there be
more than six (6) Eurodollar Tranches outstanding at any time.
4.5. Optional Prepayments and Commitment Reductions. (a) The Borrower may,
on the last day of any Interest Period with respect thereto, in the case of
Eurodollar Loans, or at any time and from time to time, in the case of ABR
Loans, prepay the Loans, in whole or in part, without premium or penalty, upon
at least one Business Day's irrevocable notice to the Administrative Agent in
the case of ABR Loans, and upon at least three Business Days' irrevocable notice
to the Administrative Agent in the case of Eurodollar Loans, in each case
specifying the date and amount of prepayment and whether the prepayment is of
Eurodollar Loans, ABR Loans or a combination thereof, and, in each case if of a
combination thereof, the amount allocable to each. Upon receipt of any such
notice the Administrative Agent shall promptly notify each Lender thereof. If
any such notice is given, the amount specified in such notice shall be due and
payable on the date specified therein, together with any amounts payable
pursuant to subsection 4.14. Partial prepayments shall be in an aggregate
principal amount of $5,000,000 or a whole multiple of $1,000,000 in excess
thereof.
(b) Subject to subsection 4.5(c), the Borrower shall have the right,
upon not less than three Business Days' notice to the Administrative Agent, to
terminate the Revolving Credit Commitments or, from time to time, to reduce the
amount of the Revolving Credit Commitments. Any such reduction shall be in an
amount equal to $5,000,000 or a whole multiple of $1,000,000 in excess thereof
and shall reduce permanently the Revolving Credit Commitments then in effect.
Termination of the Revolving Credit Commitments shall also terminate the
obligation of the Issuing Lender to issue Letters of Credit.
(c) In the event of any termination of the Revolving Credit
Commitments, the Borrower shall on the date of such termination repay or prepay
all of its outstanding Revolving Credit Loans (together with accrued and unpaid
interest on the Revolving Credit Loans and any amounts payable pursuant to
subsection 4.14 and any other amounts payable hereunder), reduce
Amended and Restated Credit Agreement
27
the Letter of Credit Outstandings to zero and cause all Letters of Credit to be
canceled and returned to the Issuing Lender (or shall cash collateralize the
Letter of Credit Outstandings (or provide supporting letters of credit from an
institution reasonably acceptable to the Administrative Agent) on terms and
pursuant to documentation reasonably satisfactory to the Issuing Lender and the
Administrative Agent). In the event of any partial reduction of the Revolving
Credit Commitments, then (i) at or prior to the effective date of such
reduction, the Administrative Agent shall notify the Borrower and the Lenders of
the Aggregate Revolving Credit Exposure of all the Lenders and (ii) if the
Aggregate Revolving Credit Exposure of all the Lenders would exceed the
aggregate Commitments after giving effect to such reduction, then, prior to
giving effect to such reduction, the Borrower shall, on the date of such
reduction, then, repay or prepay Revolving Credit Loans and, second, reduce the
Letter of Credit Outstandings (or cash collateralize the Letter of Credit
Outstandings (or provide supporting letters of credit from an institution
reasonably acceptable to the Administrative Agent) on terms and pursuant to
documentation reasonably satisfactory to the Issuing Lender and the
Administrative Agent), in an aggregate amount sufficient to eliminate such
excess.
(d) The Loans shall be repaid, and the Letter of Credit Outstandings
shall be reduced or cash collateralized, to the extent required by subsection
4.10. All such prepayments and cash collateralization shall be made in
accordance with this subsection 4.5.
(e) In the event the amount of any prepayment of the Loans required
to be made above shall exceed the aggregate principal amount of the outstanding
ABR Loans (the amount of any such excess being called the "Excess Amount"), the
Borrower shall have the right, in lieu of making such prepayment in full, to
prepay all the outstanding applicable ABR Loans and to deposit an amount equal
to the Excess Amount with, and (ii) in the event that Letter of Credit
Outstandings are required to be cash collateralized, the Borrower shall deposit
an amount equal to the aggregate amount of Letter of Credit Outstandings to be
cash collateralized with, the Administrative Agent in a cash collateral account
maintained (pursuant to documentation reasonably satisfactory to the
Administrative Agent) by and in the sole dominion and control of the
Administrative Agent. Any amounts so deposited shall be held by the
Administrative Agent as collateral for the obligations of the Borrower under
this Agreement and applied to the prepayment of the applicable Eurodollar Loans
at the end of the current Interest Periods applicable thereto or Letter of
Credit Outstandings, as the case may be, or, during an Event of Default, to
payment of any obligations under this Agreement (including obligations in
respect of the Letters of Credit). On any Business Day on which (i) collected
amounts remain on deposit in or to the credit of such cash collateral account
after giving effect to the payments made on such day pursuant to this subsection
4.5(e) and (ii) the Borrower shall have delivered to the Administrative Agent a
written request or a telephonic request (which shall be promptly confirmed in
writing) that such remaining collected amounts be invested in the Cash
Equivalent specified in such request, the Administrative Agent shall use its
reasonable efforts to invest such remaining collected amounts in such Cash
Equivalent, provided, however, that the Administrative Agent shall have
continuous dominion and full control over any such investments (and over any
interest that accrues thereon) to the same extent that it has dominion and
control over such cash collateral account and no Cash Equivalent shall mature
after the end of the Interest Period for which it is to be applied. The Borrower
shall not have the right to withdraw any amount from such cash collateral
account until the applicable Eurodollar Loans and accrued interest thereon and
Letter of Credit Outstandings are paid in full or if a Default or Event of
Amended and Restated Credit Agreement
28
Default then exists or would result. Any prepayment or collateralization
pursuant to this subsection 4.5(e) shall be applied in the order set forth in
clause (ii) of the second sentence of subsection 4.5(c).
4.6. Commitment Fee; Administrative Agent's Fee; Other Fees. (a) The
Borrower agrees to pay to the Administrative Agent for the account of each
Lender a commitment fee for the period from and including, for each Lender, the
Closing Date to but not including the Termination Date, computed at the
Commitment Fee Rate on the average daily amount of the lesser of (i) the
Available Commitment of such Lender and (ii) the Borrowing Base Availability
with respect to such Lender, during the period for which payment is made,
payable quarterly in arrears on the last day of each March, June, September and
December (commencing on December 31, 2004) and on the Termination Date or such
earlier date as the Revolving Credit Commitments shall terminate as provided
herein, commencing on the first of such dates to occur after the date hereof.
Commitment fees shall be nonrefundable when paid.
(b) The Borrower shall pay to the Administrative Agent the fees set
forth in the Fee Letter.
4.7. Inability to Determine Interest Rate. If prior to the first day of
any Interest Period:
(a) the Administrative Agent shall have determined (which
determination shall be conclusive and binding upon the Borrower) that, by reason
of circumstances affecting the relevant market, adequate and reasonable means do
not exist for ascertaining the Eurodollar Rate for such Interest Period, or
(b) the Administrative Agent shall have received notice from the
Required Lenders that the Eurodollar Rate determined or to be determined for
such Interest Period will not adequately and fairly reflect the cost to such
Lenders (as conclusively certified by such Lenders) of making or maintaining
their affected Loans during such Interest Period,
the Administrative Agent shall give telecopy or telephonic notice thereof to the
Borrower and the Lenders as soon as practicable thereafter. If such notice is
given (x) any Eurodollar Loans requested to be made on the first day of such
Interest Period shall be made as ABR Loans, (y) any Loans that were to have been
converted on the first day of such Interest Period to Eurodollar Loans shall be
continued as ABR Loans and (z) any outstanding Eurodollar Loans shall be
converted, on the first day of such Interest Period, to ABR Loans. Until such
notice has been withdrawn by the Administrative Agent, no further Eurodollar
Loans shall be made or continued as such, nor shall the Borrower have the right
to convert Loans to Eurodollar Loans.
4.8. Pro Rata Treatment and Payments. (a) Each borrowing by the Borrower
from the Lenders hereunder, each payment by the Borrower on account of any
commitment fee hereunder and any reduction of the Revolving Credit Commitments
of the Lenders shall be made pro rata according to the respective Commitment
Percentages of the Lenders. Each payment (including each prepayment) by the
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 Lenders. All payments (including prepayments) to be made by the
Borrower hereunder,
Amended and Restated Credit Agreement
29
whether on account of principal, interest, fees or otherwise, shall be made
without set off or counterclaim and shall be made prior to 12:00 Noon, New York
City time, on the due date thereof to the Administrative Agent, for the account
of the Lenders, at the Administrative Agent's office specified in subsection
11.2, in Dollars and in immediately available funds. The Administrative Agent
shall distribute such payments to the Lenders promptly upon receipt in like
funds as received. If any payment hereunder becomes due and payable on a day
other than a Business Day, such payment shall be extended to the next succeeding
Business Day, and, with respect to payments of principal, interest thereon shall
be payable at the then applicable rate during such extension.
(b) Unless the Administrative Agent shall have been notified in
writing by any Lender prior to a borrowing that such Lender will not make the
amount that would constitute its Commitment Percentage of such borrowing
available to the Administrative Agent, the Administrative Agent may assume that
such Lender is making such amount available to the Administrative Agent, and the
Administrative Agent may, in reliance upon such assumption, make available to
the Borrower a corresponding amount. If such amount is not made available to the
Administrative Agent by the required time on the Borrowing Date therefor, such
Lender shall pay to the Administrative Agent, on demand, such amount with
interest thereon at a rate equal to the daily average Federal Funds Effective
Rate for the period until such Lender makes such amount immediately available to
the Administrative Agent. A certificate of the Administrative Agent submitted to
any Lender with respect to any amounts owing under this subsection shall be
conclusive in the absence of manifest error. If such Lender's Commitment
Percentage of such borrowing is not made available to the Administrative Agent
by such Lender within three Business Days after such Borrowing Date, the
Administrative Agent shall also be entitled to recover such amount with interest
thereon at the rate per annum applicable to ABR Loans hereunder, on demand, from
the Borrower.
4.9. Computation of Borrowing Base. (a) Borrowing Base. (i) The Borrowing
Base in effect from time to time shall represent the maximum principal amount
(subject to the aggregate amount of the Revolving Credit Commitments) of Loans
and Letter of Credit Outstandings that the Lenders will allow to remain
outstanding during the Commitment Period. The Borrowing Base will be based upon
the value of Proved Reserves attributable to the Oil and Gas Properties of the
Borrower and its Subsidiaries and other assets of the Borrower and its
Subsidiaries acceptable to the Administrative Agent in its sole discretion, and
will be determined by the Administrative Agent in accordance with paragraph (d)
of this subsection 4.9, subject to approval by Required Lenders or all of the
Lenders, as the case may be. Until the Commitments are no longer in effect, all
Letters of Credit have terminated and all of the Loans and all other obligations
under this Agreement are paid in full, this Agreement shall be subject to the
then effective Borrowing Base.
(b) Reserve Reports. Prior to March 15 and September 15 of each
year, the Borrower shall, at its own expense, furnish to the Administrative
Agent and to each Lender Reserve Reports, which Reserve Reports shall be dated
no earlier than the immediately preceding December 31 (in the case of Reserve
Reports due on March 15) and June 30 (in the case of Reserve Reports due on
September 15 and shall set forth, among other things, (i) the Oil and Gas
Properties, then owned by the Borrower and its Subsidiaries, (ii) the Proved
Reserves attributable to such Oil and Gas Properties and (iii) a projection of
the rate of production and net
Amended and Restated Credit Agreement
30
income of the Proved Reserves as of the date of such Reserve Report, all in
accordance with the guidelines published by the Securities and Exchange
Commission and such reasonable assumptions as the Administrative Agent shall
provide. Concurrently with the delivery of the Reserve Reports, the Borrower
shall furnish to the Administrative Agent and to each Lender a certificate of a
Responsible Officer showing any material additions to or material deletions from
the Oil and Gas Properties listed in the Reserve Report, which additions or
deletions were made by the Borrower and its Subsidiaries since the date of the
previous Reserve Report.
(c) Redetermination of the Borrowing Base. The Borrowing Base shall
be redetermined (i) after receipt by the Administrative Agent of each scheduled
Reserve Report, (ii) upon the delivery of a Lender Redetermination Notice to the
Borrower and (iii) upon the delivery of a Borrower Redetermination Notice to the
Administrative Agent, all as provided in this subsection 4.9. Within 15 days
after the delivery of a Borrower Redetermination Notice or a Lender
Redetermination Notice, the Borrower shall furnish to the Administrative Agent
and to each Lender a Reserve Report prepared by engineers employed by the
Borrower and certified by a Responsible Officer of the Borrower as of the most
recent practicable date and, if requested by the Required Lenders, within 30
days after the delivery of a Borrower Redetermination Notice or a Lender
Redetermination Notice, a Reserve Report prepared by the Borrower and audited by
▇.▇. ▇▇▇▇▇ & Company Inc. or another independent engineering firm selected by
the Borrower and reasonably acceptable to the Administrative Agent. If the
Borrower fails to deliver a Reserve Report within the time period provided for
in either the preceding sentence or in subsection 4.9(b) above, then the
Administrative Agent shall have the right to rely on the last Reserve Report
previously delivered by the Borrower with any such adjustments and taking into
account any additional information as the Administrative Agent may deem
appropriate, in its sole discretion. The Administrative Agent shall redetermine
the Borrowing Base in its sole discretion, and the Administrative Agent shall
notify the Borrower and the Lenders of its redetermination of the Borrowing Base
(i) with respect to regularly scheduled Reserve Reports, (A) on or before April
15 (in the case of Reserve Reports due on March 15) and (B) on or before October
15 (in the case of Reserve Reports due on September 15), and (ii) with respect
to a Lender Redetermination Notice or a Borrower Redetermination Notice, as
promptly as practicable following delivery to the Administrative Agent of all
information (including Reserve Reports) requested from the Borrower, or if no
such information is delivered by Borrower following such request, then at such
time as the Administrative Agent determines is practicable. Within 15 Business
Days after receipt from the Administrative Agent of the amount of its
redetermination of the Borrowing Base, each Lender shall notify the
Administrative Agent in writing stating whether or not such Lender agrees with
that redetermination. Failure of any Lender to give such notice within such
period of time shall be deemed to constitute an acceptance of such
redetermination. The Borrowing Base may be decreased from the then effective
Borrowing Base with the consent of Required Lenders but may only be increased
from the then effective Borrowing Base with the consent of all of the Lenders.
If Required Lenders or all of the Lenders, as the case may be, agree with that
redetermination, then the Administrative Agent promptly shall notify the
Borrower of the Borrowing Base as so redetermined, whereupon, with respect to
redeterminations made in connection with regularly scheduled Reserve Reports,
that redetermined value shall become effective (and shall remain effective until
the Borrowing Base is again redetermined as provided in this subsection (c)) on
April 30 (in the case of Reserve Reports due on March 15) and October 31 (in the
case of Reserve Reports due on September 15). If Required Lenders or all of the
Lenders, as the case may be, have not approved in writing or are
Amended and Restated Credit Agreement
31
not deemed to have approved the Borrowing Base within the 15 Business Day period
following their receipt of the proposed amount from the Administrative Agent,
the Borrowing Base shall be set at the amount of the then current Borrowing Base
and the Borrowing Base shall remain at such level until Required Lenders or all
of the Lenders, as the case may be, utilizing the procedure outlined herein,
agree on a new Borrowing Base. Each redetermination provided for by this
subsection 4.9(c) shall be made in accordance with the provisions of subsection
4.9(d). It is the intention of the Borrower and the Lenders that the
redetermination of the Borrowing Base be administratively completed by the
Lenders within 45 days after the furnishing of each Reserve Report, subject to
the provisions of this paragraph (c) but effective (notwithstanding the date
that redetermination is completed) only on the applicable date provided in
Section 4.9(d)(ii) hereof.
(d) Criteria.
(i) All determinations and redeterminations by the
Administrative Agent provided for in this subsection 4.9 (and any
determinations and decisions by either or both of the Administrative
Agent and Required Lenders or all of the Lenders, as the case may
be, in connection therewith, including effecting any redetermination
of the value of any component contained in a Reserve Report) shall
be made by the Administrative Agent and the Lenders in their sole
discretion and shall be made on a reasonable basis and in good faith
based upon the application by the Administrative Agent and the
Lenders of their respective oil and gas lending criteria as they
customarily used at the time of determination in assigning
collateral value to oil and gas properties for similarly situated
customers of the Administrative Agent and the Lenders.
(ii) All redeterminations (other than those arising from a
Borrower Redetermination Notice or a Lender Redetermination Notice)
of the Borrowing Base referred to in this subsection 4.9 shall
become effective on April 30 (in the case of Reserve Reports due on
March 15) and October 31 (in the case of Reserve Reports due on
September 15). Borrowing Base redeterminations arising from a
Borrower Redetermination Notice or a Lender Redetermination Notice
shall become effective upon written notice by the Administrative
Agent to the Borrower and the Lenders of the redetermined Borrowing
Base as redetermined in accordance with the terms hereof.
(iii) Upon the issuance of Subordinated Indebtedness, the
Borrowing Base shall be redetermined in accordance with the
procedures set forth in subsection 4.9 which would have applied had
a Borrower Redetermination Notice or a Lender Redetermination Notice
been delivered.
(e) Title. Concurrently with the delivery to the Administrative
Agent of each Reserve Report, the Administrative Agent may request that the
Borrower furnish to the Administrative Agent reasonable evidence of the
Borrower's title to the Oil and Gas Properties which have been developed or
acquired by the Borrower subsequent to the Reserve Report immediately preceding
such Reserve Report.
Amended and Restated Credit Agreement
32
(f) Mandatory Reductions. The Borrowing Base shall automatically be
reduced by the loan value assigned to each Oil and Gas Property in the Borrowing
Base (as determined by the Administrative Agent in its sole discretion) that is
Disposed by the Borrower in accordance with Section 8.6(d).
(g) Initial Borrowing Base. The initial Borrowing Base hereunder
shall be $130,000,000.00
4.10. Borrowing Base Compliance. If at any time the Aggregate Revolving
Credit Exposure of the Lenders exceeds the Borrowing Base then in effect (any
such excess, the "Borrowing Base Deficiency") (including as a result of a
redetermination in connection with the incurrence of Subordinated Indebtedness
provided for in subsection 8.2(f)), the Borrower shall prepay the Revolving
Credit Loans and then to the extent necessary, cash collateralize the Letter of
Credit Outstandings in an amount equal to 100% of such Borrowing Base Deficiency
within 90 days after the effective date of the redetermination resulting in such
Borrowing Base Deficiency, together with (i) interest accrued to the date of
such payment or prepayment and (ii) any amounts payable under subsection 4.14.
Repayments and collateralization pursuant to this subsection 4.10 shall be made
as set forth in subsection 4.5(c)
4.11. Illegality. Notwithstanding any other provision herein, if the
adoption of or any change in any Requirement of Law or in the interpretation or
application thereof after the date hereof shall make it unlawful for any Lender
to make or maintain Eurodollar Loans as contemplated by this Agreement (a) the
commitment of such Lender hereunder to make Eurodollar Loans, continue
Eurodollar Loans as such and convert ABR Loans to Eurodollar Loans shall
forthwith be canceled and (b) such Lender's Loans then outstanding as Eurodollar
Loans, if any, shall be converted automatically to ABR Loans on the respective
last days of the then current Interest Periods with respect to such Loans or
within such earlier period as required by law. If any such conversion of a
Eurodollar Loan occurs on a day which is not the last day of the then current
Interest Period with respect thereto, the Borrower shall pay to such Lender such
amounts, if any, as may be required pursuant to subsection 4.14.
4.12. Requirements of Law. (a) If the adoption of or any change in any
Requirement of Law or in the interpretation or application thereof after the
date hereof or compliance by any Lender with any request or directive (whether
or not having the force of law) from any central bank or other Governmental
Authority made subsequent to the date hereof:
(i) shall subject any Lender to any tax of any kind whatsoever
with respect to this Agreement, any Note, any Letter of Credit, any
L/C Application or any Eurodollar Loan made by it, or change the
basis of taxation of payments to such Lender in respect thereof
(except for Non-Excluded Taxes covered by subsection 4.13, changes
in the rate or computation of tax on the overall net income of such
Lender, franchise taxes imposed in lieu of net income taxes and
doing business taxes);
(ii) shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against
assets held by, deposits or other liabilities in or for the account
of, advances, loans or other extensions of
Amended and Restated Credit Agreement
33
credit by, or any other acquisition of funds by, any office of such
Lender which is not otherwise included in the determination of the
Eurodollar Rate hereunder, or
(iii) shall impose on such Lender any other condition;
and the result of any of the foregoing is to increase the cost to such Lender,
by an amount which such Lender deems to be material, of making, converting into,
continuing or maintaining Eurodollar Loans or issuing or participating in
Letters of Credit or to reduce any amount receivable hereunder in respect
thereof, then, in any such case, the Borrower shall promptly pay such Lender
such additional amount or amounts as will compensate such Lender for such
increased cost or reduced amount receivable.
(b) If any Lender shall have determined that the adoption of or any
change in any Requirement of Law regarding capital adequacy or in the
interpretation or application thereof or compliance by such Lender or any
corporation controlling such Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) from any Governmental
Authority made subsequent to the date hereof shall have the effect of reducing
the rate of return on such Lender's or such corporation's capital as a
consequence of its obligations hereunder or under any Letter of Credit to a
level below that which such Lender or such corporation could have achieved but
for such adoption, change or compliance (taking into consideration such Lender's
or such corporation's policies with respect to capital adequacy) by an amount
deemed by such Lender to be material, then from time to time, the Borrower shall
promptly pay to such Lender such additional amount or amounts as will compensate
such Lender for such reduction.
(c) If any Lender becomes entitled to claim any additional amounts
pursuant to this subsection, it shall promptly notify the Borrower (with a copy
to the Administrative Agent) of the event by reason of which it has become so
entitled. A certificate as to any additional amounts payable pursuant to this
subsection submitted by such Lender to the Borrower (with a copy to the
Administrative Agent) shall be conclusive in the absence of manifest error. The
agreements in this subsection shall survive the termination of this Agreement
and the payment of the Loans and all other amounts payable hereunder.
4.13. Taxes. (a) All payments made by the Borrower under this Agreement
and any Notes shall be made free and clear of, and without deduction or
withholding for or on account of, any present or future income, stamp or other
taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now
or hereafter imposed, levied, collected, withheld or assessed by any
Governmental Authority, excluding net income taxes, franchise taxes (imposed in
lieu of net income taxes) and doing business taxes imposed on the Administrative
Agent or any Lender as a result of a present or former connection between the
Administrative Agent or such Lender and the jurisdiction of the Governmental
Authority imposing such tax or any political subdivision or taxing authority
thereof or therein (other than any such connection arising solely from the
Administrative Agent or such Lender having executed, delivered or performed its
obligations or received a payment under, or enforced, this Agreement or any
Note). If any such non-excluded taxes, levies, imposts, duties, charges, fees
deductions or withholdings ("Non-Excluded Taxes") are required to be withheld
from any amounts payable to the Administrative Agent or any Lender hereunder or
under any Note, the amounts so payable to the Administrative Agent or such
Amended and Restated Credit Agreement
34
Lender shall be increased to the extent necessary to yield to the Administrative
Agent or such Lender (after payment of all Non-Excluded Taxes) interest or any
such other amounts payable hereunder at the rates or in the amounts specified in
this Agreement, provided, however, that the Borrower shall not be required to
increase any such amounts payable to any Non-U.S. Lender if such Non-U.S. Lender
fails to comply with the requirements of paragraph (b) of this subsection.
Whenever any Non-Excluded Taxes are payable by the Borrower, as promptly as
possible thereafter the Borrower shall send to the Administrative Agent for its
own account or for the account of such Lender, as the case may be, a certified
copy of an original official receipt received by the Borrower showing payment
thereof. If, when the Borrower is required by this subsection 4.13(a) to pay any
Non-Excluded Taxes, the Borrower fails to pay any Non-Excluded Taxes when due to
the appropriate taxing authority or fails to remit to the Administrative Agent
the required receipts or other required documentary evidence, the Borrower shall
indemnify the Administrative Agent and the Lenders for any incremental taxes,
interest or penalties that may become payable by the Administrative Agent or any
Lender as a result of any such failure. The agreements in this subsection shall
survive the termination of this Agreement and the payment of the Loans and all
other amounts payable hereunder.
(b) Each Lender (or Transferee) that is not a citizen or resident of
the United States of America, a corporation, partnership or other entity created
or organized in or under the laws of the United States of America, or any estate
or trust that is subject to federal income taxation regardless of the source of
its income (a "Non-U.S. Lender") shall deliver to the Borrower and the
Administrative Agent (or, in the case of a Participant, to the Lender from which
the related participation shall have been purchased) two copies of either U.S.
Internal Revenue Service form ▇-▇▇▇▇, ▇▇▇▇ ▇-▇▇▇▇ or successors forms, and is
otherwise exempt from IRS interest withholding obligations, or, in the case of a
Non-U.S. Lender claiming exemption from U.S. federal withholding tax under
Section 871(h) or 881(c) of the Code with respect to payments of "portfolio
interest," a Form W-8, or any subsequent versions thereof or successors thereto
(and, if such Non-U.S. Lender delivers a Form W-8, an annual certificate
representing that such Non-U.S. Lender (i) is not a "bank" for purposes of
Section 881(c) of the Code (and is not subject to regulatory or other legal
requirements as a bank in any jurisdiction, and has not been treated as a bank
in any filing with or submission made to any Governmental Authority or rating
agency), (ii) is not a 10% shareholder (within the meaning of Section 871 (h)(3
)(B) of the Code) of the Borrower and (iii) is not a controlled foreign
corporation related to the Borrower (within the meaning of Section 864(d)(4) of
the Code)), properly completed and duly executed by such Non-U.S. Lender
claiming complete exemption from U.S. federal withholding tax on all payments by
the Borrower under this Agreement and the other Loan Documents, along with such
other additional forms as the Borrower, the Administrative Agent (or, in the
case of a Participant, the Lender from which the related participation shall
have been purchased) may reasonably request to establish the availability of
such exemption. Such forms shall be delivered by each Non-U.S. Lender on or
before the date it becomes a party to this Agreement (or, in the case of any
Participant, on or before the date such Participant purchases the related
participation), and if a Person cannot deliver such forms because such Person is
not exempt from U.S. federal withholding tax under the Code as described above,
then such Person shall not become a Lender or Transferee hereunder or a party
hereto.
4.14. Indemnity. The Borrower agrees to indemnify each Lender and to hold
each Lender harmless from any loss or expense which such Lender may sustain or
incur (other than
Amended and Restated Credit Agreement
35
through such Lender's gross negligence or willful misconduct) as a consequence
of (a) default by the Borrower in making a borrowing of, conversion into or
continuation of Eurodollar Loans after the Borrower has given a notice
requesting the same in accordance with the provisions of this Agreement, (b)
default by the Borrower in making any prepayment of a Eurodollar Loan after the
Borrower has given a notice thereof in accordance with the provisions of this
Agreement or (c) the making of a prepayment of or a conversion of Eurodollar
Loans on a day which is not the last day of an Interest Period with respect
thereto. Such indemnification may include an amount equal to the excess, if any,
of (i) the amount of interest which would have accrued on the amount so prepaid,
or converted, or not so borrowed, converted or continued, for the period from
the date of such prepayment or conversion or of such failure to borrow, convert
or continue to the last day of the applicable Interest Period (or, in the case
of a failure to borrow, convert or continue, the Interest Period that would have
commenced on the date of such failure) in each case at the applicable rate of
interest for such Eurodollar Loans provided for herein (excluding, however, the
percentage added to the Eurodollar Rate pursuant to subsection 4.1, (a) to the
extent included therein) over (ii) the amount of interest (as reasonably
determined by such Lender) which would have accrued to such Lender on such
amount by placing such amount on deposit for a comparable period with leading
banks in the interbank eurodollar market. This covenant shall survive the
termination of this Agreement and the payment of the Loans and all other amounts
payable hereunder.
4.15. Change of Lending Office. (a) Each Lender agrees that if it makes
any demand for payment under subsection 4.12 or 4.13(a), or if any adoption or
change of the type described in subsection 4.11 shall occur with respect to it,
it will use reasonable efforts (consistent with its internal policy and legal
and regulatory restrictions and so long as such efforts would not be
disadvantageous to it, as determined in its sole discretion) to designate a
different lending office if the making of such a designation would reduce or
obviate the need for the Borrower to make payments under subsection 4.12 or
4.13(a), or would eliminate or reduce the effect of any adoption or change
described in subsection 4.11.
(b) If any Lender requests compensation under subsection 4.12, or if
the Borrower is required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to subsection
4.13, or if any Lender defaults in its obligation to fund Loans hereunder, then
the Borrower may, at its expense and effort, upon notice to such Lender and the
Administrative Agent, require such Lender to, and such Lender promptly shall,
assign and delegate, without recourse (in accordance with and subject to the
restrictions contained in subsection 11.6), all its interests, rights and
obligations under this Agreement to an assignee that shall assume such
obligations (which assignee may be another Lender, if a Lender accepts such
assignment); provided that (i) if such assignee is not a Lender or an Affiliate
thereof, the Borrower shall have received the prior written consents of the
Administrative Agent and Issuing Lender which consents shall not unreasonably be
withheld, (ii) such Lender shall have received payment of an amount equal to the
outstanding principal of its Loans and participations in Letters of Credit,
accrued interest thereon, accrued fees and all other amounts payable to it
hereunder, from the assignee (at least to the extent of such outstanding
principal) and the Borrower (in the case of all other amounts) and (iii) in the
case of any such assignment resulting from a claim for compensation under
subsection 4.12 or payments required to be made pursuant to subsection 4.13,
such assignment will result in a reduction in such compensation or payments
compared to the compensation or payments payable to the assigning
Amended and Restated Credit Agreement
36
Lender, A Lender shall not be required to make any such assignment and
delegation if, prior thereto, as a result of a waiver by such Lender or
otherwise, the circumstances entitling the Borrower to require such assignment
and delegation no longer exist or cease to apply.
4.16. Collateral Security
(a) Closing Date. To secure the performance by the Borrower of the
Obligations hereunder and under the Notes, Security Documents and any Hedging
Agreement, whether now or hereafter incurred, matured or unmatured, direct or
contingent, including extensions, modifications, renewals and increases thereof,
and substitutions therefore, the Borrower shall, as of the Closing Date, have:
(i) pursuant to the Pledge Agreement, granted and assigned to
the Administrative Agent, for the ratable benefit of the Lenders and
the Hedge Parties, a first priority Lien on all of its shares of
stock in each domestic Subsidiary and the cash proceeds therefrom;
and
(ii) pursuant to the Mortgages and the Security Agreement,
granted and assigned to the Administrative Agent, for the ratable
benefit of the Lenders and the Hedge Parties, a first priority Lien,
subject only to Permitted Liens, on not less than 75% of the Present
Value of the Oil and Gas Properties of the Borrower and its
Subsidiaries (the "Continuing 75% Test") and all of their personal
property, related assets and the cash proceeds of all of the
foregoing.
(b) Subsequently Acquired Property. If the Borrower or any of its
Subsidiaries (or newly organized Subsidiaries) shall, following the Closing
Date, acquire additional Oil and Gas Properties, the Borrower shall grant
security interests and mortgage Liens to the Administrative Agent, for the
ratable benefit of the Lenders and the Hedge Parties, in and on any such
property as provided in Section 7.9 hereof.
(c) Form of Security Documents. The granting and assigning of such
security interests and Liens by the Borrower and each of its Subsidiaries shall
be pursuant to the Security Documents in form and substance reasonably
satisfactory to the Administrative Agent.
(d) Title Work. As of the Closing Date, the Borrower shall have
furnished to the Administrative Agent title documents reasonably satisfactory to
the Administrative Agent with respect to the title and Lien status of at least
70% of the Present Value of the Oil and Gas Properties of the Borrower and its
Subsidiaries. At or prior to the addition of any subsequently acquired Oil and
Gas Properties to the collateral pursuant to Section 4.16(b) above, the Borrower
shall furnish to the Administrative Agent title documents reasonably
satisfactory to the Administrative Agent with respect to the title and Lien
status of a sufficient number of subsequently acquired Oil and Gas Properties so
that the Administrative Agent shall at all times have title documents with
respect to at least 70% of the Present Value of the Oil and Gas Properties of
the Borrower and its Subsidiaries (the "Continuing 70% Test"). If at any time
after the Closing Date, the Borrower fails to provide title documents reasonably
satisfactory to the Administrative Agent for a sufficient number of Oil and Gas
Properties to meet the Continuing 70% Test, such failure shall not constitute an
Event of Default, but the Administrative Agent
Amended and Restated Credit Agreement
37
may redetermine the Borrowing Base by written notice to the Borrower as required
to bring the Borrower into compliance with the Continuing 70% Test until such
title documents are provided. Without regard to whether the Borrower or any
Subsidiary provides satisfactory title documents with respect to a particular
Oil and Gas Property owned by such Person, such Oil and Gas Property shall, if
necessary to meet the requirements of Section 7.9 hereof, be encumbered by a
Mortgage in favor of the Administrative Agent for the ratable behalf of the
Lenders and the Hedge Parties, and shall be included in the collateral.
(e) Security for Hedging Agreements. The Administrative Agent and
the Lenders agree that upon execution and delivery of a Hedging Agreement by a
Hedge Party, such Hedge Party shall possess a pari passu Lien in the collateral
provided in the Security Documents and the cash proceeds therefrom as security
for the obligations of the Borrower and the other Subsidiaries under the Hedging
Agreement.
SECTION 5
REPRESENTATIONS AND WARRANTIES
To induce the Administrative Agent and the Lenders to enter into this
Agreement and to make the Loans and issue or participate in the Letters of
Credit, the Borrower hereby represents and warrants to the Administrative Agent
and each Lender that:
5.1. Financial Condition. (a) (i) The consolidated balance sheet of the
Borrower and its consolidated Subsidiaries at December 31, 2003 and the related
consolidated statements of operations, of cash flows and of changes in
stockholders' equity for the fiscal year ended on such date, together with the
related notes and schedules thereto, reported on by BDO ▇▇▇▇▇▇▇, and (ii) the
unaudited consolidated balance sheet of the Borrower and its consolidated
Subsidiaries as at September 30, 2004, in each case, together with the related
consolidated statements of operations, of cash flow, and of changes in
stockholders' equity for each of the fiscal quarters then ended, in each case
copies of which have heretofore been furnished to each Lender, present fairly in
all material respects the consolidated financial condition of the Borrower and
its consolidated Subsidiaries as at such dates, and the consolidated results of
their operations and their consolidated cash flows for the respective periods
then ended, in conformity with GAAP.
(b) All such financial statements referred to in subsection 5.1(a),
including the related schedules and notes thereto, have been prepared in
accordance with GAAP applied consistently throughout the periods involved
(except as approved by such accountants or Responsible Officer, as the case may
be, and as disclosed therein). On the Closing Date, neither the Borrower nor any
of its consolidated Subsidiaries have, at the date of the most recent balance
sheet referred to above, any material Guarantee Obligation, contingent liability
or liability for taxes, or any long-term lease, outstanding debt or Lien or
unusual forward or long-term commitment, including, without limitation, any
interest rate or foreign currency swap or exchange transaction, which is not
disclosed in the financial statements referred to in subsection 5.1(a) or in the
notes thereto to the extent required by GAAP.
5.2. No Change. (a) Since September 30, 2004, there has been no
development, circumstance or event which has had or could reasonably be expected
to have a Material Adverse Effect (provided that any change in non-cash charges
or expenses accrued by the Borrower to
Amended and Restated Credit Agreement
38
meet ceiling test levels in conformity with Securities and Exchange Commission
Regulation S-X article 4-10(C)(4), in and of itself, shall not be deemed to be a
violation of this subsection 5.2(a)), and (b) during the period from January 1,
2004 to and including the date hereof, no dividends or other distributions have
been declared, paid or made upon the Capital Stock of the Borrower nor, except
as disclosed in the Borrower's Form 10-Q for the quarter ended September 30,
2004, has any of the Capital Stock of the Borrower been redeemed, retired,
purchased or otherwise acquired for value by the Borrower or any of its
Subsidiaries.
5.3. Corporate Existence; Compliance with Law. Each of the Borrower and
its Subsidiaries (a) is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization, (b) has the corporate
power and authority, and the legal right, to own and operate its Property, to
lease the Property it operates as lessee and to conduct the business in which it
is currently engaged, (c) is duly qualified as a foreign corporation and in good
standing under the laws of each jurisdiction where its ownership, lease or
operation of Property or the conduct of its business requires such qualification
except to the extent that the failure to be so qualified and in good standing
could not reasonably be expected to have, in the aggregate, a Material Adverse
Effect and (d) is in compliance with all applicable Requirements of Law
(including, without limitation, Environmental Laws) except to the extent that
the failure to comply therewith could not reasonably be expected to have, in the
aggregate, a Material Adverse Effect.
5.4. Corporate Power; Authorization; Enforceable Obligations. The Borrower
and each of the other Loan Parties has the corporate power and authority, and
the legal right, to make, deliver and perform the Loan Documents to which it is
a party and, in the case of the Borrower, to borrow hereunder and has taken all
necessary corporate action to authorize the execution, delivery and performance
of the Loan Documents to which it is a party. No consent or authorization of,
filing with, notice to or other act by or in respect of, any Governmental
Authority or any other Person is required in connection with the borrowings
hereunder or the delivery, performance, validity or enforceability of the Loan
Documents to which each Loan Party is a party other than those which have been
obtained and are in full force and effect. This Agreement has been, and each
other Loan Document to which any Loan Party is a party will be, duly executed
and delivered on behalf of such Loan Party. This Agreement constitutes, and each
other Loan Document to which any Loan Party is a party when executed and
delivered will constitute, a legal, valid and binding obligation of such Loan
Party enforceable against such Loan Party in accordance with its terms, subject
to the effects of bankruptcy, insolvency, fraudulent transfer or conveyance,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally, general equitable principles (whether considered in
a proceeding in equity or at law) and an implied covenant of good faith and fair
dealing.
5.5. No Legal Bar. The execution, delivery and performance of the Loan
Documents, the granting of the Liens under the Security Documents, the
borrowings hereunder and the use of the proceeds thereof will not violate any
applicable Requirement of Law or Contractual Obligation of the Borrower or of
any of its Subsidiaries and will not result in, or require, the creation or
imposition of any Lien on any of its or their respective Properties or revenues
pursuant to any such Requirement of Law or Contractual Obligation, other than
any Lien created pursuant to the Security Documents.
Amended and Restated Credit Agreement
39
5.6. No Material Litigation. No litigation, investigation or proceeding of
or before any arbitrator or Governmental Authority is pending or, to the
knowledge of the Borrower, threatened by or against the Borrower or any of its
Subsidiaries or against any of its or their respective Properties or revenues
(a) with respect to any of the Loan Documents or any of the transactions
contemplated hereby or thereby, or (b) which could reasonably be expected to
have a Material Adverse Effect.
5.7. No Default. Neither the Borrower nor any of its Subsidiaries is in
default under or with respect to any of its Contractual Obligations in any
respect which could reasonably be expected to have a Material Adverse Effect. No
Default or Event of Default has occurred and is continuing.
5.8. Ownership of Property; Liens. (a) Except for the Oil and Gas
Properties, the Borrower and its Subsidiaries each have good title in fee simple
to, or a valid leasehold interest in, all its material real Property and
material interests in real Property, and good title to, or a valid leasehold
interest in, all its other material Property, and none of such Property is
subject to any Lien except as permitted by subsection 8.3.
(b) The Borrower and its Subsidiaries each have good and defensible
title to all of its Oil and Gas Properties which are not personal property and
good title to all such Oil and Gas Properties which are personal property and
material to the Borrower and its Subsidiaries taken as a whole, except for (i)
such imperfections of title as do not in the aggregate materially detract from
the value thereof to, or the use thereof in, the business of the Borrower or any
of its Subsidiaries, (ii) Oil and Gas Properties and interests therein disposed
of since the date of the most recent Reserve Report as permitted by subsection
8.6 hereof, and (iii) Liens permitted by subsection 8.3 hereof. The quantum and
nature of the interest of the Borrower and its Subsidiaries in and to the Oil
and Gas Properties as set forth in each Reserve Report includes the entire
interest of the Borrower and its Subsidiaries in such Oil and Gas Properties as
of the date of such Reserve Report and are complete and accurate in all material
respects as of the date of such Reserve Report; and there are no "back-in" or
"reversionary" interests held by third parties which could materially reduce the
interest of the Borrower and its Subsidiaries in such Oil and Gas Properties
except as expressly set forth in such Reserve Report. The ownership of the Oil
and Gas Properties by the Borrower and its Subsidiaries shall not in any
material respect obligate any such Person to bear the costs and expenses
relating to the maintenance, development or operations of each such Oil and Gas
Property in an amount in excess of the working interest of such Person in each
Oil and Gas Property set forth in the most recent Reserve Report.
5.9. Intellectual Property. Each of the Borrower and its Subsidiaries
owns, or is licensed to use, all trademarks, tradenames, copyrights, technology,
know-how and processes necessary for the conduct of its business as currently
conducted except for those the failure to own or license which could not
reasonably be expected to have a Material Adverse Effect (the "Intellectual
Property"). No claim has been asserted and is pending by any Person challenging
or questioning the use of any such Intellectual Property or the validity or
effectiveness of any such Intellectual Property, nor does the Borrower know of
any valid basis for any such claim which could reasonably be expected to have a
Material Adverse Effect. The use of such Intellectual Property by the Borrower
and its Subsidiaries does not infringe on the rights of any
Amended and Restated Credit Agreement
40
Person, except for such claims and infringements that, in the aggregate, could
not reasonably be expected to have a Material Adverse Effect.
5.10. No Burdensome Restrictions. No applicable Requirement of Law or
Contractual Obligation of the Borrower or any of its Subsidiaries has had during
the last fiscal year of the Borrower, or could reasonable be expected to have, a
Material Adverse Effect.
5.11. Taxes. Each of the Borrower and its Subsidiaries has filed all
material tax returns which, to the knowledge of such Loan Party, are required to
be filed by it and has paid or caused to be paid all taxes shown on said returns
and all assessments, fees and other governmental charges levied upon it or upon
any of its Property or income which are due and payable, other than such taxes,
assessments, fees and other governmental charges, if any, as are being
diligently contested in good faith and by appropriate proceedings and with
respect to which there have been established adequate reserves on the books of
the Borrower or its Subsidiaries, as the case may be, in accordance with GAAP.
No tax lien has been filed and, to the knowledge of the Borrower, no claim is
being asserted, with respect to any such taxes or assessments, fees or other
governmental charges.
5.12. Federal Reserve Regulations. No part of the proceeds of any Loans
will be used for "purchasing" or "carrying" any "margin stock" within the
respective meanings of each of the quoted terms under Regulation U of the Board
of Governors of the Federal Reserve System as now and from time to time
hereafter in effect. If requested by any Lender or the Administrative Agent, the
Borrower will furnish to the Administrative Agent and each Lender a statement to
the foregoing effect in conformity with the requirements of FR Form U-1 referred
to in said Regulation U. The Loans and other transactions contemplated hereunder
will not violate the provisions of Regulations T and X.
5.13. ERISA. Neither a Reportable Event nor an "accumulated funding
deficiency" (within the meaning of Section 412 of the Code or Section 302 of
ERISA) has occurred during the five-year period prior to the date on which this
representation is made or deemed made with respect to any Plan, and each Plan
has complied in all material respects with the applicable provisions of ERISA
and the Code. No termination of a Single Employer Plan has occurred, and no Lien
in favor of the PBGC or a Plan has arisen, during such five-year period. The
present value of all accrued benefits under each Single Employer Plan (based on
those assumptions used to fund such Plans) did not, as of the last annual
valuation date prior to the date on which this representation is made or deemed
made, exceed the value of the assets of such Plan allocable to such accrued
benefits. Neither the Borrower nor any Commonly Controlled Entity has had a
complete or partial withdrawal from any Multiemployer Plan, and neither the
Borrower nor any Commonly Controlled Entity would become subject to any
liability under ERISA if the Borrower or any such Commonly Controlled Entity
were to withdraw completely from all Multiemployer Plans as of the valuation
date most closely preceding the date on which this representation is made or
deemed made. No such Multiemployer Plan is in Reorganization or Insolvent.
5.14. Investment Company Act; Other Regulations. Neither the Borrower nor
any of its Subsidiaries is (a) an "investment company," or a company
"controlled" by an "investment company," within the meaning of the Investment
Company Act of 1940, as amended or (b) a
Amended and Restated Credit Agreement
41
"holding company" as defined in, or subject to regulation under, the Public
Utility Holding Company Act of 1935. Neither the Borrower nor any of its
Subsidiaries is subject to regulation under any Federal or State statute or
regulation (other than Regulation X of the Board of Governors of the Federal
Reserve System) which limits its ability to incur Indebtedness.
5.15. Subsidiaries. The Persons listed on Schedule 5.15 constitute all the
Subsidiaries of the Borrower at the date hereof.
5.16. Purpose of Loans. The proceeds of the Loans and the Letters of
Credit will be used (a) to refinance certain indebtedness of the Borrower
arising under the Existing Credit Facility, and to pay fees and expenses related
thereto, (b) to repay the Fortis Subordinated Debt, and (c) after the Closing
Date, for working capital and for the general corporate purposes of the Borrower
and its Subsidiaries in the ordinary course of business, including (without
limiting the generality of the foregoing) the exploration, exploitation,
development and acquisition of Oil and Gas Properties.
5.17. Environmental Matters. Except as set forth on Schedule 5.17, and
other than exceptions to any of the following that could not, in the aggregate,
reasonably be expected to either (a) result in the existence of an unsatisfied
liability in excess of a Material Environmental Amount or (b) give rise to a
Material Adverse Effect or materially adversely affect the value of the
Mortgaged Properties taken as a whole:
(a) each of the Borrower and its Subsidiaries: (i) is, and within
the period of all applicable statutes of limitation has been in compliance with
all applicable Environmental Laws; (ii) holds all Environmental Permits (each of
which is in full force and effect) required for any of its current or planned
operations or for any Property owned, leased, or otherwise operated by it; (iii)
is, and within the period of all applicable statutes of limitation has been, in
compliance with all of its Environmental Permits; and (iv) reasonably believes
that (A) each of its Environmental Permits will be timely renewed without
expense, (B) any additional Environmental Permits which it has reason to believe
will be required will be timely obtained without expense, and (C) the costs of
complying with such renewed or additional Environmental Permits and any other
Environmental Laws applicable to or reasonably expected to apply to the Borrower
and its Subsidiaries will not exceed the Borrower's and its Subsidiaries'
existing costs of complying with Environmental Permits and Environmental Laws.
(b) Materials of Environmental Concern have not been transported,
disposed of, emitted, discharged, or otherwise released or threatened to be
released, to or at any real Property presently or formerly owned, leased or
operated by the Borrower or any Subsidiary or at any other location, which could
reasonably be expected to (i) give rise to liability of the Borrower or any
Subsidiary under any applicable Environmental Law or (ii) interfere with the
Borrower's continued operations.
(c) no judicial, administrative, or arbitral proceeding (including
any notice of violation or alleged violation) under or relating to any
Environmental Law to which the Borrower or any Subsidiary is, or to the
knowledge of the Borrower will be, named as a party is pending or, to the
knowledge of the Borrower, threatened.
Amended and Restated Credit Agreement
42
(d) the Borrower has not received any written request for
information, or been notified that it or any Subsidiary is a potentially
responsible party under the federal Comprehensive Environmental Response,
Compensation, and Liability Act or any similar Environmental Law, or with
respect to any Materials of Environmental Concern.
(e) neither the Borrower nor any Subsidiary has entered into or
agreed to any consent decree, order, or settlement or other agreement, nor is
subject to any judgment, decree, or order or other agreement, in any judicial,
administrative, arbitral, or other forum, relating to compliance with or
liability under any Environmental Law.
(f) neither the Borrower nor any Subsidiary has assumed or retained,
by contract or operation of law, any liabilities of any kind, fixed, contingent
or otherwise, under any Environmental Law.
5.18. No Material Misstatements. (a) All written information, reports,
financial statements, exhibits and schedules (including, without limitation, the
Borrower's report on Form 10-K for the year ended December 31, 2003, as filed
with the Securities and Exchange Commission) furnished to the Administrative
Agent or any Lender by or on behalf of the Borrower or any of its Subsidiaries
in connection with the negotiation of any Loan Document or included therein or
delivered pursuant thereto, when taken as a whole, did not contain, and as they
may be amended, supplemented or modified from time to time, will not contain, as
of the date such statements were made, any untrue statements of a material fact
and did not omit, and as they may be amended, supplemented or modified from time
to time, will not omit, to state as of the date such statements were made, any
material fact necessary in order to make the statements contained therein, in
the light of the circumstances under which they were, are or will be made, not
materially misleading.
(b) All projections and estimates concerning the Borrower and its
Subsidiaries that are or have been made available to the Administrative Agent or
any Lender by or on behalf of the Borrower or any of its Subsidiaries have been
or will be prepared based on good faith estimates and based upon assumptions
believed by the Borrower to be reasonable in all material respects at the time
of such preparation.
(c) The leases contributing to the Loan Parties' interests in those
▇▇▇▇▇ listed on Schedule 5.18(c) hereto (which ▇▇▇▇▇ are further identified
under the same identifying name in Borrower's Reserve Report dated as of
September 30, 2004) are described on Exhibit "A" to one or more of the
instruments constituting or otherwise covered by the Mortgages. Further, those
title materials referenced on this Schedule 5.18(c) as relating to any
particular well listed thereon relate to such well.
5.19. Insurance. Each of the Borrower and its Subsidiaries carries and
maintains with respect to its insurable properties insurance (including, to the
extent consistent with past practices, self-insurance) with financially sound
and reputable insurers of the types, to such extent and against such risks as is
customary with companies in the same or similar businesses.
5.20. Future Commitments. As of the date hereof and as of the Closing
Date, except as set forth on Schedule 5.20, on a net basis there are no material
gas imbalances, material take-or-
Amended and Restated Credit Agreement
43
pay or other prepayments with respect to any Oil and Gas Property of the
Borrower or any Subsidiary (or, in the case of Oil and Gas Properties operated
by operators other than the Borrower or its Subsidiaries, to the Borrower's
knowledge after reasonable investigation) which would require the Borrower or
any Subsidiary to deliver Hydrocarbons produced from Oil and Gas Properties at
some future time without then or thereafter receiving full payment therefor.
5.21. Security Documents. (a) The provisions of the Pledge Agreement
delivered to the Administrative Agent are effective to create in favor of the
Administrative Agent, for the ratable benefit of the Lenders and the Hedge
Parties, a legal, valid and enforceable security interest in the Pledged
Securities and proceeds thereof and, when certificates representing or
constituting the Pledged Securities are delivered to the Administrative Agent,
the Pledge Agreement shall constitute a fully perfected first priority lien on,
and security interest in, all right, title and interest of the pledgor party
therein in such Pledged Securities and the proceeds thereof, in each case prior
and superior in right to any other Person.
(b) On the Closing Date, the shares of Capital Stock listed on
Schedule I to the Pledge Agreement will constitute all the issued and
outstanding shares of Capital Stock of the direct and indirect Subsidiaries of
the Borrower; all such shares have been duly and validly issued and are fully
paid and nonassessable; and the relevant Pledgor of said shares is the record
and beneficial owner of said shares.
(c) The provisions of the Mortgages will be effective to grant to
the Administrative Agent, for the ratable benefit of the Lenders and the Hedge
Parties, legal, valid and enforceable mortgage liens on all of the right, title
and interest of the Borrower and its Subsidiaries in the mortgaged property
described therein. Such Mortgages have been recorded in the appropriate
recording office and constitute perfected first liens on, and security interest
in, such mortgaged property.
(d) The provisions of the Security Agreement delivered to the
Administrative Agent are effective to create in favor of the Administrative
Agent, for the ratable benefit of the Lenders and the Hedge Parties, a legal,
valid and enforceable security interest in the collateral described therein and
proceeds thereof and, upon the filing of UCC-1 Financing Statements with the
secretary of state of each jurisdiction of formation for each of the Loan
Parties, the Security Agreement shall constitute a fully perfected first
priority lien on, and security interest in, all right, title and interest of the
applicable Loan Party in such collateral and the proceeds thereof, in each case
prior and superior in right to any other Person.
5.22. Immaterial Subsidiaries. The value of the assets owned by the
Immaterial Subsidiaries does not exceed $1,000,000 in the aggregate.
SECTION 6
CONDITIONS PRECEDENT
6.1. Conditions to Closing Date. The Closing Date shall occur upon, and
the obligations of the Lenders to make Extensions of Credit hereunder shall be
subject to, the satisfaction of the following conditions precedent:
Amended and Restated Credit Agreement
44
(a) Loan Documents. The Administrative Agent shall have received
(with the number of original counterparts requested by the Administrative Agent)
(i) this Agreement, executed and delivered by a duly authorized officer of the
Borrower, (ii) the Assignment, executed and delivered by a duly authorized
officer of Societe Generale, the Administrative Agent, and each Lender as of the
Closing Date, (iii) the Guarantee Agreement or an amendment thereto, executed
and delivered by a duly authorized officer of each Loan Party thereto and (iv)
any Revolving Credit Note requested by a Lender pursuant to Section 2.3(e)
payable to the order of such requesting Lender in the amount of its Revolving
Credit Commitment.
(b) Security Documents. The Administrative Agent shall have received
(with the number of original counterparts requested by the Administrative Agent)
(i) the Pledge Agreement or an amendment thereto, executed and delivered by a
duly authorized officer of each Loan Party thereto, together with certificates
representing the Pledged Securities accompanied by undated stock powers executed
in blank, (ii) the Mortgage Amendment, executed and delivered by a duly
authorized officer of each Loan Party thereto, (iii) the Assignment of Liens,
executed and delivered by a duly authorized officer of Societe Generale as
administrative agent under the Existing Credit Facility, (iv) the Security
Agreement or an amendment thereto, executed and delivered by a duly authorized
officer of each Loan Party thereto, and (v) acknowledgment copies or other
evidence of the proper filing of Financing Statements Amendments (Form UCC-3)
under the Uniform Commercial Code of all jurisdictions to the extent necessary
or desirable or required, in the reasonable judgment of the Administrative
Agent, to perfect the security interests created or purported to be created by
the Pledge Agreement or the Security Agreement.
(c) Continuing 75% Test. The Borrower and its Subsidiaries shall be
in compliance with the Continuing 75% Test with respect to Liens on their Oil
and Gas Properties.
(d) Closing Certificate. The Administrative Agent shall have
received (with the number of original counterparts requested by the
Administrative Agent), a certificate of the Borrower, dated the Closing Date,
substantially in the form of Exhibit F, with appropriate insertions and
attachments, satisfactory in form and substance to the Administrative Agent,
executed by a Responsible Officer of the Borrower.
(e) Corporate Proceedings of the Loan Parties. The Administrative
Agent shall have received (with the number of original counterparts requested by
the Administrative Agent), a copy of the resolutions, in form and substance
satisfactory to the Administrative Agent, of the Board of Directors of each Loan
Party authorizing (i) the execution, delivery and performance of this Agreement
and the Loan Documents to which it is a party, (ii) in the case of the Borrower,
the borrowings contemplated hereunder and (iii) the granting by it of the Liens
created pursuant to the Loan Documents, certified by the Secretary or an
Assistant Secretary of such Loan Party as of the Closing Date, which certificate
shall be in form and substance reasonably satisfactory to the Administrative
Agent and shall state that the resolutions thereby certified have not been
amended, modified, revoked or rescinded.
(f) Loan Party Incumbency Certificates. The Administrative Agent
shall have received (with the number of original counterparts requested by the
Administrative Agent), a certificate of each Loan Party, dated the Closing Date,
as to the incumbency and signature of the officers of such Loan Party executing
any Loan Document reasonably satisfactory in form and
Amended and Restated Credit Agreement
45
substance to the Administrative Agent, executed by the President or any Vice
President and the Secretary or any Assistant Secretary of such Loan Party.
(g) Corporate Documents. The Administrative Agent shall have
received (with the number of original counterparts requested by the
Administrative Agent), true and complete copies of the certificate of
incorporation and by-laws of each Loan Party, certified as of the Closing Date
as complete and correct copies thereof by the Secretary or an Assistant
Secretary of such Loan Party. The Administrative Agent shall have received
certificates from the appropriate Governmental Authority certifying as to the
good standing, existence and authority of each of the Loan Parties in all
jurisdictions where required by the Administrative Agent.
(h) Legal Opinions.
(i) The Administrative Agent shall have received the executed
legal opinion of Fulbright & ▇▇▇▇▇▇▇▇ L.L.P., counsel to the
Borrower and each other Loan Party, in form and substance reasonably
acceptable to the Administrative Agent.
(ii) The Administrative Agent shall have received the executed
legal opinion (other than as to title opinion matters) of ▇▇▇▇▇▇,
Arata, McCollam, ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, L.L.P., Louisiana counsel to the
Administrative Agent, in form and substance reasonably acceptable to
the Administrative Agent.
(iii) The Administrative Agent shall have received such legal
opinions as shall cover such other matters incident to the
transactions contemplated by this Agreement and the other Loan
Documents as the Administrative Agent may reasonably require.
(i) Consents, Licenses and Approvals. All governmental and third
party approvals (including consents) necessary or, in the discretion of the
Administrative Agent, advisable in connection with the continuing operations of
the Borrower and its Subsidiaries and the execution, delivery and performance of
the Loan Documents shall have been obtained and be in full force and effect, and
all applicable waiting periods shall have expired without any action being taken
or threatened by any competent authority which would restrain, prevent or
otherwise impose adverse conditions on this Agreement and the other Loan
Documents and the transactions contemplated hereby and thereby. The
Administrative Agent shall have received, with a counterpart for each Lender, a
certificate of the Borrower as to the foregoing.
(j) Due Diligence. The Administrative Agent and the Lenders shall
have completed satisfactory due diligence review of the assets, liabilities,
business, operations and condition (financial or otherwise) of the Borrower and
its Subsidiaries, including, but not limited, to a review of their Oil and Gas
Properties, Subordinated Indebtedness, and all legal, financial, accounting,
governmental, environmental, tax and regulatory matters, and fiduciary aspects
of the proposed financing.
Amended and Restated Credit Agreement
46
(k) Legal Structure and Capitalization. The Administrative
Agent and the Lenders shall be satisfied with the organization, corporate and
legal structure and capitalization of the Borrower and its Subsidiaries.
(l) Projections; Financial Statements. The Administrative
Agent and the Lenders shall have received true and correct copies of the
Borrower and its Subsidiaries' business and financial plan for the fiscal year
ending December 31, 2005 (the "Projections"), in form and substance satisfactory
to the Administrative Agent. The Administrative Agent and the Lenders shall have
received true and correct copies of the financial statements referred to in
Section 5.1(a).
(m) Fees. The Lenders, the Administrative Agent and the Sole
Lead Arranger shall have received all fees and expenses required to be paid on
or before the Closing Date pursuant to the Fee Letter and for which invoices
have been presented.
(n) Representations and Warranties. Each of the
representations and warranties made by each Loan Party in or pursuant to the
Loan Documents shall be true and correct on and as of such date as if made on
and as of such date (unless such representations and warranties are stated to
relate to a specific earlier date, in which case such representations and
warranties shall be true and correct as of such earlier date).
(o) No Default. No Default or Event of Default shall have
occurred and be continuing on such date.
(p) No Material Adverse Effect. No event or events which,
individually or in the aggregate, has had or is reasonably likely to have a
Material Adverse Effect shall have occurred.
(q) Insurance Certificates. Certificate(s) of insurance naming
the Administrative Agent as loss payee or additional insured evidencing
insurance which meets the requirements of this Agreement and the Security
Documents and which is in amount, form and substance and from an issuer
satisfactory to the Administrative Agent.
(r) Lien Searches. Results of lien, tax and judgment searches
of the UCC Records of the Secretary of State and applicable counties of the
States of Delaware, Louisiana and Texas from a source acceptable to the
Administrative Agent and reflecting no Liens against any of the Collateral as to
which perfection of a Lien is accomplished by the filing of a financing
statement other than in favor of the Administrative Agent.
(s) Assignment of Existing Credit Facility. The Administrative
Agent and the Lenders shall have received sufficient evidence indicating that
simultaneously with the making of the initial Loans hereunder, the obligations
of the Borrower and its Subsidiaries under the Existing Credit Facility
(including, without limitation, any obligations of any Subsidiary of the
Borrower in respect of guaranties and security agreements executed in connection
with such Existing Credit Facility) and the Liens securing the same shall have
been assigned to the Administrative Agent for the benefit of the Lenders and
encumbering the same Property.
47
(t) Title. The Administrative Agent shall be satisfied in its
sole discretion that the Loan Parties' title to their Oil and Gas Properties
satisfies the Continuing 70% Test.
(u) Fortis Subordinated Debt. The Fortis Subordinated Debt
shall have been repaid in full together with all interest due and payable.
(v) Additional Matters. All corporate and other proceedings,
and all documents, instruments and other legal matters in connection with the
transactions contemplated by this Agreement and the other Loan Documents shall
be reasonably satisfactory in form and substance to the Administrative Agent,
and the Administrative Agent shall have received such other documents and legal
opinions in respect of any aspect or consequence of the transactions
contemplated hereby or thereby as it shall reasonably request.
6.2. Conditions to Each Extension of Credit. The agreement of each
Lender to make any Extension of Credit requested to be made by it on any date
(including, without limitation, its initial Loans) is subject to the
satisfaction of the following conditions precedent:
(a) Representations and Warranties. Each of the
representations and warranties made by each Loan Party in or pursuant to the
Loan Documents shall be true and correct on and as of such date as if made on
and as of such date (unless such representations and warranties are stated to
relate to a specific earlier date, in which case such representations and
warranties shall be true and correct as of such earlier date).
(b) No Default. No Default or Event of Default shall have
occurred and be continuing on such date or after giving effect to the Extensions
of Credit requested to be made on such date.
(c) Maintenance of Borrowing Base. After giving effect to the
Extensions of Credit requested to be made on any date, the Aggregate Revolving
Credit Exposure of the Lenders shall not exceed the Borrowing Base then in
effect.
(d) Additional Matters. All corporate and other proceedings,
and all documents, instruments and other legal matters in connection with the
transactions contemplated by this Agreement and the other Loan Documents shall
be reasonably satisfactory in form and substance to the Administrative Agent,
and the Administrative Agent shall have received such other documents and legal
opinions in respect of any aspect or consequence of the transactions
contemplated hereby or thereby as it shall reasonably request.
Each borrowing by, and Letter of Credit issued on behalf of, the Borrower
hereunder shall constitute a representation and warranty by the Borrower as of
the date thereof that the conditions contained in (a), (b) and (c) of this
subsection have been satisfied.
6.3. Determinations Under Section 6. For purposes of determining
compliance with the conditions specified in Section 6.1, each Lender shall be
deemed to have consented to, approved or accepted or to be satisfied with each
document or other matter required thereunder to be consented to or approved by
or acceptable or satisfactory to the Lenders if such Lender has executed and
delivered its signature page to this Agreement to the Administrative Agent.
48
SECTION 7
AFFIRMATIVE COVENANTS
The Borrower hereby agrees that, so long as the Commitments remain in
effect, any Loan, or Letter of Credit or Note remains outstanding and unpaid or
any amount is owing to any Lender or the Administrative Agent hereunder or under
any other Loan Document, the Borrower shall and (except in the case of delivery
of financial information, reports and notices) shall cause each of its
Subsidiaries to:
7.1. Financial Statements. Furnish to the Administrative Agent and to
each of the Lenders:
(a) as soon as available, but in any event within 105 days
after the end of each fiscal year of the Borrower, a copy of the consolidated
balance sheet of the Borrower and its consolidated Subsidiaries as at the end of
such year and the related consolidated statements of operations, cash flows and
changes in stockholders' equity for such year, setting forth in each case in
comparative form the figures for the previous year, reported on without a "going
concern" or like qualification or exception, or qualification arising out of the
scope of the audit, by BDO ▇▇▇▇▇▇▇ or other independent certified public
accountants of nationally recognized standing reasonably acceptable to the
Required Lenders; and
(b) as soon as available, but in any event not later than 50
days after the end of each of the first three quarterly fiscal periods of each
fiscal year of the Borrower and its consolidated Subsidiaries, the unaudited
consolidated balance sheet of the Borrower and its consolidated Subsidiaries as
at the end of such quarter and the related unaudited consolidated statements of
operations, cash flows and changes in stockholders' equity of the Borrower and
its consolidated Subsidiaries for such quarter and the portion of the fiscal
year through the end of such quarter, setting forth in each case in comparative
form the figures for the previous year, certified by a Responsible Officer as
being fairly stated in all material respects (subject to normal year-end and
audit adjustments);
all such financial statements shall be complete and correct in all material
respects and shall be prepared in accordance with GAAP applied consistently
throughout the periods reflected therein and with prior periods (except as
approved by such accountants or officer, as the case may be, and disclosed
therein).
7.2. Certificates; Other Information. Furnish to the Administrative
Agent and to each of the Lenders:
(a) concurrently with the delivery of the audited financial
statements referred to in subsection 5.1(a)(i), a certificate of the independent
certified public accountants reporting on such financial statements stating that
in making the examination necessary therefor no knowledge was obtained of any
Default or Event of Default, except as specified in such certificate;
(b) concurrently with the delivery of the financial statements
referred to in subsections 7.1(a) and (b), a certificate of a Responsible
Officer stating that, to the best of such Officer's knowledge, during such
period (i) no Subsidiary has been formed or acquired (or, if
49
any such Subsidiary has been formed or acquired, the Borrower has complied with
the requirements of subsection 7.9 with respect thereto) and (ii) the Borrower
has observed or performed all of its covenants (and setting forth the
calculations used to determine compliance with the covenants set forth in
subsection 8.1) and other agreements, and satisfied every condition, contained
in this Agreement and the other Loan Documents to be observed, performed or
satisfied by it, and that such officer has obtained no knowledge of any Default
or Event of Default except as specified in such certificate;
(c) within five Business Days after the same are sent, copies
of all financial statements and reports which the Borrower sends to its
stockholders, and within five days after the same are filed, copies of all
financial statements and reports on Form 10-K, 10-Q or 8-K, if any, and all
definitive proxy statements which the Borrower may make to, or file with, the
Securities and Exchange Commission or any successor or analogous Governmental
Authority;
(d) promptly upon receipt thereof, copies of all reports and
management letters submitted to the Borrower or any Subsidiary by independent
public accountants in connection with any interim or special audit of the books
or operations of the Borrower or such Subsidiary made by such accountants;
(e) together with any Reserve Report delivered pursuant to
Section 4.9, (i) a schedule identifying as of the last day of the fiscal period
for which the financial statements are delivered or as of the date of delivery
of such Reserve Report, as the case may be, each commodity fixed price contract
having a term longer than one year then in effect as to which the Borrower or
any of its Subsidiaries is bound which provides for payments during any year of
such contract of $1,000,000 or more, and setting forth the names of the parties
thereto and of any guarantees thereof, and the volumes attributable to each such
contract and (ii) and, a schedule demonstrating compliance with the Continuing
75% Test set forth in Section 4.16(a)(ii), such schedule to set forth the
location and filing information of the recorded Mortgages and the Present Value
of the Oil and Gas Properties subject to each Mortgage;
(f) within 30 days of the commencement of each fiscal year,
annual cash flow projections for such fiscal year of the Borrower, including
quarterly production volumes, revenues, expenses, taxes and budgeted capital
expenditures; and
(g) promptly, such additional financial and other information
concerning the Borrower and its Subsidiaries as any Lender (acting through the
Administrative Agent) may from time to time reasonably request.
7.3. Payment of Obligations. Pay, discharge or otherwise satisfy at or
before maturity or before they become delinquent, as the case may be, all of its
obligations of whatever nature, including, without limitation, taxes,
assessments, fees and other governmental charges, except where (x) the amount or
validity thereof is currently being contested in good faith by appropriate
proceedings and reserves in conformity with GAAP with respect thereto have been
provided on the books of the Borrower or the applicable Subsidiary, as the case
may be, or (y) the failure to pay, discharge or otherwise satisfy such
obligations, in the aggregate, could not reasonably be expected to have a
Material Adverse Effect.
50
7.4. Conduct of Business and Maintenance of Existence; Compliance with
Law and Contractual Obligations. Continue to engage in business of the same
general type as now conducted by it and preserve, renew and keep in full force
and effect its corporate existence and take all reasonable action to maintain
all rights, privileges and franchises necessary or desirable in the normal
conduct of its business, except as otherwise permitted by subsection 8.5; comply
with all Contractual Obligations and Requirements of Law except to the extent
that failure to comply therewith could not reasonably be expected to have, in
the aggregate, a Material Adverse Effect.
7.5. Maintenance of Property; Insurance. Maintain all Property useful
and necessary in its business in accordance with past practices and customary
industry norms, (x) ordinary wear and tear and (y) casualty events which could
not reasonably be expected to have a Material Adverse Effect excepted; maintain
with financially sound and reputable insurance companies insurance of such
types, in such amounts and against such risks as is customary to be maintained
by companies engaged in the same or a similar business in the same general area;
and furnish to the Administrative Agent, upon written request, full information
as to the insurance carried.
7.6. Inspection of Property; Books and Records; Discussions. Keep
proper books of records and account in which full, true and correct entries in
conformity with GAAP and all Requirements of Law shall be made of all dealings
and transactions in relation to its business and activities; and permit
representatives of any Lender to visit and inspect any of its properties and
examine and make abstracts from any of its books and records at any reasonable
time and as often as may reasonably be requested through the Administrative
Agent and to discuss the business, operations, properties and financial and
other condition of the Borrower and its Subsidiaries with officers and employees
of the Borrower and its Subsidiaries and with its independent certified public
accountants.
7.7. Notices. Promptly give notice to the Administrative Agent of:
(a) the occurrence of any Default or Event of Default;
(b) any (i) default or event of default under any Contractual
Obligation of the Borrower or any of its Subsidiaries or (ii) litigation,
investigation or proceeding which may exist at any time between the Borrower or
any of its Subsidiaries and any Governmental Authority, which in the case of
either clause (i) or (ii), if not cured or if adversely determined, as the case
may be, could have, in the opinion of a Responsible Officer, a Material Adverse
Effect;
(c) any litigation or proceeding affecting the Borrower or any
of its Subsidiaries which could reasonably be expected, in the opinion of a
Responsible Officer, to result in an adverse judgment of $3,000,000 or more not
covered by insurance or in which injunctive or similar relief is sought;
(d) the following events, as soon as possible and in any event
within 30 days after the Borrower knows or has reason to know thereof: (i) the
occurrence or expected occurrence of any Reportable Event with respect to any
Plan, a failure to make any required contribution to a Plan, the creation of any
Lien in favor of the PBGC or a Plan or any withdrawal from, or the termination,
Reorganization or Insolvency of, any Multiemployer Plan or (ii) the
51
institution of proceedings or the taking of any other action by the PBGC or the
Borrower or any Commonly Controlled Entity or any Multiemployer Plan with
respect to the withdrawal from, or the terminating, Reorganization or Insolvency
of, any Plan; and
(e) any event or circumstance which has had a Material Adverse
Effect.
Each notice pursuant to this subsection shall be accompanied by a statement of a
Responsible Officer setting forth details of the occurrence referred to therein
and stating what the Borrower and its Subsidiaries have taken or propose to take
with respect thereto.
7.8. Environmental Laws. (a) Except as set forth in Schedule 5.17 and
as, individually or in the aggregate, could not reasonably be expected to either
(i) result in the payment of a Material Environmental Amount or (ii) have a
Material Adverse Effect, (x) comply with all Environmental Laws, and obtain,
comply with and maintain any and all Environmental Permits necessary for its
operations as conducted and as planned; and (y) take all reasonable efforts to
ensure that all of its tenants, subtenants, contractors, subcontractors, and
invitees comply with all Environmental Laws, and obtain, comply with and
maintain any and all Environmental Permits, applicable to any of them.
(b) Except as set forth in Schedule 5.17 and to the extent
that the failure to comply could not reasonably be expected either to (i) result
in the payment of a Material Environmental Amount or (ii) give rise to a
Material Adverse Effect, comply with all orders and directives of all
Governmental Authorities regarding Environmental Laws, other than such orders
and directives as to which an appeal or other appropriate action to contest such
order or directive has been timely and properly taken in good faith.
(c) Prior to acquiring any ownership or leasehold interest in
real property or other interest in any real property that could give rise to the
Borrower being subject to potential significant liability under or violations of
any Environmental Law, which potential liabilities or violations, if incurred,
could reasonably be expected to have a Material Adverse Effect: (i) notify the
Administrative Agent; and (ii) if requested by the Administrative Agent, provide
to the Administrative Agent a written report by an environmental consultant
reasonably acceptable to the Administrative Agent assessing the presence or
potential presence of significant levels of any Materials of Environmental
Concern on, under, in, or about the property, or of other conditions that could
give rise to potentially significant liability or violations of any
Environmental Law.
7.9. Additional Collateral. (a) With respect to any Person that,
subsequent to the Closing Date, becomes a Subsidiary (other than a Foreign
Subsidiary) promptly: (i) cause such Person to become a party to the Guarantee
Agreement and the Security Agreement, pursuant to documentation which is in form
and substance reasonably satisfactory to the Administrative Agent, (ii) cause
the Capital Stock of such Person owned by the Borrower or any Subsidiary to be
pledged to the Administrative Agent, for the ratable benefit of the Lenders and
the Hedge Parties, pursuant to documentation reasonably satisfactory to the
Administrative Agent, and take all actions reasonably necessary or advisable to
cause the Lien thereon to be duly perfected in accordance with all applicable
Requirements of Law, and deliver any certificates representing such Capital
Stock to the Administrative Agent, together with undated stock powers executed
and delivered in blank by a duly authorized officer of the Borrower or such
Subsidiary, as the
52
case may be, and (iii) if requested by the Administrative Agent, deliver to the
Administrative Agent legal opinions relating to the matters described in clauses
(i) and (ii) immediately preceding, which opinions shall be in form and
substance, and from counsel, reasonably satisfactory to the Administrative
Agent.
(b) With respect to any Person that, subsequent to the Closing
Date, becomes a Subsidiary and is a Foreign Subsidiary, promptly: (i) execute
and deliver to the Administrative Agent a new pledge agreement and security
agreement as the Administrative Agent shall deem reasonably necessary or
advisable to grant to the Administrative Agent, for the benefit of the Lenders
and the Hedge Parties, a Lien on the Capital Stock of such Subsidiary which is
owned by the Borrower or any Subsidiary (provided that in no event shall more
than 65% of the Capital Stock of any such Subsidiary be required to be so
pledged), (ii) deliver to the Administrative Agent any certificates representing
such Capital Stock, together with undated stock powers executed and delivered in
blank by a duly authorized officer of the Borrower or such Subsidiary, as the
case may be, and take or cause to be taken all such other actions under the law
of the jurisdiction of organization of such Foreign Subsidiary as may be
reasonably necessary or advisable to perfect such Lien on such Capital Stock and
(iii) if requested by the Administrative Agent, deliver to the Administrative
Agent legal opinions relating to the matters described in clauses (i) and (ii)
immediately preceding, which opinions shall be in form and substance, and from
counsel, reasonably satisfactory to the Administrative Agent.
(c) With respect to the Borrower or any Subsidiary that,
subsequent to the Closing Date, acquires any additional Oil and Gas Properties,
promptly execute and deliver to the Administrative Agent Mortgages or amendments
to Mortgages presently in force granting security interests and Liens to the
Administrative Agent, for the ratable benefit of the Lenders and the Hedge
Parties, such that the Borrower and its Subsidiaries shall be in compliance with
the Continuing 75% Test.
(d) If an Event of Default should occur, the Borrower shall
promptly execute and deliver to the Administrative Agent Mortgages or amendments
to Mortgages presently in force granting security interests and Liens to the
Administrative Agent, for the ratable benefit of the Lenders and the Hedge
Parties, such that the Administrative Agent shall have at all times first
priority perfected Liens on, and security interests in, Oil and Gas Properties
of the Borrower and its Subsidiaries equal to at least 95% of the Present Value.
7.10. Maintenance and Operation of Property. Except to the extent that
the failure to comply could not reasonably be expected to have a Material
Adverse Effect and consistent with the standards of a reasonably prudent
operator under the same circumstances:
(a) Maintain, develop, and operate Borrower's and the
Guarantors' Oil and Gas Properties, and oil and gas gathering assets in a good
and workmanlike manner, and observe and comply with all of the terms and
provisions, express or implied, of all oil and gas leases relating to the
Properties so long as the oil and gas leases are capable of producing
Hydrocarbons in quantities and at prices providing for continued efficient and
profitable operation of business;
53
(b) Comply in all material respects with all contracts and
agreements applicable to or relating to Borrower's and the Guarantors' Oil and
Gas Properties or the production and sale of hydrocarbons and accompanying
elements therefrom;
(c) At all times, maintain, preserve, and keep all operating
equipment used with respect to Borrower's and the Guarantors' Oil and Gas
Properties, and oil and gas gathering assets in proper repair, working order and
condition, and make all necessary or appropriate repairs, renewals,
replacements, additions and improvements thereto so that the efficiency of the
operating equipment shall at all times be properly preserved and maintained,
provided that no item of operating equipment need be so repaired, renewed,
replaced, added to or improved, if Borrower or its Subsidiaries shall in good
faith determine that the action is not necessary or desirable for such Person's
continued efficient and profitable operation of business.
(d) With respect to Borrower's and the Guarantors' Oil and Gas
Properties, and oil and gas gathering assets which are operated by operators
other than Borrower or a Subsidiary, seek to enforce the operators' contractual
obligations to maintain, develop, and operate such Properties subject to the
applicable operating agreements.
(e) If and when any of the ▇▇▇▇▇ located on the Oil and Gas
Properties of the Borrower or its Subsidiaries ceases producing Hydrocarbons in
paying quantities and is of no further use and the Borrower or any other Person
is required to do so under any agreement or law or when doing so would be in
conformity with generally accepted practices then prevalent in the Borrower's
industry, the Borrower will plug and abandon, or cause to be plugged and
abandoned, any and all such ▇▇▇▇▇ in accordance in all material respects with
industry practice and the local state and/or federal laws and regulations then
in force and regulating the plugging of Hydrocarbon ▇▇▇▇▇.
7.11. Further Assurances. Upon the request of the Administrative Agent,
promptly perform or cause to be performed any and all acts and execute or cause
to be executed any and all documents (including, without limitation, financing
statements and continuation statements) for filing under the provisions of the
Uniform Commercial Code or any other Requirement of Law which are necessary or
advisable to maintain in favor of the Administrative Agent, for the benefit of
the Lenders, Liens on the Pledged Securities and on the Oil and Gas Properties
subject to the Mortgages that are duly perfected in accordance with all
applicable Requirements of Law.
SECTION 8
NEGATIVE COVENANTS
The Borrower hereby agrees that, so long as the Commitments remain in
effect, any Loan, Letter of Credit or any Note remains outstanding and unpaid or
any amount is owing to any Lender or the Administrative Agent hereunder or under
any other Loan Document, the Borrower shall not, and shall not (except with
respect to subsection 8.1) permit any Subsidiary to, directly or indirectly:
8.1. Financial Covenant Conditions.
(a) Interest Coverage Ratio. Permit as of the end of any
fiscal quarter, for any period of four consecutive fiscal quarters, the ratio of
EBITDA to Consolidated Interest Expense
54
of the Borrower and its Subsidiaries for such four consecutive fiscal quarters
then ended to be less than 2.5 to 1.0.
(b) Total Debt Leverage Ratio. Permit the ratio of total
Indebtedness to EBITDA, determined on a consolidated basis, of the Borrower and
its Subsidiaries, as of the last day of any fiscal quarter of the Borrower, for
the period of four consecutive fiscal quarters then ended, to be greater than
3.0 to 1.0.
(c) Current Ratio. Permit, as of the end of any fiscal quarter
the ratio of the consolidated current assets of the Borrower and its
Subsidiaries, but including therein the amount of all Loans available but
undrawn hereunder as current assets, and excluding therefrom amounts included
due to the application of FAS 133, to the consolidated current liabilities of
the Borrower and its Subsidiaries (other than (A) current maturities of
Indebtedness arising under this Agreement, (B) amounts included due to the
application of FAS 133 and 143, and (C) accrued obligations to pay in kind
dividends using securities of the Borrower) to be less than 1.0 to 1.0.
(d) Tangible Net Worth. Permit the Consolidated Tangible Net
Worth of the Borrower and its Subsidiaries to be less than $204,500,000 plus (i)
50% of Consolidated Net Income for the period October 1, 2004 to December 31,
2004 and Consolidated Net Income for any fiscal year commencing thereafter, and
(ii) 50% of the net cash proceeds of any equity offering received by the
Borrower or any of its Subsidiaries after September 30, 2004.
8.2. Limitation on Indebtedness. Create, incur, assume or suffer to
exist any Indebtedness, except:
(a) Indebtedness of the Borrower or any Guarantor under any
Loan Document;
(b) Indebtedness outstanding on the date hereof and listed on
Schedule 8.2 and any refinancings, refundings, renewals or extensions thereof on
terms and conditions reasonably acceptable to the Administrative Agent;
(c) Indebtedness of the Borrower under Interest Rate
Protection Agreements entered into in the ordinary course of business of the
Borrower and not for speculative purposes, in each case having terms and
conditions reasonably satisfactory to the Administrative Agent;
(d) Indebtedness of the Borrower under Commodity Hedging
Agreements permitted under subsection 8.16;
(e) Indebtedness of the Borrower issued or owed to any
Wholly-Owned Subsidiary which is a Guarantor (other than Indebtedness incurred
at any time when a Default or Event of Default shall have occurred and be
continuing) and Indebtedness of any Wholly-Owned Subsidiary which is a Guarantor
issued or owed to the Borrower or to any other Wholly-Owned Subsidiary which is
a Guarantor;
(f) Subordinated Indebtedness that is issued on terms which
are satisfactory to the Administrative Agent and the Required Lenders with
respect to provisions regarding maturity, interest rate, covenants, events of
default and subordination language, provided that
55
after giving effect to the issuance of such Subordinated Indebtedness, the
Borrower is in compliance with the covenants contained in subsection 8.1 hereof;
(g) Guarantee Obligations permitted by subsection 8.4;
(h) Indebtedness incurred to finance the acquisition of
equipment or other assets, provided that the amount of such Indebtedness does
not exceed the purchase price of such equipment or other assets, as applicable;
and
(i) Indebtedness of the Borrower and its Wholly-Owned
Subsidiaries created, incurred or assumed after the date hereof not otherwise
permitted pursuant to this subsection 8.2, provided that the aggregate
outstanding principal amount of such Indebtedness shall not exceed $10,000,000
at any one time outstanding.
8.3. Limitation on Liens. Create, incur, assume or suffer to exist any
Lien upon any of its property, assets or revenues, whether now owned or
hereafter acquired, except for the following (and each of the following are
collectively referred to herein as "Permitted Liens"):
(a) Liens for taxes, assessments or other governmental charges
or levies not yet due or which are being contested in good faith by appropriate
proceedings, provided that adequate reserves with respect thereto are maintained
on the books of the Borrower or its applicable Subsidiary, as the case may be,
in conformity with GAAP;
(b) carriers', warehousemen's, mechanics', materialmen's,
landlords', repairmen's or other like Liens arising in the ordinary course of
business securing obligations which are not overdue for a period of more than 60
days or which are being contested in good faith by appropriate proceedings,
which proceedings would have the effect of preventing the forfeiture or sale of
the property or assets subject to any such Lien;
(c) pledges or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance and
other social security legislation;
(d) deposits made to secure the performance of bids, tenders,
trade contracts (other than for borrowed money), leases, statutory obligations,
surety and appeal bonds, performance and return-of-money bonds and other
obligations of a like nature incurred in the ordinary course of business;
(e) easements, rights-of-way, servitudes, permits,
reservations, exceptions, covenants and other restrictions as to the use of real
property and other similar encumbrances incurred in the ordinary course of
business which, with respect to all of the foregoing, do not secure the payment
of Indebtedness of the type described in clauses (a)-(d) of the definition
thereof and which do not materially detract from the value of the Property
subject thereto or materially interfere with the ordinary conduct of the
business of the Borrower or any Subsidiary;
(f) Liens in existence on the date hereof listed on Schedule
8.3, securing Indebtedness permitted by subsection 8.2(b), provided that no such
Lien is amended after the date of this Agreement to cover any additional
Property or to secure additional Indebtedness and that the amount of
Indebtedness secured thereby is not increased;
56
(g) Liens created pursuant to the Security Documents and other
Liens created after the date hereof and securing Indebtedness hereunder or under
any other Loan Document;
(h) Liens reserved in customary oil, gas and/or mineral leases
for bonus or rental payments and for compliance with the terms of such leases
and Liens reserved in customary operating agreements, farm-out and farm-in
agreements, exploration agreements, development agreements and other similar
agreements for compliance with the terms of such agreements, to the extent that
(x) any such Lien referred to in this clause (h) does not materially impair the
use or value of the property subject to such Lien for the purposes for which
such property is held and (y) in the case of customary operating agreements,
farm-out and farm-in agreements, exploration agreements, development agreements
and other similar agreements, the amount of any obligations secured thereby that
are delinquent, that are not diligently contested in good faith and for which
adequate reserves are not maintained by the Borrower or the applicable
Subsidiary, as the case may be, do not exceed, at any time outstanding, the
amount owing by the Borrower or any Subsidiary, as applicable, for one month's
billed operating expenses or other expenditures attributable to such entity's
interest in the Property covered thereby;
(i) defects, irregularities and deficiencies in the title of
any rights of way or other Property of the Borrower or any Subsidiary of the
Borrower which in the aggregate do not materially impair the use of such rights
of way or other property for the purposes for which such rights of way and other
Property are held by the Borrower or any Subsidiary of the Borrower, and
defects, irregularities and deficiencies in title to any property of the
Borrower or any Subsidiary of the Borrower, which defects, irregularities or
deficiencies have been cured by possession under applicable statutes of
limitation;
(j) royalties, overriding royalties, revenue interests, net
revenue interests, production payments (other than production payments granted
or created in connection with the incurrence of Indebtedness) and advance
payment obligations (other than obligations in respect of advance payments
received in connection with the incurrence of Indebtedness), provided that the
value of the Oil and Gas Properties shown on the Borrower's Reserve Reports is
net of such Liens;
(k) any Lien securing Indebtedness, neither assumed nor
guaranteed by the Borrower or any of its Subsidiaries nor on which it
customarily pays interest, existing upon real estate or rights in or relating to
real estate acquired by the Borrower for substation, metering station, pump
station, storage gathering line, transmission line, transportation line,
distribution line or for right-of-way purposes, and any Liens reserved in leases
for rent and for compliance with the terms of the leases in the case of
leasehold estates, to the extent that any such Lien referred to in this
paragraph (k) does not materially impair the use or value of the property
subject to such Lien for the purposes for which such property is held;
(l) Liens on Property of a Subsidiary of the Borrower,
provided that such Liens secure only obligations owing to the Borrower;
(m) judgment and other similar Liens arising in connection
with court proceedings, provided that the judgment relating thereto shall have
been stayed or bonded pending appeal, provided that no such Lien shall encumber
any Oil and Gas Property;
57
(n) Liens arising out of all presently existing and future
division and transfer orders, advance payment agreements, processing contracts,
gas processing plant agreements, operating agreements, gas balancing or deferred
production agreements, pooling, unitization or communitization agreements,
pipeline, gathering or transportation agreements, platform agreements, drilling
contracts, injection or repressuring agreements, cycling agreements,
construction agreements, salt water or other disposal agreements, leases or
rental agreements, farm-out and farm-in agreements, exploration and development
agreements, and any and all other contracts or agreements covering, arising out
of, used or useful in connection with or pertaining to the exploration,
development, operation, production, sale, use, purchase, exchange, storage,
separation, dehydration, treatment, compression, gathering, transportation,
processing, improvement, marketing, disposal or handling of any property of the
Borrower or any Subsidiary of the Borrower, provided that such agreements are
entered into in the ordinary course of business and contain terms customary for
such agreements in the industry and provided further that no Liens described in
this paragraph (n) shall be granted or created in connection with the incurrence
of Indebtedness;
(o) customary preferential rights to purchase and calls on
productions by sellers relating to Properties acquired by the Borrower or any
Subsidiary of the Borrower after the date hereof; and
(p) Liens securing any other Indebtedness expressly permitted
by subsection 8.2 provided that no such Lien shall encumber any Oil and Gas
Property.
8.4. Limitation on Guarantee Obligations. Create, incur, assume or
suffer to exist any Guarantee Obligation except (a) Guarantee Obligations in
existence on the date hereof and listed on Schedule 8.4, (b) Guarantee
Obligations arising under the Loan Documents, (c) Guarantee Obligations with
respect to Indebtedness permitted by subsection 8.2 (other than subsection (g)
thereof), (d) Guarantee Obligations incurred by any Borrower or any Subsidiary
thereof with respect to any obligations or liabilities of a Borrower or any
Subsidiary thereof, so long as the incurring of such obligations or liabilities
is not prohibited by Section 8.2 hereof, and (e) Guarantee Obligations issued by
the Borrower or by any of its Subsidiaries in the ordinary course of business of
obligations of other Persons (other than in respect of Indebtedness) in
connection with current oil and gas drilling, oil and gas production, oil and
gas transportation, crude oil purchasing, oil and gas exploration or other
similar programs or operations.
8.5. Limitation on Fundamental Change. Enter into any merger,
consolidation or amalgamation as a constituent party, or liquidate, wind up or
dissolve itself (or suffer any liquidation or dissolution), or convey, sell,
lease, assign, transfer or otherwise dispose of, all or substantially all of its
property, business or assets, or make any material change in its present method
of conducting business except:
(a) (i) any Subsidiary of the Borrower (including a Foreign
Subsidiary) may be merged or consolidated with or into the Borrower (provided
that the Borrower shall be the continuing or surviving corporation) or with or
into any one or more Wholly-Owned Subsidiaries which are Domestic Subsidiaries
(provided that such Wholly-Owned Subsidiary or Subsidiaries shall be the
continuing or surviving Person) and (ii) any Foreign Subsidiary of the Borrower
may be merged or consolidated with or into any one or more Wholly-Owned
Subsidiaries which are
58
Foreign Subsidiaries (provided that a Wholly-Owned Subsidiary or Subsidiaries
shall be the continuing or surviving Person);
(b) (i) any Wholly-Owned Subsidiary (including a Wholly-Owned
Subsidiary which is a Foreign Subsidiary) of the Borrower may sell, lease,
transfer or otherwise dispose of any or all of its assets (upon voluntary
liquidation or otherwise) to the Borrower or any Wholly-Owned Subsidiary which
is a Domestic Subsidiary and (ii) any Wholly-Owned Subsidiary of the Borrower
which is a Foreign Subsidiary may sell, lease, transfer or otherwise dispose of
any or all of its assets (upon voluntary liquidation or otherwise) to any
Wholly-Owned Subsidiary which is a Foreign Subsidiary; and
(c) any Wholly-Owned Subsidiary may be merged or consolidated
with any Person acquired in connection with a Permitted Business Acquisition,
which acquisition complies with subsection 8.8(g) and is made in the ordinary
course of the Oil and Gas Business, provided that a Wholly-Owned Subsidiary
shall be the continuing or surviving Person.
8.6. Limitation on Sale of Assets. Convey, sell, lease, assign,
transfer or otherwise dispose of any of its property, business or assets
(including, without limitation, receivables and leasehold interests), whether
now owned or hereafter acquired, or issue or sell any shares of the Borrower's
Disqualified Stock or such Subsidiary's Capital Stock to any Person other than
the Borrower or any domestic Wholly-Owned Subsidiary, except:
(a) the sale or other disposition of obsolete or worn out
property in the ordinary course of business;
(b) the sale of inventory (including Hydrocarbons or other
mineral products or surplus) in the ordinary course of business;
(c) as permitted by subsection 8.5(b);
(d) the Disposition of any Oil and Gas Properties included in
the Borrowing Base, provided that (i) except as provided in clause (ii) below, a
portion of the Net Proceeds of such Disposition equal to the amount by which the
Borrowing Base has been reduced pursuant to Section 4.10(f) as a result of such
Disposition shall be applied within three Business Days after the receipt of
such Net Proceeds toward the prepayment of the Loans, (ii) if the aggregate
value (determined by reference to the most recent Reserve Report) of such Oil
and Gas Properties so Disposed of is less than $5,000,000 in any fiscal year,
then the Net Proceeds thereof shall be reinvested within 270 days after the
closing of such Disposition in Oil and Gas Properties and (iii) the aggregate
value (determined by reference to the most recent Reserve Report) of all Oil and
Gas Properties so Disposed of in any fiscal year of the Borrower shall not
exceed 10% of the most recent and effective Borrowing Base;
(e) sales or other Dispositions of Property not constituting
Oil and Gas Properties included in the Borrowing Base (other than the Capital
Stock of any direct or indirect Subsidiaries of the Borrower), provided that the
Net Proceeds of such Dispositions are reinvested in assets used or useful in the
business of the Borrower and its Subsidiaries; and
59
(f) Dispositions of Oil and Gas Properties not constituting
Proved Reserves pursuant to farm-ins and farm-outs and transfers of royalty
interests, overriding royalty interests, net revenue interests and other similar
transfers, all pursuant to exploration and development activity in the ordinary
course of business of the Borrower and its Subsidiaries.
8.7. Limitation on Dividends. Declare or pay any dividend on (other
than dividends payable solely in common stock of the Borrower), or make any
payment on account of, or set apart assets for a sinking or other analogous fund
for, the purchase, redemption, defeasance, retirement or other acquisition of
(other than a conversion of the Borrower's Series C Preferred Stock into common
stock which is not considered to result in the payment of a dividend), any
shares of any class of Capital Stock of the Borrower or any Subsidiary or any
warrants or options to purchase any such Capital Stock, whether now or hereafter
outstanding, or make any other distribution in respect thereof, either directly
or indirectly, whether in cash or property or in obligations of the Borrower or
any Subsidiary, except that:
(a) any Subsidiary may declare and pay dividends to or make
other distributions to the Borrower or to any other Wholly-Owned Subsidiary
which is a Guarantor; and
(b) so long as no Default or Event of Default shall have
occurred and be continuing or would result therefrom, (i) the Borrower may
redeem or purchase Capital Stock or rights to acquire Capital Stock using
proceeds from the issuance of Capital Stock or rights to acquire Capital Stock,
(ii) the Borrower may use and issue its own Capital Stock (other than
Disqualified Stock) (A) to purchase or acquire issued and outstanding shares of
its Capital Stock, warrants, options, debt instruments convertible into or other
rights to purchase the Borrower's Capital Stock, (B) to satisfy the exercise of
stock options or warrants or (C) in connection with any employee benefit plan of
the Borrower or its Subsidiaries, (iii) the Borrower may redeem or repurchase
common stock, or rights to purchase preferred stock or common stock issued to
the Borrower's shareholders for an aggregate amount not to exceed $1,000,000 in
any fiscal year, (iv) the Borrower may redeem or repurchase Series C Preferred
Stock for an aggregate consideration of not more than $10,000,000 during any
fiscal year, plus accrued and unpaid dividends, so long as the Borrower has
Borrowing Base Availability of at least 10% of the then applicable Borrowing
Base immediately prior to such redemption or repurchase, and (v) the Borrower
may pay dividends on the Series C Preferred Stock (A) in its own Capital Stock
and (B) so long as no Borrowing Base Deficiency shall have occurred and be
continuing or would result therefrom, in cash so long as no more than $4,250,000
in the aggregate is expended for such purpose during any fiscal year of the
Borrower; provided that the annual dividend payable on the Series C Preferred
Stock shall not exceed $8.50 per $100 of stated value.
8.8. Limitation on Investments, Loans and Advances. Make any advance,
loan, extension of credit or capital contribution to, or incur any Guarantee
Obligation on behalf or for the benefit of, or purchase any stock, bonds, notes,
debentures or other securities of or any assets constituting a business unit of,
or make any other investment (including by the issuance of letters of credit) in
(collectively, "Investments"), any Person, except:
(a) extensions of trade credit in the ordinary course of
business;
60
(b) Investments in Cash Equivalents;
(c) loans and advances to officers and employees of the
Borrower or any Subsidiary for travel, entertainment and relocation expenses in
the ordinary course of business in an aggregate amount for the Borrower and its
Subsidiaries not to exceed $1,000,000 at any one time outstanding;
(d) investments, loans or advances, the material details of
which have been set forth on Schedule 8.8;
(e) so long as no Default or Event of Default shall have
occurred and be continuing, Investments by the Borrower in any Wholly-Owned
Subsidiary which is a Guarantor and Investments by any Wholly-Owned Subsidiary
which is a Guarantor in the Borrower or in other Wholly-Owned Subsidiaries which
are Guarantors;
(f) Investments constituting Permitted Business Investments;
(g) Investments constituting Permitted Business Acquisitions
made or entered into in the ordinary course of the Oil and Gas Business;
provided that with respect to a Permitted Business Acquisition which is not an
acquisition funded entirely with the common stock of the Borrower, (i) after
giving effect to the consummation of the transactions contemplated by such
Permitted Business Acquisition and the Loans to be made and the Letters of
Credit to be issued hereunder in connection therewith, the sum of (A) the cash
and Cash Equivalents then held by the Borrower and (B) an amount equal to the
difference between (x) the aggregate Revolving Credit Commitments (or, if less,
the Borrowing Base) in effect at such time and (y) the Aggregate Revolving
Credit Exposure of all the Lenders at such time, equals at least $10,000,000 and
(ii) the aggregate amount of such Investments does not exceed in the aggregate
$30,000,000 since the Closing Date;
(h) obligations (in each case not outstanding for more than 90
days) owed by or to Affiliates under operating agreements relating to Oil and
Gas Properties in an aggregate amount not to exceed $10,000,000 at any time;
(i) transactions expressly permitted under (i) subsection 8.2
(provided, that no loans may be made by the Borrower pursuant to subsection
8.2(e) at any time when a Default or Event of Default shall have occurred and be
continuing), (ii) subsection 8.3, (iii) subsection 8.4, (iv) subsection 8.5 or
(v) subsection 8.16, as applicable;
(j) Investments in joint ventures made pursuant to exploration
and development activity in the ordinary course of business of the Borrower and
its Subsidiaries to the extent that the Borrower's or a Subsidiary's Investment
therein is limited to the contribution by the Borrower or such Subsidiary of (i)
Oil and Gas Properties which are not Proved Reserves and (ii) seismic data to
the extent that an interest is retained in such data by the Borrower or its
Subsidiaries; and
(k) Investments not otherwise permitted hereunder in an amount
at any time not in excess of $2,500,000.
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8.9. Limitation on Optional Payments and Modifications of Debt
Instruments, Other Documents. (a) Make any optional payment or prepayment on or
redemption, defeasance or purchase of (i) any Indebtedness (other than
Indebtedness under this Agreement) which has an aggregate principal amount in
excess of $5,000,000 or (ii) any Subordinated Indebtedness (other than (A) as
permitted pursuant to Section 8.2(f), (B) provided that no Default, Event of
Default or Borrowing Base Deficiency has occurred and is continuing, principal
with respect thereto and (C) provided that no Default or Event of Default has
occurred and is continuing, fees with respect thereto and interest thereon), or
(b) amend, modify or change, or consent or agree to any amendment, modification
or change to any of the terms (including the subordination provisions) of any
such Indebtedness described in clauses (i) or (ii) immediately preceding (other
than any such amendment, modification or change which would extend the maturity
or reduce the amount of any payment of principal thereof or which would reduce
the rate or extend the date for payment of interest thereon).
(b) Amend or modify the certificate of incorporation
(including, without limitation, the Series C Preferred Stock Designation) or
bylaws of the Borrower, unless such amendment or modification is immaterial to
the interests of the Lenders.
8.10. Limitation on Transactions with Affiliates. Enter into any
transaction, including, without limitation, any purchase, sale, lease or
exchange of Property or the rendering of any service, with any Affiliate (other
than transactions between or among the Borrower and its Wholly-Owned
Subsidiaries which are Domestic Subsidiaries) unless such transaction is (a)
otherwise permitted under this Agreement, (b) in the ordinary course of the
Borrower's or the applicable Subsidiary's business and (c) upon fair and
reasonable terms no less favorable to the Borrower or the applicable Subsidiary,
as the case may be, than it would obtain in a comparable arm's length
transaction with a Person which is not an Affiliate or, in the event no
comparable transaction with an unaffiliated Person is available, on terms that
are fair from a financial point of view to the Borrower or the applicable
Subsidiary provided, however, this subsection 8.10 shall not apply to (i) the
payment of reasonable and customary fees to directors of the Borrower who are
not employees of the Borrower; (ii) loans or advances made pursuant to
subsection 8.8(c); or (iii) any other transaction with any employee, officer or
director of the Borrower pursuant to drilling arrangements, exploration and
production arrangements, Plans, compensation or other similar arrangements
entered into the ordinary course of business and approved by a majority of the
disinterested members of the Board of Directors of the Borrower.
8.11. Limitation on Sales and Leasebacks. Enter into any arrangement (a
"Sale and Leaseback Transaction") with any Person providing for the leasing by
the Borrower or any Subsidiary of real or personal property which has been or is
to be sold or transferred by the Borrower or such Subsidiary to such Person or
to any other Person to whom funds have been or are to be advanced by such Person
on the security of such property or rental obligations of the Borrower or any
Subsidiary.
8.12. Limitation on Changes in Fiscal Year. Permit the fiscal year of
the Borrower and its Subsidiaries to end on a day other than December 31.
8.13. Limitation on Negative Pledge Clauses. Enter into with any Person
any agreement, other than this Agreement, which prohibits or limits the ability
of the Borrower or
62
any of its Subsidiaries to create, incur, assume or suffer to exist any Lien
upon any of its property, assets or revenues, whether now owned or hereafter
acquired.
8.14. Limitation on Lines of Business. Enter into any business, either
directly or through any Subsidiary, except for those businesses in which the
Borrower and its Subsidiaries are engaged on the date of this Agreement or which
are directly related thereto or to the Oil and Gas Business.
8.15. Forward Sales. Except in accordance with ordinary practice in the
Oil and Gas Business, enter into or permit to exist any advance payment
agreement or other arrangement pursuant to which the Borrower or any of its
Subsidiaries, having received full or substantial payment of the purchase price
for a specified quantity of Hydrocarbons upon entering such agreement or
arrangement, is required to deliver, in one or more installments subsequent to
the date of such agreement or arrangement, such quantity of Hydrocarbons
pursuant to and during the terms of such agreement or arrangement
8.16. Hedging Agreements. Enter into any Hedging Agreement, other than
Hedging Agreements (a) entered into in the ordinary course of business to hedge
or mitigate risks to which the Borrower or any of its Subsidiaries is exposed in
the conduct of its business or the management of its liabilities and (b)
Commodity Hedging Agreements with a Lender or an Affiliate of a Lender; provided
that the aggregate amount of Commodity Hedging Agreements may not exceed (i) for
oil, the total volumes to be hedged shall not exceed 75% of expected oil
production of the Borrower for any twenty-four month period and 50% for any
thirty-six month period (determined by reference to the most recent Reserve
Report) and (ii) for gas, the total volumes to be hedged for any twenty-four
month period shall not exceed 75% of expected gas production of the Borrower for
any twenty-four month period and 50% for any thirty-six month period (determined
by reference to the most recent Reserve Report).
8.17. Limitation on Leases. Permit Consolidated Lease Expense for any
fiscal year of the Borrower to exceed $7,500,000.
8.18. Limitation on Immaterial Subsidiaries. Permit each direct or
indirect Immaterial Subsidiary to acquire any additional assets or to conduct
any material additional business, either directly or indirectly, unless prior to
owning such assets or conducting such business such Immaterial Subsidiary
executes and delivers to the Administrative Agent those documents set forth in
subsection 7.9(a).
SECTION 9
EVENTS OF DEFAULT
If any of the following events shall occur and be continuing:
(a) The Borrower shall fail to pay any principal of any Loan
or any Reimbursement Obligation when due in accordance with the terms thereof or
hereof; or the Borrower shall fail to pay any interest on any Loan, or any other
amount payable hereunder, within three Business Days after any such interest or
other amount becomes due in accordance with the terms thereof or hereof; or
63
(b) Any representation or warranty made or deemed made by any
Loan Party herein or in any other Loan Document or which is contained in any
certificate, document or financial or other statement furnished by it at any
time under or in connection with this Agreement or any such other Loan Document
shall prove to have been incorrect in any material respect on or as of the date
made or deemed made; or
(c) The Borrower or any of its Subsidiaries shall default in
the observance or performance of any agreement applicable to it contained in
subsections 4.10, 7.7(a) or 7.9 of this Agreement, Section 8 of this Agreement
or Section 5(b) of the Pledge Agreement; or
(d) The Borrower or any of its Subsidiaries shall default in
the observance or performance of any other agreement applicable to it contained
in this Agreement or any other Loan Document (other than as provided in
paragraphs (a) through (c) of this Section, and such default shall continue
unremedied for a period of 30 consecutive days; or
(e) The Borrower or any of its Subsidiaries shall (i) default
in any payment of principal of or interest of any Indebtedness (excluding the
Loans or any guarantee thereof), or in the payment of any Guarantee Obligation,
beyond the period of grace (not to exceed 30 days), if any, provided in the
instrument or agreement under which such Indebtedness or Guarantee Obligation
was created; provided that the aggregate principal amount of such Indebtedness
and Guarantee Obligations equals or exceeds $4,000,000; (ii) default in the
observance or performance of any other agreement or condition relating to any
such Indebtedness or Guarantee Obligation or contained in any instrument or
agreement evidencing, securing or relating thereto, or any other event shall
occur or condition exist, the effect of which default or other event or
condition is to cause, or to permit the holder or holders of such Indebtedness
or beneficiary or beneficiaries of such Guarantee Obligation (or a trustee or
agent on behalf of such holder or holders or beneficiary or beneficiaries) to
cause, with the giving of notice if required, such Indebtedness to become due
prior to its stated maturity or such Guarantee Obligation to become payable,
provided that the aggregate principal amount of all such Indebtedness and
Guarantee Obligations which would then become due and payable would equal or
exceed $4,000,000; or (iii) default in any payment required to be made with
respect to any Redeemable Preferred Stock of the Borrower; or
(f) (i) The Borrower or any of its Subsidiaries shall commence
any case, proceeding or other action (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief entered
with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or
seeking reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to it or its debts, or (B)
seeking appointment of a receiver, trustee, custodian, conservator or other
similar official for it or for all or any substantial part of its assets, or the
Borrower or any of its Subsidiaries shall make a general assignment for the
benefit of its creditors; or (ii) there shall be commenced against the Borrower
or any of its Subsidiaries any case, proceeding or other action of a nature
referred to in clause (i) above which (A) results in the entry of an order for
relief or any such adjudication or appointment or (B) remains undismissed,
undischarged or unbonded for a period of 60 days; or (iii) there shall be
commenced against the Borrower or any of its Subsidiaries any case, proceeding
or other action seeking issuance of a warrant of attachment, execution,
restraint or similar process against all or
64
any substantial part of its assets which results in the entry of an order for
any such relief which shall not have been vacated, discharged, or stayed or
bonded pending appeal within 60 days from the entry thereof; or (iv) the
Borrower or any of its Subsidiaries shall take any action in furtherance of, or
indicating its consent to, approval of, or acquiescence in, any of the acts set
forth in clause (i), (ii), or (iii) above; or (v) the Borrower or any of its
Subsidiaries shall generally not, or shall be unable to, or shall admit in
writing its inability to, pay its debts as they become due; or
(g) (i) Any Person shall engage in any "prohibited
transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code)
involving any Plan, (ii) any "accumulated funding deficiency" (as defined in
Section 302 of ERISA), whether or not waived, shall exist with respect to any
Plan or any Lien in favor of the PBGC or a Plan shall arise on the assets of the
Borrower or any Commonly Controlled Entity, (iii) a Reportable Event shall occur
with respect to, or proceedings shall commence to have a trustee appointed, or a
trustee shall be appointed, to administer or to terminate, any Single Employer
Plan, which Reportable Event or commencement of proceedings or appointment of a
trustee is, in the reasonable opinion of the Required Lenders, likely to result
in the termination of such Plan for purposes of Title IV of ERISA, (iv) any
Single Employer Plan shall terminate for purposes of Title IV of ERISA, (v) the
Borrower or any Commonly Controlled Entity shall, or in the reasonable opinion
of the Required Lenders is likely to, incur any liability in connection with a
withdrawal from, or the Insolvency or Reorganization of, a Multiemployer Plan or
(vi) any other event or condition shall occur or exist with respect to a Plan;
and in each case in clauses (i) through (vi) above, such event or condition,
together with all other such events or conditions, if any, could have a Material
Adverse Effect; or
(h) One or more judgments or decrees shall be entered against
the Borrower or any Subsidiary involving in the aggregate a liability (to the
extent not paid or covered by insurance) of $2,000,000 or more, and all such
judgments or decrees shall not have been vacated, discharged, stayed or bonded
pending appeal (or otherwise paid or satisfied in full) within 90 days after the
entry thereof; or
(i) A material provision of any Loan Document or the guarantee
of any of the Guarantors under the Guarantee Agreement shall cease, for any
reason, to be in full force and effect, or any Loan Party, any of their
Affiliates, or any officer or employee of any of the foregoing, shall so assert;
or
(j) The subordination provisions contained in any Subordinated
Indebtedness shall cease, for any reason, to be in full force and effect, or any
Person that is a party thereto or holders of at least 25% of the aggregate
principal amount of such Subordinated Indebtedness shall so assert in writing;
or
(k) Environmental liabilities aggregating in excess of a
Material Environmental Amount shall be outstanding at any time with respect to
the Borrower or any of its Subsidiaries and the Borrower and such Subsidiaries
are not using their best efforts to remedy the liability; or
65
(l) Any Lien created by the Pledge Agreement, the Security
Agreement or any other Security Document shall cease to be enforceable and of
the same effect and priority purported to be created thereby; or
(m) A Change of Control shall occur; or
(n) Any court, government or governmental agency shall
condemn, seize or otherwise appropriate, or take custody or control of, all or
any material portion (such materiality determined by reference to the Borrower
and its Subsidiaries taken as a whole) of the Property of the Borrower or any
Guarantor; or
(o) The Borrower shall fail to cure a Borrowing Base
Deficiency within 90 days thereof as required by Section 4.10;
then, and in any such event, (A) if such event is an Event of Default specified
in clause (i) or (ii) of paragraph (f) of this Section, automatically the
Commitments shall immediately terminate and the Loans hereunder (with accrued
and unpaid interest thereon) and all other amounts owing under this Agreement
(including, without limitation, all Letter of Credit Outstandings, whether or
not the beneficiaries of the then outstanding Letters of Credit shall have
presented the documents required thereunder) and the other Loan Documents shall
immediately become due and payable, and (B) if such event is any other Event of
Default, either or both of the following actions may be taken: (i) with the
consent of the Required Lenders, the Administrative Agent may, or upon the
request of the Required Lenders, the Administrative Agent shall, by written
notice to the Borrower, declare the Commitments to be terminated forthwith,
whereupon the Commitments shall immediately terminate; and (ii) with the consent
of the Required Lenders, the Administrative Agent may, or upon the request of
the Required Lenders, the Administrative Agent shall, by written notice to the
Borrower, declare the Loans hereunder (with accrued and unpaid interest thereon)
and all other amounts owing under this Agreement (including, without limitation,
all amounts of Letter of Credit Outstandings, whether or not the beneficiaries
of the then outstanding Letters of Credit shall have presented the documents
required thereunder) and the other Loan Documents to be due and payable
forthwith, whereupon the same shall immediately become due and payable.
With respect to all Letters of Credit with respect to which presentment
for honor shall not have occurred at the time of an acceleration pursuant to the
preceding paragraph, the Borrower shall at such time deposit in a cash
collateral account opened by the Administrative Agent an amount equal to the
aggregate then unexpired amount that is available to be drawn under such Letters
of Credit. The Borrower hereby grants to the Administrative Agent, for the
benefit of the Issuing Lender and the L/C Participants, a security interest in
such cash collateral to secure all obligations of the Borrower under this
Agreement and the other Loan Documents. Amounts held in such cash collateral
account shall be applied by the Administrative Agent to the payment of drafts
drawn under such Letters of Credit, and the unused portion thereof after all
such Letters of Credit shall have expired, been cancelled or been fully drawn
upon, if any, shall be applied to repay other obligations of the Borrower
hereunder and under the Notes. After all such Letters of Credit shall have
expired, been cancelled or been fully drawn upon, all Reimbursement Obligations
shall have been satisfied and all other obligations of the Borrower hereunder
and under the other Loan Documents shall have been paid in full, the balance, if
any, in such cash
66
collateral account shall be returned to the Borrower. The Borrower shall execute
and deliver to the Administrative Agent, for the account of the Issuing Lender
and the L/C Participants, such further documents and instruments as the
Administrative Agent may reasonably request to evidence the creation and
perfection of the within security interest in such cash collateral account.
Except as expressly provided above in this Section, presentment, demand, protest
and all other notices of any kind are hereby expressly waived.
SECTION 10
THE ADMINISTRATIVE AGENT; OTHERS
10.1. Appointment. Each Lender hereby irrevocably designates and
appoints Fortis as Administrative Agent of such Lender under this Agreement and
the other Loan Documents, and each such Lender irrevocably authorizes the
Administrative Agent, in such capacity, to take such action on its behalf under
the provisions of this Agreement and the other Loan Documents and to exercise
such powers and perform such duties as are expressly delegated to the
Administrative Agent by the terms of this Agreement and the other Loan
Documents, together with such other powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary contained elsewhere in this
Agreement, the Administrative Agent shall not have any duties or
responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against the
Administrative Agent.
10.2. Delegation of Duties. The Administrative Agent may execute any of
its duties under this Agreement and the other Loan Documents by or through
agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Administrative Agent shall
not be responsible for the negligence or misconduct of any agents or attorneys
in-fact selected by it with reasonable care.
10.3. Exculpatory Provisions. Neither the Administrative Agent nor any
of its officers, directors, employees, agents, attorneys-in-fact or Affiliates
shall be (i) liable for any action lawfully taken or omitted to be taken by it
or such Person under or in connection with this Agreement or any other Loan
Document (except for its or such Person's own gross negligence or willful
misconduct) or (ii) responsible in any manner to any of the Lenders for any
recitals, statements, representations or warranties made by any Loan Party or
any officer thereof contained in this Agreement or any other Loan Document or in
any certificate, report, statement or other document referred to or provided for
in, or received by the Administrative Agent under or in connection with, this
Agreement or any other Loan Document or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any other Loan
Document or for any failure of any Loan Party to perform its obligations
hereunder or thereunder. The Administrative Agent shall not be under any
obligation to any Lender to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, this
Agreement or any other Loan Document, or to inspect the properties, books or
records of any Loan Party.
10.4. Reliance by Administrative Agent. The Administrative Agent shall
be entitled to rely, and shall be fully protected in relying, upon any Note,
writing, resolution, notice, consent,
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certificate, affidavit, letter, telecopy, telex or teletype message, statement,
order or other document or conversation believed by it to be genuine and correct
and to have been signed, sent or made by the proper Person or Persons and upon
advice and statements of legal counsel (including, without limitation, counsel
to the Loan Parties), independent accountants and other experts selected by the
Administrative Agent. The Administrative Agent may deem and treat the payee of
any Note as the owner thereof for all purposes unless a written notice of
assignment, negotiation or transfer thereof shall have been filed with the
Administrative Agent. The Administrative Agent shall be fully justified in
failing or refusing to take any action under this Agreement or any other Loan
Document unless it shall first receive such advice or concurrence of the
Required Lenders (or, where unanimous consent of the Lenders is expressly
required hereunder, such Lenders) as it deems appropriate or it shall first be
indemnified to its satisfaction by the Lenders against any and all liability and
expense which may be incurred by it by reason of taking or continuing to take
any such action. The Administrative Agent shall in all cases be fully protected
in acting, or in refraining from acting, under this Agreement and the other Loan
Documents in accordance with a request of the Required Lenders (or, where
unanimous consent of the Lenders or the Required Lenders is expressly required
hereunder, such Lenders or Required Lenders, as applicable), and such request
and any action taken or failure to act pursuant thereto shall be binding upon
all the Lenders and all future holders of the Loans.
10.5. Notice of Default. The Administrative Agent shall not be deemed
to have knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless the Administrative Agent has received notice from a Lender or
the Borrower referring to this Agreement, describing such Default or Event of
Default and stating that such notice is a "notice of default." In the event that
the Administrative Agent receives such a notice, the Administrative Agent shall
give notice thereof to the Lenders. The Administrative Agent shall take such
action with respect to such Default or Event of Default as shall be reasonably
directed by the Required Lenders; provided that unless and until the
Administrative Agent shall have received such directions, the Administrative
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default or Event of Default as it shall
deem advisable in the best interests of the Lenders.
10.6. Non-Reliance on Administrative Agent and Other Lenders. Each
Lender expressly acknowledges that neither the Administrative Agent nor any of
its officers, directors, employees, agents, attorneys-in-fact or Affiliates has
made any representations or warranties to it and that no act by the
Administrative Agent hereafter taken, including any review of the affairs of any
Loan Party, shall be deemed to constitute any representation or warranty by the
Administrative Agent to any Lender. Each Lender represents to the Administrative
Agent that it has, independently and without reliance upon the Administrative
Agent or any other Lender, and based on such documents and information as it has
deemed appropriate, made its own appraisal of and investigation into the
business, operations, property, financial and other condition and
creditworthiness of each Loan Party and made its own decision to make its
Extensions of Credit hereunder and enter into this Agreement. Each Lender also
represents that it will, independently and without reliance upon the
Administrative Agent or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking action under
this Agreement and the other Loan Documents, and to make such investigation as
it deems necessary to inform itself as to the business, operations, property,
financial and other condition and creditworthiness of
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each Loan Party. Except for notices, reports and other documents expressly
required to be furnished to the Lenders by the Administrative Agent hereunder,
the Administrative Agent shall not have any duty or responsibility to provide
any Lender with any credit or other information concerning the business,
operations, property, condition (financial or otherwise), prospects or
creditworthiness of any Loan Party which may come into the possession of the
Administrative Agent or any of its officers, directors, employees, agents,
attorneys-in-fact or Affiliates.
10.7. Indemnification. The Lenders agree to indemnify the
Administrative Agent in its capacity as such (to the extent not reimbursed by
the Borrower and without limiting the obligation the Borrower to do so), ratably
according to their respective Commitment Percentages in effect on the date on
which indemnification is sought, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind whatsoever which may at any time
(including, without limitation, at any time following the payment of the
obligations under this Agreement) be imposed on, incurred by or asserted against
the Administrative Agent in any way relating to or arising out of, the
Commitments, this Agreement, any of the other Loan Documents or any documents
contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or any action taken or omitted by the
Administrative Agent under or in connection with any of the foregoing; provided
that no Lender shall be liable for the payment of any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting solely from the Administrative
Agent's gross negligence or willful misconduct. The agreements in this
subsection shall survive the payment of all obligations under this Agreement and
all other amounts payable hereunder.
10.8. Administrative Agent in Its Individual Capacity. The
Administrative Agent and its Affiliates may make loans to, accept deposits from
and generally engage in any kind of business with any Loan Party as though the
Administrative Agent were not the Administrative Agent hereunder and under the
other Loan Documents. With respect to the Extensions of Credit made by it, the
Administrative Agent shall have the same rights and powers under this Agreement
and the other Loan Documents as any Lender and may exercise the same as though
it were not the Administrative Agent, and the terms "Lender" and "Lenders" shall
include the Administrative Agent in its individual capacity.
10.9. Successor Administrative Agent. The Administrative Agent may
resign as Administrative Agent upon 30 days' notice to the Lenders. If the
Administrative Agent shall resign as Administrative Agent under this Agreement
and the other Loan Documents, then the Required Lenders shall appoint from among
the Lenders a successor agent for the Lenders, which successor agent, with the
consent of the Borrower (such consent not to be unreasonably withheld or
delayed), shall succeed to the rights, powers and duties of the Administrative
Agent hereunder. Effective upon such appointment and approval, the term
"Administrative Agent" shall mean such successor agent, and the former
Administrative Agent's rights, powers and duties as Administrative Agent shall
be terminated, without any other or further act or deed on the part of such
former Administrative Agent or any of the parties to this Agreement or any
holders of the Loans. After any retiring Administrative Agent's resignation as
Administrative Agent, the provisions of this Section 10 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was
Administrative Agent under this Agreement and the other Loan Documents. The
Administrative Agent may be removed at any time with or without cause
69
by the Required Lenders (which for this purpose, shall not include the Loans or
Commitments of the Administrative Agent), provided that on the effectiveness of
such removal the Obligations owing to such Administrative Agent as a Lender are
repaid in full and as an Issuing Lender are cash collateralized or otherwise
secured. If the Administrative Agent is removed, the procedures set forth in
this Section 10.9 shall apply in appointing a successor Administrative Agent.
10.10. Issuing Lender. The provisions of this Section 10 applicable to
the Administrative Agent shall apply to the Issuing Lender in the performance of
its duties under the Loan Documents, mutatis mutandis.
10.11. Others. None of the Sole Lead Arranger, the Bookrunner, the
Syndication Agent, or the Documentation Agent, in such respective capacities,
shall have any duties or responsibilities, or incur any liabilities, under this
Agreement or the other Loan Documents.
SECTION 11
MISCELLANEOUS
11.1. Amendments and Waivers. Neither this Agreement nor any other Loan
Document, nor any terms hereof or thereof may be amended, supplemented or
modified except in accordance with the provisions of this subsection. The
Required Lenders may, or, with the written consent of the Required Lenders, the
Administrative Agent may, from time to time, (a) enter into with the applicable
Loan Parties written amendments, supplements or modifications hereto and to the
other Loan Documents for the purpose of adding any provisions to this Agreement
or the other Loan Documents or changing in any manner the rights of the Lenders
or of the applicable Loan Parties hereunder or thereunder or (b) waive, on such
terms and conditions as the Required Lenders or the Administrative Agent, as the
case may be, may specify in such instrument, any of the requirements of this
Agreement or the other Loan Documents or any Default or Event of Default and its
consequences; provided, however, that no such waiver and no such amendment,
supplement or modification shall (i) reduce the principal amount, or extend the
scheduled date of final maturity, of any Loan, or reduce the stated rate of any
interest or fee payable hereunder or extend the scheduled date of any payment
thereof or increase the principal amount or extend the expiration date of any
Lender's Commitments, or change the limits on Letter of Credit Outstandings as
set forth in subsection 3.1(a)(i), in each case without the consent of each
Lender affected thereby, (ii) amend, modify or waive any provision of this
subsection or reduce the percentage specified in the definition of Required
Lenders or the Required Lenders (or modify any provision of this Agreement or
any other Loan Document to provide that an action currently requiring the
approval of or consent by the Required Lenders may be taken with the consent or
approval by a lower percentage of Lenders), or consent to the assignment or
transfer by any Loan Party of any of its rights and obligations under this
Agreement and the other Loan Documents other than in accordance with the terms
of the applicable Loan Documents, in each case without the written consent of
all the Lenders, (iii) release, or subordinate the interest of the
Administrative Agent in, all or substantially all of the collateral for the
Obligations hereunder or release all or substantially all of the Guarantors from
their respective obligations under the Guarantee Agreement without the written
consent of each Lender, (iv) change subsection 4.8(a) or subsection 11.7(a) in a
manner that would alter the pro rata sharing of payments required thereby,
without the written consent of each Lender, (v) amend, modify or waive any
provision of Section 10 without the written consent of the then
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Administrative Agent and Issuing Lender, (vi) amend, modify or waive any
provision of Section 8.16 without the written consent of the Required Lenders or
(vii) amend, modify or waive any provision of this Agreement or any other Loan
Document prior to the initial Borrowing Date without the written consent of each
Lender. Any such waiver and any such amendment, supplement or modification shall
apply equally to each of the Lenders and shall be binding upon the Loan Parties,
the Lenders, the Administrative Agent and all future holders of the Loans. In
the case of any waiver, the Loan Parties, the Lenders and the Administrative
Agent shall be restored to their former positions and rights hereunder and under
the other Loan Documents, and any Default or Event of Default waived shall be
deemed to be cured and not continuing; no such waiver shall extend to any
subsequent or other Default or Event of Default or impair any right consequent
thereon.
11.2. Notices. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including by
facsimile transmission) and, unless otherwise expressly provided herein, shall
be deemed to have been duly given or made (a) in the case of delivery by hand or
by courier service, when delivered, (b) in the case of delivery by mail, three
Business Days after being deposited in the mails, postage prepaid, or (c) in the
case of delivery by facsimile transmission, when sent and receipt has been
confirmed, addressed as follows in the case of the Borrower and the
Administrative Agent, and as set forth in Schedule 11.2 in the case of the other
parties hereto, or to such other address as may be hereafter notified by the
respective parties hereto:
The Borrower: The Meridian Resource Corporation
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.,
Chairman and Chief Executive Officer
Fax: (▇▇▇)-▇▇▇-▇▇▇▇
with a copy to:
Fulbright & ▇▇▇▇▇▇▇▇, L.L.P.
▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
The Administrative Agent: Fortis Capital Corp.
Millennium I
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇ LLP
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▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
provided that any notice, request or demand to or upon the Administrative Agent
or the Lenders pursuant to subsection 2.2, 4.3, 4.5 or 4.8 shall not be
effective until received.
11.3. No Waiver; Cumulative Remedies. No failure to exercise and no
delay in exercising, on the part of the Administrative Agent, the Issuing Lender
or any Lender, any right, remedy, power or privilege hereunder or under the
other Loan Documents shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, remedy, power or privilege hereunder preclude any
other or further exercise thereof or the exercise of any other right, remedy,
power or privilege. The rights, remedies, powers and privileges herein provided
are cumulative and not exclusive of any rights, remedies, powers and privileges
provided by law.
11.4. Survival of Representations and Warranties. All representations
and warranties made hereunder, in the other Loan Documents and in any document,
certificate or statement delivered pursuant hereto or in connection herewith
shall survive the execution and delivery of this Agreement and the making of the
Extensions of Credit hereunder.
11.5. Payment of Expenses and Taxes. The Borrower agrees (a) to pay or
reimburse the Administrative Agent, the Sole Lead Arranger, the Bookrunner, the
Syndication Agent, the Documentation Agent and their Affiliates for all their
reasonable and documented out-of-pocket costs and expenses incurred in
connection with the development, syndication, preparation and execution of, and
any amendment, supplement or modification to, this Agreement and the other Loan
Documents and any other documents prepared in connection herewith or therewith,
and the consummation and administration of the transactions contemplated hereby
and thereby, including, without limitation, the reasonable fees and
disbursements of (i) counsel to the Administrative Agent and (ii) the
Administrative Agent customarily charged by it in connection with syndicated
credits, (b) to pay or reimburse each Lender and the Administrative Agent for
all its reasonable and documented costs and expenses incurred in connection with
the enforcement or preservation of any rights under this Agreement, the other
Loan Documents and any such other documents, including, without limitation, the
reasonable fees and disbursements of counsel to the Administrative Agent and to
the several Lenders, (c) to pay, indemnify, and hold each Lender, the
Administrative Agent, the Sole Lead Arranger, the Bookrunner, the Syndication
Agent, and the Documentation Agent (and their respective Affiliates and their
respective directors, officers, employees and agents) harmless from, any and all
recording and filing fees and any and all liabilities with respect to, or
resulting from any delay in paying, stamp, excise and other taxes, if any, which
may be payable or determined to be payable in connection with the execution and
delivery of, or consummation or administration of any of the transactions
contemplated by, or any amendment, supplement or modification of, or any waiver
or consent under or in respect of, this Agreement, the other Loan Documents and
any such other documents, and (d) to pay, indemnify, and hold each Lender, the
Administrative Agent, the Sole Lead Arranger, the Bookrunner, the Syndication
Agent and the Documentation Agent (and their respective directors, officers,
employees, agents and affiliates) harmless from and against any and all other
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs,
72
expenses or disbursements of any kind or nature whatsoever with respect to the
execution, delivery, enforcement, performance and administration of this
Agreement, the other Loan Documents or the use or the proposed use of proceeds
contemplated by this Agreement, including, without limitation, any of the
foregoing relating to the violation of, noncompliance with or liability under,
any Environmental Law applicable to any Loan Party or any of the Properties (all
the foregoing in this clause (d), collectively, the "indemnified liabilities"),
provided that the Borrower shall have no obligation under this clause (d) to any
Administrative Agent, the Sole Lead Arranger, the Bookrunner, the Syndication
Agent, the Documentation Agent or any Lender (or any of their respective
directors, officers, employers, agents or affiliates), with respect to
indemnified liabilities to the extent such liabilities are determined by a court
of competent jurisdiction by final and nonappealable judgment to have resulted
from the gross negligence or willful misconduct of such Person. Without limiting
the foregoing, and to the extent permitted by applicable law, the Borrower
agrees not to assert, and hereby waives, and agrees to cause each of its
Subsidiaries not to assert and to so waive, all rights for contribution or any
other rights of recovery with respect to all claims, demands, penalties, fines,
liabilities, settlements, damages, costs and expenses of whatever kind or
nature, under or related to Environmental Laws, that any of them might have by
statute or otherwise against any Person entitled to indemnification under this
subsection 11.5. The agreements in this subsection shall survive repayment of
the Loans and all other amounts payable hereunder and the termination of this
Agreement
11.6. Successors and Assigns; Participations and Assignments. (a) This
Agreement shall be binding upon and inure to the benefit of the Borrower, the
Lenders, the Administrative Agent, all future holders of the Loans and any Notes
hereunder and their respective successors and assigns, except that the Borrower
may not assign or transfer any of its rights or obligations under this Agreement
without the prior written consent of each Lender.
(b) Any Lender may, in the ordinary course of its commercial
banking or lending business and in accordance with applicable law and at no cost
or expense to the Borrower, at any time sell to one or more banks or other
entities ("Participants") participating interests in any Loan owing to such
Lender, any Commitment of such Lender or any other interest of such Lender
hereunder and under the other Loan Documents. In the event of any such sale by a
Lender of a participating interest to a Participant, (i) such Lender's
obligations under this Agreement to the other parties to this Agreement shall
remain unchanged, (ii) such Lender shall remain solely responsible for the
performance thereof, (iii) such Lender shall remain the holder of any such Loan
(and any Note evidencing such Loan) for all purposes under this Agreement and
the other Loan Documents, (iv) the Borrower and the Administrative Agent shall
continue to deal solely and directly with such Lender in connection with such
Lender's rights and obligations under this Agreement and the other Loan
Documents, and (v) in any proceeding under the Bankruptcy Code the Lender shall
be, to the extent permitted by law, the sole representative with respect to the
obligations held in the name of such Lender, whether for its own account or for
the account of any Participant No Lender shall be entitled to create in favor of
any Participant, in the participation agreement pursuant to which such
Participant's participating interest shall be created or otherwise, any right to
vote on, consent to or approve any matter relating to this Agreement or any
other Loan Document except for those specified in clauses (i) and (ii) of the
proviso to subsection 11.1. The Borrower agrees that each Participant shall be
entitled to the benefits of subsections 4.13 and 4.14 with respect to its
participation in
73
the Commitments and the Loans and Letters of Credit outstanding from time to
time as if it was a Lender; provided that, in the case of subsection 4.13, such
Participant shall have complied with the requirements of said subsection and
provided, further, that no Participant shall be entitled to receive any greater
amount pursuant to any such subsection than the transferor Lender would have
been entitled to receive in respect of the amount of the participation
transferred by such transferor Lender to such Participant had no such transfer
occurred.
(c) Any Lender may, in the ordinary course of its commercial
banking or lending business and in accordance with applicable law, at any time
and from time to time assign to any Lender or any Affiliate thereof or, with the
prior written consent of the Administrative Agent and the Borrower (which in
each case shall not be unreasonably withheld), to an additional bank or
financial institution or other entity (an "Assignee") all or any part of its
rights and obligations under this Agreement and the other Loan Documents
including, without limitation, its Revolving Credit Commitments, L/C
Commitments, Revolving Credit Loans and L/C Participating Interests, pursuant to
an Assignment and Acceptance, substantially in the form of Exhibit G, executed
by such Assignee, such assigning Lender (and, in the case of an Assignee that is
not then a Lender, by the Borrower, the Administrative Agent and each Issuing
Lender) and delivered to the Administrative Agent for its acceptance and
recording in the Register, provided that (i) (unless the Borrower and the
Administrative Agent otherwise consent in writing) no such transfer to an
Assignee (other, than a Lender or any Affiliate thereof) shall be in an
aggregate principal amount less than $1,000,000 in the aggregate (or, if less,
the full amount of such assigning Lender's Revolving Credit Loans, L/C
Participating Interests and Revolving Credit Commitments), and (ii) if any
Lender assigns all or any part of its rights and obligations under this
Agreement to one of its Affiliates in connection with or in contemplation of the
sale or other disposition of its interest in such Affiliate, the Borrower's
prior written consent shall be required for such assignment (which shall not be
unreasonably withheld). Upon such execution, delivery, acceptance and recording,
from and after the effective date determined pursuant to such Assignment and
Acceptance, (x) the Assignee thereunder shall be a party hereto and, to the
extent provided in such Assignment and Acceptance, have the rights and
obligations of a Lender hereunder with a Revolving Credit Commitment and L/C
Commitment as set forth therein, and (y) the assigning Lender thereunder shall,
to the extent provided in such Assignment and Acceptance, be released from its
obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all or the remaining portion of an assigning Lender's rights
and obligations under this Agreement, such assigning Lender shall cease to be a
party hereto). Notwithstanding any provision of this paragraph (c) and paragraph
(e) of this subsection, the consent of the Borrower shall not be required, and,
unless requested by the Assignee and/or the assigning Lender, new Notes shall
not be required to be executed and delivered by the Borrower, for any assignment
which occurs at any time when any of the events described in Section 9 shall
have occurred and be continuing.
(d) The Administrative Agent, on behalf of the Borrower, shall
maintain at the address of the Administrative Agent referred to in subsection
11.2 a copy of each Assignment and Acceptance delivered to it and a register
(the "Register") for the recordation of the names and addresses of the Lenders
and the Commitments of, and principal amounts of the Loans owing to, each Lender
from time to time. The entries in the Register shall be conclusive, in the
absence of manifest error, and the Borrower, the Administrative Agent and the
Lenders may (and, in the case of any Loan or other obligation hereunder not
evidenced by a Note, shall) treat
74
each Person whose name is recorded in the Register as the owner of a Loan or
other obligation hereunder as the owner thereof for all purposes of this
Agreement and the other Loan Documents, notwithstanding any notice to the
contrary. Any assignment of any Loan or other obligation hereunder not evidenced
by a Note shall be effective only upon appropriate entries with respect thereto
being made in the Register. The Register shall be available for inspection by
the Borrower or any Lender at any reasonable time and from time to time upon
reasonable prior notice.
(e) Notwithstanding anything in this Agreement to the
contrary, no assignment under subsection 11.6(c) of any rights or obligations
under or in respect of the Loans, the Notes or the Letters of Credit shall be
effective unless and until the Administrative Agent shall have recorded the
assignment pursuant to subsection 11.6(d). Upon its receipt of an Assignment and
Acceptance executed by an assigning Lender and an Assignee (and, in the case of
an Assignee that is not then a Lender or an affiliate thereof, by the Borrower
and the Administrative Agent) together with payment to the Administrative Agent
of a registration and processing fee of $3,500 (other than in the case of an
assignment by a Lender to an affiliate of such Lender), the Administrative Agent
shall (i) promptly accept such Assignment and Acceptance and (ii) on the
effective date determined pursuant thereto record the information contained
therein in the Register and give notice of such acceptance and recordation to
the Lenders and the Borrower. On or prior to such effective date, the assigning
Lender shall surrender any outstanding Notes held by it all or a portion of
which are being assigned, and the Borrower, at its own expense, shall, upon the
request to the Administrative Agent by the assigning Lender or the Assignee, as
applicable, execute and deliver to the Administrative Agent (in exchange for the
outstanding Notes of the assigning Lender) a new Revolving Credit Note to the
order of such Assignee in an amount equal to the lesser of (A) the amount of
such Assignee's Revolving Credit Commitment and (B) the aggregate principal
amount of all Revolving Credit Loans made by such Assignee, after giving effect
to such Assignment and Acceptance and, if the assigning Lender has retained a
Revolving Credit Commitment hereunder, a new Revolving Credit Note to the order
of the assigning Lender in an amount equal to the lesser of (A) the amount of
such Lender's Revolving Credit Commitment and (B) the aggregate principal amount
of all Revolving Credit Loans made by such Lender, after giving effect to such
Assignment and Acceptance. Any such new Notes shall be dated the Closing Date
and shall otherwise be in the form of the Note replaced thereby. Any Notes
surrendered by the assigning Lender shall be returned by the Administrative
Agent to the Borrower marked "canceled."
(f) The Borrower authorizes each Lender to disclose to any
Participant or Assignee (each, a "Transferee") and any prospective Transferee,
any and all financial information in such Lender's possession concerning the
Loan Parties and their Affiliates which has been delivered to such Lender by or
on behalf of the Borrower pursuant to this Agreement or which has been delivered
to such Lender by or on behalf of the Borrower in connection with such Lender's
credit evaluation of the Loan Parties and their Affiliates prior to becoming a
party to this Agreement.
(g) For avoidance of doubt, the parties to this Agreement
acknowledge that the provisions of this subsection concerning assignments of
Loans and Notes relate only to absolute assignments and that such provisions do
not prohibit assignments creating security
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interests, including, without limitation, any pledge or assignment by a Lender
of any Loan or Note to any Federal Reserve Bank in accordance with applicable
law.
(h) Notwithstanding anything to the contrary contained herein,
any Lender (a "Granting Lender") may grant to a special purpose funding vehicle
that is an Affiliate of such Lender (a "SPC"), identified as such in writing
from time to time by the Granting Lender to the Administrative Agent and the
Borrower, the option to provide to the Borrower all or any part of any Loan that
such Granting Lender would otherwise be obligated to make to the Borrower
pursuant to this Agreement; provided that (i) nothing herein shall constitute a
commitment by any SPC to make any Loan, and (ii) if an SPC elects not to
exercise such option or otherwise fails to provide all or any part of such Loan,
the Granting Lender shall be obligated to make such Loan pursuant to the terms
hereof. The making of a Loan by an SPC hereunder shall utilize the Commitment of
the Granting Lender to the same extent, and as if, such Loan were made by such
Granting Lender. Each party hereto hereby agrees that no SPC shall be liable for
any indemnity or similar payment obligation under this Agreement (all liability
for which shall remain with the Granting Lender). In furtherance of the
foregoing, each party hereto hereby agrees (which agreement shall survive the
termination of this Agreement) that, prior to the date that is one year and one
day after the payment in full of all outstanding commercial paper or other
senior indebtedness of any SPC, it will not institute against, or join any other
person in instituting against, such SPC any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings under the laws of the United
States or any State thereof. In addition, notwithstanding anything to the
contrary contained in this Section 11.6(h), any SPC may (i) with notice to, but
without the prior written consent of, the Borrower and the Administrative Agent
and without paying any processing fee therefor, assign all or a portion of its
interests in any Loans to the Granting Lender or to any financial institutions
(consented to by the Borrower and Agent) providing liquidity and/or credit
support to or for the account of such SPC to support the funding or maintenance
of Loans and (ii) disclose on a confidential basis any non-public information
relating to its Loans to any rating agency, commercial paper dealer or provider
of any surety, guarantee or credit or liquidity enhancement to such SPC. This
section may not be amended without the written consent of the SPC. Nothing in
this section in any way affects the Granting Lender's obligations under this
Agreement.
11.7. Adjustments; Set-off. (a) If any Lender (a "Benefitted Lender")
shall at any time receive any payment of all or part of its Loans or
Reimbursement Obligations, or interest thereon, or receive any collateral in
respect thereof (whether voluntarily or involuntarily, by set-off, pursuant to
events or proceedings of the nature referred to in subsection 9(f), or
otherwise), in a greater proportion than any such payment to or collateral
received by any other Lender, if any, in respect of such other Lender's Loans or
Reimbursement Obligations, or interest thereon, such Benefitted Lender shall
purchase for cash from the other Lenders a participating interest in such
portion of each such other Lender's Loans or Reimbursement Obligations, or shall
provide such other Lenders with the benefits of any such collateral, or the
proceeds thereof, as shall be necessary to cause such Benefitted Lender to share
the excess payment or benefits of such collateral or proceeds ratably with each
of the Lenders; provided, however, that if all or any portion of such excess
payment or benefits is thereafter recovered from such Benefitted Lender, such
purchase shall be rescinded, and the purchase price and benefits returned, to
the extent of such recovery, but without interest.
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(b) In addition to any rights and remedies of the Lenders
provided by law, each Lender shall have the right, without prior notice to the
Borrower, any such notice being expressly waived by the Borrower to the extent
permitted by applicable law, upon any amount becoming due and payable by the
Borrower hereunder (whether at the stated maturity, by acceleration or
otherwise) to set-off and appropriate and apply against such amount any and all
deposits (general or special, time or demand, provisional or final), in any
currency, and any other credits, indebtedness or claims, in any currency, in
each case whether direct or indirect, absolute or contingent, matured or
unmatured, at any time held or owing by such Lender or any branch or agency
thereof to or for the credit or the account of the Borrower, as the case may be.
Each Lender agrees promptly to notify the Borrower and the Administrative Agent
after any such set-off and application made by such Lender, provided that, to
the extent permitted by applicable law, the failure to give such notice shall
not affect the validity of such set-off and application.
11.8. Counterparts. This Agreement may be executed by one or more of
the parties to this Agreement on any number of separate counterparts (including
by facsimile transmission), and all of said counterparts taken together shall be
deemed to constitute one and the same instrument. A set of the copies of this
Agreement signed by all the parties shall be lodged with the Borrower and the
Administrative Agent
11.9. Severability. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
11.10. Integration. This Agreement and the other Loan Documents
represent the agreement of the Borrower, the other Loan Parties, the
Administrative Agent and the Lenders with respect to the subject matter hereof,
and there are no promises, undertakings, representations or warranties by the
Administrative Agent or any Lender relative to subject matter hereof not
expressly set forth or referred to herein or in the other Loan Documents.
11.11. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF TEXAS.
11.12. Submission To Jurisdiction; Waivers. The Borrower hereby
irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to which it
is a party, or for recognition and enforcement of any judgment in respect
thereof, to the non-exclusive general jurisdiction of the Courts of the State of
Texas, and federal courts sitting therein, and appellate courts from any
thereof;
(b) consents that any such action or proceeding may be brought
in such courts and waives any objection that it may now or hereafter have to
the venue of any such action or proceeding in any such court or that such action
or
77
proceeding was brought in an inconvenient court and agrees not to plead or
claim the same;
(c) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or certified
mail (or any substantially similar form of mail), postage prepaid, to the
Borrower at its address set forth in subsection 11.2 or at such other address of
which the Administrative Agent shall have been notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or shall limit
the right to ▇▇▇ in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any
right it may have to claim or recover in any legal action or proceeding referred
to in this subsection any special, exemplary, punitive or consequential damages.
11.13. Acknowledgments. The Borrower hereby acknowledges that:
(a) it has been advised by counsel in the negotiation,
execution and delivery of this Agreement and the other Loan Documents;
(b) neither the Administrative Agent nor any Lender has any
fiduciary relationship with or duty to the Borrower arising out of or in
connection with this Agreement or any of the other Loan Documents, and the
relationship between Administrative Agent and Lenders, on one hand, and the
Borrower, on the other hand, in connection herewith or therewith is solely that
of debtor and creditor; and
(c) no joint venture is created hereby or by the other Loan
Documents or otherwise exists by virtue of the transactions contemplated hereby
among the Lenders or among the Borrower and the Lenders.
11.14. WAIVERS OF JURY TRIAL. THE BORROWER, THE ADMINISTRATIVE AGENT
AND THE LENDERS HEREBY KNOWINGLY AND INTENTIONALLY, IRREVOCABLY AND
UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING
TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
11.15. Production Proceeds. Notwithstanding that, by the terms of the
Mortgages, the Borrower is and will be assigning to the Administrative Agent and
Lenders all of the "Production Proceeds" (as defined in the Mortgage) accruing
to the property covered thereby, so long as no Event of Default has occurred the
Borrower may continue to receive from the purchasers of production all such
Production Proceeds, and the Administrative Agent shall reasonably cooperate
with the Borrower so that the purchasers of production pay such Production
Proceeds directly to the Borrower and not to the Administrative Agent nor the
Lenders. Upon the occurrence and continuation of an Event of Default, the
Administrative Agent and Lenders may exercise all rights and remedies granted
under the Mortgages, including the right to obtain possession of all Production
Proceeds then held by the Borrower or to receive directly from the purchasers of
production all other Production Proceeds. In no case shall any failure, whether
purposed or inadvertent, by the Administrative Agent or Lenders to collect
directly any such
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Production Proceeds constitute in any way a waiver, remission or release of any
of their rights under the Mortgages, nor shall any release of any Production
Proceeds by Administrative Agent or Lenders to the Borrower constitute a waiver,
remission, or release of any other Production Proceeds or of any rights of
Administrative Agent or Lenders to collect other Production Proceeds thereunder.
11.16. Release of Mortgaged Properties. The Administrative Agent is
hereby authorized by the Lenders to execute, at the cost and expense of the
Borrower and pursuant to documentation reasonably acceptable to the
Administrative Agent, partial releases of the Mortgaged Properties to the extent
such Mortgaged Properties are sold in accordance with the terms of the Mortgage
and subsection 8.6.
11.17. Limitation on Interest. The Borrower, the Loan Parties, the
Administrative Agent and the Lenders intend to contract in strict compliance
with applicable usury law from time to time in effect. In furtherance thereof
such persons stipulate and agree that none of the terms and provisions contained
in the Loan Documents shall ever be construed to provide for interest in excess
of the maximum amount of interest permitted to be charged by applicable law from
time to time in effect. Neither any Loan Party nor any present or future
guarantors, endorsers, or other Persons hereafter becoming liable for payment of
any Obligation shall ever be liable for unearned interest thereon or shall ever
be required to pay interest thereon in excess of the maximum amount that may be
lawfully charged under applicable law from time to time in effect, and the
provisions of this section shall control over all other provisions of the Loan
Documents which may be in conflict or apparent conflict herewith. The
Administrative Agent and the Lenders expressly disavow any intention to charge
or collect excessive unearned interest or finance charges in the event the
maturity of any Obligation is accelerated. If (a) the maturity of any Obligation
is accelerated for any reason, (b) any Obligation is prepaid and as a result any
amounts held to constitute interest are determined to be in excess of the legal
maximum, or (c) any Lender or may other holder of any or all of the Obligations
shall otherwise collect moneys which are determined to constitute interest which
would otherwise increase the interest on any or all of the Obligations to an
amount in excess of that permitted to be charged by applicable law then in
effect, then all sums determined to constitute interest in excess of such legal
limit shall, without penalty, be promptly applied to reduce the then outstanding
principal of the related Obligations or, at such Lender's or holder's option,
promptly returned to Borrower or the other payor thereof upon such
determination. In determining whether or not the interest paid or payable, under
any specific circumstance, exceeds the maximum amount permitted under applicable
law, Lenders, the Administrative Agent and the Loan Parties (and any other
payers thereof) shall to the greatest extent permitted under applicable law, (i)
characterize any non-principal payment as an expense, fee or premium rather than
as interest, (ii) exclude voluntary prepayments and the effects thereof, and
(iii) amortize, prorate, allocate, and spread the total amount of interest
throughout the entire contemplated term of the instruments evidencing the
Obligations in accordance with the amounts outstanding from time to time
thereunder and the maximum legal rate of interest from time to time in effect
under applicable law in order to lawfully charge the maximum amount of interest
permitted under applicable law.
11.18. Existing Indebtedness. The Borrower, the Administrative Agent
and the Lenders have agreed that this Agreement is an amendment and restatement
of the Existing Credit Facility, not a new or substitute credit agreement or
novation of the Existing Credit Facility, and each
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reference to an "Extension of Credit" shall include each Extension of Credit
made or issued heretofore under the Existing Credit Facility as well as each
Extension of Credit made or issued hereafter under this Agreement.
11.19. USA Patriot Act Notice. Each Lender and the Administrative Agent
(for itself and not on behalf of any Lender) hereby notifies the Borrower that
pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56
(signed into law October 26, 2001)) (the "Act"), it is required to obtain,
verify and record information that identifies the Borrower, which information
includes the name and address of the Borrower and other information that will
allow such Lender or the Administrative Agent, as applicable, to identify the
Lender in accordance with the Act.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
THE MERIDIAN RESOURCE CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
-------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
Title: Chief Executive Officer
FORTIS CAPITAL CORP., as Administrative
Agent, Sole Lead Arranger, Bookrunner,
Issuing Lender and as a Lender
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Title: Senior Vice President
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Managing Director
COMERICA BANK, as Syndication Agent and as
a Lender
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇
Title: Vice President
UNION BANK OF CALIFORNIA, N. A.,
as Documentation Agent and as a Lender
By: /s/ ▇▇▇ ▇▇▇▇▇
-----------------------------------
Name: ▇▇▇ ▇▇▇▇▇
Title: Vice President
UNION BANK OF CALIFORNIA, N. A.,
as Documentation Agent and as a Lender
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Senior Vice President
THE Bank of Nova Scotia,
as a Lender
By: /s/ ▇. ▇▇▇▇
-----------------------------------
Name: ▇. ▇▇▇▇
Title: Senior Manager
ALLIED IRISH BANKS p.l.c.
as a Lender
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Vice President
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇
Title: Senior Vice President