EXHIBIT 10.1
CREDIT AGREEMENT
DATED AS OF JUNE 14, 2004
AMONG
▇▇▇▇▇▇ PETROLEUM COMPANY
AS BORROWER,
UNION BANK OF CALIFORNIA, N.A.,
AS LEAD ARRANGER, ADMINISTRATIVE AGENT AND DOCUMENTATION AGENT,
AND
THE LENDERS SIGNATORY HERETO
$175,000,000 SENIOR SECURED CREDIT FACILITY
TABLE OF CONTENTS
PAGE
ARTICLE I DEFINITIONS AND ACCOUNTING MATTERS.......................................................... 1
Section 1.01 Terms Defined Above.................................................................. 1
Section 1.02 Certain Defined Terms................................................................ 1
Section 1.03 Accounting Terms and Determinations.................................................. 17
ARTICLE II COMMITMENTS................................................................................. 17
Section 2.01 Loans and Letters of Credit.......................................................... 17
Section 2.02 Borrowings, Continuations and Conversions, Letters of Credit......................... 18
Section 2.03 Changes of Commitments............................................................... 20
Section 2.04 Fees................................................................................. 20
Section 2.05 Several Obligations.................................................................. 21
Section 2.06 Notes................................................................................ 21
Section 2.07 Prepayments.......................................................................... 22
Section 2.08 Borrowing Base....................................................................... 23
Section 2.09 Assumption of Risks.................................................................. 24
Section 2.10 Obligation to Reimburse and to Prepay................................................ 25
Section 2.11 Lending Offices...................................................................... 27
ARTICLE III PAYMENTS OF PRINCIPAL AND INTEREST.......................................................... 27
Section 3.01 Repayment of Principal............................................................... 27
Section 3.02 Payment of Interest.................................................................. 27
Section 3.03 Payment Waterfall.................................................................... 28
ARTICLE IV PAYMENTS; PRO RATA TREATMENT; COMPUTATIONS; ETC............................................. 29
Section 4.01 Payments............................................................................. 29
Section 4.02 Pro Rata Treatment................................................................... 29
Section 4.03 Computations......................................................................... 30
Section 4.04 Non-receipt of Funds by the Administrative Agent..................................... 30
Section 4.05 Set-off, Sharing of Payments, Etc.................................................... 30
Section 4.06 Taxes................................................................................ 31
Section 4.07 Disposition of Proceeds.............................................................. 34
ARTICLE V CAPITAL ADEQUACY AND YIELD PROTECTION....................................................... 35
Section 5.01 Additional Costs..................................................................... 35
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TABLE OF CONTENTS
(continued)
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Section 5.02 Limitation on LIBOR Loans............................................................ 36
Section 5.03 Illegality........................................................................... 37
Section 5.04 Base Rate Loans Pursuant to Sections 5.01, 5.02 and 5.03............................. 37
Section 5.05 Compensation......................................................................... 37
Section 5.06 Time Limit; Etc...................................................................... 38
Section 5.07 Replacement Lenders.................................................................. 38
ARTICLE VI CONDITIONS PRECEDENT........................................................................ 39
Section 6.01 Initial Funding...................................................................... 39
Section 6.02 Initial and Subsequent Loans and Letters of Credit................................... 41
Section 6.03 Conditions Precedent for the Benefit of Lenders...................................... 41
Section 6.04 No Waiver............................................................................ 41
ARTICLE VII REPRESENTATIONS AND WARRANTIES.............................................................. 42
Section 7.01 Corporate Existence.................................................................. 42
Section 7.02 Financial Condition.................................................................. 42
Section 7.03 Litigation........................................................................... 42
Section 7.04 No Breach............................................................................ 42
Section 7.05 Authority............................................................................ 43
Section 7.06 Approvals............................................................................ 43
Section 7.07 Use of Loans......................................................................... 43
Section 7.08 ERISA................................................................................ 43
Section 7.09 Taxes................................................................................ 44
Section 7.10 Titles, etc.......................................................................... 45
Section 7.11 No Material Misstatements............................................................ 45
Section 7.12 Investment Company Act............................................................... 46
Section 7.13 Public Utility Holding Company Act................................................... 46
Section 7.14 Subsidiaries......................................................................... 46
Section 7.15 Location of Business, Offices and Inventory.......................................... 46
Section 7.16 Defaults............................................................................. 46
Section 7.17 Environmental Matters................................................................ 46
Section 7.18 Compliance with the Law.............................................................. 47
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TABLE OF CONTENTS
(continued)
PAGE
Section 7.19 Insurance............................................................................ 48
Section 7.20 Hedging Agreements................................................................... 48
Section 7.21 Restriction on Liens................................................................. 48
Section 7.22 Material Agreements.................................................................. 48
Section 7.23 Gas Imbalances....................................................................... 49
ARTICLE VIII AFFIRMATIVE COVENANTS....................................................................... 49
Section 8.01 Reporting Requirements............................................................... 49
Section 8.02 Litigation........................................................................... 51
Section 8.03 Maintenance, Etc..................................................................... 52
Section 8.04 Environmental Matters................................................................ 53
Section 8.05 Further Assurances................................................................... 54
Section 8.06 Performance of Obligations........................................................... 54
Section 8.07 Engineering Reports.................................................................. 54
Section 8.08 Title Information.................................................................... 55
Section 8.09 Collateral........................................................................... 56
Section 8.10 ERISA Information and Compliance..................................................... 57
Section 8.11 Inspection; Books and Records........................................................ 57
ARTICLE IX NEGATIVE COVENANTS.......................................................................... 58
Section 9.01 Debt................................................................................. 58
Section 9.02 Liens................................................................................ 59
Section 9.03 Investments, Loans and Advances...................................................... 59
Section 9.04 Dividends, Distributions and Redemptions............................................. 61
Section 9.05 Sales and Leasebacks................................................................. 61
Section 9.06 Nature of Business................................................................... 61
Section 9.07 [Intentionally omitted].............................................................. 61
Section 9.08 Mergers, Etc......................................................................... 61
Section 9.09 Proceeds of Notes; Letters of Credit................................................. 61
Section 9.10 ERISA Compliance..................................................................... 62
Section 9.11 [Intentionally omitted].............................................................. 63
Section 9.12 Current Ratio........................................................................ 63
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TABLE OF CONTENTS
(continued)
PAGE
Section 9.13 Fixed Charge Coverage Ratio.......................................................... 63
Section 9.14 Leverage Ratio....................................................................... 63
Section 9.15 Sale of Oil and Gas Properties....................................................... 64
Section 9.16 Environmental Matters................................................................ 64
Section 9.17 Transactions with Affiliates......................................................... 64
Section 9.18 Subsidiaries......................................................................... 64
Section 9.19 Negative Pledge Agreements........................................................... 64
Section 9.20 Gas Imbalances, Take-or-Pay or Other Prepayments..................................... 65
Section 9.21 Subordinated Debt.................................................................... 65
Section 9.22 Hanover Agreements................................................................... 65
Section 9.23 Permitted Medusa Transactions........................................................ 65
ARTICLE X EVENTS OF DEFAULT; REMEDIES................................................................. 65
Section 10.01 Events of Default.................................................................... 65
Section 10.02 Remedies............................................................................. 67
ARTICLE XI THE ADMINISTRATIVE AGENT.................................................................... 68
Section 11.01 Appointment, Powers and Immunities................................................... 68
Section 11.02 Reliance by Administrative Agent..................................................... 69
Section 11.03 Defaults............................................................................. 69
Section 11.04 Rights as a Lender................................................................... 69
Section 11.05 Indemnification...................................................................... 69
Section 11.06 Non-Reliance on Administrative Agent and other Lenders............................... 70
Section 11.07 Action by Administrative Agent....................................................... 70
Section 11.08 Resignation or Removal of Administrative Agent....................................... 70
ARTICLE XII MISCELLANEOUS............................................................................... 71
Section 12.01 Waiver............................................................................... 71
Section 12.02 Notices.............................................................................. 71
Section 12.03 Payment of Expenses, Indemnities, etc................................................ 71
Section 12.04 Amendments, Etc...................................................................... 74
Section 12.05 Successors and Assigns............................................................... 74
Section 12.06 Assignments and Participations....................................................... 74
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TABLE OF CONTENTS
(continued)
PAGE
Section 12.07 Invalidity........................................................................... 76
Section 12.08 Counterparts......................................................................... 76
Section 12.09 References; Use of Word "Including".................................................. 76
Section 12.10 Survival............................................................................. 76
Section 12.11 Captions............................................................................. 76
Section 12.12 No Oral Agreements................................................................... 77
Section 12.13 Governing Law; Submission to Jurisdiction............................................ 77
Section 12.14 Interest............................................................................. 78
Section 12.15 Confidentiality...................................................................... 79
Section 12.16 Exculpation Provisions............................................................... 79
Section 12.17 Hedging Agreement Substitution of Collateral......................................... 80
Section 12.18 Amendment, Restatement and Rearrangement of Prior Debt............................... 80
Section 12.19 Obligations as Senior Indebtedness; Specified Senior Indebtedness.................... 80
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ANNEXES, EXHIBITS AND SCHEDULES
Annex I - List of Percentage Shares and Maximum Credit Amounts
Exhibit A - Form of Note
Exhibit B - Form of Borrowing, Continuation and Conversion Request
Exhibit C - Form of Compliance Certificate
Exhibit D - List of Security Instruments
Exhibit E - Form of Assignment Agreement
Schedule 7.02 - Liabilities
Schedule 7.03 - Litigation
Schedule 7.09 - Taxes
Schedule 7.10 - Titles, etc.
Schedule 7.14 - Subsidiaries and Partnerships
Schedule 7.17 - Environmental Matters
Schedule 7.19 - Insurance
Schedule 7.20 - Hedging Agreements
Schedule 7.22 - Material Agreements
Schedule 7.23 - Gas Imbalances
Schedule 9.01 - Debt
Schedule 9.02 - Liens
Schedule 9.03 - Investments, Loans and Advances
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THIS CREDIT AGREEMENT dated as of June 14, 2004 is among ▇▇▇▇▇▇ PETROLEUM
COMPANY, a corporation formed under the laws of the State of Delaware (the
"Borrower"); each of the lenders that is a signatory hereto or which becomes a
signatory hereto as provided in Section 12.06 (individually, together with its
successors and assigns, a "Lender" and, collectively, the "Lenders"); and UNION
BANK OF CALIFORNIA, N.A., (in its individual capacity, "UBOC"), as
administrative agent for the Lenders (in such capacity, together with its
successors in such capacity, the "Administrative Agent") and as documentation
agent.
R E C I T A L S
A The Borrower has previously requested that the Lenders provide certain
loans to and extensions of credit on behalf of the Borrower;
B Pursuant to such request, certain of the Lenders agreed to make such
loans and extensions of credit subject to the terms and conditions of the Prior
Credit Agreement; and
C The Borrower has now requested (and the Lenders have agreed) that the
Prior Credit Agreement be amended and restated in its entirety in accordance
with the terms and provisions of this Agreement.
D In consideration of the mutual covenants and agreements herein contained
and of the loans, extensions of credit and commitments hereinafter referred to,
the parties hereto agree that the Prior Credit Agreement is hereby amended and
restated in its entirety to read as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING MATTERS
Section 1.01 Terms Defined Above. As used in this Agreement, the terms
"Administrative Agent," "Borrower," "Lender," "Lenders" and "UBOC" shall have
the meanings indicated above.
Section 1.02 Certain Defined Terms. As used herein, the following terms
shall have the following meanings (all terms defined in this Article I or in
other provisions of this Agreement in the singular to have equivalent meanings
when used in the plural and vice versa):
"2005 Subordinated Notes" shall mean the 11% Senior Subordinated Notes due
December 15, 2005, issued by Borrower under that certain indenture dated October
26, 2000, between Borrower and American Stock Transfer & Trust Company, as
trustee, as modified, renewed, or supplemented from time to time to the extent
permitted under Sections 9.01 and 9.23 of this Agreement.
"2010 Senior Notes" shall mean the 9.75% Senior Notes due December 5,
2010, issued by Borrower under that certain indenture dated March 15, 2004,
between Borrower and American Stock Transfer & Trust Company, as trustee, as
modified, renewed, or supplemented from time to time to the extent permitted
under Sections 9.01 and 9.23 of this Agreement.
"Additional Costs" shall have the meaning assigned such term in Section
5.01(a).
"Additional Entrada Assets" shall have the meaning assigned to such term
in Section 8.09(a).
"Affected Loans" shall have the meaning assigned such term in Section
5.04.
"Affiliate" of any Person shall mean (i) any Person directly or indirectly
controlled by, controlling or under common control with such first Person, (ii)
any director or officer of such first Person or of any Person referred to in
clause (i) above and (iii) if any Person in clause (i) above is an individual,
any member of the immediate family (including parents, spouse and children) of
such individual and any trust whose principal beneficiary is such individual or
one or more members of such immediate family and any Person who is controlled by
any such member or trust. For purposes of this definition, any Person which owns
directly or indirectly 20% or more of the securities having ordinary voting
power for the election of directors or other governing body of a corporation or
10% or more of the partnership or other ownership interests of any other Person
(other than as a limited partner of such other Person) will be deemed to
"control" (including, with its correlative meanings, "controlled by" and "under
common control with") such corporation or other Person.
"Agreement" shall mean this Credit Agreement, as the same may from time to
time be amended or supplemented.
"Aggregate Commitments" at any time shall equal the amount calculated in
accordance with Section 2.03.
"Aggregate Maximum Credit Amount" at any time shall equal the sum of the
Maximum Credit Amounts of the Lenders, as the same may be reduced pursuant to
Section 2.03(b). The Aggregate Maximum Credit Amount on the Closing Date shall
be $175,000,000.
"Applicable Lending Office" shall mean, for each Lender and for each Type
of Loan, the lending office of such Lender (or an Affiliate of such Lender)
designated for such Type of Loan on the signature pages hereof or such other
offices of such Lender (or of an Affiliate of such Lender) as such Lender may
from time to time specify to the Administrative Agent and the Borrower as the
office by which its Loans of such Type are to be made and maintained.
"Applicable Margin" shall mean the applicable per annum percentage set
forth at the appropriate intersection in the table shown below, based on the
Borrowing Base Utilization as in effect from time to time:
APPLICABLE MARGIN
------------------------------
BORROWING BASE UTILIZATION LIBOR LOANS BASE RATE LOANS
-------------------------- ----------- ---------------
Less than 50% 1.50% 0.00%
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APPLICABLE MARGIN
------------------------------
BORROWING BASE UTILIZATION LIBOR LOANS BASE RATE LOANS
-------------------------- ----------- ---------------
Greater than or equal to 50%, 1.75% 0.00%
but less than 80%
Greater than or equal to 80% 2.00% 0.25%
Each change in the Applicable Margin resulting from a change in the Borrowing
Base Utilization shall take effect on the day such change in the Borrowing Base
Utilization occurs.
"Assignment" shall have the meaning assigned such term in Section
12.06(b).
"Base Rate" shall mean, with respect to any Base Rate Loan, for any day,
the higher of (i) the Federal Funds Rate for any such day plus 1/2 of 1% or (ii)
the Prime Rate for such day. Each change in any interest rate provided for
herein based upon the Base Rate resulting from a change in the Base Rate shall
take effect at the time of such change in the Base Rate.
"Base Rate Loans" shall mean Loans that bear interest at rates based upon
the Base Rate.
"Beneficiaries" shall mean the Administrative Agent, the Lenders, each
Issuing Bank and each Affiliate of a Lender that is a party to a Hedging
Agreement with the Borrower or any Guarantor.
"Borrowing Base" shall mean at any time an amount equal to the amount
determined in accordance with Section 2.08.
"Borrowing Base Deficiency" shall occur and be continuing at any time
that, and relate to the amount by which, the sum of the aggregate outstanding
principal amount of the Loans, plus the LC Exposure, exceeds the Borrowing Base.
"Borrowing Base Properties" means those Oil and Gas Properties of Borrower
and the Guarantors elected by the Borrower to be evaluated for Borrowing Base
purposes and included in the most recent Reserve Report delivered to the Lenders
under this Agreement.
"Business Day" shall mean any day other than a day on which commercial
banks are authorized or required to close in Houston, Texas or Los Angeles,
California and, where such term is used in the definition of "Quarterly Date" or
if such day relates to a borrowing or continuation of, a payment or prepayment
of principal of or interest on, or a conversion of or into, or the Interest
Period for, a LIBOR Loan or a notice by the Borrower with respect to any such
borrowing or continuation, payment, prepayment, conversion or Interest Period,
any day which is also a day on which dealings in Dollar deposits are carried out
in the London interbank market.
"Change of Control" means the occurrence of any of the following events:
(i) any Person or two or more Persons, other than the Borrower or any Affiliate
of the Borrower, acting as a
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group shall acquire beneficial ownership (within the meaning of Rule 13d-3 of
the Securities and Exchange Commission under the Exchange Act, and including
holding proxies to vote for the election of directors other than proxies held by
the Borrower's management or their designees to be voted in favor of persons
nominated by the Borrower's Board of Directors) of 40% or more of the
outstanding voting securities of the Borrower, measured by voting power
(including both ordinary shares and any preferred stock or other equity
securities entitling the holders thereof to vote with the holders of common
stock in elections for directors of the Borrower), (ii) the Borrower shall fail
beneficially to own, directly or indirectly, 100% of the outstanding shares of
voting capital stock of any of the Guarantors on a fully-diluted basis, or (iii)
50% or more of the directors of the Borrower shall consist of Persons not
nominated by the Borrower's Board of Directors (not including as Board nominees
any directors which the Board is obligated to nominate pursuant to shareholders
agreements, voting trust arrangements or similar arrangements).
"Closing Date" shall mean the date on which all conditions precedent
described in Section 6.01 have been satisfied or waived.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time and any successor statute.
"Collateral" shall mean the Property owned by the Borrower and the
Guarantors which is subject to the Liens existing and to exist under the terms
of the Security Instruments.
"Commitment" shall mean, for any Lender, its obligation to make Loans as
provided in Section 2.01(a) and to participate in the Letters of Credit as
provided in Section 2.01(b) up to the lesser of (i) such Lender's Maximum Credit
Amount and (ii) the Lender's Percentage Share of the amount equal to the then
effective Borrowing Base.
"Consolidated Net Income" shall mean with respect to the Borrower and its
Consolidated Subsidiaries, for any period, the aggregate of the net income (or
loss) of the Borrower and its Consolidated Subsidiaries after allowances for
taxes for such period, determined on a consolidated basis in accordance with
GAAP; provided that there shall be excluded from such net income (to the extent
otherwise included therein) the following: (i) the net income of any Person in
which the Borrower or any Consolidated Subsidiary has an interest (which
interest does not cause the net income of such other Person to be consolidated
with the net income of the Borrower and its Consolidated Subsidiaries in
accordance with GAAP), except to the extent of the amount of dividends or
distributions actually paid in such period by such other Person to the Borrower
or to a Consolidated Subsidiary, as the case may be; (ii) the net income (but
not loss) of any Consolidated Subsidiary to the extent that the declaration or
payment of dividends or similar distributions or transfers or loans by that
Consolidated Subsidiary is not at the time permitted by operation of the terms
of its charter or any agreement, instrument or Governmental Requirement
applicable to such Consolidated Subsidiary, or is otherwise restricted or
prohibited in each case determined in accordance with GAAP; (iii) the net income
(or loss) of any Person acquired in a pooling of interests transaction for any
period prior to the date of such transaction; (iv) any extraordinary gains or
losses, including gains or losses attributable to Property sales not in the
ordinary course of business; and (v) the cumulative effect of a change in
accounting principles and any gains or losses attributable to writeups or write
downs of assets.
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"Consolidated Subsidiaries" shall mean each Subsidiary of a Person
(whether now existing or hereafter created or acquired) the financial statements
of which shall be (or should have been) consolidated with the financial
statements of such Person in accordance with GAAP. Unless otherwise indicated,
each reference to the term "Consolidated Subsidiary" shall mean a Subsidiary
consolidated with the Borrower.
"CPOC" means ▇▇▇▇▇▇ Petroleum Operating Company, a Delaware corporation.
"Debt" shall mean, for any Person the sum of the following (without
duplication): (i) all obligations of such Person for borrowed money or evidenced
by bonds, debentures, notes or other similar instruments (including principal,
interest, fees and charges); (ii) all obligations of such Person (whether
contingent or otherwise) in respect of bankers' acceptances, letters of credit,
surety or other bonds and similar instruments; (iii) all obligations of such
Person to pay the deferred purchase price of Property or services (other than
for borrowed money); (iv) all obligations under leases which shall have been, or
should have been, in accordance with GAAP, recorded as capital leases in respect
of which such Person is liable (whether contingent or otherwise); (v) all
obligations of such Person under leases treated as operating leases under GAAP
and as a loan or financing for U.S. income tax purposes; (vi) all Debt (as
described in the other clauses of this definition) and other obligations of
others secured by a Lien on any asset of such Person, whether or not such Debt
is assumed by such Person; (vii) all Debt (as described in the other clauses of
this definition) and other obligations of others guaranteed by such Person or in
which such Person otherwise assures a creditor against loss of the debtor or
obligations of others; (viii) all obligations or undertakings of such Person to
maintain or cause to be maintained the financial position or covenants of others
or to purchase the Debt or Property of others; (ix) obligations to deliver goods
or services including Hydrocarbons in consideration of advance payments, except
as permitted by Section 9.20 and disclosed by Section 8.07(c); (x) obligations
to pay for goods or services whether or not such goods or services are actually
received or utilized by such Person; (xi) any capital stock of such Person in
which such Person has a mandatory obligation to redeem such stock, but
excluding, in the case of the Borrower, mandatory obligations to redeem such
stock after September 15, 2004; (xii) any Debt of a Special Entity for which
such Person is liable either by agreement or because of a Governmental
Requirement; (xiii) the undischarged balance of any production payment created
by such Person or for the creation of which such Person directly or indirectly
received payment; and (xiv) all obligations of such Person under Hedging
Agreements.
"Default" shall mean an Event of Default or an event which with notice or
lapse of time or both would become an Event of Default.
"Deferred Compensation Plan" shall mean the ▇▇▇▇▇▇ Petroleum Operating
Company Deferred Compensation Plan dated as of December 1, 1996 and the letter
to employees dated December 13, 1996 relating thereto.
"Deficiency Payment" shall mean, in respect of any Borrowing Base
Deficiency, any payments made by the Borrower during a Deficiency Period for
such Borrowing Base Deficiency equal to either (i) in the case of each such
payment the amount of the Borrowing Base Deficiency on the first day of such
Deficiency Period divided by six (6) or (ii) such other amount as the Majority
Lenders may approve, which when aggregated with the other such
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payments for such Deficiency Period, are sufficient to reduce the Borrowing Base
Deficiency to zero on or before the final day of such Deficiency Period.
"Deficiency Period" shall mean any period of time commencing on the date
that the Administrative Agent notifies the Borrower of the existence of a
Borrowing Base Deficiency and ending on the date which is six (6) months
thereafter.
"Dollars" and "$" shall mean lawful money of the United States of America.
"EBITDA" shall mean, for any period, the sum of Consolidated Net Income
for such period plus the following expenses or charges to the extent deducted
from Consolidated Net Income in such period: interest, taxes, depreciation,
depletion and amortization and any other non cash charges or expenses.
"Engineering Reports" shall have the meaning assigned such term in Section
2.08.
"Environmental Laws" shall mean any and all Governmental Requirements
pertaining to health or the environment in effect in any and all jurisdictions
in which the Borrower or any Subsidiary is conducting or at any time has
conducted business, or where any Property of the Borrower or any Subsidiary is
located, including without limitation, the Oil Pollution Act of 1990 ("OPA"),
the Clean Air Act, as amended, the Comprehensive Environmental, Response,
Compensation, and Liability Act of 1980 ("CERCLA"), as amended, the Federal
Water Pollution Control Act, as amended, the Occupational Safety and Health Act
of 1970, as amended, the Resource Conservation and Recovery Act of 1976
("RCRA"), as amended, the Safe Drinking Water Act, as amended, the Toxic
Substances Control Act, as amended, the Superfund Amendments and Reauthorization
Act of 1986, as amended, the Hazardous Materials Transportation Act, as amended,
and other environmental conservation or protection laws. The term "oil" shall
have the meaning specified in OPA, the terms "hazardous substance" and "release"
(or "threatened release") have the meanings specified in CERCLA, and the terms
"solid waste" and "disposal" (or "disposed") have the meanings specified in
RCRA; provided, however, that (i) in the event either OPA, CERCLA or RCRA is
amended so as to broaden the meaning of any term defined thereby, such broader
meaning shall apply subsequent to the effective date of such amendment and (ii)
to the extent the laws of the state in which any Property of the Borrower or any
Subsidiary is located establish a meaning for "oil," "hazardous substance,"
"release," "solid waste" or "disposal" which is broader than that specified in
either OPA, CERCLA or RCRA, such broader meaning shall apply.
"Entrada Field" means any and all Oil and Gas Properties on, under or
related to Garden Banks Blocks 738, 782, 826 and 827 located in the federal
offshore waters of the Gulf of Mexico.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time and any successor statute.
"ERISA Affiliate" shall mean each trade or business (whether or not
incorporated) which together with the Borrower or any Subsidiary would be deemed
to be a "single employer" within the meaning of section 4001(b)(1) of ERISA or
subsections (b), (c), (m) or (o) of section 414 of the Code.
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"ERISA Event" shall mean (i) a "Reportable Event" described in Section
4043 of ERISA and the regulations issued thereunder, (ii) the withdrawal of the
Borrower, any Subsidiary or any ERISA Affiliate from a Plan during a plan year
in which it was a "substantial employer" as defined in Section 4001(a)(2) of
ERISA, (iii) the filing of a notice of intent to terminate a Plan or the
treatment of a Plan amendment as a termination under Section 4041 of ERISA, (iv)
the institution of proceedings to terminate a Plan by the PBGC or (v) any other
event or condition which might constitute grounds under Section 4042 of ERISA
for the termination of, or the appointment of a trustee to administer, any Plan.
"Event of Default" shall have the meaning assigned such term in Section
10.01.
"Excepted Liens" shall mean: (i) Liens for taxes, assessments or other
governmental charges or levies not yet due or which are being contested in good
faith by appropriate action and for which adequate reserves have been
maintained; (ii) Liens in connection with workmen's compensation, unemployment
insurance or other social security, old age pension or public liability
obligations not yet due or which are being contested in good faith by
appropriate action and for which adequate reserves have been maintained in
accordance with GAAP; (iii) operators', vendors', carriers', warehousemen's,
repairmen's, mechanics', workmen's, materialmen's, construction or other like
Liens arising by operation of law in the ordinary course of business or incident
to the exploration, development, operation and maintenance of Oil and Gas
Properties or landlord's liens, each of which is in respect of obligations that
have not been outstanding more than 90 days or which are being contested in good
faith by appropriate proceedings and for which adequate reserves have been
maintained in accordance with GAAP; (iv) any Liens reserved in leases or farmout
agreements for rent or royalties and for compliance with the terms of the
farmout agreements or leases in the case of leasehold estates, to the extent
that any such Lien referred to in this clause does not materially impair the use
of the Property covered by such Lien for the purposes for which such Property is
held by the Borrower or any Subsidiary or materially impair the value of such
Property subject thereto; (v) encumbrances (other than to secure the payment of
borrowed money or the deferred purchase price of Property or services),
easements, restrictions, servitudes, permits, conditions, covenants, exceptions
or reservations in any rights of way or other Property of the Borrower or any
Subsidiary for the purpose of roads, pipelines, transmission lines,
transportation lines, distribution lines for the removal of gas, oil, coal or
other minerals or timber, and other like purposes, or for the joint or common
use of real estate, rights of way, facilities and equipment, and defects,
irregularities, zoning restrictions and deficiencies in title of any rights of
way or other Property which in the aggregate do not materially impair the use of
such rights of way or other Property for the purposes of which such rights of
way and other Property are held by the Borrower or any Subsidiary or materially
impair the value of such Property subject thereto; (vi) deposits of cash or
securities to secure the performance of bids, trade contracts, leases, statutory
obligations and other obligations of a like nature incurred in the ordinary
course of business; and (vii) Liens permitted by the Security Instruments.
"Existing Other Debt" shall mean the 2005 Subordinated Notes and the 2010
Senior Notes.
"Federal Funds Rate" shall mean, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest 1/100 of 1%) equal to the weighted average
of the rates on overnight
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federal funds transactions with a member of the Federal Reserve System arranged
by federal funds brokers on such day, as published by the Federal Reserve Bank
of New York on the Business Day next succeeding such day, provided that (i) if
the date for which such rate is to be determined is not a Business Day, the
Federal Funds Rate for such day shall be such rate on such transactions on the
next preceding Business Day as so published on the next succeeding Business Day,
and (ii) if such rate is not so published for any day, the Federal Funds Rate
for such day shall be the average rate charged to the Administrative Agent on
such day on such transactions as determined by the Administrative Agent.
"Fee Letter" shall mean that certain letter agreement from UBOC to the
Borrower dated as of June 14, 2004 concerning certain fees in connection with
this Agreement and any agreements or instruments executed in connection
therewith, as the same may be amended or replaced from time to time.
"Financial Statements" shall mean the financial statement or statements of
the Borrower and its Consolidated Subsidiaries described or referred to in
Section 7.02.
"Funded Debt" shall mean, for any Person the sum (without duplication) of
all Debt of the type described in clauses (i), (iv) and (v) of the definition
thereof.
"GAAP" shall mean generally accepted accounting principles in the United
States of America in effect from time to time.
"Governmental Authority" shall include the country, the state, county,
city and political subdivisions in which any Person or such Person's Property is
located or which exercises valid jurisdiction over any such Person or such
Person's Property, and any court, agency, department, commission, board, bureau
or instrumentality of any of them including monetary authorities which exercises
valid jurisdiction over any such Person or such Person's Property. Unless
otherwise specified, all references to Governmental Authority herein shall mean
a Governmental Authority having jurisdiction over, where applicable, the
Borrower, its Subsidiaries or any of their Property or the Administrative Agent,
any Lender, any Affiliate of Lender or any Applicable Lending Office.
"Governmental Requirement" shall mean any law, statute, code, ordinance,
order, determination, rule, regulation, judgment, decree, injunction, franchise,
permit, certificate, license, authorization or other directive or requirement
(whether or not having the force of law), including, without limitation,
Environmental Laws, energy regulations and occupational, safety and health
standards or controls, of any Governmental Authority.
"Guarantors" shall mean CPOC, ▇▇▇▇▇▇ Offshore Production, Inc., a
Mississippi corporation, and Mississippi Marketing, Inc., a Mississippi
corporation, each a "Guarantor".
"Guaranty Agreement" shall mean an agreement executed by each Guarantor in
form and substance satisfactory to the Administrative Agent guarantying,
unconditionally, payment of the Obligations, as the same may be amended,
modified or supplemented from time to time.
-8-
"Hanover Processing Agreement" shall mean that certain Processing
Agreement dated as of December 14, 2001 by and between CPOC and Hanover
Compression Limited Partnership and an accurate copy of which has been
previously provided to the Lenders.
"Hanover Sales Documents" shall mean that certain ▇▇▇▇ of Sale dated as of
December 14, 2001 and that certain Engineering, Procurement, Construction and
Installation (EPCI) Contract dated as of December 14, 2001 each by and between
CPOC and Hanover Compression Limited Partnership and accurate copies of which
have been previously provided to the Lenders.
"Hedging Agreements" shall mean any commodity, interest rate or currency
swap, cap, floor, collar, forward agreement (for a term in excess of thirty
days) or other exchange or protection agreements or any option with respect to
any such transaction.
"Highest Lawful Rate" shall mean, with respect to each Lender, the maximum
nonusurious interest rate, if any, that at any time or from time to time may be
contracted for, taken, reserved, charged or received on the Notes or on other
Obligations under laws applicable to such Lender which are presently in effect
or, to the extent allowed by law, under such applicable laws which may hereafter
be in effect and which allow a higher maximum nonusurious interest rate than
applicable laws now allow.
"Hydrocarbon Interests" shall mean all rights, titles, interests and
estates now or hereafter acquired in and to oil and gas leases, oil, gas and
mineral leases, or other liquid or gaseous hydrocarbon leases, mineral fee
interests, overriding royalty and royalty interests, net profit interests and
production payment interests, including any reserved or residual interests of
whatever nature.
"Hydrocarbons" shall mean oil, gas, casinghead gas, drip gasoline, natural
gasoline, condensate, distillate, liquid hydrocarbons, gaseous hydrocarbons and
all products refined or separated therefrom.
"Indemnified Parties" shall have the meaning assigned such term in Section
12.03(a)(ii).
"Indemnity Matters" shall mean any and all actions, suits, proceedings
(including any investigations, litigation or inquiries), claims, demands and
causes of action made or threatened against a Person and, in connection
therewith, all losses, liabilities, damages (including, without limitation,
consequential damages) or reasonable costs and expenses of any kind or nature
whatsoever incurred by such Person whether caused by the sole or concurrent
negligence of such Person seeking indemnification.
"Initial Funding" shall mean the funding of the initial Loans or issuance
of the initial Letters of Credit upon satisfaction of the conditions set forth
in Sections 6.01 and 6.02.
"Initial Reserve Report" shall mean the report of the Borrower, dated
February 26, 2004, with respect to the Oil and Gas Properties of the Borrower as
of December 31, 2003, a copy of which has been delivered to the Administrative
Agent.
"Interest Period" shall mean, with respect to any LIBOR Loan, the period
commencing on the date such LIBOR Loan is made and ending on the numerically
corresponding day in the
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first, second, third or sixth calendar month thereafter, as the Borrower may
select as provided in Section 2.02 (or such other period as may be requested by
the Borrower and agreed to by the Majority Lenders), except that each Interest
Period which commences on the last Business Day of a calendar month (or on any
day for which there is no numerically corresponding day in the appropriate
subsequent calendar month) shall end on the last Business Day of the appropriate
subsequent calendar month.
Notwithstanding the foregoing: (i) no Interest Period may end after the
Revolving Credit Termination Date; (ii) each Interest Period which would
otherwise end on a day which is not a Business Day shall end on the next
succeeding Business Day (or, if such next succeeding Business Day falls in the
next succeeding calendar month, on the next preceding Business Day); and (iii)
no Interest Period shall have a duration of less than one month and, if the
Interest Period for any LIBOR Loans would otherwise be for a shorter period,
such Loans shall not be available hereunder.
"Issuing Bank" shall mean UBOC or any other Lender agreed to among the
Borrower, such Lender and the Administrative Agent to issue Letters of Credit.
"LC Commitment" at any time shall mean $20,000,000.
"LC Exposure" at any time shall mean the difference between (i) the
aggregate face amount of all undrawn and uncancelled Letters of Credit plus the
aggregate of all amounts drawn under all Letters of Credit and not yet
reimbursed, minus (ii) the aggregate amount of all cash securing outstanding
Letters of Credit pursuant to Section 2.10(b).
"Letter of Credit Agreements" shall mean the written agreements with the
Issuing Bank, as issuing lender for any Letter of Credit, executed in connection
with the issuance by the Issuing Bank of the Letters of Credit, such agreements
to be on the Issuing Bank's customary form for letters of credit of comparable
amount and purpose as from time to time in effect or as otherwise agreed to by
the Borrower and the Issuing Bank.
"Letters of Credit" shall mean the letters of credit issued pursuant to
Section 2.01(b) and all reimbursement obligations pertaining to any such letters
of credit, and "Letter of Credit" shall mean any one of the Letters of Credit
and the reimbursement obligations pertaining thereto.
"LIBOR" shall mean the rate of interest determined on the basis of the
rate for deposits in Dollars for a period equal to the applicable Interest
Period commencing on the first day of such Interest Period appearing on Dow
▇▇▇▇▇ Market Service Page 3750 as of 11:00 a.m. (London time) two (2) Business
Days prior to the first day of the applicable Interest Period. In the event that
such rate does not appear on Dow ▇▇▇▇▇ Market Service Page 3750, "LIBOR" shall
be determined by the Administrative Agent to be the rate per annum at which
deposits in Dollars are offered by leading reference banks in the London
interbank market to UBOC at approximately 11:00 a.m. (London time) two Business
Days prior to the first day of the applicable Interest Period for a period equal
to such Interest Period and in an amount substantially equal to the amount of
the applicable Loan.
"LIBOR Loans" shall mean Loans the interest rates on which are determined
on the basis of rates referred to in the definition of "LIBOR Rate".
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"LIBOR Rate" shall mean, with respect to any LIBOR Loan, a rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) determined by the
Administrative Agent to be equal to the quotient of (i) LIBOR for such Loan for
the Interest Period for such Loan divided by (ii) 1 minus the Reserve
Requirement for such Loan for such Interest Period.
"Lien" shall mean any interest in Property securing an obligation owed to,
or a claim by, a Person other than the owner of the Property, whether such
interest is based on the common law, statute or contract, and whether such
obligation or claim is fixed or contingent, and including but not limited to (i)
the lien or security interest arising from a mortgage, encumbrance, pledge,
security agreement, conditional sale or trust receipt or a lease, consignment or
bailment for security purposes or (ii) production payments and the like payable
out of Oil and Gas Properties. The term "Lien" shall include reservations,
exceptions, encroachments, easements, rights of way, covenants, conditions,
restrictions, leases and other title exceptions and encumbrances affecting
Property. For the purposes of this Agreement, the Borrower or any Subsidiary
shall be deemed to be the owner of any Property which it has acquired or holds
subject to a conditional sale agreement, or leases under a financing lease or
other arrangement pursuant to which title to the Property has been retained by
or vested in some other Person in a transaction intended to create a financing.
"Loan Documents" shall mean this Agreement, the Notes, all Letters of
Credit, all Letter of Credit Agreements, the Fee Letter and the Security
Instruments.
"Loans" shall mean the loans as provided for by Section 2.01(a).
"Majority Lenders" shall mean, at any time while no Loans or Letters of
Credit are outstanding, Lenders having at least sixty six and two thirds percent
(66-2/3%) of the Aggregate Commitments and, at any time while Loans or Letters
of Credit are outstanding, Lenders holding at least sixty six and two thirds
percent (66-2/3%) of the outstanding aggregate principal amount of the Loans and
Letters of Credit (without regard to any sale by a Lender of a participation in
any Loan or Letter of Credit under Section 12.06(c)).
"Material Adverse Effect" shall mean any set of circumstances or events
that (i) has or could reasonably be expected to have any material and adverse
effect upon, or result in or reasonably be expected to result in a material
adverse change in, (A) the assets, liabilities, prospects, financial condition,
business, operations or affairs of the Borrower and its Subsidiaries taken as a
whole different from those reflected in the Financial Statements or the
financial statements most recently furnished pursuant to Section 8.01(a) or from
the facts represented or warranted in any Loan Document, or (B) the ability of
the Borrower and its Subsidiaries taken as a whole to carry out their business
as at the Closing Date or as proposed as of the Closing Date to be conducted or
to duly and punctually pay and perform their obligations under any of the Loan
Documents, or (C) the validity, binding effect or enforceability of this
Agreement or any of the other Loan Documents or (ii) impairs materially or could
reasonably be expected to impair materially the ability of the Administrative
Agent or any of the Lenders, to the extent permitted, to enforce its legal
remedies pursuant to the Loan Documents or otherwise available at law or in
equity.
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"Maximum Credit Amount" shall mean, as to each Lender, the amount set
forth opposite such Lender's name on Annex I under the caption "Maximum Credit
Amounts" (as the same may be reduced pursuant to Section 2.03(b) pro rata to
each Lender based on its Percentage Share), as modified from time to time to
reflect any assignments permitted by Section 12.06(b).
"Mortgaged Oil and Gas Property" shall mean any Borrowing Base Property
that is Collateral.
"Multiemployer Plan" shall mean a Plan defined as such in Section 3(37) or
4001(a)(3) of ERISA.
"Notes" shall mean the Notes provided for by Section 2.06, together with
any and all renewals, extensions for any period, increases, rearrangements,
substitutions, amendments, and/or modifications thereof.
"Obligations" shall mean all indebtedness, obligations and liabilities of
the Borrower to any of the Lenders, any of the Lenders' Affiliates, any Issuing
Bank or the Administrative Agent, individually or collectively, existing on the
date of this Agreement or arising thereafter, direct or indirect, joint or
several, absolute or contingent, matured or unmatured, liquidated or
unliquidated, secured or unsecured, arising or incurred under any Hedging
Agreement, under this Agreement or any of the other Loan Documents or in respect
of any of the Loans made or reimbursement obligations incurred or any of the
Notes, Letters of Credit or other instruments at any time evidencing any
thereof, including interest accruing subsequent to the filing of a petition or
other action concerning bankruptcy or other similar proceedings, and all
renewals, extensions, rearrangements, amendments, refinancings, replacements
and/or increases of the foregoing. The term "Obligations" shall include, where
the context refers to "Obligations" of any or all of the Guarantors, all
obligations of any or all of the Guarantors, pursuant to any and all guarantees,
guaranty agreements, and all other instruments, executed by any and all of the
Guarantors, now or in the future, guaranteeing all or any portion of the
"Obligations" of the Borrower.
"Oil and Gas Properties" shall mean 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) which
may affect all or any portion of the Hydrocarbon Interests; all operating
agreements, contracts and other agreements which relate to any of the
Hydrocarbon Interests or the production, sale, purchase, exchange or processing
of Hydrocarbons from or attributable to such Hydrocarbon Interests; all
Hydrocarbons in and under and which may be produced and saved or attributable to
the Hydrocarbon Interests, including all oil in tanks, the lands covered thereby
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 manner appertaining, belonging, affixed or
incidental to the Hydrocarbon Interests; and all Properties, rights, titles,
interests and estates described or referred to above, including any and all
Property, real or personal, now owned or hereinafter acquired and situated upon,
used, held for use or useful in connection with the operating, working or
development of any of such Hydrocarbon Interests or Property (excluding drilling
rigs, automotive equipment or other personal property which may be on such
premises for the purpose
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of drilling a well or for other similar temporary uses) and including any and
all oil ▇▇▇▇▇, gas ▇▇▇▇▇, injection ▇▇▇▇▇ or other ▇▇▇▇▇, buildings, structures,
fuel separators, liquid extraction plants, plant compressors, pumps, pumping
units, field gathering systems, tanks and tank batteries, fixtures, valves,
fittings, machinery and parts, engines, boilers, meters, apparatus, equipment,
appliances, tools, implements, cables, wires, towers, casing, tubing and rods,
surface leases, rights-of-way, easements and servitudes together with all
additions, substitutions, replacements, accessions and attachments to any and
all of the foregoing.
"Other Taxes" shall have the meaning assigned such term in Section
4.06(b).
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions.
"Percentage Share" shall mean the percentage of the Aggregate Commitments
to be provided by a Lender under this Agreement as indicated on Annex I hereto,
as modified from time to time to reflect any assignments permitted by Section
12.06(b).
"Permitted Medusa Transaction" means each of the following transactions
now or hereafter undertaken by the Borrower or any Subsidiary with respect to
the development of Oil and Gas Properties related to Mississippi Canyon Blocks
582, 538, 493, 624, 539, and 581 located in the federal offshore waters of the
Gulf of Mexico (the "Medusa Field") in conjunction with the other working
interest owners in the Medusa Field:
(i) the construction of the gas export line and related facilities
designed to transport natural gas production from the Medusa Field to
downstream markets (the "Medusa Gas System"); the conveyance of all or a
portion thereof to a third party (the "Medusa Gas System Owner") upon
completion thereof in consideration of the Medusa Field working interest
owners being reimbursed for all or a portion of their actual costs
incurred for construction of that portion of the Medusa Gas System so
conveyed; and the agreement of the Medusa Field working interest owners to
transport all or a portion of their future gas production from the Medusa
Field for a gathering fee (which gathering fee may vary based on actual
throughput) paid to the Medusa Gas System Owner, pursuant to, among other
things, the documents and agreements listed as items 6 through 18 on
Schedule 7.22, as the same may be from time to time modified or amended;
(ii) the construction of the oil export line and related facilities
designed to transport oil production from the Medusa Field to downstream
markets (the "Medusa Oil System"); the conveyance of all or a portion
thereof to a third party (the "Medusa Oil System Owner") upon completion
thereof in consideration of the Medusa Field working interest owners being
reimbursed for all or a portion of their actual costs incurred for
construction of that portion of the Medusa Oil System so conveyed; and the
agreement of the Medusa Field working interest owners to transport all or
a portion of their future oil production from the Medusa Field for a
transportation fee (which transportation fee may vary based on actual
throughput) paid to the Medusa Oil System Owner, pursuant to, among other
things, the documents and agreements listed as items 6 through 18 on
Schedule 7.22, as the same may be from time to time modified or amended;
and
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(iii) the construction of a spar facility ( the "Medusa SPAR") to
produce and process the Medusa field hydrocarbons; the conveyance of all
or a portion thereof to an Affiliate or a third party (the "Medusa SPAR
Owner") upon completion thereof in consideration of the Medusa Field
working interest owners being reimbursed for all or a portion of their
actual costs incurred for construction of that portion of the Medusa SPAR
so conveyed; and the agreement of the Medusa Field working interest owners
to produce and process all or a portion of their future production from
the Medusa Field through the Medusa SPAR for a tariff (which tariff may
vary based on actual throughput) paid to the Medusa SPAR Owner, pursuant
to, among other things, the documents and agreements listed as items 6
through 18 on Schedule 7.22, as the same may be from time to time modified
or amended.
"Person" shall mean any individual, corporation, company, voluntary
association, partnership, joint venture, trust, unincorporated organization or
government or any agency, instrumentality or political subdivision thereof, or
any other form of entity.
"Plan" shall mean any employee pension benefit plan, as defined in Section
3(2) of ERISA, which (i) is currently or hereafter sponsored, maintained or
contributed to by the Borrower, any Subsidiary or an ERISA Affiliate or (ii) was
at any time during the preceding six calendar years sponsored, maintained or
contributed to, by the Borrower, any Subsidiary or an ERISA Affiliate.
"Post Default Rate" shall mean, in respect of any principal of any Loan
and any past due interest thereon or any other amount payable by the Borrower
under this Agreement or any other Loan Document, a rate per annum during the
period commencing on the date of occurrence of an Event of Default until such
amount is paid in full or all Events of Default are cured or waived equal to 2%
per annum above the Base Rate as in effect from time to time plus the Applicable
Margin (if any), but in no event to exceed the Highest Lawful Rate; provided
however, that for a LIBOR Loan, and any past due interest thereon, the "Post
Default Rate" for such principal shall be, for the period commencing on the date
of occurrence of an Event of Default and ending on the earlier to occur of the
last day of the Interest Period therefor or the date all Events of Default are
cured or waived, 2% per annum above the interest rate for such Loan as provided
in Section 3.02(a)(ii), but in no event to exceed the Highest Lawful Rate.
"Prime Rate" shall mean the rate of interest from time to time announced
publicly by the Administrative Agent at the Principal Office as its prime
commercial lending rate. Such rate is set by the Administrative Agent as a
general reference rate of interest, taking into account such factors as the
Administrative Agent may deem appropriate, it being understood that many of the
Administrative Agent's commercial or other loans are priced in relation to such
rate, that it is not necessarily the lowest or best rate actually charged to any
customer and that the Administrative Agent may make various commercial or other
loans at rates of interest having no relationship to such rate.
"Principal Office" shall mean the principal office of the Administrative
Agent, presently located at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇.
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"Prior Credit Agreement" shall mean that certain First Amended and
Restated Credit Agreement dated as of June 30, 2002 among ▇▇▇▇▇▇ Petroleum
Company, as borrower, and Wachovia Bank, National Association, as a lender and
administrative agent, and UBOC, as a lender and documentation agent, as amended,
supplemented and modified on or before the Closing Date.
"Prior Debt" shall mean the outstanding Debt under the Prior Credit
Agreement.
"Property" shall mean any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
"Quarterly Dates" shall mean the last day of each March, June, September,
and December, in each year, the first of which shall be June 20, 2004.
"Redetermination Date" shall mean the date that the redetermined Borrowing
Base becomes effective subject to the notice requirements specified in Section
2.08(e) both for scheduled redeterminations and unscheduled redeterminations.
"Regulation D" shall mean Regulation D of the Board of Governors of the
Federal Reserve System (or any successor), as the same may be amended or
supplemented from time to time.
"Regulatory Change" shall mean, with respect to any Lender, any change
after the Closing Date in any Governmental Requirement (including Regulation D)
or the adoption or making after such date of any interpretations, directives or
requests applying to a class of lenders (including such Lender or its Applicable
Lending Office) of or under any Governmental Requirement (whether or not having
the force of law) by any Governmental Authority charged with the interpretation
or administration thereof.
"Required Payment" shall have the meaning assigned such term in Section
4.04.
"Reserve Report" shall mean a report, in form and substance satisfactory
to the Administrative Agent, setting forth, as of each January 1 (or such other
date in the event of an unscheduled redetermination); (i) the oil and gas
reserves attributable to the Borrowing Base Properties together with a
projection of the rate of production and future net income, taxes, operating
expenses and capital expenditures with respect thereto as of such date, based
upon the pricing assumptions consistent with SEC reporting requirements at the
time and (ii) such other information as the Administrative Agent may reasonably
request. The term "Reserve Report" shall also include the information to be
provided by the Borrower as of April 1, August 1 and October 1 of each year
pursuant to Section 8.07(a).
"Reserve Requirement" shall mean, for any Interest Period for any LIBOR
Loan, the average maximum rate at which reserves (including any marginal,
supplemental or emergency reserves) are required to be maintained during such
Interest Period under Regulation D by member banks of the Federal Reserve System
in New York City with deposits exceeding one billion Dollars against
"Eurocurrency liabilities" (as such term is used in Regulation D). Without
limiting the effect of the foregoing, the Reserve Requirement shall reflect any
other reserves required to be maintained by such member banks by reason of any
Regulatory Change
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against (i) any category of liabilities which includes deposits by reference to
which LIBOR is to be determined as provided in the definition of "LIBOR" or (ii)
any category of extensions of credit or other assets which include a LIBOR Loan.
"Responsible Officer" shall mean, as to any Person, the Chief Executive
Officer, the President or any Vice President of such Person and, with respect to
financial matters, the term "Responsible Officer" shall include the Chief
Financial Officer or the Treasurer of such Person. Unless otherwise specified,
all references to a Responsible Officer herein shall mean a Responsible Officer
of the Borrower.
"Revolving Credit Termination Date" shall mean the earlier to occur of (i)
July 31, 2007 or (ii) the date that the Commitments are sooner terminated
pursuant to Sections 2.03(b) or 10.02.
"Scheduled Redetermination Date" shall have the meaning assigned such term
in Section 2.08(d).
"SEC" shall mean the Securities and Exchange Commission or any successor
Governmental Authority.
"Security Instruments" shall mean the agreements or instruments described
or referred to in Exhibit D, and any and all other agreements or instruments now
or hereafter executed and delivered by the Borrower or any other Person (other
than participation or similar agreements between any Lender and any other lender
or creditor with respect to any Obligations pursuant to this Agreement) in
connection with, or as security for the payment or performance of, the Notes,
this Agreement, or reimbursement obligations under the Letters of Credit, as
such agreements may be amended, supplemented or restated from time to time.
"Special Entity" shall mean any joint venture, limited liability company
or partnership, general or limited partnership or any other type of partnership
or company other than a corporation in which a Person or one or more of its
other Subsidiaries is a member, owner, partner or joint venturer and owns,
directly or indirectly, at least a majority of the equity of such entity or
controls such entity, but excluding any tax partnerships that are not classified
as partnerships under state law. For purposes of this definition, any Person
which owns directly or indirectly an equity investment in another Person which
allows the first Person to manage or elect managers who manage the normal
activities of such second Person will be deemed to "control" such second Person
(e.g. a sole general partner controls a limited partnership).
"Subordinated Debt" shall mean any Debt of the Borrower expressly
subordinated to the Obligations, on terms specifically including, without
limitation, that payments on such Debt shall be prohibited if a Default exists
or would result from such payment, and other terms and conditions and pursuant
to documentation, all in form and substance satisfactory to the Majority
Lenders.
"Subsidiary" shall mean (i) any corporation of which at least a majority
of the outstanding shares of stock having by the terms thereof ordinary voting
power to elect a majority of the board of directors of such corporation
(irrespective of whether or not at the time stock of any other class or classes
of such corporation shall have or might have voting power by reason of
-16-
the happening of any contingency) is at the time directly or indirectly owned or
controlled by another Person or one or more of such Person's Subsidiaries or by
such Person and one or more of its Subsidiaries and (ii) any Special Entity of
which at least a majority of the equity interests are owned, directly or
indirectly or controlled by such Person. Unless otherwise indicated herein, each
reference to the term "Subsidiary" shall mean a Subsidiary of the Borrower.
"Taxes" shall have the meaning assigned such term in Section 4.06(a).
"Transfer" shall have the meaning assigned such term in Section 9.15.
"Type" shall mean, with respect to any Loan, a Base Rate Loan or a LIBOR
Loan.
Section 1.03 Accounting Terms and Determinations. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
determinations with respect to accounting matters hereunder shall be made, and
all financial statements and certificates and reports as to financial matters
required to be furnished to the Administrative Agent or the Lenders hereunder
shall be prepared, in accordance with GAAP, applied on a basis consistent with
the audited financial statements of the Borrower referred to in Section 7.02
(except for changes concurred with by the Borrower's independent public
accountants).
ARTICLE II
COMMITMENTS
Section 2.01 Loans and Letters of Credit.
(a) Loans. Each Lender severally agrees, on the terms and conditions
of this Agreement, to make loans to the Borrower during the period from
and including (i) the Closing Date or (ii) such later date that such
Lender becomes a party to this Agreement as provided in Section 12.06(b),
to and up to, but excluding, the Revolving Credit Termination Date in an
aggregate principal amount at any one time outstanding up to, but not
exceeding, the amount of such Lender's Commitment as then in effect;
provided, however, that the aggregate principal amount of all such Loans
by all Lenders hereunder at any one time outstanding, plus the LC Exposure
shall not exceed the Aggregate Commitments. Subject to the terms of this
Agreement, during the period from the Closing Date to and up to, but
excluding, the Revolving Credit Termination Date, the Borrower may borrow,
repay and reborrow the amount described in this Section 2.01(a).
(b) Letters of Credit. During the period from and including the
Closing Date to, but excluding, the Revolving Credit Termination Date, the
Issuing Bank, as issuing bank for the Lenders, agrees to extend credit for
the account of the Borrower or any Guarantor at any time and from time to
time by issuing, renewing, extending or reissuing Letters of Credit;
provided, however, the LC Exposure at any one time outstanding shall not
exceed the lesser of (i) the LC Commitment or (ii) the Aggregate
Commitments, as then in effect, minus the aggregate principal amount of
all Loans and the LC Exposure then outstanding. The Lenders shall
participate in such Letters of Credit according to their respective
Percentage Shares. Each of the Letters of Credit shall (i) be issued by
the
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Issuing Bank, (ii) contain such terms and provisions as are reasonably
required by the Issuing Bank, (iii) be for the account of the Borrower and
(iv) expire not later than the earlier to occur of (A) twenty-four months
after the date of its issuance and (B) ten (10) days before the Revolving
Credit Termination Date.
(c) Limitation on Types of Loans. Subject to the other terms and
provisions of this Agreement, at the option of the Borrower, the Loans may
be Base Rate Loans or LIBOR Loans; provided that, without the prior
written consent of the Majority Lenders, no more than ten (10) LIBOR Loans
may be outstanding at any time.
Section 2.02 Borrowings, Continuations and Conversions, Letters of Credit.
(a) Borrowings. The Borrower shall give the Administrative Agent
(which shall promptly notify the Lenders) advance notice as hereinafter
provided of each borrowing hereunder, which shall specify (i) the
aggregate amount of such borrowing, (ii) the Type and (iii) the date
(which shall be a Business Day) of the Loans to be borrowed, and (iv) (in
the case of LIBOR Loans) the duration of the Interest Period therefor.
(b) Minimum Amounts. All Base Rate Loan borrowings shall be in
amounts of at least $100,000 or the remaining balance of the Aggregate
Commitments, if less, or any whole multiple of $50,000 in excess thereof,
and all LIBOR Loans shall be in amounts of at least $500,000 or any whole
multiple of $100,000 in excess thereof.
(c) Notices. All borrowings, continuations and conversions shall
require advance written notice to the Administrative Agent (which shall
promptly notify the Lenders) in the form of Exhibit B (or telephonic
notice promptly confirmed by such a written notice), which in each case
shall be irrevocable, from the Borrower to be received by the
Administrative Agent not later than 10:00 a.m. Los Angeles, California
time (i) on the date of each Base Rate Loan borrowing and (ii) three
Business Days prior to the date of each LIBOR Loan borrowing, continuation
or conversion. Without in any way limiting the Borrower's obligation to
confirm in writing any telephonic notice, the Administrative Agent may act
without liability upon the basis of telephonic notice believed by the
Administrative Agent in good faith to be from the Borrower prior to
receipt of written confirmation. In each such case, the Borrower hereby
waives the right to dispute the Administrative Agent's record of the terms
of such telephonic notice except in the case of gross negligence or
willful misconduct by the Administrative Agent.
(d) Continuation Options. Subject to the provisions made in this
Section 2.02(d), the Borrower may elect to continue all or any part of any
LIBOR Loan beyond the expiration of the then current Interest Period
relating thereto by giving advance notice as provided in Section 2.02(c)
to the Administrative Agent (which shall promptly notify the Lenders) of
such election, specifying the amount of such Loan to be continued and the
Interest Period therefor. In the absence of such a timely and proper
election, the Borrower shall be deemed to have elected to convert such
LIBOR Loan to a Base Rate Loan pursuant to Section 2.02(e). All or any
part of any LIBOR Loan may be continued as provided herein, provided that
(i) any continuation of any such Loan shall be (as to each Loan as
continued for an applicable Interest Period) in amounts of at least
$500,000 or any whole multiple of $100,000 in excess thereof and (ii) no
Default shall have
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occurred and be continuing. If a Default shall have occurred and be
continuing, each LIBOR Loan shall be converted to a Base Rate Loan on the
last day of the Interest Period applicable thereto.
(e) Conversion Options. The Borrower may elect to convert all or any
part of any LIBOR Loan on the last day of the then current Interest Period
relating thereto to a Base Rate Loan by giving advance notice to the
Administrative Agent (which shall promptly notify the Lenders) of such
election. Subject to the provisions made in this Section 2.02(e), the
Borrower may elect to convert all or any part of any Base Rate Loan at any
time and from time to time to a LIBOR Loan by giving advance notice as
provided in Section 2.02(c) to the Administrative Agent (which shall
promptly notify the Lenders) of such election. All or any part of any
outstanding Loan may be converted as provided herein, provided that (i)
any conversion of any Base Rate Loan into a LIBOR Loan shall be (as to
each such Loan into which there is a conversion for an applicable Interest
Period) in amounts of at least $500,000 or any whole multiple of $100,000
in excess thereof and (ii) no Default shall have occurred and be
continuing. If a Default shall have occurred and be continuing, no Base
Rate Loan may be converted into a LIBOR Loan.
(f) Advances. Not later than 11:00 a.m. Los Angeles, California time
on the date specified for each borrowing hereunder, each Lender shall make
available the amount of the Loan to be made by it on such date to the
Administrative Agent, to an account which the Administrative Agent shall
specify, in immediately available funds, for the account of the Borrower.
The amounts so received by the Administrative Agent shall be made
available to Borrower by depositing the same, in immediately available
funds, in an account of the Borrower, designated by the Borrower.
(g) Letters of Credit.
(i) The Borrower shall give the Issuing Bank (which shall
promptly notify the Lenders of such request and their Percentage Share of
such Letter of Credit, with a copy to the Administrative Agent) advance
notice to be received by the Issuing Bank not later than 11:00 a.m. Los
Angeles, California time not less than three (3) Business Days prior
thereto of each request for the issuance, and at least three (3) Business
Days prior to the date of the renewal or extension, of a Letter of Credit
hereunder which request shall specify (i) the amount of such Letter of
Credit which shall be at least $50,000, (ii) the date (which shall be a
Business Day) such Letter of Credit is to be issued, renewed or extended,
(iii) the duration thereof, (iv) the name and address of the beneficiary
thereof, (v) the type of the Letter of Credit and (vi) such other
information as the Issuing Bank may reasonably request, all of which shall
be reasonably satisfactory to the Issuing Bank. Subject to the terms and
conditions of this Agreement, on the date specified for the issuance,
renewal or extension of a Letter of Credit, the Issuing Bank shall issue,
renew or extend such Letter of Credit to the beneficiary thereof.
(ii) In conjunction with the issuance of each Letter of
Credit, the Borrower and the applicable Guarantor, if the account party,
shall execute a Letter of Credit Agreement. In the event of any conflict
between any provision of a Letter of Credit Agreement and this Agreement,
the Borrower, the Issuing Bank, the
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Administrative Agent and the Lenders hereby agree that the provisions of
this Agreement shall govern.
(iii) The Issuing Bank will send to the Borrower, the
Administrative Agent and each Lender, immediately upon issuance of any
Letter of Credit, or an amendment thereto, a true and complete copy of
such Letter of Credit, or such amendment thereto.
Section 2.03 Changes of Commitments.
(a) The Aggregate Commitments shall at all times be equal to the
lesser of (i) the Aggregate Maximum Credit Amounts after adjustments
resulting from reductions pursuant to Section 2.03(b) or (ii) the
Borrowing Base as determined from time to time.
(b) The Borrower shall have the right to terminate or to reduce the
amount of the Aggregate Maximum Credit Amounts at any time, or from time
to time, upon not less than three (3) Business Days' prior notice to the
Administrative Agent (which shall promptly notify the Lenders) of each
such termination or reduction, which notice shall specify the effective
date thereof and the amount of any such reduction (which shall not be less
than $1,000,000 or any whole multiple of $1,000,000 in excess thereof) and
shall be irrevocable and effective only upon receipt by the Administrative
Agent. Each reduction in the Aggregate Maximum Credit Amount shall apply
pro rata to each Lender based on its Percentage Share.
(c) The Aggregate Maximum Credit Amounts once terminated or reduced
may not be reinstated.
Section 2.04 Fees.
(a) Commitment Fee. The Borrower shall pay to the Administrative
Agent for the account of each Lender a commitment fee on the daily unused
amount of the Aggregate Commitments for the period from and including the
Closing Date up to, but excluding, the earlier of the date the Aggregate
Commitments are terminated or the Revolving Credit Termination Date at a
rate per annum equal to the rate set forth at the appropriate intersection
in the table set forth below:
BORROWING BASE UTILIZATION RATE
-------------------------- ----
Less than 80% 0.375%
Greater than or equal to 80% 0.250%
Accrued commitment fees shall be payable quarterly in arrears on each Quarterly
Date and on the earlier of the date the Aggregate Commitments are terminated or
the Revolving Credit Termination Date.
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(b) Letter of Credit Fees.
(i) The Borrower agrees to pay the Administrative Agent, for
the account of each Lender, commissions for issuing the Letters of Credit
on the daily average outstanding of the maximum liability of the Issuing
Bank existing from time to time under such Letters of Credit (calculated
separately for each Letter of Credit) at the per annum rate equal to the
then effective Applicable Margin for LIBOR Loans, provided that each
Letter of Credit shall bear a minimum commission of $500. Each Letter of
Credit shall be deemed to be outstanding up to the full face amount of the
Letter of Credit until the Issuing Bank has received the canceled Letter
of Credit or a written cancellation of the Letter of Credit from the
beneficiary of such Letter of Credit in form and substance acceptable to
the Issuing Bank, or for any reductions in the amount of the Letter of
Credit (other than from a drawing), written notification from the
beneficiary of such Letter of Credit. Such commissions are payable
quarterly in arrears on each Quarterly Date and upon cancellation or
expiration of each such Letter of Credit.
(ii) The Issuing Bank, for its own account, shall receive
0.125% of the face amount of each Letter of Credit as an issuing fee.
(iii) The Borrower agrees to pay concurrently with each
issuance, negotiation, drawing, or amendment of each Letter of Credit, to
the Issuing Bank for the sole account of the Issuing Bank, issuance,
negotiation, drawing and amendment fees in the amounts set forth from time
to time as the Issuing Bank's published scheduled fees for such services.
(c) Fee Letter. The Borrower shall pay to the Administrative Agent
such other fees as are set forth in the Fee Letter on the dates and in the
amounts specified therein.
Section 2.05 Several Obligations. The failure of any Lender to make any
Loan to be made by it or to provide funds for disbursements or reimbursements
under Letters of Credit on the date specified therefor shall not relieve any
other Lender of its obligation to make its Loan or provide funds on such date,
but no Lender shall be responsible for the failure of any other Lender to make a
Loan to be made by such other Lender or to provide funds to be provided by such
other Lender.
Section 2.06 Notes. The Loans made by each Lender shall be evidenced by a
single promissory note of the Borrower in substantially the form of Exhibit A,
dated (i) the Closing Date or (ii) the effective date of an Assignment pursuant
to Section 12.06(b), payable to the order of such Lender in a principal amount
equal to its Maximum Credit Amount as originally in effect and otherwise duly
completed and such substitute Notes as required by Section 12.06(b). The date,
amount, Type, interest rate and Interest Period of each Loan made by each
Lender, and all payments made on account of the principal thereof, shall be
recorded by such Lender on its books for its Note, and, prior to any transfer
may be endorsed by such Lender on the schedule attached to such Note or any
continuation thereof or on any separate record maintained by such Lender.
Failure to make any such notation or to attach a schedule shall not affect any
Lender's
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or the Borrower's rights or obligations in respect of such Loans or affect the
validity of such transfer by any Lender of its Note.
Section 2.07 Prepayments.
(a) Voluntary Prepayments. The Borrower may prepay the Base Rate
Loans upon not less than one (1) Business Day's prior notice to the
Administrative Agent (which shall promptly notify the Lenders), which
notice shall specify the prepayment date (which shall be a Business Day)
and the amount of the prepayment (which shall be at least $100,000 or the
remaining aggregate principal balance outstanding on the Notes) and shall
be irrevocable and effective only upon receipt by the Administrative
Agent, provided that interest on the principal prepaid, accrued to the
prepayment date, shall be paid on the prepayment date. The Borrower may
prepay LIBOR Loans on the same conditions as for Base Rate Loans (except
that prior notice to the Administrative Agent shall be not less than three
(3) Business Days for LIBOR Loans) and in addition such prepayments of
LIBOR Loans shall be subject to the terms of Section 5.05 and shall be in
an amount equal to all of the LIBOR Loans for the Interest Period prepaid
provided that interest on the principal prepaid accrued to the prepayment
date, shall be paid on the prepayment date.
(b) Mandatory Prepayments.
(i) If, after giving effect to any optional termination or
reduction by the Borrower of the Aggregate Maximum Credit Amounts pursuant
to Section 2.03(b), the outstanding aggregate principal amount of the
Loans plus the LC Exposure exceeds the Aggregate Maximum Credit Amounts,
the Borrower shall (i) prepay the Loans on the date of such termination or
reduction in an aggregate principal amount equal to the excess, together
with interest on the principal amount paid accrued to the date of such
prepayment and (ii) if any excess remains after prepaying all of the Loans
because of LC Exposure, pay to the Administrative Agent on behalf of the
Lenders an amount equal to the excess to be held as cash collateral as
provided in Section 2.10(b) hereof.
(ii) Upon any redetermination of the amount of the Borrowing
Base in accordance with Section 2.08, if the redetermined Borrowing Base
results in a Borrowing Base Deficiency, then the Borrower shall within
thirty (30) days of receipt of written notice thereof either: (A) prepay
the Loans (and provide cash collateral for the Letters of Credit) in an
aggregate principal amount equal to the Borrowing Base Deficiency,
together with interest on the principal amount paid accrued to the date of
such prepayment; or (B) the Borrower shall notify the Administrative Agent
(which will promptly notify the Lenders) in writing of the Borrower's
election to initiate a Deficiency Period during which it will eliminate
such Borrowing Base Deficiency by making six (6) consecutive monthly
Deficiency Payments, the first of such payments being due and payable with
the delivery to the Administrative Agent of such notice and each of the
remaining payments due and payable on the same day of each month
thereafter during the Deficiency Period; provided however, in the event of
an acceleration of the maturity of the Notes pursuant to Section 10.02
hereof, such acceleration shall also accelerate the maturity of all
outstanding and unpaid Deficiency Payments. All payments under this
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subsection (ii), whether a single payment under clause (A) or monthly
Deficiency Payments under clause (B), shall be applied in the order of
priority specified in Section 3.03, and any payments required by Section
3.03(a)(iii) to be held as cash collateral shall be held in accordance
with Section 2.10(b).
(c) Generally. Prepayments permitted or required under this Section
2.07 shall be without premium or penalty, except as required under Section
5.05 for prepayment of LIBOR Loans. Any prepayments on the Loans may be
reborrowed subject to the then effective Aggregate Commitments.
Section 2.08 Borrowing Base.
(a) The Borrowing Base shall be determined in accordance with
Section 2.08(b) by the Administrative Agent with the concurrence of the
Lenders and is subject to redetermination in accordance with Section
2.08(d). Upon any redetermination of the Borrowing Base, such
redetermination shall remain in effect until the next successive
Redetermination Date. So long as any of the Commitments are in effect or
any LC Exposure or Loans are outstanding hereunder, this facility shall be
governed by the then effective Borrowing Base. During the period from and
after the Closing Date until the first redetermination pursuant to Section
2.08(d) or adjusted pursuant to Section 8.08(c), the amount of the
Borrowing Base shall be $60,000,000.
(b) Upon receipt of the reports required by Section 8.07 and
such other reports, data and supplemental information as may from time to
time be reasonably requested by the Administrative Agent (the "Engineering
Reports"), the Administrative Agent will redetermine the Borrowing Base.
Such redetermination will be in accordance with its normal and customary
procedures for evaluating oil and gas reserves and other related assets as
such exist at that particular time, and the Administrative Agent, in its
sole discretion, may make adjustments to the rates, volumes and prices and
other assumptions set forth therein in accordance with its normal and
customary procedures for evaluating oil and gas reserves and other related
assets as such exist at that particular time. The Administrative Agent
shall propose to the Lenders a new Borrowing Base within 14 days following
receipt by the Administrative Agent and the Lenders of the Engineering
Reports in a timely and complete manner. After having received notice of
such proposal by the Administrative Agent, the Lenders shall have 14 days
to agree or disagree with such proposal. Any Lenders that have not
communicated their approval or disapproval at the end of the 14 days shall
be deemed to have approved the Administrative Agent's proposal of the
redetermined Borrowing Base. To the extent that within such 14 days the
Administrative Agent has not received the requisite number of approvals
from the Lenders of the redetermined Borrowing Base, the requisite number
of Lenders shall, within a reasonable period of time, agree on a new
Borrowing Base. Any increase in the Borrowing Base must be approved by the
Administrative Agent and all of the Lenders and any decrease in or
reaffirmation of the existing Borrowing Base must be approved by the
Majority Lenders.
(c) The Administrative Agent may exclude any Oil and Gas Property or
portion of production therefrom or any income from any other Property from
the
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Borrowing Base, at any time, because title information is not reasonably
satisfactory, such Property is not Collateral or such Property is not
assignable.
(d) So long as any of the Commitments are in effect and until
payment in full of all Loans hereunder, on or around the first Business
Day of August 2004, October 2004, January 2005 and April 2005 and
thereafter on or around the first Business Day of each April and October,
commencing October, 2005 (each being a "Scheduled Redetermination Date"),
the Lenders shall redetermine the amount of the Borrowing Base in
accordance with Section 2.08(b). In addition, (i) the Borrower may
initiate a redetermination of the Borrowing Base at any other time as it
so elects by specifying in writing to the Administrative Agent (who will
promptly notify the Lenders) the date by which the Borrower will furnish
to the Administrative Agent and the Lenders a Reserve Report in accordance
with Section 8.07(b) and the date by which such redetermination is
requested to occur; provided, however, that the Borrower may initiate only
one such unscheduled redetermination between Scheduled Redetermination
Dates during the first twelve (12) months after the Closing Date and
thereafter, may initiate only one such unscheduled redetermination per
year and (ii) the Majority Lenders may initiate a redetermination of the
Borrowing Base at any other time as they so elect by specifying in writing
to the Borrower the date by which the Borrower is to furnish a Reserve
Report in accordance with Section 8.07(b) and the date on which such
redetermination is to occur; provided, however, that the Majority Lenders
may initiate only one such unscheduled redetermination
between Scheduled Redetermination Dates during the first twelve (12)
months after the Closing Date and thereafter, may initiate only one such
unscheduled redetermination per year.
(e) The Administrative Agent shall promptly notify in writing the
Borrower and the Lenders of the new Borrowing Base. Any redetermination of
the Borrowing Base shall not be in effect until written notice is received
by the Borrower.
Section 2.09 Assumption of Risks. The Borrower assumes all risks of the
acts or omissions of any beneficiary of any Letter of Credit or any transferee
thereof with respect to its use of such Letter of Credit. Neither the Issuing
Bank (except in the case of gross negligence or willful misconduct on the part
of the Issuing Bank or any of its employees), its correspondents nor any Lender
shall be responsible for the validity, sufficiency or genuineness of
certificates or other documents or any endorsements thereon, even if such
certificates or other documents should in fact prove to be invalid,
insufficient, fraudulent or forged; for errors, omissions, interruptions or
delays in transmissions or delivery of any messages by mail, telex, or
otherwise, whether or not they be in code; for errors in translation or for
errors in interpretation of technical terms; the validity or sufficiency of any
instrument transferring or assigning or purporting to transfer or assign any
Letter of Credit or the rights or benefits thereunder or proceeds thereof, in
whole or in part, which may prove to be invalid or ineffective for any reason;
the failure of any beneficiary or any transferee of any Letter of Credit to
comply fully with conditions required in order to draw upon any Letter of
Credit; or for any other consequences arising from causes beyond the Issuing
Bank's control or the control of the Issuing Bank's correspondents (INCLUDING
THE ISSUING BANK'S OWN NEGLIGENCE). In addition, neither the Issuing Bank, the
Administrative Agent nor any Lender shall be responsible for any error, neglect,
or default of any of the Issuing Bank's correspondents; and none of the above
shall affect, impair or prevent
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the vesting of any of the Issuing Bank's, the Administrative Agent's or any
Lender's rights or powers hereunder or under the Letter of Credit Agreements,
all of which rights shall be cumulative. The Issuing Bank and its correspondents
may accept certificates or other documents that appear on their face to be in
order, without responsibility for further investigation of any matter contained
therein regardless of any notice or information to the contrary. In furtherance
and not in limitation of the foregoing provisions, the Borrower agrees that any
action, inaction or omission taken or not taken by the Issuing Bank or by any
correspondent for the Issuing Bank in good faith in connection with any Letter
of Credit, or any related drafts, certificates, documents or instruments, shall
be binding on the Borrower and shall not put the Issuing Bank or its
correspondents under any resulting liability to the Borrower.
Section 2.10 Obligation to Reimburse and to Prepay.
(a) If a disbursement by the Issuing Bank is made under any Letter
of Credit, the Borrower shall pay to the Administrative Agent within two
(2) Business Days after notice of any such disbursement is received by the
Borrower, the amount of each such disbursement made by the Issuing Bank
under the Letter of Credit (if such payment is not sooner effected as may
be required under this Section 2.10 or under other provisions of the
Letter of Credit), together with interest on the amount disbursed from and
including the date of disbursement until payment in full of such disbursed
amount at a varying rate per annum equal to (i) the then applicable
interest rate for Base Rate Loans through the second Business Day after
notice of such disbursement is received by the Borrower and (ii)
thereafter, the Post-Default Rate for Base Rate Loans (but in no event to
exceed the Highest Lawful Rate) for the period from and including the
third Business Day following the date of such disbursement to and
including the date of repayment in full of such disbursed amount. The
obligations of the Borrower under this Agreement with respect to each
Letter of Credit shall be absolute, unconditional and irrevocable and
shall be paid or performed strictly in accordance with the terms of this
Agreement under all circumstances whatsoever, including, without
limitation, but only to the fullest extent permitted by applicable law,
the following circumstances: (i) any lack of validity or enforceability of
this Agreement, any Letter of Credit or any of the Security Instruments;
(ii) any amendment or waiver of (including any default), or any consent to
departure from this Agreement (except to the extent permitted by any
amendment or waiver), any Letter of Credit or any of the Security
Instruments; (iii) the existence of any claim, set-off, defense or other
rights which the Borrower may have at any time against the beneficiary of
any Letter of Credit or any transferee of any Letter of Credit (or any
Persons for whom any such beneficiary or any such transferee may be
acting), the Issuing Bank, the Administrative Agent, any Lender or any
other Person, whether in connection with this Agreement, any Letter of
Credit, the Security Instruments, the transactions contemplated hereby or
any unrelated transaction; (iv) any statement, certificate, draft, notice
or any other document presented under any Letter of Credit proves to have
been forged, fraudulent, insufficient or invalid in any respect or any
statement therein proves to have been untrue or inaccurate in any respect
whatsoever; (v) payment by the Issuing Bank under any Letter of Credit
against presentation of a draft or certificate which appears on its face
to comply, but does not comply, with the terms of such Letter of Credit;
and (vi) any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing.
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Notwithstanding anything in this Agreement to the contrary, the Borrower
will not be liable for payment or performance that results from the gross
negligence or willful misconduct of the Issuing Bank, except where the
Borrower or any Subsidiary actually recovers the proceeds for itself or
the Issuing Bank of any payment made by the Issuing Bank in connection
with such gross negligence or willful misconduct.
(b) In the event of a payment or prepayment pursuant to Section
2.07(b) or the maturity of the Notes, whether by acceleration or
otherwise, an amount equal to the LC Exposure (or the excess in the case
of Section 2.07(b)) shall be deemed to be forthwith due and owing by the
Borrower to the Issuing Bank, the Administrative Agent and the Lenders as
of the date of any such occurrence; and the Borrower's obligation to pay
such amount shall be absolute and unconditional, without regard to whether
any beneficiary of any such Letter of Credit has attempted to draw down
all or a portion of such amount under the terms of a Letter of Credit,
and, to the fullest extent permitted by applicable law, shall not be
subject to any defense or be affected by a right of set-off, counterclaim
or recoupment which the Borrower may now or hereafter have against any
such beneficiary, the Issuing Bank, the Administrative Agent, the Lenders
or any other Person for any reason whatsoever. Such payments shall be held
by the Issuing Bank on behalf of the Lenders as cash collateral securing
the LC Exposure in an account or accounts at the Principal Office; and the
Borrower hereby grants to and by its deposit with the Administrative Agent
grants to the Administrative Agent a security interest in such cash
collateral. In the event of any such payment by the Borrower of amounts
contingently owing under outstanding Letters of Credit and in the event
that thereafter drafts or other demands for payment complying with the
terms of such Letters of Credit are not made prior to the respective
expiration dates thereof, the Administrative Agent agrees, if no Event of
Default has occurred and is continuing or if no other amounts are
outstanding under this Agreement, the Notes or the Security Instruments,
to remit to the Borrower amounts for which the contingent obligations
evidenced by the Letters of Credit have ceased.
(c) Each Lender severally and unconditionally agrees that it shall
promptly reimburse the Issuing Bank an amount equal to such Lender's
Percentage Share of any disbursement made by the Issuing Bank under any
Letter of Credit that is not reimbursed according to this Section 2.10.
(d) Notwithstanding anything to the contrary contained herein, if no
Default exists and subject to availability under the Aggregate Maximum
Credit Amount (after reduction for LC Exposure), to the extent the
Borrower has not reimbursed the Issuing Bank for any drawn upon Letter of
Credit within one (1) Business Day after notice of such disbursement has
been received by the Borrower, the amount of such Letter of Credit
reimbursement obligation shall automatically be funded by the Lenders as a
Base Rate Loan hereunder and used by the Lenders to pay such Letter of
Credit reimbursement obligation. If the funding of such Letter of Credit
reimbursement obligation as a Base Rate Loan would cause the aggregate
amount of all Loans outstanding to exceed the Aggregate Maximum Credit
Amount (after reduction for LC Exposure), such Letter of Credit
reimbursement obligation shall not be funded as a Base Rate Loan, but
instead shall accrue interest as provided in Section 2.10(a).
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Section 2.11 Lending Offices. The Loans of each Type made by each Lender
shall be made and maintained at such Lender's Applicable Lending Office for
Loans of such Type.
ARTICLE III
PAYMENTS OF PRINCIPAL AND INTEREST
Section 3.01 Repayment of Principal.
(a) Loans. On the Revolving Credit Termination Date the Borrower
shall repay the outstanding aggregate principal of the Loans and the Notes
evidencing the Loans.
(b) Generally. The Borrower will pay to the Administrative Agent,
for the account of each Lender, the principal payments required by this
Section 3.01.
Section 3.02 Payment of Interest.
(a) Interest Rates. The Borrower will pay to the Administrative
Agent, for the account of each Lender, interest on the unpaid principal
amount of each Loan made by such Lender for the period commencing on the
date such Loan is made to, but excluding, the date such Loan shall be paid
in full, at the following rates per annum:
(i) if such a Loan is a Base Rate Loan, the Base Rate (as in
effect from time to time) plus the Applicable Margin, but in no event to
exceed the Highest Lawful Rate; and
(ii) if such a Loan is a LIBOR Loan, for each Interest Period
relating thereto, the LIBOR Rate for such Loan plus the Applicable Margin
(as in effect from time to time), but in no event to exceed the Highest
Lawful Rate.
(b) Post-Default Rate. Notwithstanding the foregoing, the Borrower
will pay to the Administrative Agent, for the account of each Lender
interest at the applicable Post-Default Rate on any principal of any Loan
made by such Lender, and (to the fullest extent permitted by law) on any
other amount payable by the Borrower hereunder, under any Loan Document or
under any Note held by such Lender to or for account of such Lender, for
the period commencing on the date of an Event of Default until the same is
paid in full or all Events of Default are cured or waived.
(c) Due Dates. Accrued interest on Base Rate Loans shall be payable
on each Quarterly Date commencing on June 28, 2004, and accrued interest
on each LIBOR Loan shall be payable on the last day of the Interest Period
therefor and, if such Interest Period is longer than three months at
three-month intervals following the first day of such Interest Period,
except that interest payable at the Post-Default Rate shall be payable
from time to time on demand and interest on any LIBOR Loan that is
converted into a Base Rate Loan (pursuant to Section 5.04) shall be
payable on the date of conversion (but only to the extent so converted).
Any accrued and unpaid interest on the Loans on the Revolving Credit
Termination Date shall be paid on such date.
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(d) Determination of Rates. Promptly after the determination of any
interest rate provided for herein or any change therein, the
Administrative Agent shall notify the Lenders to which such interest is
payable and the Borrower thereof. Each determination by the Administrative
Agent of an interest rate or fee hereunder shall, except in cases of
manifest error, be final, conclusive and binding on the parties.
Section 3.03 Payment Waterfall. Notwithstanding any other provision in
this Agreement or any other Loan Document to the contrary:
(a) Whenever the Borrower (or any Guarantor) pays or is required to
make payments on the Obligations, or whenever any Lender receives (and
such funds were not received from the Administrative Agent in accordance
with the priorities established by this Section 3.03) or has the right to
receive funds to be applied to the Obligations (whether in bankruptcy,
pursuant to Section 4.05, or otherwise), or whenever the Administrative
Agent holds proceeds of collection or other funds to be applied to the
Obligations, in each case whether before or after maturity (and
notwithstanding any bankruptcy, insolvency, or any other proceeding), such
payments shall be made and such proceeds and other funds shall be applied
in the following order of priority:
(i) first, to reimbursements of expenses and payment of
indemnities due and owing at the time in question to the Administrative
Agent or the Lenders under this Agreement and the other Loan Documents;
(ii) second, to accrued interest (including, without
limitation, interest which may accrue subsequent to Borrower or any
Guarantor becoming subject to any state or federal debtor-relief statute),
fees, and principal then due and owing to the Lenders (whether such
principal is due and owing at maturity, due to acceleration, or due to a
reduction in the Borrowing Base, or for any reason), together with any
payments then due and owing to the Lenders or their Affiliates under
Hedging Agreements permitted hereunder;
(iii) third, to the extent expressly required at such time
under Section 2.10(b), to serve as cash collateral to be held by the
Administrative Agent to secure the LC Exposure;
(iv) fourth, to the prepayment of principal on the Loans until
they are paid in full;
(v) fifth, to the pro rata payment of all other Obligations;
and
(vi) last, any excess shall be paid to the Borrower or as
otherwise required by any Governmental Requirement.
(b) Payments must be made in accordance with the foregoing order of
priority whether or not the Borrower provides sufficient funds to make all
payments due on the Obligations at the time in question, but compliance
with such order of priority does not relieve the Borrower of its duty to
make all payments of the Obligations whenever they
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become due and any breach of such duty shall constitute an Event of
Default or Default as provided in Section 10.01.
(c) Should any Lender receive any funds to be applied to the
Obligations from any source whatsoever (whether in bankruptcy, pursuant to
Section 4.05, or otherwise) and such funds have not been distributed to
the Lenders in accordance with the provisions of this Section 3.03, such
funds shall immediately be paid to the Administrative Agent who shall
distribute such funds in accordance with the provisions of this Section
3.03. The Lenders grant to the Administrative Agent the right to enforce,
collect and receive any such payment or distribution and to give releases
or acquittances therefor, subject, however to the express provisions
contained in this Agreement permitting all or certain Lenders to direct
the Administrative Agent to act or refrain from acting; provided, however,
that nothing contained in this section shall prohibit the Lenders from
suing for collections of principal on the Notes at maturity or for
collection of interest on the Notes provided that the Administrative Agent
has not already commenced such suits, and provided that the Lenders have
the right to bring such suits under the provisions of this Agreement
including, without limitation, all provisions under Section 10.02;
provided that if any sums are collected by any of the Lenders, they will
be paid to the Administrative Agent for payment and distribution in
accordance with Section 3.03.
ARTICLE IV
PAYMENTS; PRO RATA TREATMENT; COMPUTATIONS; ETC.
Section 4.01 Payments. Except to the extent otherwise provided herein, all
payments of principal, interest and other amounts to be made by the Borrower
under this Agreement, the Notes and the Letter of Credit Agreements shall be
made in Dollars, in immediately available funds, to the Administrative Agent at
such account as the Administrative Agent shall specify by notice to the Borrower
from time to time, not later than 11:00 a.m. Los Angeles, California time on the
date on which such payments shall become due (each such payment made after such
time on such due date to be deemed to have been made on the next succeeding
Business Day). Such payments shall be made without (to the fullest extent
permitted by applicable law) defense, set-off or counterclaim. Each payment
received by the Administrative Agent under this Agreement or any Note for
account of a Lender shall be paid promptly to such Lender in immediately
available funds. Except as otherwise provided in the definition of "Interest
Period", if the due date of any payment under this Agreement or any Note would
otherwise fall on a day which is not a Business Day such date shall be extended
to the next succeeding Business Day and interest shall be payable for any
principal so extended for the period of such extension. At the time of each
payment to the Administrative Agent of any principal of or interest on any
borrowing, the Borrower shall notify the Administrative Agent of the Loans to
which such payment shall apply. In the absence of such notice the Administrative
Agent may specify the Loans to which such payment shall apply, but to the extent
possible such payment or prepayment will be applied first to the Loans comprised
of Base Rate Loans.
Section 4.02 Pro Rata Treatment. Except to the extent otherwise provided
herein each Lender agrees that: (i) each borrowing from the Lenders under
Section 2.01 and each continuation and conversion under Section 2.02 shall be
made from the Lenders pro rata in
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accordance with their Percentage Share, each payment of commitment fee under
Section 2.04(a) shall be made for account of the Lenders pro rata in accordance
with their Percentage Share, and each termination or reduction of the amount of
the Aggregate Maximum Credit Amounts under Section 2.03(b) shall be applied to
the Commitment of each Lender, pro rata according to the amounts of its
respective Commitment; (ii) each payment of principal of Loans by the Borrower
shall be made for account of the Lenders pro rata in accordance with the
respective unpaid principal amount of the Loans held by the Lenders; and (iii)
each payment of interest on Loans by the Borrower shall be made for account of
the Lenders pro rata in accordance with the amounts of interest due and payable
to the respective Lenders; and (iv) each reimbursement by the Borrower of
disbursements under Letters of Credit shall be made for account of the Issuing
Bank or, if funded by the Lenders, pro rata for the account of the Lenders, in
accordance with the amounts of reimbursement obligations due and payable to each
respective Lender.
Section 4.03 Computations. Interest on LIBOR Loans and fees shall be
computed on the basis of a year of 360 days and actual days elapsed (including
the first day but excluding the last day) occurring in the period for which such
interest is payable, unless such calculation would exceed the Highest Lawful
Rate, in which case interest shall be calculated on the per annum basis of a
year of 365 or 366 days, as the case may be. Interest on Base Rate Loans shall
be computed on the basis of a year of 365 or 366 days, as the case may be, and
actual days elapsed (including the first day but excluding the last day)
occurring in the period for which such interest is payable.
Section 4.04 Non-receipt of Funds by the Administrative Agent. Unless the
Administrative Agent shall have been notified by a Lender or the Borrower prior
to the date on which such notifying party is scheduled to make payment to the
Administrative Agent (in the case of a Lender) of the proceeds of a Loan or a
payment under a Letter of Credit to be made by it hereunder or (in the case of
the Borrower) a payment to the Administrative Agent for account of one or more
of the Lenders hereunder (such payment being herein called the "Required
Payment"), which notice shall be effective upon receipt, that it does not intend
to make the Required Payment to the Administrative Agent, the Administrative
Agent may assume that the Required Payment has been made and may, in reliance
upon such assumption (but shall not be required to), make the amount thereof
available to the intended recipient(s) on such date and, if such Lender or the
Borrower (as the case may be) has not in fact made the Required Payment to the
Administrative Agent, the recipient(s) of such payment shall, on demand, repay
to the Administrative Agent the amount so made available together with interest
thereon in respect of each day during the period commencing on the date such
amount was so made available by the Administrative Agent until, but excluding,
the date the Administrative Agent recovers such amount at a rate per annum
which, for any Lender as recipient, will be equal to the Federal Funds Rate, and
for the Borrower as recipient, will be equal to the Base Rate plus the
Applicable Margin.
Section 4.05 Set-off, Sharing of Payments, Etc.
(a) The Borrower agrees that, in addition to (and without limitation
of) any right of set-off, bankers' lien or counterclaim a Lender may
otherwise have, each Lender shall have the right and be entitled (after
consultation with the Administrative Agent), at its option, to offset
balances held by it or by any of its Affiliates for account of the
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Borrower or any Guarantor at any of its offices, in Dollars or in any
other currency, against any principal of or interest on any of such
Lender's Loans, or any other amount payable to such Lender hereunder,
which is not paid when due after the passage of any applicable grace
periods (regardless of whether such balances are then due to the
Borrower), in which case it shall promptly notify the Borrower and the
Administrative Agent thereof, provided that such Lender's failure to give
such notice shall not affect the validity thereof.
(b) If any Lender shall obtain payment of any principal of or
interest on any Loan made by it to the Borrower under this Agreement (or
reimbursement as to any Letter of Credit) through the exercise of any
right of set-off, banker's lien or counterclaim or similar right or
otherwise, and, as a result of such payment, such Lender shall have
received a greater portion of the principal or interest (or reimbursement)
then due hereunder by the Borrower to such Lender than the portion
received by any other Lenders, it shall promptly (i) notify the
Administrative Agent and each other Lender thereof and (ii) purchase from
such other Lenders participations in (or, if and to the extent specified
by such Lender, direct interests in) the Loans (or participations in
Letters of Credit) made by such other Lenders (or in interest due thereon,
as the case may be) in such amounts, and make such other adjustments from
time to time as shall be equitable, to the end that all the Lenders shall
share the benefit of such excess payment (net of any expenses which may be
incurred by such Lender in obtaining or preserving such excess payment)
pro rata in accordance with the unpaid principal and/or interest on the
Loans held by each of the Lenders (or reimbursements of Letters of
Credit). To such end all the Lenders shall make appropriate adjustments
among themselves (by the resale of participations sold or otherwise) if
such payment is rescinded or must otherwise be restored. The Borrower
agrees that any Lender so purchasing a participation (or direct interest)
in the Loans made by other Lenders (or in interest due thereon, as the
case may be) may exercise all rights of set-off, banker's lien,
counterclaim or similar rights with respect to such participation as fully
as if such Lender were a direct holder of Loans (or Letters of Credit) in
the amount of such participation. Nothing contained herein shall require
any Lender to exercise any such right or shall affect the right of any
Lender to exercise, and retain the benefits of exercising, any such right
with respect to any other indebtedness or obligation of the Borrower. If
under any applicable bankruptcy, insolvency or other similar law, any
Lender receives a secured claim in lieu of a set off to which this Section
4.05 applies, such Lender shall, to the extent practicable, exercise its
rights in respect of such secured claim in a manner consistent with the
rights of the Lenders entitled under this Section 4.05 to share the
benefits of any recovery on such secured claim.
Section 4.06 Taxes.
(a) Payments Free and Clear. Any and all payments by the Borrower
hereunder shall be made, in accordance with Section 4.01, free and clear
of and without deduction for any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with
respect thereto, excluding, in the case of each Lender, the Issuing Bank
and the Administrative Agent, taxes imposed on its income, and franchise
or similar taxes imposed on it, by (i) any jurisdiction (or political
subdivision
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thereof) of which the Administrative Agent, the Issuing Bank or such
Lender, as the case may be, is a citizen or resident or in which such
Lender has an Applicable Lending Office, (ii) the jurisdiction (or any
political subdivision thereof) in which the Administrative Agent, the
Issuing Bank or such Lender is organized, or (iii) any jurisdiction (or
political subdivision thereof) in which such Lender, the Issuing Bank or
the Administrative Agent is presently doing business which taxes are
imposed solely as a result of doing business in such jurisdiction (all
such non-excluded taxes, levies, imposts, deductions, charges,
withholdings and liabilities being hereinafter referred to as "Taxes"). If
the Borrower shall be required by law to deduct any Taxes from or in
respect of any sum payable hereunder to the Lenders, the Issuing Bank or
the Administrative Agent (i) the sum payable shall be increased by the
amount necessary so that after making all required deductions (including
deductions applicable to additional sums payable under this Section 4.06)
such Lender, the Issuing Bank or the Administrative Agent (as the case may
be) shall receive an amount equal to the sum it would have received had no
such deductions been made, (ii) the Borrower shall make such deductions
and (iii) the Borrower shall pay the full amount deducted to the relevant
taxing authority or other Governmental Authority in accordance with
applicable law.
(b) Other Taxes. In addition, to the fullest extent permitted by
applicable law, the Borrower agrees to pay any present or future stamp or
documentary taxes or any other excise or property taxes, charges or
similar levies that arise from any payment made hereunder or from the
execution, delivery or registration of, or otherwise with respect to, this
Agreement or any Security Instrument (hereinafter referred to as "Other
Taxes").
(C) INDEMNIFICATION. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, THE BORROWER WILL INDEMNIFY EACH LENDER AND THE ISSUING BANK AND THE
ADMINISTRATIVE AGENT FOR THE FULL AMOUNT OF TAXES AND OTHER TAXES
(INCLUDING, BUT NOT LIMITED TO, ANY TAXES OR OTHER TAXES IMPOSED BY ANY
GOVERNMENTAL AUTHORITY ON AMOUNTS PAYABLE UNDER THIS SECTION 4.06) PAID BY
SUCH LENDER, THE ISSUING BANK OR THE ADMINISTRATIVE AGENT (ON THEIR BEHALF
OR ON BEHALF OF ANY LENDER), AS THE CASE MAY BE, AND ANY LIABILITY
(INCLUDING PENALTIES, INTEREST AND EXPENSES) ARISING THEREFROM OR WITH
RESPECT THERETO, WHETHER OR NOT SUCH TAXES OR OTHER TAXES WERE CORRECTLY
OR LEGALLY ASSERTED UNLESS THE PAYMENT OF SUCH TAXES WAS NOT CORRECTLY OR
LEGALLY ASSERTED AND SUCH LENDER'S PAYMENT OF SUCH TAXES OR OTHER TAXES
WAS THE RESULT OF ITS GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. ANY PAYMENT
PURSUANT TO SUCH INDEMNIFICATION SHALL BE MADE WITHIN THIRTY (30) DAYS
AFTER THE DATE ANY LENDER, THE ISSUING BANK OR THE ADMINISTRATIVE AGENT,
AS THE CASE MAY BE, MAKES WRITTEN DEMAND THEREFOR. IF ANY LENDER, THE
ISSUING BANK OR THE ADMINISTRATIVE AGENT RECEIVES A REFUND OR CREDIT IN
RESPECT OF ANY TAXES OR OTHER TAXES FOR WHICH SUCH LENDER, ISSUING BANK OR
THE ADMINISTRATIVE AGENT HAS RECEIVED PAYMENT FROM THE BORROWER IT SHALL
PROMPTLY NOTIFY THE BORROWER OF SUCH REFUND OR CREDIT AND SHALL, IF NO
DEFAULT HAS OCCURRED AND IS CONTINUING, WITHIN THIRTY (30) DAYS AFTER
RECEIPT OF A REQUEST BY THE BORROWER (OR PROMPTLY UPON RECEIPT, IF THE
BORROWER HAS REQUESTED APPLICATION FOR SUCH REFUND OR CREDIT PURSUANT
HERETO), PAY AN AMOUNT EQUAL TO SUCH REFUND OR CREDIT TO THE BORROWER
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WITHOUT INTEREST (BUT WITH ANY INTEREST SO REFUNDED OR CREDITED), PROVIDED
THAT THE BORROWER, UPON THE REQUEST OF SUCH LENDER, THE ISSUING BANK OR
THE ADMINISTRATIVE AGENT, AGREES TO RETURN SUCH REFUND OR CREDIT (PLUS
PENALTIES, INTEREST OR OTHER CHARGES) TO SUCH LENDER OR THE ADMINISTRATIVE
AGENT IN THE EVENT SUCH LENDER OR THE ADMINISTRATIVE AGENT IS REQUIRED TO
REPAY SUCH REFUND OR CREDIT.
(d) Lender Representations.
(i) Each Lender represents that it is either (A) not a
"foreign person" as such term is defined in U.S. Treasury Regulations
Section 1.1441-1(c)(2) or (B) it is entitled to complete exemption from
United States withholding tax imposed on or with respect to any payments,
including fees, to be made to it pursuant to this Agreement (1) under an
applicable provision of a tax convention to which the United States of
America is a party or (2) because it is acting through a branch, agency or
office in the United States of America and any payment to be received by
it hereunder is effectively connected with a trade or business in the
United States of America. Each Lender that is a "foreign person" as such
term is defined in U.S. Treasury Regulations Section 1.441-1(c)(2) agrees
to provide to the Borrower and the Administrative Agent on the Closing
Date, or on the date of its delivery of the Assignment pursuant to which
it becomes a Lender, and at such other times as required by United States
law or as the Borrower or the Administrative Agent shall reasonably
request, two accurate and complete original signed copies of either (y)
Internal Revenue Service Form W-8ECI (or successor form) certifying that
all payments to be made to it hereunder will be effectively connected to a
United States trade or business (the "Form W-8ECI Certification") or (z)
Internal Revenue Service Form W-8BEN (or successor form) certifying that
it is entitled to the benefit of a provision of a tax convention to which
the United States of America is a party which completely exempts from
United States withholding tax all payments to be made to it hereunder (the
"Form W-8BEN Certification"). In addition, each Lender agrees that if it
previously filed a Form W-8ECI Certification, it will deliver to the
Borrower and the Administrative Agent a new Form W-8ECI Certification
prior to the first payment date occurring in each of its subsequent
taxable years; and if it previously filed a Form W-8BEN Certification, it
will deliver to the Borrower and the Administrative Agent a new
certification prior to the first payment date falling in the third year
following the previous filing of such certification. Each Lender also
agrees to deliver to the Borrower and the Administrative Agent such other
or supplemental forms as may at any time be required as a result of
changes in applicable law or regulation in order to confirm or maintain in
effect its entitlement to exemption from United States withholding tax on
any payments hereunder, provided that the circumstances of such Lender at
the relevant time and applicable laws permit it to do so. If a Lender
determines, as a result of any change in either (i) a Governmental
Requirement or (ii) its circumstances, that it is unable to submit any
form or certificate that it is obligated to submit pursuant to this
Section 4.06, or that it is required to withdraw or cancel any such form
or certificate previously submitted, it shall promptly notify the Borrower
and the Administrative Agent of such fact. If a Lender is organized under
the laws of a jurisdiction outside the United States of America, unless
the Borrower and the Administrative Agent have received a Form W-8BEN
Certification or Form W-8ECI
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Certification satisfactory to them indicating that all payments to be made
to such Lender hereunder are not subject to United States withholding tax,
the Borrower shall withhold taxes from such payments at the applicable
statutory rate. Each Lender agrees to indemnify and hold harmless the
Borrower or Administrative Agent, as applicable, from any United States
taxes, penalties, interest and other expenses, costs and losses incurred
or payable by (i) the Administrative Agent as a result of such Lender's
failure to submit any form or certificate that it is required to provide
pursuant to this Section 4.06 or (ii) the Borrower or the Administrative
Agent as a result of their reliance on any such form or certificate which
such Lender has provided to them pursuant to this Section 4.06.
(ii) For any period with respect to which a Lender has failed
to provide the Borrower with the form required pursuant to this Section
4.06, if any, (other than if such failure is due to a change in a
Governmental Requirement occurring subsequent to the date on which a form
originally was required to be provided), such Lender shall not be entitled
to indemnification under Section 4.06 with respect to taxes imposed by the
United States which taxes would not have been imposed but for such failure
to provide such forms; provided, however, that if a Lender, which is
otherwise exempt from or subject to a reduced rate of withholding tax,
becomes subject to taxes because of its failure to deliver a form required
hereunder, the Borrower shall take such steps as such Lender shall
reasonably request to assist such Lender to recover such taxes.
(iii) Any Lender claiming any additional amounts payable
pursuant to this Section 4.06 shall use reasonable efforts (consistent
with legal and regulatory restrictions) to file any certificate or
document requested by the Borrower or the Administrative Agent or to
change the jurisdiction of its Applicable Lending Office or to contest any
tax imposed if the making of such a filing or change or contesting such
tax would avoid the need for or reduce the amount of any such additional
amounts that may thereafter accrue and would not, in the sole
determination of such Lender, be otherwise disadvantageous to such Lender.
Section 4.07 Disposition of Proceeds. Certain of the Security Instruments
contain an assignment by the Borrower and the Guarantors, as the case may be,
unto and in favor of the Agent for the benefit of the Lenders of all Hydrocarbon
production and all proceeds attributable thereto which may be produced from or
allocated to the Mortgaged Oil and Gas Properties, and further provides in
general for the application of such proceeds to the satisfaction of the
Obligations and any other obligations described therein and secured thereby.
Notwithstanding the assignment contained in such Security Instruments, until the
occurrence of an Event of Default, the Lenders agree that they will neither
notify the purchaser or purchasers of such production nor take any other action
to cause such proceeds to be remitted to the Lenders, but the Lenders will
instead permit such proceeds to be paid to the Borrower and the Guarantors, as
the case may be.
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ARTICLE V
CAPITAL ADEQUACY AND YIELD PROTECTION
Section 5.01 Additional Costs.
(a) LIBOR Regulations, etc. The Borrower shall pay directly to each
Lender from time to time such amounts as such Lender may determine to be
necessary to compensate such Lender for any costs which it determines are
attributable to its making or maintaining of any LIBOR Loans or issuing or
participating in Letters of Credit hereunder or its obligation to make any
LIBOR Loans or issue or participate in any Letters of Credit hereunder, or
any reduction in any amount receivable by such Lender hereunder in respect
of any of such LIBOR Loans, Letters of Credit or such obligation (such
increases in costs and reductions in amounts receivable being herein
called "Additional Costs"), resulting from any Regulatory Change which:
(i) changes the basis of taxation of any amounts payable to such Lender
under this Agreement or any Note in respect of any of such LIBOR Loans or
Letters of Credit (other than taxes imposed on the overall net income of
such Lender or of its Applicable Lending Office for any of such LIBOR
Loans by the jurisdiction in which such Lender has its principal office or
Applicable Lending Office); or (ii) imposes or modifies any reserve,
special deposit, minimum capital, capital ratio or similar requirements
relating to any extensions of credit or other assets of, or any deposits
with or other liabilities of such Lender, or the Commitment or Loans of
such Lender or the London interbank market; or (iii) imposes any other
condition affecting this Agreement or any Note (or any of such extensions
of credit or liabilities) or such Lender's Commitment or Loans. Each
Lender will notify the Administrative Agent and the Borrower of any event
occurring after the Closing Date which will entitle such Lender to
compensation pursuant to this Section 5.01(a) as promptly as practicable
after it obtains knowledge thereof and determines to request such
compensation, and will designate a different Applicable Lending Office for
the Loans of such Lender affected by such event if such designation will
avoid the need for, or reduce the amount of, such compensation and will
not, in the sole opinion of such Lender, be disadvantageous to such
Lender, provided that such Lender shall have no obligation to so designate
an Applicable Lending Office located in the United States. If any Lender
requests compensation from the Borrower under this Section 5.01(a), the
Borrower may, by notice to such Lender, suspend the obligation of such
Lender to make additional Loans of the Type with respect to which such
compensation is requested until the Regulatory Change giving rise to such
request ceases to be in effect (in which case the provisions of Section
5.04 shall be applicable).
(b) Regulatory Change. Without limiting the effect of the provisions
of Section 5.01(a), in the event that at any time (by reason of any
Regulatory Change or any other circumstances arising after the Closing
Date affecting (A) any Lender, (B) the London interbank market or (C) such
Lender's position in such market), the LIBOR Rate, as determined in good
faith by such Lender, will not adequately and fairly reflect the cost to
such Lender of funding its LIBOR Loans, then, if such Lender so elects, by
notice to the Borrower and the Administrative Agent, the obligation of
such Lender to make additional LIBOR Loans shall be suspended until such
Regulatory Change or other
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circumstances ceases to be in effect (in which case the provisions of
Section 5.04 shall be applicable).
(c) Capital Adequacy. Without limiting the effect of the foregoing
provisions of this Section 5.01 (but without duplication), the Borrower
shall pay directly to any Lender from time to time on request such amounts
as such Lender may reasonably determine to be necessary to compensate such
Lender or its parent or holding company for any costs which it determines
are attributable to the maintenance by such Lender or its parent or
holding company (or any Applicable Lending Office), pursuant to any
Governmental Requirement following any Regulatory Change, of capital in
respect of its Commitment, its Note, or its Loans or any interest held by
it in any Letter of Credit, such compensation to include, without
limitation, an amount equal to any reduction of the rate of return on
assets or equity of such Lender or its parent or holding company (or any
Applicable Lending Office) to a level below that which such Lender or its
parent or holding company (or any Applicable Lending Office) could have
achieved but for such Governmental Requirement. Such Lender will notify
the Borrower that it is entitled to compensation pursuant to this Section
5.01(c) as promptly as practicable after it determines to request such
compensation.
(d) Compensation Procedure. Any Lender notifying the Borrower of the
incurrence of Additional Costs under this Section 5.01 shall in such
notice to the Borrower and the Administrative Agent set forth in
reasonable detail the basis and amount of its request for compensation.
Determinations and allocations by each Lender for purposes of this Section
5.01 of the effect of any Regulatory Change pursuant to Section 5.01(a) or
(b), or of the effect of capital maintained pursuant to Section 5.01(c),
on its costs or rate of return of maintaining Loans or its obligation to
make Loans or issue Letters of Credit, or on amounts receivable by it in
respect of Loans or Letters of Credit, and of the amounts required to
compensate such Lender under this Section 5.01, shall be conclusive and
binding for all purposes, provided that such determinations and
allocations are made on a reasonable basis. Any request for additional
compensation under this Section 5.01 shall be paid by the Borrower within
thirty (30) days of the receipt by the Borrower of the notice described in
this Section 5.01(d).
Section 5.02 Limitation on LIBOR Loans. Anything herein to the contrary
notwithstanding, if, on or prior to the determination of any LIBOR Rate for any
Interest Period:
(a) the Administrative Agent determines (which determination shall
be conclusive, absent manifest error) that quotations of interest rates
for the relevant deposits referred to in the definition of "LIBOR Rate" in
Section 1.02 are not being provided in the relevant amounts or for the
relevant maturities for purposes of determining rates of interest for
LIBOR Loans as provided herein; or
(b) the Administrative Agent determines (which determination shall
be conclusive, absent manifest error) that the relevant rates of interest
referred to in the definition of "LIBOR Rate" in Section 1.02 upon the
basis of which the rate of interest for LIBOR Loans for such Interest
Period is to be determined are not sufficient to adequately cover the cost
to the Lenders of making or maintaining LIBOR Loans;
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then the Administrative Agent shall give the Borrower prompt notice thereof, and
so long as such condition remains in effect, the Lenders shall be under no
obligation to make additional LIBOR Loans.
Section 5.03 Illegality. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for any Lender or its
Applicable Lending Office to honor its obligation to make or maintain LIBOR
Loans hereunder, then such Lender shall promptly notify the Borrower thereof and
such Lender's obligation to make LIBOR Loans shall be suspended until such time
as such Lender may again make and maintain LIBOR Loans (in which case the
provisions of Section 5.04 shall be applicable).
Section 5.04 Base Rate Loans Pursuant to Sections 5.01, 5.02 and 5.03. If
the obligation of any Lender to make LIBOR Loans shall be suspended pursuant to
Sections 5.01, 5.02 or 5.03 ("Affected Loans"), all Affected Loans which would
otherwise be made by such Lender shall be made instead as Base Rate Loans (and,
if an event referred to in Section 5.01(b) or Section 5.03 has occurred and such
Lender so requests by notice to the Borrower, all Affected Loans of such Lender
then outstanding shall be automatically converted into Base Rate Loans on the
date specified by such Lender in such notice) and, to the extent that Affected
Loans are so made as (or converted into) Base Rate Loans, all payments of
principal which would otherwise be applied to such Lender's Affected Loans shall
be applied instead to its Base Rate Loans.
Section 5.05 Compensation. The Borrower shall pay to each Lender within
thirty (30) days of receipt of written request of such Lender (which request
shall set forth, in reasonable detail, the basis for requesting such amounts and
which shall be conclusive and binding for all purposes provided that such
determinations are made on a reasonable basis), such amount or amounts as shall
compensate it for any loss, cost, expense or liability which such Lender
determines are attributable to:
(a) any payment, prepayment or conversion of a LIBOR Loan properly
made by such Lender or the Borrower for any reason (including, without
limitation, the acceleration of the Loans pursuant to Section 10.01) on a
date other than the last day of the Interest Period for such Loan; or
(b) any failure by the Borrower for any reason (including but not
limited to, the failure of any of the conditions precedent specified in
Article VI to be satisfied) to borrow, continue or convert a LIBOR Loan
from such Lender on the date for such borrowing, continuation or
conversion specified in the relevant notice given pursuant to Section
2.02(c).
Without limiting the effect of the preceding sentence, such compensation shall
include an amount equal to the excess, if any, of (i) the amount of interest
which would have accrued on the principal amount so paid, prepaid or converted
or not borrowed for the period from the date of such payment, prepayment or
conversion or failure to borrow to the last day of the Interest Period for such
Loan (or, in the case of a failure to borrow, the Interest Period for such Loan
which would have commenced on the date specified for such borrowing) at the
applicable rate of interest for such Loan provided for herein over (ii) the
interest component of the amount such Lender would have bid in the London
interbank market for Dollar deposits of leading banks in
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amounts comparable to such principal amount and with maturities comparable to
such period (as reasonably determined by such Lender).
Section 5.06 Time Limit; Etc.
(a) Time Limited. Notwithstanding anything to the contrary contained
in Sections 5.01 through 5.05, the Borrower shall not be required to
reimburse or pay any costs or expenses to any Lender as required by such
sections which have accrued more than 180 days prior to such Lender's
giving notice to the Borrower that such Lender has suffered or incurred
such costs or expenses.
(b) Non Discriminatory Basis. None of the Lenders shall be permitted
to pass through to the Borrower costs and expenses under Sections 5.01
through 5.05 which are not also passed through by such Lender to other
customers of such Lender similarly situated when such customer is subject
to documents containing similar provisions as those contained in such
Sections.
Section 5.07 Replacement Lenders.
(a) Terminated Lenders. If any Lender has notified the Borrower and
the Administrative Agent of its incurring Additional Costs under Section
5.01 or has required the Borrower to make payments for Taxes under Section
4.06 or it is unable to make LIBOR Loans under Section 5.03, then the
Borrower may, unless such Lender has notified the Borrower and the
Administrative Agent that the circumstances giving rise to such notice no
longer apply, terminate, in whole but not in part, the Commitment of any
Lender (other than the Administrative Agent) (the "Terminated Lender") at
any time upon five (5) Business Days' prior written notice to the
Terminated Lender and the Administrative Agent (such notice referred to
herein as a "Notice of Termination").
(b) Replacement Lenders. In order to effect the termination of the
Commitment of the Terminated Lender, the Borrower shall: (i) obtain an
agreement with one or more Lenders to increase their Commitment and/or
(ii) request any one or more other banking institutions to become parties
to this Agreement in place and instead of such Terminated Lender and agree
to accept a Commitment; provided, however, that such one or more other
banking institutions are reasonably acceptable to the Administrative Agent
and become parties by executing an Assignment (the lenders or other
banking institutions that agree to accept in whole or in part the
Commitment of the Terminated Lender being referred to herein as the
"Replacement Lenders"), such that the aggregate increased and/or accepted
Commitments of the Replacement Lenders under clauses (i) and (ii) above
equal the Commitment of the Terminated Lender.
(c) Content of Notice of Termination. The Notice of Termination
shall include the name of the Terminated Lender, the date the termination
will occur (the "Lender Termination Date"), and the Replacement Lender or
Replacement Lenders to which the Terminated Lender will assign its
Commitment and, if there will be more than one Replacement Lender, the
portion of the Terminated Lender's Commitment to be assigned to each
Replacement Lender.
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(d) Effecting Termination. On the Lender Termination Date, (i) the
Terminated Lender shall by execution and delivery of an Assignment assign
its Commitment to the Replacement Lender or Replacement Lenders (pro rata,
if there is more than one Replacement Lender, in proportion to the portion
of the Terminated Lender's Commitment to be assigned to each Replacement
Lender) indicated in the Notice of Termination and shall assign to the
Replacement Lender or Replacement Lenders each of its Loans (if any) then
outstanding and participation interests in Letters of Credit (if any) then
outstanding pro rata as aforesaid), (ii) the Terminated Lender shall
endorse its Note, payable without recourse, representation or warranty to
the order of the Replacement Lender or Replacement Lenders (pro rata as
aforesaid), (iii) the Replacement Lender or Replacement Lenders shall
purchase the Note held by the Terminated Lender (pro rata as aforesaid) at
a price equal to the unpaid principal amount thereof plus interest and
facility and other fees accrued and unpaid to the Lender Termination Date,
and (iv) the Replacement Lender or Replacement Lenders will thereupon (pro
rata as aforesaid) succeed to and be substituted in all respects for the
Terminated Lender with like effect as if becoming a Lender pursuant to the
terms of Section 12.06(b), and the Terminated Lender will have the rights
and benefits of an assignor under Section 12.06(b). To the extent not in
conflict, the terms of Section 12.06(b) shall supplement the provisions of
this Section 5.06(d). For each assignment made under this Section 5.06,
the Replacement Lender shall pay to the Administrative Agent the
processing fee provided for in Section 12.06(b). The Borrower will be
responsible for the payment of any breakage costs associated with
termination and Replacement Lenders, as set forth in Section 5.05.
ARTICLE VI
CONDITIONS PRECEDENT
Section 6.01 Initial Funding. The obligation of the Lenders to make the
Initial Funding is subject to the receipt by the Administrative Agent and the
Lenders of all fees due and payable pursuant to Section 2.04 on or before the
Closing Date and the receipt by the Administrative Agent of the following
documents (in sufficient original counterparts, other than the Notes, for each
Lender) and satisfaction of the other conditions provided in this Section 6.01,
each of which shall be satisfactory to the Administrative Agent in form and
substance:
(a) A certificate of the Secretary or an Assistant Secretary of the
Borrower setting forth (i) resolutions of its board of directors with
respect to the authorization of the Borrower to execute and deliver the
Loan Documents to which it is a party and to enter into the transactions
contemplated in those documents, (ii) the officers of the Borrower (y) who
are authorized to sign the Loan Documents to which Borrower is a party and
(z) who will, until replaced by another officer or officers duly
authorized for that purpose, act as its representative for the purposes of
signing documents and giving notices and other communications in
connection with this Agreement and the transactions contemplated hereby,
(iii) specimen signatures of the authorized officers, and (iv) the
articles or certificate of incorporation and bylaws of the Borrower,
certified as being true and complete. The Administrative Agent and the
Lenders may conclusively rely on such
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certificate until the Administrative Agent receives notice in writing from
the Borrower to the contrary.
(b) A certificate of the Secretary or an Assistant Secretary of each
of the Guarantors setting forth (i) resolutions of its board of directors
with respect to the authorization of such Guarantor to execute and deliver
the Loan Documents to which it is a party and to enter into the
transactions contemplated in those documents, (ii) the officers of such
Guarantor (y) who are authorized to sign the Loan Documents to which such
Guarantor is a party and (z) who will, until replaced by another officer
or officers duly authorized for that purpose, act as its representative
for the purposes of signing documents and giving notices and other
communications in connection with this Agreement and the transactions
contemplated hereby, (iii) specimen signatures of the authorized officers,
and (iv) the articles or certificate of incorporation and bylaws of such
Guarantor, certified as being true and complete. The Administrative Agent
and the Lenders may conclusively rely on such certificate until they
receive notice in writing from such Guarantor to the contrary.
(c) Certificates of the appropriate state agencies with respect to
the existence, qualification and good standing of the Borrower and each of
the Guarantors.
(d) The Notes, duly completed and executed.
(e) The Security Instruments, including those described on Exhibit
D, duly completed and executed in sufficient number of counterparts for
recording, if necessary.
(f) An opinion of ▇▇▇▇▇▇ and ▇▇▇▇▇, LLP, counsel to the Borrower and
the Guarantors, in form and substance satisfactory to the Administrative
Agent and its counsel, as to such matters incident to the transactions
herein contemplated as the Administrative Agent and its counsel may
reasonably request. An opinion of Simon, Peragrine, ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇,
L.L.P., Louisiana counsel, and an opinion of Alabama counsel satisfactory
to the Administrative Agent and its counsel, in form and substance
satisfactory to the Administrative Agent and its counsel, as to such
matters incident to the transactions herein contemplated as the
Administrative Agent and its counsel may reasonably request including,
without limitation, opinions that all mortgage taxes have been properly
paid.
(g) A certificate of insurance coverage of the Borrower evidencing
that the Borrower is carrying insurance in accordance with Section 7.19.
(h) Title information satisfactory to the Administrative Agent
setting forth a status of title acceptable to the Administrative Agent to
at least 80% of the value of the Oil and Gas Properties included in the
Initial Reserve Report.
(i) Appropriate UCC search certificates reflecting no prior Liens
other than those permitted pursuant to Section 9.02.
(j) Environmental assessment reports relating to the Oil and Gas
Properties of the Borrower and the Subsidiaries as may be requested by the
Administrative Agent,
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including environmental audits, phase I reports or other environmental
reports of any nature whatsoever (whether prepared internally or by third
party consultants); and the Administrative Agent must be satisfied with
the results of the review of such reports and environmental condition of
such Oil and Gas Properties.
(k) Letters in lieu, in form and substance satisfactory to the
Administrative Agent, executed by the Borrower and each Subsidiary, as
appropriate, to each of the purchasers of the Hydrocarbons of the Borrower
and each such Guarantor produced from the Borrower's and such Guarantors'
Mortgaged Oil and Gas Properties.
(l) Such other documents as the Administrative Agent or any Lender
or special counsel to the Administrative Agent may reasonably request.
Section 6.02 Initial and Subsequent Loans and Letters of Credit. The
obligation of the Lenders to make Loans to the Borrower upon the occasion of
each borrowing hereunder and to issue, renew, extend or reissue Letters of
Credit for the account of the Borrower (including the Initial Funding) is
subject to the further conditions precedent that, as of the date of such Loans
and after giving effect thereto:
(a) no Default shall exist;
(b) no Material Adverse Effect shall have occurred; and
(c) the representations and warranties made by the Borrower in
Article VII and in the Security Instruments shall be true on and as of the
date of the making of such Loans or issuance, renewal, extension or
reissuance of a Letter of Credit with the same force and effect as if made
on and as of such date and following such new borrowing, except to the
extent such representations and warranties are expressly limited to an
earlier date or the Majority Lenders may expressly consent in writing to
the contrary.
Each request for a borrowing or issuance, renewal, extension or reissuance
of a Letter of Credit by the Borrower hereunder shall constitute a certification
by the Borrower to the effect set forth in Section 6.02(c) (both as of the date
of such notice and, unless the Borrower otherwise notifies the Administrative
Agent prior to the date of and immediately following such borrowing or issuance,
renewal, extension or reissuance of a Letter of Credit as of the date thereof).
Section 6.03 Conditions Precedent for the Benefit of Lenders. All
conditions precedent to the obligations of the Lenders to make any Loan or the
Issuing Bank to issue, renew or extend any Letter of Credit are imposed hereby
solely for the benefit of the Lenders and the Issuing Bank, and no other Person
may require satisfaction of any such condition precedent or be entitled to
assume that the Lenders will refuse to make any Loan or the Issuing Bank to
issue, renew or extend any Letter of Credit in the absence of strict compliance
with such conditions precedent.
Section 6.04 No Waiver. No waiver of any condition precedent shall
preclude the Administrative Agent or the Lenders from requiring such condition
to be met prior to making any subsequent Loan or preclude the Lenders from
thereafter declaring that the failure of the Borrower to satisfy such condition
precedent constitutes a Default.
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ARTICLE VII
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Administrative Agent and the
Lenders that (each representation and warranty herein is given as of the Closing
Date and shall be deemed repeated and reaffirmed on the dates of each borrowing
and issuance, renewal, extension or reissuance of a Letter of Credit as provided
in Section 6.02):
Section 7.01 Corporate Existence. Each of the Borrower and each Guarantor:
(i) is a corporation duly organized, legally existing and in good standing under
the laws of the jurisdiction of its incorporation; (ii) has all requisite
corporate power, and has all material governmental licenses, authorizations,
consents and approvals necessary to own its assets and carry on its business as
now being or as proposed to be conducted; and (iii) is qualified to do business
in all jurisdictions in which the nature of the business conducted by it makes
such qualification necessary and where failure so to qualify would have a
Material Adverse Effect.
Section 7.02 Financial Condition. The audited consolidated balance sheet
of the Borrower and its Consolidated Subsidiaries as at December 31, 2003 and
the related consolidated statement of income, stockholders' equity and cash flow
of the Borrower and its Consolidated Subsidiaries for the fiscal year ended on
said date, with the opinion thereon of Ernst & Young LLP heretofore furnished to
the Administrative Agent and the unaudited consolidated balance sheet of the
Borrower and its Consolidated Subsidiaries as at March 31, 2004 and their
related consolidated statements of income, stockholders' equity and cash flow of
the Borrower and its Consolidated Subsidiaries for the three month period ended
on such date heretofore furnished to the Administrative Agent, are complete and
correct in all material respects and fairly present the consolidated financial
condition of the Borrower and its Consolidated Subsidiaries as at said dates and
the results of its operations for the fiscal year and the three month period
ending on said dates, all in accordance with GAAP, as applied on a consistent
basis (subject, in the case of the interim financial statements, to normal
year-end adjustments). Neither the Borrower nor any Subsidiary has on the
Closing Date any material Debt, contingent liabilities, liabilities for taxes,
unusual forward or long-term commitments or unrealized or anticipated losses
from any unfavorable commitments, except as referred to or reflected or provided
for in the Financial Statements or in Schedule 7.02. As of the Closing Date,
since December 31, 2003, there has been no change or event having a Material
Adverse Effect.
Section 7.03 Litigation. Except as disclosed to the Lenders in Schedule
7.03 hereto, at the Closing Date there is no litigation, legal, administrative
or arbitral proceeding, investigation or other action of any nature pending or,
to the knowledge of the Borrower threatened against or affecting the Borrower or
any Subsidiary which involves the possibility of any judgment or liability
against the Borrower or any Subsidiary not fully covered by insurance (except
for normal deductibles).
Section 7.04 No Breach. Neither the execution and delivery of the Loan
Documents, nor compliance with the terms and provisions hereof will conflict
with or result in a breach of, or require any consent which has not been
obtained as of the Closing Date under, the respective charter or by laws of the
Borrower or any Subsidiary, or any Governmental Requirement or any
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agreement or instrument to which the Borrower or any Subsidiary is a party or by
which it is bound or to which it or its Properties are subject, or constitute a
default under any such agreement or instrument, or result in the creation or
imposition of any Lien upon any of the revenues or assets of the Borrower or any
Subsidiary pursuant to the terms of any such agreement or instrument other than
the Liens created by the Loan Documents.
Section 7.05 Authority. The Borrower and each Guarantor have all necessary
corporate power and authority to execute, deliver and perform its obligations
under the Loan Documents to which it is a party; and the execution, delivery and
performance by the Borrower and each Guarantor of the Loan Documents to which it
is a party, have been duly authorized by all necessary corporate action on its
part; and the Loan Documents constitute the legal, valid and binding obligations
of the Borrower and each Guarantor, enforceable in accordance with their terms.
Section 7.06 Approvals. No authorizations, approvals or consents of, and
no filings or registrations with, any Governmental Authority are necessary for
the execution, delivery or performance by the Borrower or any Guarantor of the
Loan Documents or for the validity or enforceability thereof, except for the
recording and filing of the Security Instruments as required by this Agreement.
Section 7.07 Use of Loans. The proceeds of the Loans shall be used for (i)
the acquisition of Oil and Gas Properties, (ii) exploration and development of
Oil and Gas Properties, (iii) working capital, (iv) to repay or retire Debt
under the Prior Credit Agreement, (v) to repurchase, redeem or repay Existing
Other Debt or Subordinated Debt to the extent otherwise permitted under this
Agreement and (vi) general corporate purposes. None of the Guarantors or the
Borrower is engaged principally, or as one of its important activities, in the
business of extending credit for the purpose, whether immediate, incidental or
ultimate, of buying or carrying margin stock (within the meaning of Regulation
T, U or X of the Board of Governors of the Federal Reserve System) and no part
of the proceeds of any Loan hereunder will be used to buy or carry any margin
stock.
Section 7.08 ERISA.
(a) The Borrower, each Subsidiary and each ERISA Affiliate have
complied in all material respects with ERISA and, where applicable, the
Code regarding each Plan.
(b) Each Plan is, and has been, maintained in substantial compliance
with ERISA and, where applicable, the Code.
(c) No act, omission or transaction has occurred which could result
in imposition on the Borrower, any Subsidiary or any ERISA Affiliate
(whether directly or indirectly) of (i) either a civil penalty assessed
pursuant to section 502(c), (i) or (l) of ERISA or a tax imposed pursuant
to Chapter 43 of Subtitle D of the Code or (ii) breach of fiduciary duty
liability damages under section 409 of ERISA.
(d) No Plan (other than a defined contribution plan) or any trust
created under any such Plan has been terminated since September 2, 1974.
No liability to the PBGC (other than for the payment of current premiums
which are not past due) by the Borrower,
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any Subsidiary or any ERISA Affiliate has been or is expected by the
Borrower, any Subsidiary or any ERISA Affiliate to be incurred with
respect to any Plan. No ERISA Event with respect to any Plan has occurred.
(e) Full payment when due has been made of all amounts which the
Borrower, any Subsidiary or any ERISA Affiliate is required under the
terms of each Plan or applicable law to have paid as contributions to such
Plan, and no accumulated funding deficiency (as defined in section 302 of
ERISA and section 412 of the Code), whether or not waived, exists with
respect to any Plan.
(f) The actuarial present value of the benefit liabilities under
each Plan which is subject to Title IV of ERISA does not, as of the end of
the Borrower's most recently ended fiscal year, exceed the current value
of the assets (computed on a plan termination basis in accordance with
Title IV of ERISA) of such Plan allocable to such benefit liabilities. The
term "actuarial present value of the benefit liabilities" shall have the
meaning specified in section 4041 of ERISA.
(g) None of the Borrower, any Subsidiary or any ERISA Affiliate
sponsors, maintains, or contributes to an employee welfare benefit plan,
as defined in section 3(1) of ERISA, including, without limitation, any
such plan maintained to provide benefits to former employees of such
entities, that may not be terminated by the Borrower, a Subsidiary or any
ERISA Affiliate in its sole discretion at any time without any material
liability.
(h) None of the Borrower, any Subsidiary or any ERISA Affiliate
sponsors, maintains or contributes to, or has at any time in the preceding
six calendar years, sponsored, maintained or contributed to, any
Multiemployer Plan.
(i) None of the Borrower, any Subsidiary or any ERISA Affiliate is
required to provide security under section 401(a)(29) of the Code due to a
Plan amendment that results in an increase in current liability for the
Plan.
Section 7.09 Taxes. Except as set out in Schedule 7.09, each of the
Borrower and its Subsidiaries has filed all United States Federal income tax
returns and all other tax returns which are required to be filed by them and
have paid all material taxes due pursuant to such returns or pursuant to any
assessment received by the Borrower or any Subsidiary. The charges, accruals and
reserves on the books of the Borrower and its Subsidiaries in respect of taxes
and other governmental charges are, in the opinion of the Borrower, adequate. No
tax lien has been filed and, to the knowledge of the Borrower, no claim is being
asserted with respect to any such tax, fee or other charge.
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Section 7.10 Titles, etc.
(a) Except as set out in Schedule 7.10, each of the Borrower and the
Guarantors has good and defensible title to its material (individually or
in the aggregate) Properties (other than the Additional Entrada Assets),
free and clear of all Liens, except Liens permitted by Section 9.02.
Except as set forth in Schedule 7.10, after giving full effect to the
Excepted Liens, the Borrower owns at least the net interests in production
attributable to the Hydrocarbon Interests reflected in the most recently
delivered Reserve Report and the ownership of such Properties does not in
any material respect obligate the Borrower to bear the costs and expenses
relating to the maintenance, development and operations of each such
Property in an amount in excess of the working interest of each Property
set forth in the most recently delivered Reserve Report without a
corresponding increase in net revenue interest for such Properties. All
information contained in the most recently delivered Reserve Report is
true and correct in all material respects as of the date thereof.
(b) All material leases and agreements necessary for the conduct of
the business of the Borrower and the Guarantors are valid and subsisting,
in full force and effect and there exists no default or event or
circumstance which with the giving of notice or the passage of time or
both would give rise to a default under any such lease or agreement, which
would affect in any material respect the conduct of the business of the
Borrower and the Guarantors.
(c) The rights, Properties and other assets presently owned, leased
or licensed by the Borrower and the Guarantors including, without
limitation, all easements and rights of way, include all rights,
Properties and other assets reasonably necessary to permit the Borrower
and the Guarantors to conduct their business in all material respects in
the same manner as its business has been conducted prior to the Closing
Date.
(d) All of the assets and Properties of the Borrower and the
Guarantors which are reasonably necessary for the operation of its
business are in good working condition and are maintained in accordance
with customary industry standards.
Section 7.11 No Material Misstatements. No written information, statement,
exhibit, certificate, document or report furnished to the Administrative Agent
and the Lenders (or any of them) by the Borrower or any Subsidiary in connection
with the negotiation of this Agreement contained any material misstatement of
fact or omitted to state a material fact or any fact necessary to make the
statement contained therein not materially misleading in the light of the
circumstances in which made and with respect to the Borrower and its
Subsidiaries taken as a whole. There is no fact peculiar to the Borrower or any
Subsidiary which has a Material Adverse Effect or in the future is reasonably
likely to have (so far as the Borrower can now foresee) a Material Adverse
Effect and which has not been disclosed in writing to the Administrative Agent
and the Lenders by or on behalf of the Borrower or any Subsidiary prior to, or
on, the Closing Date in connection with the transactions contemplated hereby.
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Section 7.12 Investment Company Act. Neither the Borrower nor any
Subsidiary is an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended.
Section 7.13 Public Utility Holding Company Act. Neither the Borrower nor
any Subsidiary is a "holding company," or a "subsidiary company" of a "holding
company," or an "affiliate" of a "holding company" or of a "subsidiary company"
of a "holding company," or a "public utility" within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
Section 7.14 Subsidiaries. Except as set forth on Schedule 7.14, as of the
Closing Date the Borrower has no Subsidiaries.
Section 7.15 Location of Business, Offices and Inventory. The Borrower's
principal place of business and chief executive offices are located at the
address stated on the signature page of this Agreement. The principal place of
business and chief executive office of each Subsidiary are located at the
addresses stated on Schedule 7.14. Schedule 7.14 sets forth as of the Closing
Date each of the locations where the Borrower and its Subsidiaries conducts
business or maintains inventory and indicates whether the Borrower or the
applicable Subsidiary is qualified to do business in that jurisdiction.
Section 7.16 Defaults. Neither the Borrower nor any Subsidiary is in
default nor has any event or circumstance occurred which, but for the expiration
of any applicable grace period or the giving of notice, or both, would
constitute a default under any material agreement or instrument to which the
Borrower or any Subsidiary is a party or by which the Borrower or any Subsidiary
is bound which default would have a Material Adverse Effect. No Default
hereunder has occurred and is continuing.
Section 7.17 Environmental Matters. Except (i) as provided in Schedule
7.17 or (ii) as would not have a Material Adverse Effect (or with respect to
(c), (d) and (e) below, where the failure to take such actions would not have a
Material Adverse Effect):
(a) Neither any Property of the Borrower or any Subsidiary nor the
operations conducted thereon violate any order or requirement of any court
or Governmental Authority or any Environmental Laws;
(b) Without limitation of clause (a) above, no Property of the
Borrower or any Subsidiary nor the operations currently conducted thereon
or, to the best knowledge of the Borrower, by any prior owner or operator
of such Property or operation, are in violation of or subject to any
existing, pending or threatened action, suit, investigation, inquiry or
proceeding by or before any court or Governmental Authority or to any
remedial obligations under Environmental Laws;
(c) All notices, permits, licenses or similar authorizations, if
any, required to be obtained or filed in connection with the operation or
use of any and all Property of the Borrower and each Subsidiary, including
without limitation past or present treatment, storage, disposal or release
of a hazardous substance or solid waste into the environment, have been
duly obtained or filed, and the Borrower and each Subsidiary are in
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compliance with the terms and conditions of all such notices, permits,
licenses and similar authorizations;
(d) All hazardous substances, solid waste, and oil and gas
exploration and production wastes, if any, generated at any and all
Property of the Borrower or any Subsidiary have in the past been
transported, treated and disposed of in accordance with Environmental Laws
and so as not to pose an imminent and substantial endangerment to public
health or welfare or the environment, and, to the best knowledge of the
Borrower, all such transport carriers and treatment and disposal
facilities have been and are operating in compliance with Environmental
Laws and so as not to pose an imminent and substantial endangerment to
public health or welfare or the environment, and are not the subject of
any existing, pending or threatened action, investigation or inquiry by
any Governmental Authority in connection with any Environmental Laws;
(e) The Borrower has taken all steps reasonably necessary to
determine and has determined that no hazardous substances, solid waste, or
oil and gas exploration and production wastes, have been disposed of or
otherwise released and there has been no threatened release of any
hazardous substances on or to any Property of the Borrower or any
Subsidiary except in compliance with Environmental Laws and so as not to
pose an imminent and substantial endangerment to public health or welfare
or the environment;
(f) To the extent applicable, all Property of the Borrower and each
Subsidiary currently satisfies all design, operation, and equipment
requirements imposed by the OPA or scheduled as of the Closing Date to be
imposed by OPA during the term of this Agreement, and the Borrower does
not have any reason to believe that such Property, to the extent subject
to OPA, will not be able to maintain compliance with the OPA requirements
during the term of this Agreement; and
(g) Neither the Borrower nor any Subsidiary has any known contingent
liability in connection with any release or threatened release of any oil,
hazardous substance or solid waste into the environment.
Section 7.18 Compliance with the Law. Neither the Borrower nor any
Subsidiary has violated any Governmental Requirement or failed to obtain any
license, permit, franchise or other governmental authorization necessary for the
ownership of any of its Properties or the conduct of its business, which
violation or failure would have (in the event such violation or failure were
asserted by any Person through appropriate action) a Material Adverse Effect.
Except for such acts or failures to act as would not have a Material Adverse
Effect, the Oil and Gas Properties (and properties unitized therewith) have been
maintained, operated and developed in a good and workmanlike manner and in
conformity with all applicable laws and all rules, regulations and orders of all
duly constituted authorities having jurisdiction and in conformity with the
provisions of all leases, subleases or other contracts comprising a part of the
Hydrocarbon Interests and other contracts and agreements forming a part of the
Oil and Gas Properties; specifically in this connection, (i) after the Closing
Date, no Oil and Gas Property is subject to having allowable production reduced
below the full and regular allowable (including the maximum permissible
tolerance) because of any overproduction (whether or not the same was
permissible at the time) prior to the Closing Date and (ii) none of the ▇▇▇▇▇
comprising a part
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of the Oil and Gas Properties (or properties unitized therewith) are deviated
from the vertical more than the maximum permitted by applicable laws,
regulations, rules and orders, and such ▇▇▇▇▇ are, in fact, bottomed under and
are producing from, and the well bores are wholly within, the Oil and Gas
Properties (or in the case of ▇▇▇▇▇ located on properties unitized therewith,
such unitized properties).
Section 7.19 Insurance. Schedule 7.19 attached hereto contains an accurate
and complete description of all material policies of fire, liability, workmen's
compensation and other forms of insurance owned or held by the Borrower and each
Subsidiary. All such policies are in full force and effect, all premiums with
respect thereto covering all periods up to and including the date of the closing
have been paid, and no notice of cancellation or termination has been received
with respect to any such policy. Such policies are sufficient for compliance
with all requirements of law and of all material agreements to which the
Borrower or any Subsidiary is a party; are valid, outstanding and enforceable
policies; provide adequate insurance coverage in at least such amounts and
against at least such risks (but including in any event public liability) as are
customarily insured against in the same general area by companies engaged in the
same or a similar business for the assets and operations of the Borrower and
each Subsidiary; will remain in full force and effect through the respective
dates set forth in Schedule 7.19 without the payment of additional premiums; and
will not in any way be affected by, or terminate or lapse by reason of, the
transactions contemplated by this Agreement. Schedule 7.19 identifies all
material risks, if any, which the Borrower and its Subsidiaries and their
respective Board of Directors or officers have designated as being self insured.
Neither the Borrower nor any Subsidiary has been refused any insurance with
respect to its assets or operations, nor has its coverage been limited below
usual and customary policy limits, by an insurance carrier to which it has
applied for any such insurance or with which it has carried insurance during the
last three years.
Section 7.20 Hedging Agreements. Schedule 7.20 sets forth, as of the
Closing Date, a true and complete list of all Hedging Agreements (including
commodity price swap agreements, forward agreements (for terms in excess of
thirty days) or contracts of sale which provide for prepayment for deferred
shipment or delivery of oil, gas or other commodities) of the Borrower and each
Subsidiary, the material terms thereof (including the type, term, effective
date, termination date and notional amounts or volumes), the net ▇▇▇▇ to market
value thereof, all credit support agreements relating thereto (including any
margin required or supplied), and the counter party to each such agreement.
Section 7.21 Restriction on Liens. Neither the Borrower nor any of the
Guarantors is a party to any agreement or arrangement (other than this
Agreement, the Security Instruments and the agreements and instruments governing
the Existing Other Debt), or subject to any order, judgment, writ or decree,
which either restricts or purports to restrict its ability to grant Liens to
other Persons on or in respect of their respective assets or Properties.
Section 7.22 Material Agreements. Set forth on Schedule 7.22 hereto is a
complete and correct list of all material agreements, leases, indentures,
purchase agreements, obligations in respect of letters of credit, guarantees,
joint venture agreements, and other instruments in effect or to be in effect as
of the Closing Date (other than Hedging Agreements and agreements relating to
Debt of the type described in clause (iii) in the definition of Debt or clause
(vii) in the definition of Debt to the extent relating to primary obligations of
the type described in clause (iii)
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in the definition of Debt) providing for, evidencing, securing or otherwise
relating to any Debt of the Borrower or any of its Subsidiaries, and all
obligations of the Borrower or any of its Subsidiaries to issuers of surety or
appeal bonds issued for account of the Borrower or any such Subsidiary, and such
list correctly sets forth the names of the debtor or lessee and creditor or
lessor with respect to the Debt or lease obligations outstanding or to be
outstanding and the Property subject to any Lien securing such Debt or lease
obligation. The Borrower has heretofore delivered to the Administrative Agent a
complete and correct copy of all such material credit agreements, indentures,
purchase agreements, contracts, letters of credit, guarantees, joint venture
agreements, or other instruments, including any modifications or supplements
thereto, as in effect on the Closing Date, which the Administrative Agent has
requested.
Section 7.23 Gas Imbalances. Except as set forth on Schedule 7.23 or on
the most recent certificate delivered pursuant to Section 8.07(c), on a net
basis there are no gas imbalances, take or pay or other prepayments with respect
to the Borrower's Oil and Gas Properties which would require the Borrower to
deliver, in the aggregate, five percent (5%) or more of the quarterly production
from Hydrocarbons produced from the Borrower's Oil and Gas Properties at some
future time without then or thereafter receiving full payment therefor.
ARTICLE VIII
AFFIRMATIVE COVENANTS
The Borrower covenants and agrees that, so long as any of the Commitments
are in effect and until payment in full of all Loans hereunder, all interest
thereon and all other amounts payable by the Borrower hereunder:
Section 8.01 Reporting Requirements. The Borrower shall deliver, or shall
cause to be delivered, to the Administrative Agent with sufficient copies of
each for the Lenders:
(a) Annual Financial Statements. As soon as available and in any
event within 90 days after the end of each fiscal year of the Borrower,
the audited consolidated statement of income, stockholders' equity,
changes in financial position and cash flows of the Borrower and its
Consolidated Subsidiaries for such fiscal year, and the related
consolidated balance sheet of the Borrower and its Consolidated
Subsidiaries as at the end of such fiscal year, and setting forth in each
case in comparative form the corresponding figures for the preceding
fiscal year, and accompanied by the related opinion of independent public
accountants of recognized national standing reasonably acceptable to the
Administrative Agent which opinion shall state that said financial
statements fairly present the consolidated and consolidating financial
condition and results of operations of the Borrower and its Consolidated
Subsidiaries as at the end of, and for, such fiscal year and that such
financial statements have been prepared in accordance with GAAP, except
for such changes in such principles with which the independent public
accountants shall have concurred and such opinion shall not contain a
"going concern" or like qualification or exception, and a certificate of
such accountants stating that, in making the examination necessary for
their opinion, they obtained no knowledge, except as specifically stated,
of any Default.
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(b) Quarterly Financial Statements. As soon as available and in any
event within 45 days after the end of each of the first three fiscal
quarterly periods of each fiscal year of the Borrower, consolidated
statements of income, changes in financial position and cash flows of the
Borrower and its Consolidated Subsidiaries for such period and for the
period from the beginning of the respective fiscal year to the end of such
period, and the related balance sheet as at the end of such period, and
setting forth in each case in comparative form the corresponding figures
for the corresponding period in the preceding fiscal year, accompanied by
the certificate of a Responsible Officer, which certificate shall state
that said financial statements fairly present the consolidated financial
condition and results of operations of the Borrower and its Consolidated
Subsidiaries in accordance with GAAP, as at the end of, and for, such
period (subject to normal year-end audit adjustments).
(c) Notice of Default, Etc. Promptly after the Borrower knows that
any Default or any Material Adverse Effect has occurred, a notice of such
Default or Material Adverse Effect, describing the same in reasonable
detail and the action the Borrower proposes to take with respect thereto.
(d) Other Accounting Reports. Promptly upon receipt thereof, a copy
of each other material report or letter submitted to the Borrower or any
Subsidiary by independent accountants in connection with any annual,
interim or special audit made by them of the books of the Borrower and its
Subsidiaries, and a copy of any response by the Borrower or any Subsidiary
of the Borrower, or the Board of Directors of the Borrower or any
Subsidiary of the Borrower, to such letter or report.
(e) SEC Filings, Etc. Promptly upon its becoming available, each
financial statement, report, notice or proxy statement sent by the
Borrower to stockholders generally and each regular or periodic report and
any registration statement, prospectus or material written communication
(other than transmittal letters) in respect thereof filed by the Borrower
with or received by the Borrower in connection therewith from any
securities exchange or the SEC or any successor agency.
(f) Notices Under Other Loan Agreements. Promptly after the
furnishing thereof, copies of any statement, report or notice furnished to
any Person pursuant to the terms of any indenture, loan or credit or other
similar agreement, other than this Agreement and not otherwise required to
be furnished to the Lenders pursuant to any other provision of this
Section 8.01.
(g) Other Matters. From time to time such other information
regarding the business, affairs or financial condition of the Borrower or
any Subsidiary (including, without limitation, any Plan or Multiemployer
Plan, any reports or other information required to be filed under ERISA),
and any operating reports with respect to the operation of Oil and Gas
Properties as any Lender or the Administrative Agent may reasonably
request.
(h) Hedging Agreements. As soon as available and in any event within
forty five days after the last day of each calendar quarter, a report, in
form and substance
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satisfactory to the Administrative Agent, setting forth as of the last
Business Day of such calendar quarter a true and complete list of all
Hedging Agreements (including commodity price swap agreements, forward
agreements with terms in excess of thirty days or contracts of sale which
provide for prepayment for deferred shipment or delivery of oil, gas or
other commodities) of the Borrower and each Subsidiary, the material terms
thereof (including the type, term, effective date, termination date and
notional amounts or volumes), the net ▇▇▇▇ to market value therefor, any
new credit support agreements relating thereto not listed on Schedule
7.20, any margin required or supplied under any credit support document,
and the counter party to each such agreement.
(i) Monthly Reports. As soon as available and in any event within 45
days after the end of each month, a report in form and substance
satisfactory to the Administrative Agent prepared by the Borrower for each
of its Borrowing Base Properties detailing for such month production,
revenue, expense, production taxes and price information;
(j) Annual Projected Budget. At the time it furnishes each set of
financial statements pursuant to paragraph (a) above, an annual operating
budget for the Borrower and its Subsidiaries in form and substance
reasonably acceptable to the Administrative Agent, which budget shall
include revenues, expenses and capital expenditures (detailing the
projected capital expenditures with respect to drilling (both development
and exploration), leasehold, geological and geophysical, capitalized
general and administrative expenses, and capitalized interest) for the
following fiscal year.
(k) Sales and Leasebacks. Prompt written notice if the Borrower or
any Subsidiary enters into any arrangement permitted by Section 9.05.
The Borrower will furnish to the Administrative Agent, at the time it furnishes
each set of financial statements pursuant to paragraph (a) or (b) above, a
certificate substantially in the form of Exhibit C executed by a Responsible
Officer (i) certifying as to the matters set forth therein and stating that no
Default has occurred and is continuing (or, if any Default has occurred and is
continuing, describing the same in reasonable detail), and (ii) setting forth in
reasonable detail the computations necessary to determine whether the Borrower
is in compliance with Sections 9.12, 9.13 and 9.14 as of the end of the
respective fiscal quarter or fiscal year.
Section 8.02 Litigation. The Borrower shall promptly give to the
Administrative Agent notice of: (i) all legal or arbitral proceedings, and of
all proceedings before any Governmental Authority affecting the Borrower or any
Subsidiary, except proceedings which, if adversely determined, could not
reasonably be expected to have a Material Adverse Effect, and (ii) of any
litigation or proceeding against or adversely affecting in any material respect
the Borrower or any Subsidiary in which the amount involved is not covered in
full by insurance (subject to normal and customary deductibles and for which the
insurer has not assumed the defense) or injunctive or similar relief is sought.
The Borrower will, and will cause each of its Subsidiaries to, promptly notify
the Administrative Agent and each of the Lenders of any claim, judgment, Lien
(other than those permitted under Section 9.02) or other encumbrance affecting
any Borrowing Base Property of the Borrower or any Subsidiary if the value of
the claim, judgment, Lien, or other encumbrance affecting such Borrowing Base
Property shall exceed $500,000.
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Section 8.03 Maintenance, Etc.
(a) Generally. The Borrower shall and shall cause each Subsidiary
to: preserve and maintain its corporate existence and all of its material
rights, privileges and franchises; keep books of record and account in
which full, true and correct entries will be made of all dealings or
transactions in relation to its business and activities; comply with all
Governmental Requirements if failure to comply with such requirements will
have a Material Adverse Effect; pay and discharge all taxes, assessments
and governmental charges or levies imposed on it or on its income or
profits or on any of its Property prior to the date on which penalties
attach thereto, except for any such tax, assessment, charge or levy the
payment of which is being contested in good faith and by proper
proceedings and against which adequate reserves are being maintained; upon
reasonable notice, permit representatives of the Administrative Agent or
any Lender, during normal business hours, to examine, copy and make
extracts from its books and records, to inspect its Properties, and to
discuss its business and affairs with its officers, all to the extent
reasonably requested by such Lender or the Administrative Agent (as the
case may be); and keep, or cause to be kept, insured by financially sound
and reputable insurers all Property of a character usually insured by
Persons engaged in the same or similar business similarly situated against
loss or damage of the kinds and in the amounts customarily insured against
by such Persons and carry such other insurance as is usually carried by
such Persons. The Borrower shall promptly obtain endorsements to such
insurance policies naming "Union Bank of California, N.A., as
Administrative Agent for the Beneficiaries" as joint loss payee and
containing provisions that such policies will not be canceled without 30
days prior written notice having been given by the insurance company to
the Administrative Agent.
(b) Proof of Insurance. Contemporaneously with the delivery of the
financial statements required by Section 8.01(a) to be delivered for each
year, the Borrower will furnish or cause to be furnished to the
Administrative Agent and the Lenders a certificate of insurance coverage
from the insurer in form and substance satisfactory to the Administrative
Agent and, if requested, will furnish the Administrative Agent and the
Lenders copies of the applicable policies.
(c) Oil and Gas Properties. The Borrower will and will cause each
Subsidiary to, at its own expense, (i) do or cause to be done all things
reasonably necessary to preserve and keep in good repair, working order
and efficiency all of its Oil and Gas Properties and other material
Properties including, without limitation, all equipment, machinery and
facilities, and from time to time will make all the reasonably necessary
repairs, renewals and replacements so that at all times the state and
condition of its Oil and Gas Properties and other material Properties will
be preserved and maintained in accordance with customary industry
standards, except to the extent a portion of such Properties is no longer
capable of producing Hydrocarbons in economically reasonable amounts and
(ii) maintain good and defensible title to its material (individually and
in the aggregate) Properties, free and clear of all Liens, except Liens
permitted by Section 9.02. The Borrower will and will cause each
Subsidiary to promptly: (i) pay and discharge, or make reasonable and
customary efforts to cause to be paid and discharged, all delay rentals,
royalties, expenses and indebtedness accruing under the material leases or
other
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agreements affecting or pertaining to its Oil and Gas Properties, (ii)
perform or make reasonable and customary efforts to cause to be performed,
in accordance with customary industry standards, the material obligations
required by each and all of the material assignments, deeds, leases, sub
leases, contracts and agreements affecting its interests in its Oil and
Gas Properties and other material Properties, (iii) will and will cause
each Subsidiary to do all other things reasonably necessary to keep
unimpaired, except for Liens permitted under Section 9.02, its rights with
respect to its Oil and Gas Properties and other material Properties and
prevent any material forfeiture thereof or default thereunder, except to
the extent a portion of such Properties is no longer capable of producing
Hydrocarbons in economically reasonable amounts and except for
dispositions permitted by Section 9.15. The Borrower will and will cause
each Subsidiary to operate its Oil and Gas Properties and other material
Properties or cause or make reasonable and customary efforts to cause such
Oil and Gas Properties and other material Properties to be operated in a
reasonably prudent manner in accordance with the customary practices of
the industry and in compliance in all material respects with all
applicable contracts and agreements and in compliance in all material
respects with all Governmental Requirements. The Borrower will not amend,
waive, or release any such contract if such amendment, waiver or release
could reasonably be expected to cause a Material Adverse Effect.
Section 8.04 Environmental Matters.
(a) Establishment of Procedures. The Borrower will and will cause
each Subsidiary to establish and implement such procedures as may be
reasonably necessary to continuously determine and assure that any failure
of the following could not reasonably be expected to have a Material
Adverse Effect: (i) all Property of the Borrower and its Subsidiaries and
the operations conducted thereon and other activities of the Borrower and
its Subsidiaries are in compliance with and do not violate the
requirements of any Environmental Laws, (ii) no oil, hazardous substances
or solid wastes are disposed of or otherwise released on or to any
Property owned by any such party except in compliance with Environmental
Laws, (iii) no hazardous substance will be released on or to any such
Property in a quantity equal to or exceeding that quantity which requires
reporting pursuant to Section 103 of CERCLA, and (iv) no oil, oil and gas
exploration and production wastes or hazardous substance is released on or
to any such Property so as to pose an imminent and substantial
endangerment to public health or welfare or the environment.
(b) Notice of Action. The Borrower will promptly notify the
Administrative Agent and the Lenders in writing of any threatened action,
investigation or inquiry by any Governmental Authority of which the
Borrower has knowledge in connection with any Environmental Laws,
excluding routine testing, monitoring and corrective action.
(c) Future Acquisitions. The Borrower will and will cause each
Subsidiary to provide environmental audits and tests as reasonably
requested by the Administrative Agent or the Lenders (or as otherwise
required to be obtained by the Administrative Agent or the Lenders by any
Governmental Authority) in connection with any future acquisitions of
material Oil and Gas Properties or other material Properties.
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Section 8.05 Further Assurances. The Borrower will and will cause each
Guarantor to cure promptly any defects in the creation and issuance of the Notes
and the execution and delivery of the Security Instruments and this Agreement.
The Borrower at its expense will and will cause each Guarantor to promptly
execute and deliver to the Administrative Agent upon request all such other
documents, agreements and instruments to comply with or accomplish the covenants
and agreements of the Borrower or any Guarantor, as the case may be, in the
Security Instruments and this Agreement, or to further evidence and more fully
describe the collateral intended as security for the Notes, or to correct any
omissions in the Security Instruments, or to state more fully the security
obligations set out herein or in any of the Security Instruments, or to perfect,
protect or preserve any Liens created pursuant to any of the Security
Instruments, or to make any recordings, to file any notices or obtain any
consents, all as may be necessary or appropriate in connection therewith.
Section 8.06 Performance of Obligations. The Borrower will pay the Notes
according to the reading, tenor and effect thereof; and the Borrower will and
will cause each Subsidiary to do and perform every act and discharge all of the
obligations to be performed and discharged by them under the Security
Instruments and this Agreement, at the time or times and in the manner
specified.
Section 8.07 Engineering Reports.
(a) Not less than 30 days prior to each Scheduled Redetermination
Date, commencing with the Scheduled Redetermination Date to occur on or
around August 1, 2004, the Borrower shall furnish to the Administrative
Agent and the Lenders a Reserve Report. The Reserve Report for the August
1, 2004 redetermination shall be for reserves attributable to the
Borrowing Base Properties as of June 30, 2004, and prepared by or under
the supervision of the chief engineer of the Borrower who shall certify
such Reserve Report to be true and accurate and to have been prepared in
all material respects in accordance with the procedures (other than
forecasted product prices) used in the Initial Reserve Report. The January
1 Reserve Report of each year shall be prepared by certified independent
petroleum engineers or other independent petroleum consultant(s)
acceptable to the Administrative Agent and the April 1 Reserve Report,
August 1 Reserve Report, and October 1 Reserve Report of each year, as
applicable, shall be prepared by or under the supervision of the chief
engineer of the Borrower who shall certify such Reserve Report to be true
and accurate and to have been prepared in all material respects in
accordance with the procedures (other than forecasted product prices) used
in the immediately proceeding January 1 Reserve Report.
(b) In the event of an unscheduled redetermination, the Borrower
shall furnish to the Administrative Agent and the Lenders a Reserve Report
prepared by or under the supervision of the chief engineer of the Borrower
who shall certify such Reserve Report to be true and accurate and to have
been prepared in all material respects in accordance with the procedures
(other than forecasted product prices) used in the immediately preceding
Reserve Report. For any unscheduled redetermination requested by the
Majority Lenders or the Borrower pursuant to Section 2.08(d)), the
Borrower shall provide such Reserve Report with an "as of" date as
required by the Majority Lenders as
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soon as possible, but in any event no later than 30 days following the
receipt of the request by the Administrative Agent.
(c) With the delivery of each Reserve Report, the Borrower shall
provide to the Administrative Agent and the Lenders, a certificate from a
Responsible Officer certifying that, to the best of his knowledge and in
all material respects: (i) the information contained in the Reserve Report
and any other information delivered in connection therewith is true and
correct, (ii) the Borrower owns good and defensible title to the Borrowing
Base Properties evaluated in such Reserve Report and such Properties are
free of all Liens except for Liens permitted by Section 9.02, (iii) except
as set forth on an exhibit to the certificate, on a net basis there are no
gas imbalances, take or pay or other prepayments with respect to its
Borrowing Base Properties evaluated in such Reserve Report which would
require the Borrower to deliver Hydrocarbons produced from such Borrowing
Base Properties at some future time without then or thereafter receiving
full payment therefor, (iv) none of its Borrowing Base Properties listed
in the immediately prior Reserve Report as having proved reserves have
been sold since the date of the last Borrowing Base determination except
as set forth on an exhibit to the certificate, which certificate shall
list all of such Borrowing Base Properties sold and in such detail as
reasonably required by the Administrative Agent, (v) attached to the
certificate is a list of all Persons disbursing proceeds to the Borrower
from its Mortgaged Oil and Gas Properties and (vi) except as set forth on
a schedule attached to the certificate all of the Borrowing Base
Properties evaluated by such Reserve Report are Mortgaged Oil and Gas
Properties.
Section 8.08 Title Information.
(a) Delivery. On or before the delivery to the Administrative Agent
and the Lenders of each Reserve Report required by Section 8.07(a), the
Borrower will deliver title information in form and substance acceptable
to the Administrative Agent covering enough of the Mortgaged Oil and Gas
Properties evaluated by such Reserve Report that were not included in the
immediately preceding Reserve Report, so that the Administrative Agent
shall have received together with title information previously delivered
to the Administrative Agent, satisfactory title information on at least
eighty percent (80%) of the value of the Mortgaged Oil and Gas Properties
evaluated by such Reserve Report.
(b) Cure of Title Defects. The Borrower shall cure any title defects
or exceptions which are not Excepted Liens raised by such information, or
substitute acceptable Oil and Gas Properties of an equivalent value, with
no title defects or exceptions except for Excepted Liens, within 60 days
after a request by the Administrative Agent or the Lenders to cure such
defects or exceptions.
(c) Failure to Cure Title Defects. If the Borrower is unable to cure
any title defect requested by the Administrative Agent or the Lenders to
be cured within the 60- day period or the Borrower does not comply with
the requirements to provide acceptable title information covering eighty
percent (80%) of the value of the Mortgaged Oil and Gas Properties
evaluated in the most recent Reserve Report and included in the
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determination of the then current Borrowing Base, such default shall not
be a Default or an Event of Default, but instead the Administrative Agent
and the Lenders shall have the right to exercise the following remedy in
their sole discretion from time to time, and any failure to so exercise
this remedy at any time shall not be a waiver as to future exercise of the
remedy by the Administrative Agent or the Lenders. To the extent that the
Administrative Agent or the Lenders are not satisfied with title to any
Mortgaged Oil and Gas Property after the time period in Section 8.08(b)
has elapsed, such unacceptable Mortgaged Oil and Gas Property shall not
count towards the eighty percent (80%) requirement, and the Administrative
Agent may send a notice to the Borrower and the Lenders that the then
outstanding Borrowing Base shall be reduced by an amount as determined by
all of the Lenders to cause the Borrower to be in compliance with the
requirement to provide acceptable title information on eighty percent
(80%) of the value of the Mortgaged Oil and Gas Properties included in the
determination of the Borrowing Base. This new Borrowing Base shall become
effective immediately after receipt of such notice.
Section 8.09 Collateral.
(a) Collateral. The Obligations shall be secured by a perfected
first priority Lien (subject only to Liens permitted under Section 9.02
entitled to priority under applicable law or under Section 9.02) granted
to the Administrative Agent for the benefit of the Beneficiaries in (i)
the Oil and Gas Properties of the Borrower and the Guarantors, whether now
owned or hereafter acquired, pursuant to the terms of the Security
Instruments to which they are parties, and which compose at least 90% of
the value of the Borrowing Base Properties described in the most recent
Reserve Report and (ii) all of the accounts receivable, inventory,
contract rights, all of the equity interests in all Subsidiaries of the
Borrower and each Guarantor organized in a state, province, or territory
of the United States of America and 65% of the equity interests in all
Subsidiaries of the Borrower and each Guarantor organized in a
jurisdiction other than a state, province or territory of the United
States pursuant to the terms of the Security Instruments to which they are
parties. Notwithstanding the foregoing, (i) none of the Borrower's or any
of its Subsidiary's ownership interest in and to Medusa Spar, LLC shall be
part of the collateral security for the Obligations and (ii) no additional
ownership interest acquired by the Borrower or any Subsidiary after the
Closing Date in and to the Entrada Field or related equipment, accounts
receivable, contracts, general intangibles or other assets (collectively,
the "Additional Entrada Assets") shall be collateral security for the
Obligations unless the Borrower has notified the Administrative Agent, in
writing, that it has elected to include such Additional Entrada Assets as
a portion of the Borrowing Base.
(b) Title Information. Subject to the provisions of Section 8.08,
concurrently with the granting of the Lien or other action referred to in
Section 8.09(a) above, the Borrower will provide to the Administrative
Agent title information in form and substance satisfactory to the
Administrative Agent in its sole discretion with respect to the Borrower's
interests in such Mortgaged Oil and Gas Properties.
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(c) Legal Opinions. Also, promptly after the filing of any new
Security Instrument in any state, upon the reasonable request of the
Administrative Agent, the Borrower will provide to the Administrative
Agent an opinion addressed to the Administrative Agent for the benefit of
the Lenders in form and substance satisfactory to the Administrative Agent
in its sole discretion from counsel acceptable to Administrative Agent,
stating that the Security Instrument is valid, binding and enforceable in
accordance with its terms in legally sufficient form for such
jurisdiction, and the means by which such Security Instrument will perfect
the Lien created thereby.
Section 8.10 ERISA Information and Compliance. The Borrower will promptly
furnish and will cause the Subsidiaries and any ERISA Affiliate to promptly
furnish to the Administrative Agent with sufficient copies to the Lenders (i)
promptly after the filing thereof with the United States Secretary of Labor, the
Internal Revenue Service or the PBGC, copies of each annual and other report
with respect to each Plan or any trust created thereunder, (ii) immediately upon
becoming aware of the occurrence of any ERISA Event or of any "prohibited
transaction," as described in section 406 of ERISA or in section 4975 of the
Code, in connection with any Plan or any trust created thereunder, a written
notice signed by a Responsible Officer specifying the nature thereof, what
action the Borrower, the Subsidiary or the ERISA Affiliate is taking or proposes
to take with respect thereto, and, when known, any action taken or proposed by
the Internal Revenue Service, the Department of Labor or the PBGC with respect
thereto, and (iii) immediately upon receipt thereof, copies of any notice of the
PBGC's intention to terminate or to have a trustee appointed to administer any
Plan. With respect to each Plan (other than a Multiemployer Plan), the Borrower
will, and will cause each Subsidiary and ERISA Affiliate to, (i) satisfy in full
and in a timely manner, without incurring any late payment or underpayment
charge or penalty and without giving rise to any lien, all of the contribution
and funding requirements of section 412 of the Code (determined without regard
to subsections (d), (e), (f) and (k) thereof) and of section 302 of ERISA
(determined without regard to sections 303, 304 and 306 of ERISA), and (ii) pay,
or cause to be paid, to the PBGC in a timely manner, without incurring any late
payment or underpayment charge or penalty, all premiums required pursuant to
sections 4006 and 4007 of ERISA.
Section 8.11 Inspection; Books and Records. Upon reasonable notice, the
Borrower will and will cause each Guarantor to permit the Administrative Agent
and any Lender or any of their respective agents or representatives thereof,
during normal business hours and subject to the terms of any applicable
confidentiality or non-disclosure agreements to which the Borrower or such
Guarantor may be bound, to (a) examine and make copies of and abstracts from the
records and books of account of, and visit and inspect at their reasonable
discretion the Properties of, the Borrower or such Guarantor, and (b) discuss
the affairs, finances and accounts of the Borrower or such Guarantor with any of
their respective officers or directors, all to the extent reasonably requested
by the Administrative Agent or such Lender, as the case may be. The Borrower
will and will cause each Guarantor to keep proper books of records and account
in which full, true and correct entries in conformity with GAAP and all
Governmental Requirements in all material respects shall be made of all dealings
and transactions in relation to its business and activities.
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ARTICLE IX
NEGATIVE COVENANTS
The Borrower covenants and agrees that, so long as any of the Commitments
are in effect and until payment in full of Loans hereunder, all interest thereon
and all other amounts payable by the Borrower hereunder, without the prior
written consent of the Majority Lenders:
Section 9.01 Debt. Neither the Borrower nor any Subsidiary will incur,
create, assume or permit to exist any Debt, except:
(a) the Notes or other Obligations or any guaranty of or suretyship
arrangement for the Notes or other Obligations;
(b) Debt of the Borrower and its Subsidiaries existing on the
Closing Date which is reflected in the Financial Statements or is
disclosed in Schedule 9.01, and any renewals or extensions (but not
increases) thereof;
(c) accounts payable (for the deferred purchase price of Property or
services) from time to time incurred in the ordinary course of business
which, if greater than 120 days past the invoice or billing date, are
being contested in good faith by appropriate proceedings, provided that
reserves adequate under GAAP shall have been established therefor;
(d) purchase money Debt and Debt under capital leases (as required
to be reported on the financial statements of the Borrower pursuant to
GAAP) in addition to any obligations that are Debt as permitted under
Section 9.05, not to exceed $5,000,000, provided, however, that the
obligations due under the Hanover Processing Agreement shall not be
considered capital lease obligations for purposes of the limitation on
capital leases contained in this Section 9.01(d);
(e) Debt in addition to any Debt not otherwise permitted this
Section 9.01 that is unsecured and not to exceed $5,000,000 in the
aggregate outstanding at one time;
(f) Subordinated Debt (including any increases of Existing Other
Debt in connection with any refinancings thereof or otherwise) in an
amount not to exceed $20,000,000 in the aggregate outstanding at any one
time and with final maturity after July 31, 2007 and no sinking fund
payments, scheduled principal payments, or mandatory redemption
obligations on or prior to July 31, 2007;
(g) Existing Other Debt and any refinancings, renewals or extensions
(but not increases except as provided in Section 9.01(f)) of such
Subordinated Debt, provided that any such refinancing provides for a final
maturity after September 30, 2004 (or July 31, 2004, for the portion of
the 2002 Subordinated Notes being extended and renewed as described in
Section 6.01(l)), and no sinking fund payments, scheduled principal
payments, or mandatory redemption obligations on or prior to September 30,
2004, (or July 31, 2004, for the portion of the 2002 Subordinated Notes
being extended and
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renewed as described in Section 6.01(l)) and is otherwise pursuant to
terms and conditions satisfactory to the Majority Lenders;
(h) Debt associated with bonds or surety obligations required by
Governmental Requirements in connection with the operation of the Oil and
Gas Properties of the Borrower and its Subsidiaries;
(i) Hedging Agreements covering (A) oil and gas production of proved
developed producing Oil and Gas Properties of the Borrower or any
Guarantor; provided, however, that such Hedging Agreements related to oil
or gas production shall not, either individually or in the aggregate,
cover more than ninety percent (90%) of estimated production of oil or gas
of the Borrower and the Guarantors for each individual period covered by
the Hedging Agreements and (B) fluctuations in interest rates for notional
principal amounts not to exceed at any time outstanding 80% of the Debt
for borrowed money of the Borrower and its Consolidated Subsidiaries; and
(j) Debt arising out of the Deferred Compensation Plan to the extent
such Debt can be satisfied out of the investments permitted by Section
9.03(k) and the proceeds thereof.
Section 9.02 Liens. Neither the Borrower nor any Subsidiary will create,
incur, assume or permit to exist any Lien on any of its Properties (now owned or
hereafter acquired except for the Additional Entrada Assets), except:
(a) Liens securing the payment of any Obligations (provided that any
Lien securing any of the Obligations must secure all of the Obligations);
(b) Excepted Liens;
(c) Liens securing leases allowed under Section 9.01(d), but only on
the Property under lease;
(d) Liens disclosed on Schedule 9.02;
(e) Liens on cash or securities of the Borrower or any Subsidiary
securing the Debt described in Section 9.01(h) and 9.01(i); provided,
however that the aggregate amount of cash or securities which may secure
Debt described in Section 9.01(i) shall not exceed (i) from the Closing
Date until July 31, 2004, $10,000,000 and (ii) $7,500,000 thereafter; and
(f) other Liens securing Debt permitted under Section 9.01 not
exceeding $5,000,000 in the aggregate at any time.
Section 9.03 Investments, Loans and Advances. Neither the Borrower nor any
Guarantor will make or permit to remain outstanding any loans or advances to or
investments in any Person, except that the foregoing restriction shall not apply
to:
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(a) investments, loans or advances reflected in the Financial
Statements or which are disclosed to the Lenders in Schedule 9.03;
(b) accounts receivable arising in the ordinary course of business;
(c) direct obligations of the United States or any agency thereof,
or obligations guaranteed by the United States or any agency thereof, in
each case maturing within one year from the date of creation thereof;
(d) commercial paper maturing within one year from the date of
creation thereof rated in one of the two highest grades by Standard &
Poor's Corporation or ▇▇▇▇▇'▇ Investors Service, Inc.;
(e) deposits maturing within one year from the date of creation
thereof with, including certificates of deposit issued by, any Lender or
any office located in the United States of any other bank or trust company
which is organized under the laws of the United States or any state
thereof, has capital, surplus and undivided profits aggregating at least
$500,000,000 (as of the date of such Lender's or bank or trust company's
most recent financial reports) and has a short term deposit rating of no
lower than A2 or P2, as such rating is set forth from time to time, by
Standard & Poor's Corporation or ▇▇▇▇▇'▇ Investors Service, Inc.,
respectively;
(f) deposits in money market funds investing exclusively in
investments described in Section 9.03(c), 9.03(d) or 9.03(e);
(g) investments, loans or advances made by the Borrower in or to the
Guarantors or by any Guarantor in or to Borrower or another Guarantor;
(h) investments by the Borrower in direct ownership interests in
additional Oil and Gas Properties and gas gathering systems related
thereto, and investments, loans or advances in connection with or related
to farm out agreements, farm in agreements, joint operating agreements,
joint venture or area of mutual interest agreements, processing
facilities, seismic acquisition and evaluation, pipelines or other similar
or customary arrangements made in the ordinary course of business only
insofar as they do not (i) reduce the net revenue interest of the Borrower
or any Guarantor in any Borrowing Base Property for which value was given
in the most recent Borrowing Base redetermination below the undivided net
revenue interest specified for the Borrower or such Guarantor in the most
recent Reserve Report utilized by the Administrative Agent and the Lenders
in determining the then effective Borrowing Base and/or (ii) increase the
undivided working interest in any such Borrowing Base Property without a
corresponding increase in the net revenue interest specified for the
Borrower or such Guarantor in the most recent Reserve Report utilized by
the Administrative Agent and the Lenders in determining the then effective
Borrowing Base;
(i) loans or advances to employees of the Borrower and the
Guarantors in the ordinary course of business not to exceed an amount
equal to $1,000,000 in the aggregate at any time outstanding;
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(j) other investments, loans or advances not to exceed, in the
aggregate at any time outstanding, an amount equal to $10,000,000; and
(k) investments made pursuant to the Deferred Compensation Plan.
Section 9.04 Dividends, Distributions and Redemptions. The Borrower will
not declare or pay any dividend, purchase, redeem or otherwise acquire for value
any of its stock now or hereafter outstanding, return any capital to its
stockholders or make any distribution of its assets to its stockholders, except
that, if no Default exists or would result therefrom, the Borrower may (i) pay
dividends on preferred stock issued and outstanding prior to June 1, 2004, (ii)
redeem preferred stock with the proceeds of or in connection with the issuance
of equity securities, and (iii) pay stock dividends only in common stock of the
Borrower.
Section 9.05 Sales and Leasebacks. Neither the Borrower nor any Subsidiary
will enter into any arrangement, directly or indirectly, with any Person whereby
the Borrower or any Subsidiary shall sell or transfer any of its Borrowing Base
Property with respect to Borrowing Base Property having a value, in the
aggregate at any time outstanding, in excess of $5,000,000, whether now owned or
hereafter acquired, and whereby the Borrower or any Subsidiary shall then or
thereafter rent or lease as lessee such Borrowing Base Property or any part
thereof or other Borrowing Base Property which the Borrower or any Subsidiary
intends to use for substantially the same purpose or purposes as the Borrowing
Base Property sold or transferred; provided, however, that the sale of Property
undertaken pursuant to the Hanover Sales Documents shall not be deemed to be a
sale and leaseback for purposes of the limitations on sales and leasebacks of
Property contained in this Section 9.05.
Section 9.06 Nature of Business. Neither the Borrower nor any Subsidiary
will allow any material change to be made in the character of its business as an
independent oil and gas exploration and production company.
Section 9.07 [Intentionally omitted].
Section 9.08 Mergers, Etc. Neither the Borrower nor any Subsidiary will
merge into or with or consolidate with any other Person, or sell, lease or
otherwise dispose of (whether in one transaction or in a series of transactions)
all or substantially all of its Property or assets to any other Person, except
that, provided no Default or Change of Control exists or would result therefrom,
(i) any Subsidiary may merge into, or transfer all or substantially all of its
Property or assets to, the Borrower (provided the Borrower is the surviving
entity) or with any other Guarantor and (ii) the Borrower or any Subsidiary may
merge with, or transfer all or substantially all of its Property or assets to,
another Person if the Borrower or such Subsidiary is the surviving entity. The
Borrower shall provide the Administrative Agent with at least 30 days prior
written notice of any merger or consolidation permitted by this Section 9.08.
Section 9.09 Proceeds of Notes; Letters of Credit. The Borrower will not
permit the proceeds of the Notes or Letters of Credit to be used for any purpose
other than those permitted by Section 7.07. Neither the Borrower nor any Person
acting on behalf of the Borrower has taken or will take any action which might
cause any of the Loan Documents to violate Regulation T, U or X or any other
regulation of the Board of Governors of the Federal Reserve
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System or to violate Section 7 of the Securities Exchange Act of 1934 or any
rule or regulation thereunder, in each case as now in effect or as the same may
hereinafter be in effect.
Section 9.10 ERISA Compliance. The Borrower will not at any time:
(a) Engage in, or permit any Subsidiary or ERISA Affiliate to engage
in, any transaction in connection with which the Borrower, any Subsidiary
or any ERISA Affiliate could be subjected to either a civil penalty
assessed pursuant to section 502(c), (i) or (l) of ERISA or a tax imposed
by Chapter 43 of Subtitle D of the Code;
(b) Terminate, or permit any Subsidiary or ERISA Affiliate to
terminate, any Plan in a manner, or take any other action with respect to
any Plan, which could result in any material liability to the Borrower,
any Subsidiary or any ERISA Affiliate to the PBGC;
(c) Fail to make, or permit any Subsidiary or ERISA Affiliate to
fail to make, full payment when due of all amounts which, under the
provisions of any Plan, agreement relating thereto or applicable law, the
Borrower, a Subsidiary or any ERISA Affiliate is required to pay as
contributions thereto;
(d) Permit to exist, or allow any Subsidiary or ERISA Affiliate to
permit to exist, any accumulated funding deficiency within the meaning of
Section 302 of ERISA or section 412 of the Code, whether or not waived,
with respect to any Plan;
(e) Permit, or allow any Subsidiary or ERISA Affiliate to permit,
the actuarial present value of the benefit liabilities under any Plan
maintained by the Borrower, any Subsidiary or any ERISA Affiliate which is
regulated under Title IV of ERISA to exceed the current value of the
assets (computed on a plan termination basis in accordance with Title IV
of ERISA) of such Plan allocable to such benefit liabilities. The term
"actuarial present value of the benefit liabilities" shall have the
meaning specified in section 4041 of ERISA;
(f) Contribute to or assume an obligation to contribute to, or
permit any Subsidiary or ERISA Affiliate to contribute to or assume an
obligation to contribute to, any Multiemployer Plan;
(g) Acquire, or permit any Subsidiary or ERISA Affiliate to acquire,
an interest in any Person that causes such Person to become an ERISA
Affiliate with respect to the Borrower, any Subsidiary or any ERISA
Affiliate if such Person sponsors, maintains or contributes to, or at any
time in the six year period preceding such acquisition has sponsored,
maintained, or contributed to, (1) any Multiemployer Plan, or (2) any
other Plan that is subject to Title IV of ERISA under which the actuarial
present value of the benefit liabilities under such Plan exceeds the
current value of the assets (computed on a plan termination basis in
accordance with Title IV of ERISA) of such Plan allocable to such benefit
liabilities;
(h) Incur, or permit any Subsidiary or ERISA Affiliate to incur, a
liability to or on account of a Plan under sections 515, 4062, 4063, 4064,
4201 or 4204 of ERISA;
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(i) Contribute to or assume an obligation to contribute to, or
permit any Subsidiary or ERISA Affiliate to contribute to or assume an
obligation to contribute to, any employee welfare benefit plan, as defined
in section 3(1) of ERISA, including, without limitation, any such plan
maintained to provide benefits to former employees of such entities, that
may not be terminated by such entities in their sole discretion at any
time without any material liability; or
(j) Amend or permit any Subsidiary or ERISA Affiliate to amend, a
Plan resulting in an increase in current liability such that the Borrower,
any Subsidiary or any ERISA Affiliate is required to provide security to
such Plan under section 401(a)(29) of the Code.
Section 9.11 [Intentionally omitted].
Section 9.12 Current Ratio. The Borrower will not permit its ratio of (a)
consolidated current assets, plus the amount equal to the difference between (i)
the Borrowing Base and (ii) the sum of all Loans outstanding, plus LC Exposure
to (b) consolidated current liabilities (excluding current maturities of long
term debt (determined in accordance with GAAP)) to be less than 1.0 to 1.0 at
any time. For purposes of this Section 9.12, "consolidated current assets" shall
mean assets which would, in accordance with GAAP, be included as current assets
on a consolidated balance sheet of the Borrower and its Consolidated
Subsidiaries and "consolidated current liabilities" shall mean liabilities which
would, in accordance with GAAP, be included as current liabilities on a
consolidated balance sheet of the Borrower and its Consolidated Subsidiaries.
?Notwithstanding the foregoing, consolidated current liabilities shall be
determined excluding recognized but unrealized gains and/or losses attributable
to commodity or interest rate derivative instruments determined under the
provisions of Financial Accounting Standards Board Statements ("FASB") 133 or
143, as the same may be further amended, modified or clarified by the FASB.
Section 9.13 Fixed Charge Coverage Ratio. The Borrower will not permit its
Fixed Charge Coverage Ratio as of the end of any fiscal quarter of the Borrower
(calculated quarterly at the end of each fiscal quarter, commencing June 30,
2004) to be less than 2.50 to 1.00. For purposes of this Section 9.13, "Fixed
Charge Coverage Ratio" shall mean the ratio of (a) EBITDA for the immediately
preceding four fiscal quarters of the Borrower and its Consolidated Subsidiaries
to (b) the sum of cash interest expense, capital lease obligations, required
payments of principal on Debt (excluding, however, any principal due upon the
final maturity date for such Debt), and preferred dividends paid in cash by the
Borrower and its Consolidated Subsidiaries during such four fiscal quarters.
Notwithstanding the foregoing, the Fixed Charge Coverage Ratio (i) for the
fiscal quarter ending June 30, 2004, shall be calculated for the two fiscal
quarters ended on such date, and (ii) for the fiscal quarter ending September
30, 2004, shall be calculated for the three fiscal quarters ending on such date.
Section 9.14 Leverage Ratio. The Borrower will not permit its Leverage
Ratio as of the end of any fiscal quarter of the Borrower (calculated quarterly
at the end of each fiscal quarter, commencing June 30, 2004) to be greater than
4.00 to 1.00. For the purposes of this Section 9.14, "Leverage Ratio" shall mean
the ratio of (a) Funded Debt for the Borrower and its Subsidiaries on a
Consolidated basis as of the end of such fiscal quarter to (b) EBITDA for the
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immediately preceding four fiscal quarters of the Borrower and its Consolidated
Subsidiaries then ended. Notwithstanding the foregoing, the Leverage Ratio (i)
for the fiscal quarter ending June 30, 2004, shall be calculated using the
EBITDA for the two fiscal quarters ending on such date multiplied by two, and
(ii) for the fiscal quarter ending September 30, 2004, shall be calculated using
the EBITDA for the three fiscal quarters ending on such date multiplied by 4/3.
Section 9.15 Sale of Oil and Gas Properties. The Borrower will not, and
will not permit any Guarantor to, sell, assign, farm-out, convey or otherwise
transfer any Borrowing Base Property or any interest in any Borrowing Base
Property (a "Transfer") except for (a) the sale of Hydrocarbons in the ordinary
course of business; (b) farmouts of undeveloped acreage and assignments in
connection with such farmouts; (c) the sale or transfer of equipment that is no
longer necessary for the business of the Borrower or such Guarantor or is
contemporaneously replaced by equipment of at least comparable value and use and
(d) during any consecutive 12 month period, sales in the ordinary course of
business of Borrowing Base Properties which shall not exceed 15% of the then
current Borrowing Base; provided, however, that upon any such Transfer of
Borrowing Base Properties the Lenders may reduce the Borrowing Base by an amount
equal to 100% of the loan value of such Collateral and if a Borrowing Base
Deficiency results therefrom, the Borrower shall concurrently, with completing
such Transfer, made a prepayment of the outstanding principal amount of the
Loans sufficient to eliminate such Borrowing Base Deficiency.
Section 9.16 Environmental Matters. Neither the Borrower nor any
Subsidiary will cause or permit any of its Property to be in violation of, or do
anything or permit anything to be done which will subject any such Property to
any remedial obligations under any Environmental Laws, assuming disclosure to
the applicable Governmental Authority of all relevant facts, conditions and
circumstances, if any, pertaining to such Property where such violations or
remedial obligations would have a Material Adverse Effect.
Section 9.17 Transactions with Affiliates. Neither the Borrower nor any
Subsidiary will 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 the Borrower or a Guarantor) unless such
transactions are otherwise permitted under this Agreement, are in the ordinary
course of its business and are upon fair and reasonable terms no less favorable
to it than it would obtain in a comparable arm's length transaction with a
Person not an Affiliate.
Section 9.18 Subsidiaries. The Borrower shall not and shall not permit any
Subsidiary to sell or to issue any stock or ownership interest of a Subsidiary
unless such sale or issuance would be in compliance with Section 9.03 and the
other terms and provisions of this Agreement.
Section 9.19 Negative Pledge Agreements. Except for provisions in Existing
Other Debt documents, neither the Borrower nor any Guarantor will create, incur,
assume or permit to exist any contract, agreement or understanding (other than
this Agreement and the Security Instruments, and the agreements and instruments
creating Liens otherwise permitted under Section 9.02 with respect to the
Property covered by such Liens only) which in any way prohibits or restricts the
granting, conveying, creation or imposition of any Lien on any of its Property
or restricts any Guarantor from paying dividends to the Borrower, or which
requires the consent of or notice to other Persons in connection therewith.
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Section 9.20 Gas Imbalances, Take-or-Pay or Other Prepayments. The
Borrower will not allow gas imbalances, take-or-pay or other prepayments with
respect to the Oil and Gas Properties of the Borrower or any Guarantor which
would require the Borrower or any Guarantor to deliver in the aggregate five
percent (5%) or more of their Hydrocarbons produced on a quarterly basis from
such Oil and Gas Properties at some future time without then or thereafter
receiving full payment therefor.
Section 9.21 Subordinated Debt. Except with respect to the 2005
Subordinated Notes, neither the Borrower nor any Guarantor shall make any
voluntary prepayment in respect of any Subordinated Debt or the Existing Other
Debt, nor will they make any other payment thereon that would not be allowed
under the subordination provisions of any Subordinated Debt or the Existing
Other Debt. The Borrower will not amend, supplement or otherwise modify any
instruments evidencing, or agreements relating to or executed in connection
with, any Existing Other Debt, in any manner which would have the effect of (a)
accelerating the timing or amount of any scheduled payments of principal or
interest thereon, (b) increasing the rate of interest payable thereon or (c)
resulting in a Material Adverse Effect.
Section 9.22 Hanover Agreements. Without the prior written consent of the
Lenders, the Borrower will not, and will not permit any Subsidiary to, amend,
supplement, restate or otherwise modify the Hanover Processing Agreement, the
Hanover Sales Documents or any other document executed in connection therewith
that could adversely affect in any material respect the Lenders and their rights
and remedies under any Loan Document.
Section 9.23 Permitted Medusa Transactions. Notwithstanding anything in
this Agreement or any other Loan Document to the contrary, so long as no Default
or Event of Default has occurred and is continuing at the time Borrower or any
of its Subsidiaries enters into any Permitted Medusa Transaction, the entering
into and carrying out of such Permitted Medusa Transaction shall be allowed
hereunder and shall not in itself constitute a breach of, non-compliance with,
or Default or Event of Default under this Agreement or any other Loan Document.
ARTICLE X
EVENTS OF DEFAULT; REMEDIES
Section 10.01 Events of Default. One or more of the following events shall
constitute an "Event of Default":
(a) the Borrower shall default in the payment or prepayment when due
of any principal of or interest on any Loan, or any reimbursement
obligation for a disbursement made under any Letter of Credit, or any fees
or other amount payable by it hereunder or under any Security Instrument
and such default, other than a default of a payment or prepayment of
principal (which shall have no cure period), shall continue unremedied for
a period of three Business Days; or
(b) the Borrower or any Subsidiary shall default in the payment when
due of any principal of or interest on any of its other Debt aggregating
$2,500,000 or more, or
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any event specified in any note, agreement, indenture or other document
evidencing or relating to any such Debt shall occur if the effect of such
event is to cause, or (with the giving of any notice or the lapse of time
or both) to permit the holder or holders of such Debt (or a trustee or
agent on behalf of such holder or holders) to cause, such Debt to become
due prior to its stated maturity; or
(c) any representation, warranty or certification made or deemed
made herein or in any Security Instrument by the Borrower or any
Subsidiary, or any certificate furnished to any Lender or the
Administrative Agent pursuant to the provisions hereof or any Security
Instrument, shall prove to have been false or misleading as of the time
made or furnished in any material respect; or
(d) the Borrower shall default in the performance of any of its
obligations under Article IX, Section 8.01(c) or any other Article of this
Agreement other than under Article VIII (excluding Section 8.01(c)); or
the Borrower shall default in the performance of any of its obligations
under Article VIII or any Security Instrument (other than the payment of
amounts due which shall be governed by Section 10.01(a)) and such default
shall continue unremedied for a period of thirty (30) days after the
earlier to occur of (i) notice thereof to the Borrower by the
Administrative Agent or any Lender (through the Administrative Agent), or
(ii) the Borrower otherwise becoming aware of such default; or
(e) the Borrower shall admit in writing its inability to, or be
generally unable to, pay its debts as such debts become due; or
(f) the Borrower shall (i) apply for or consent to the appointment
of, or the taking of possession by, a receiver, custodian, trustee or
liquidator of itself or of all or a substantial part of its property, (ii)
make a general assignment for the benefit of its creditors, (iii) commence
a voluntary case under the Federal Bankruptcy Code (as now or hereafter in
effect), (iv) file a petition seeking to take advantage of any other law
relating to bankruptcy, insolvency, reorganization, winding-up,
liquidation or composition or readjustment of debts, (v) fail to
controvert in a timely and appropriate manner, or acquiesce in writing to,
any petition filed against it in an involuntary case under the Federal
Bankruptcy Code, or (vi) take any corporate action for the purpose of
effecting any of the foregoing; or
(g) a proceeding or case shall be commenced, without the application
or consent of the Borrower, in any court of competent jurisdiction,
seeking (i) its liquidation, reorganization, dissolution or winding-up, or
the composition or readjustment of its debts, (ii) the appointment of a
trustee, receiver, custodian, liquidator or the like of the Borrower of
all or any substantial part of its assets, or (iii) similar relief in
respect of the Borrower under any law relating to bankruptcy, insolvency,
reorganization, winding-up, or composition or adjustment of debts, and
such proceeding or case shall continue undismissed, or an order, judgment
or decree approving or ordering any of the foregoing shall be entered and
continue unstayed and in effect, for a period of 60 days; or (iv) an order
for relief against the Borrower shall be entered in an involuntary case
under the Federal Bankruptcy Code; or
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(h) a judgment or judgments for the payment of money in excess of
$5,000,000 in the aggregate shall be rendered by a court against the
Borrower or any Subsidiary and the same shall not be discharged (or
provision shall not be made for such discharge), or a stay of execution
thereof shall not be procured, within thirty (30) days from the date of
entry thereof and the Borrower or such Subsidiary shall not, within said
period of 30 days, or such longer period during which execution of the
same shall have been stayed, appeal therefrom and cause the execution
thereof to be stayed during such appeal; or
(i) the Security Instruments after delivery thereof shall for any
reason, except to the extent permitted by the terms thereof, cease to be
in full force and effect and valid, binding and enforceable in accordance
with their terms, or cease to create a valid and perfected Lien of the
priority required thereby on any of the collateral purported to be covered
thereby, except to the extent permitted by the terms of this Agreement, or
the Borrower shall so state in writing; or
(j) a Change of Control occurs; or
(k) Any Guarantor takes, suffers or permits to exist any of the
events or conditions referred to in paragraphs (e), (f), (g) or (h) or if
any provision of any guaranty agreement related thereto shall for any
reason cease to be valid and binding on such Guarantor or if such
Guarantor shall so state in writing; or
(l) an Event of Default (as defined thereunder) shall occur under
the Hanover Processing Agreement or Hanover Sales Documents.
Section 10.02 Remedies.
(a) In the case of an Event of Default other than one referred to in
clauses (e), (f) or (g) of Section 10.01 or in clause (k) to the extent it
relates to clauses (e), (f) or (g), the Administrative Agent, upon request
of the Majority Lenders, shall, by notice to the Borrower, cancel the
Commitments (in whole or part) and/or declare the principal amount then
outstanding of, and the accrued interest on all (but not less than all)
of, the Loans and all other amounts payable by the Borrower hereunder and
under the Notes (including without limitation the payment of cash
collateral to secure the LC Exposure as provided in Section 2.10(b)) to be
forthwith due and payable, whereupon such amounts shall be immediately due
and payable without presentment, demand, protest, notice of intent to
accelerate, notice of acceleration or other formalities of any kind, all
of which are hereby expressly waived by the Borrower.
(b) In the case of the occurrence of an Event of Default referred to
in clauses (e), (f) or (g) of Section 10.01 or in clause (k) to the extent
it relates to clauses (e), (f) or (g), the Commitments shall be
automatically canceled and the principal amount then outstanding of, and
the accrued interest on, the Loans and all other amounts payable by the
Borrower hereunder and under the Notes (including without limitation the
payment of cash collateral to secure the LC Exposure as provided in
Section 2.10(b)) shall become automatically immediately due and payable
without presentment, demand, protest, notice
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of intent to accelerate, notice of acceleration or other formalities of
any kind, all of which are hereby expressly waived by the Borrower.
(c) In the case of an acceleration of the Loans pursuant to the
foregoing clause (a) or (b) of this Section 10.02, or if the Borrower
defaults in the full and complete payment of all of the Loans or other
Obligations due on the Revolving Credit Termination Date, then the
Administrative Agent, upon request of the Majority Lenders, shall take
reasonable actions to liquidate the Collateral.
(d) All proceeds received after maturity of the Notes, whether by
acceleration or otherwise shall be applied as provided in Section 3.03.
ARTICLE XI
THE ADMINISTRATIVE AGENT
Section 11.01 Appointment, Powers and Immunities. Each Lender hereby
irrevocably appoints and authorizes the Administrative Agent to act as its agent
hereunder and under the Security Instruments with such powers as are
specifically delegated to the Administrative Agent by the terms of this
Agreement and the Security Instruments, together with such other powers as are
reasonably incidental thereto. The Administrative Agent (which term as used in
this sentence and in Section 11.05 and the first sentence of Section 11.06 shall
include reference to its Affiliates and its and its Affiliates' officers,
directors, employees, attorneys, accountants, experts and agents): (i) shall
have no duties or responsibilities except those expressly set forth in the Loan
Documents, and shall not by reason of the Loan Documents be a trustee or
fiduciary for any Lender; (ii) makes no representation or warranty to any Lender
and shall not be responsible to the Lenders for any recitals, statements,
representations or warranties contained in this Agreement, or in any certificate
or other document referred to or provided for in, or received by any of them
under, this Agreement, or for the value, validity, effectiveness, genuineness,
execution, effectiveness, legality, enforceability or sufficiency of this
Agreement, any Note or any other document referred to or provided for herein or
for any failure by the Borrower or any other Person (other than the
Administrative Agent) to perform any of its obligations hereunder or thereunder
or for the existence, value, perfection or priority of any collateral security
or the financial or other condition of the Borrower, its Subsidiaries or any
other obligor or guarantor; (iii) except pursuant to Section 11.07 shall not be
required to initiate or conduct any litigation or collection proceedings
hereunder; and (iv) shall not be responsible for any action taken or omitted to
be taken by it hereunder or under any other document or instrument referred to
or provided for herein or in connection herewith including its own ordinary
negligence, except for its own gross negligence or willful misconduct. The
Administrative Agent may employ agents, accountants, attorneys and experts and
shall not be responsible for the negligence or misconduct of any such agents,
accountants, attorneys or experts selected by it in good faith or any action
taken or omitted to be taken in good faith by it in accordance with the advice
of such agents, accountants, attorneys or experts. The Administrative Agent may
deem and treat the payee of any Note as the holder thereof for all purposes
hereof unless and until a written notice of the assignment or transfer thereof
permitted hereunder shall have been filed with the Administrative Agent. The
Administrative Agent is authorized to release any collateral that is permitted
to be sold or released pursuant to the terms of the Loan Documents.
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Section 11.02 Reliance by Administrative Agent. The Administrative Agent
shall be entitled to rely upon any certification, notice or other communication
(including any thereof by telephone, telex, telecopier, telegram or cable)
believed by it to be genuine and correct and to have been signed or sent by or
on behalf of the proper Person or Persons, and upon advice and statements of
legal counsel, independent accountants and other experts selected by the
Administrative Agent.
Section 11.03 Defaults. The Administrative Agent shall not be deemed to
have knowledge of the occurrence of a Default (other than the non payment of
principal of or interest on Loans or of fees or failure to reimburse for Letter
of Credit drawings) unless the Administrative Agent has received notice from a
Lender or the Borrower specifying such Default and stating that such notice is a
"Notice of Default." In the event that the Administrative Agent receives such a
notice of the occurrence of a Default, the Administrative Agent shall give
prompt notice thereof to the Lenders. In the event of a payment Default, the
Administrative Agent shall give each Lender prompt notice of each such payment
Default.
Section 11.04 Rights as a Lender. With respect to its Commitments and the
Loans made by it and its participation in the issuance of Letters of Credit,
UBOC (and any successor acting as Administrative Agent) in its capacity as a
Lender hereunder shall have the same rights and powers hereunder as any other
Lender and may exercise the same as though it were not acting as the
Administrative Agent, and the term "Lender" or "Lenders" shall, unless the
context otherwise indicates, include the Administrative Agent in its individual
capacity. UBOC (and any successor acting as Administrative Agent) and its
Affiliates may (without having to account therefor to any Lender) accept
deposits from, lend money to and generally engage in any kind of banking, trust
or other business with the Borrower (and any of its Affiliates) as if it were
not acting as the Administrative Agent, and UBOC and its Affiliates may accept
fees and other consideration from the Borrower for services in connection with
this Agreement or otherwise without having to account for the same to the
Lenders.
SECTION 11.05 INDEMNIFICATION. THE LENDERS AGREE TO INDEMNIFY THE
ADMINISTRATIVE AGENT AND THE ISSUING BANK RATABLY IN ACCORDANCE WITH THEIR
PERCENTAGE SHARES FOR THE INDEMNITY MATTERS AS DESCRIBED IN SECTION 12.03 TO THE
EXTENT NOT INDEMNIFIED OR REIMBURSED BY THE BORROWER UNDER SECTION 12.03, BUT
WITHOUT LIMITING THE OBLIGATIONS OF THE BORROWER UNDER SAID SECTION 12.03 AND
FOR ANY AND ALL OTHER LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES,
ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES OR DISBURSEMENTS OF ANY KIND AND
NATURE WHATSOEVER WHICH MAY BE IMPOSED ON, INCURRED BY OR ASSERTED AGAINST THE
ADMINISTRATIVE AGENT OR THE ISSUING BANK IN ANY WAY RELATING TO OR ARISING OUT
OF: (I) THIS AGREEMENT, THE SECURITY INSTRUMENTS OR ANY OTHER DOCUMENTS
CONTEMPLATED BY OR REFERRED TO HEREIN OR THE TRANSACTIONS CONTEMPLATED HEREBY,
BUT EXCLUDING, UNLESS A DEFAULT HAS OCCURRED AND IS CONTINUING, NORMAL
ADMINISTRATIVE COSTS AND EXPENSES INCIDENT TO THE PERFORMANCE OF ITS AGENCY
DUTIES HEREUNDER OR (II) THE ENFORCEMENT OF ANY OF THE TERMS OF THIS AGREEMENT,
ANY SECURITY INSTRUMENT OR OF ANY SUCH OTHER DOCUMENTS; WHETHER OR NOT ANY OF
THE FOREGOING SPECIFIED IN THIS SECTION 11.05 ARISES FROM THE SOLE OR CONCURRENT
NEGLIGENCE OF THE ADMINISTRATIVE AGENT OR THE ISSUING BANK, PROVIDED THAT NO
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LENDER SHALL BE LIABLE FOR ANY OF THE FOREGOING TO THE EXTENT THEY ARISE FROM
THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE ADMINISTRATIVE AGENT.
Section 11.06 Non-Reliance on Administrative Agent and other Lenders. Each
Lender acknowledges and agrees that it has, independently and without reliance
on the Administrative Agent or any other Lender, and based on such documents and
information as it has deemed appropriate, made its own credit analysis of the
Borrower and its decision to enter into this Agreement, and 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 analysis and decisions in taking or not
taking action under this Agreement. The Administrative Agent shall not be
required to keep itself informed as to the performance or observance by the
Borrower of this Agreement, the Notes, the Security Instruments or any other
document referred to or provided for herein or to inspect the properties or
books of the Borrower. Except for notices, reports and other documents and
information 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 affairs, financial condition or business of the Borrower (or any
of its Affiliates) which may come into the possession of the Administrative
Agent or any of its Affiliates. In this regard, each Lender acknowledges that
▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, L.L.P. is acting in this transaction as special counsel
to the Administrative Agent only, except to the extent otherwise expressly
stated in any legal opinion or any Loan Document. Each Lender will consult with
its own legal counsel to the extent that it deems necessary in connection with
the Loan Documents and the matters contemplated therein.
Section 11.07 Action by Administrative Agent. Except for action or other
matters expressly required of the Administrative Agent hereunder, the
Administrative Agent shall in all cases be fully justified in failing or
refusing to act hereunder unless it shall (i) receive written instructions from
the Majority Lenders (or all of the Lenders as expressly required by Section
12.04) specifying the action to be taken, and (ii) be indemnified to its
satisfaction by the Lenders against any and all liability and expenses which may
be incurred by it by reason of taking or continuing to take any such action. The
instructions of the Majority Lenders (or all of the Lenders as expressly
required by Section 12.04) and any action taken or failure to act pursuant
thereto by the Administrative Agent shall be binding on all of the Lenders. If a
Default has occurred and is continuing, the Administrative Agent shall take such
action with respect to such Default as shall be directed by the Majority Lenders
(or all of the Lenders as required by Section 12.04) in the written instructions
(with indemnities) described in this Section 11.07, 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 as it shall deem
advisable in the best interests of the Lenders. In no event, however, shall the
Administrative Agent be required to take any action which exposes the
Administrative Agent to personal liability or which is contrary to this
Agreement and the Loan Documents or applicable law.
Section 11.08 Resignation or Removal of Administrative Agent. Subject to
the appointment and acceptance of a successor Administrative Agent as provided
below, the Administrative Agent may resign at any time by giving notice thereof
to the Lenders and the Borrower, and the Administrative Agent may be removed at
any time with or without cause by
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the Majority Lenders. Upon any such resignation or removal, the Majority Lenders
shall have the right to appoint a successor Administrative Agent with the
consent of the Borrower (such consent not to be unreasonably withheld). If no
successor Administrative Agent shall have been so appointed by the Majority
Lenders and shall have accepted such appointment within thirty (30) days after
the retiring Administrative Agent's giving of notice of resignation or the
Majority Lenders' removal of the retiring Administrative Agent, then the
retiring Administrative Agent may, on behalf of the Lenders, appoint a successor
Administrative Agent with the consent of the Borrower (such consent not to be
unreasonably withheld). Upon the acceptance of such appointment hereunder by a
successor Administrative Agent, such successor Administrative Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Administrative Agent, and the retiring Administrative
Agent shall be discharged from its duties and obligations hereunder. After any
retiring Administrative Agent's resignation or removal hereunder as
Administrative Agent, the provisions of this Article XI and Section 12.03 shall
continue in effect for its benefit in respect of any actions taken or omitted to
be taken by it while it was acting as the Administrative Agent.
ARTICLE XII
MISCELLANEOUS
Section 12.01 Waiver. No failure on the part of the Administrative Agent
or any Lender to exercise and no delay in exercising, and no course of dealing
with respect to, any right, power or privilege under any of the Loan Documents
shall operate as a waiver thereof, nor shall any single or partial exercise of
any right, power or privilege under any of the Loan Documents preclude any other
or further exercise thereof or the exercise of any other right, power or
privilege. The remedies provided herein are cumulative and not exclusive of any
remedies provided by law.
Section 12.02 Notices. All notices and other communications provided for
herein and in the other Loan Documents (including, without limitation, any
modifications of, or waivers or consents under, this Agreement or the other Loan
Documents) shall be given or made in writing by telex, telecopy, courier or U.S.
Mail and telexed, telecopied, mailed or delivered to the intended recipient at
the "Address for Notices" specified below its name on the signature pages hereof
or in the Loan Documents or, as to any party, at such other address as shall be
designated by such party in a notice to each other party. Except as otherwise
provided in this Agreement or in the other Loan Documents, all such
communications shall be deemed to have been duly given when transmitted, if
transmitted before 1:00 p.m. local time on a Business Day (otherwise on the next
succeeding Business Day) by telex or telecopier and evidence or confirmation of
receipt is obtained, or personally delivered or, in the case of a mailed notice,
three (3) Business Days after the date deposited in the mails, postage prepaid,
in each case given or addressed as aforesaid.
Section 12.03 Payment of Expenses, Indemnities, etc.
(a) The Borrower agrees:
(i) whether or not the transactions hereby contemplated are
consummated, to pay all reasonable expenses of the Administrative Agent in
the
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administration (both before and after the execution hereof and including
advice of counsel as to the rights and duties of the Administrative Agent
and the Lenders with respect thereto) of, and in connection with the
negotiation, syndication, investigation, preparation, execution and
delivery of, recording or filing of, preservation of rights under,
enforcement of, and refinancing, renegotiation or restructuring of, the
Loan Documents and any amendment, waiver or consent relating thereto
(including, without limitation, travel, photocopy, mailing, courier,
telephone and other similar expenses of the Administrative Agent, the cost
of environmental audits, surveys and appraisals at reasonable intervals,
the reasonable fees and disbursements of counsel and other outside
consultants for the Administrative Agent and, in the case of enforcement,
the reasonable fees and disbursements of counsel for the Administrative
Agent and any of the Lenders); and promptly reimburse the Administrative
Agent for all amounts expended, advanced or incurred by the Administrative
Agent or the Lenders to satisfy any obligation of the Borrower under this
Agreement or any Security Instrument, including without limitation, all
costs and expenses of foreclosure;
(ii) TO INDEMNIFY THE ADMINISTRATIVE AGENT AND EACH LENDER AND
EACH OF THEIR AFFILIATES AND EACH OF THEIR OFFICERS, DIRECTORS, EMPLOYEES,
REPRESENTATIVES, AGENTS, ATTORNEYS, ACCOUNTANTS AND EXPERTS ("INDEMNIFIED
PARTIES") FROM, HOLD EACH OF THEM HARMLESS AGAINST AND PROMPTLY UPON
DEMAND PAY OR REIMBURSE EACH OF THEM FOR, THE INDEMNITY MATTERS WHICH MAY
BE INCURRED BY OR ASSERTED AGAINST OR INVOLVE ANY OF THEM (WHETHER OR NOT
ANY OF THEM IS DESIGNATED A PARTY THERETO) AS A RESULT OF, ARISING OUT OF
OR IN ANY WAY RELATED TO (I) ANY ACTUAL OR PROPOSED USE BY THE BORROWER OF
THE PROCEEDS OF ANY OF THE LOANS OR LETTERS OF CREDIT, (II) THE EXECUTION,
DELIVERY AND PERFORMANCE OF THE LOAN DOCUMENTS, (III) THE OPERATIONS OF
THE BUSINESS OF THE BORROWER AND ITS SUBSIDIARIES, (IV) THE FAILURE OF THE
BORROWER OR ANY SUBSIDIARY TO COMPLY WITH THE TERMS OF ANY SECURITY
INSTRUMENT OR THIS AGREEMENT, OR WITH ANY GOVERNMENTAL REQUIREMENT, (V)
ANY INACCURACY OF ANY REPRESENTATION OR ANY BREACH OF ANY WARRANTY OF THE
BORROWER OR ANY GUARANTOR SET FORTH IN ANY OF THE LOAN DOCUMENTS, (VI) THE
ISSUANCE, EXECUTION AND DELIVERY OR TRANSFER OF OR PAYMENT OR FAILURE TO
PAY UNDER ANY LETTER OF CREDIT, OR (VII) THE PAYMENT OF A DRAWING UNDER
ANY LETTER OF CREDIT NOTWITHSTANDING THE NON-COMPLIANCE, NON-DELIVERY OR
OTHER IMPROPER PRESENTATION OF THE MANUALLY EXECUTED DRAFT(S) AND
CERTIFICATION(S), (VIII) ANY ASSERTION THAT THE LENDERS WERE NOT ENTITLED
TO RECEIVE THE PROCEEDS RECEIVED PURSUANT TO THE SECURITY INSTRUMENTS OR
(IX) ANY OTHER ASPECT OF THE LOAN DOCUMENTS, INCLUDING, WITHOUT
LIMITATION, THE REASONABLE FEES AND DISBURSEMENTS OF COUNSEL AND ALL OTHER
EXPENSES INCURRED IN CONNECTION WITH INVESTIGATING, DEFENDING OR PREPARING
TO DEFEND ANY SUCH ACTION, SUIT, PROCEEDING (INCLUDING ANY INVESTIGATIONS,
LITIGATION OR INQUIRIES) OR CLAIM AND INCLUDING ALL INDEMNITY MATTERS
ARISING BY REASON OF THE ORDINARY NEGLIGENCE OF ANY INDEMNIFIED PARTY, BUT
EXCLUDING ALL INDEMNITY MATTERS ARISING SOLELY BY REASON OF CLAIMS BETWEEN
THE LENDERS OR ANY LENDER AND THE ADMINISTRATIVE AGENT OR A LENDER'S
SHAREHOLDERS AGAINST THE ADMINISTRATIVE AGENT OR LENDER OR BY
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REASON OF THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT ON THE PART OF ANY
INDEMNIFIED PARTY; AND
(iii) TO INDEMNIFY AND HOLD HARMLESS FROM TIME TO TIME THE
INDEMNIFIED PARTIES FROM AND AGAINST ANY AND ALL LOSSES, CLAIMS, COST
RECOVERY ACTIONS, ADMINISTRATIVE ORDERS OR PROCEEDINGS, DAMAGES AND
LIABILITIES TO WHICH ANY SUCH PERSON MAY BECOME SUBJECT (I) UNDER ANY
ENVIRONMENTAL LAW APPLICABLE TO THE BORROWER OR ANY SUBSIDIARY OR ANY OF
THEIR PROPERTIES, INCLUDING WITHOUT LIMITATION, THE TREATMENT OR DISPOSAL
OF HAZARDOUS SUBSTANCES ON ANY OF THEIR PROPERTIES, (II) AS A RESULT OF
THE BREACH OR NON-COMPLIANCE BY THE BORROWER OR ANY SUBSIDIARY WITH ANY
ENVIRONMENTAL LAW APPLICABLE TO THE BORROWER OR ANY SUBSIDIARY, (III) DUE
TO PAST OWNERSHIP BY THE BORROWER OR ANY SUBSIDIARY OF ANY OF THEIR
PROPERTIES OR PAST ACTIVITY ON ANY OF THEIR PROPERTIES WHICH, THOUGH
LAWFUL AND FULLY PERMISSIBLE AT THE TIME, COULD RESULT IN PRESENT
LIABILITY, (IV) THE PRESENCE, USE, RELEASE, STORAGE, TREATMENT OR DISPOSAL
OF HAZARDOUS SUBSTANCES ON OR AT ANY OF THE PROPERTIES OWNED OR OPERATED
BY THE BORROWER OR ANY SUBSIDIARY, OR (V) ANY OTHER ENVIRONMENTAL, HEALTH
OR SAFETY CONDITION IN CONNECTION WITH THE LOAN DOCUMENTS; PROVIDED,
HOWEVER, NO INDEMNITY SHALL BE AFFORDED UNDER THIS SECTION 12.03(A)(III)
IN RESPECT OF ANY PROPERTY FOR ANY OCCURRENCE ARISING FROM THE ACTS OR
OMISSIONS OF THE ADMINISTRATIVE AGENT OR ANY LENDER DURING THE PERIOD
AFTER WHICH SUCH PERSON, ITS SUCCESSORS OR ASSIGNS SHALL HAVE OBTAINED
POSSESSION OF SUCH PROPERTY (WHETHER BY FORECLOSURE OR DEED IN LIEU OF
FORECLOSURE, AS MORTGAGEE-IN-POSSESSION OR OTHERWISE).
(b) No Indemnified Party may settle any claim to be indemnified
without the consent of the Borrower, such consent not to be unreasonably
withheld; provided, however, that the Borrower may not reasonably withhold
consent to any settlement that an Indemnified Party proposes, if the
Borrower does not have the financial ability to pay all its obligations
outstanding and asserted against the Borrower at that time, including the
maximum potential claims against the Indemnified Party to be indemnified
pursuant to this Section 12.03.
(c) In the case of any indemnification hereunder, the Administrative
Agent or Lender, as appropriate shall give notice to the Borrower of any
such claim or demand being made against the Indemnified Party and the
Borrower shall have the non exclusive right to join in the defense against
any such claim or demand provided that if the Borrower provides a defense,
the Indemnified Party shall bear its own cost of defense unless there is a
conflict between the Borrower and such Indemnified Party.
(d) THE FOREGOING INDEMNITIES SHALL EXTEND TO THE INDEMNIFIED
PARTIES NOTWITHSTANDING THE SOLE OR CONCURRENT NEGLIGENCE OF EVERY KIND OR
CHARACTER WHATSOEVER, WHETHER ACTIVE OR PASSIVE, WHETHER AN AFFIRMATIVE
ACT OR AN OMISSION, INCLUDING WITHOUT LIMITATION, ALL TYPES OF NEGLIGENT
CONDUCT IDENTIFIED IN THE RESTATEMENT (SECOND) OF TORTS OF ONE OR MORE OF
THE INDEMNIFIED PARTIES OR BY REASON OF STRICT LIABILITY IMPOSED
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WITHOUT FAULT ON ANY ONE OR MORE OF THE INDEMNIFIED PARTIES. TO THE EXTENT
THAT AN INDEMNIFIED PARTY IS FOUND TO HAVE COMMITTED AN ACT OF GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT, THIS CONTRACTUAL OBLIGATION OF
INDEMNIFICATION SHALL CONTINUE BUT SHALL ONLY EXTEND TO THE PORTION OF THE
CLAIM THAT IS DEEMED TO HAVE OCCURRED BY REASON OF EVENTS OTHER THAN THE
GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE INDEMNIFIED PARTY.
(e) The Borrower's obligations under this Section 12.03 shall
survive any termination of this Agreement and the payment of the Notes and
shall continue thereafter in full force and effect.
(f) The Borrower shall pay any amounts due under this Section 12.03
within thirty (30) days of the receipt by the Borrower of notice of the
amount due.
Section 12.04 Amendments, Etc. Any provision of this Agreement or any
Security Instrument may be amended, modified or waived with the Borrower's and
the Majority Lenders' prior written consent; provided that (i) no amendment,
modification or waiver which extends the final maturity of the Loans, increases
the Aggregate Maximum Credit Amounts, increases the Borrowing Base, forgives the
principal amount of any Obligations outstanding under this Agreement, releases
any guarantor of the Obligations or releases all or substantially all of the
collateral, reduces the interest rate applicable to the Loans or the fees
payable to the Lenders generally, affects Section 2.03(a), this Section 12.04 or
Section 12.06(a) or modifies the definition of "Majority Lenders" shall be
effective without consent of all Lenders; (ii) no amendment, modification or
waiver which increases the Maximum Credit Amount of any Lender shall be
effective without the consent of such Lender; and (iii) no amendment,
modification or waiver which modifies the rights, duties or obligations of the
Administrative Agent shall be effective without the consent of the
Administrative Agent.
Section 12.05 Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
Section 12.06 Assignments and Participations.
(a) The Borrower may not assign its rights or obligations hereunder
or under the Notes or any Letters of Credit without the prior consent of
all of the Lenders and the Administrative Agent.
(b) Any Lender may, upon the written consent of the Administrative
Agent and, if no Event of Default has occurred and is continuing, the
Borrower (which consent will not be unreasonably withheld), assign to one
or more assignees all or a portion of its rights and obligations under
this Agreement pursuant to an Assignment Agreement substantially in the
form of Exhibit E (an "Assignment"); provided, however, that (i) any such
assignment of a partial interest in a Note shall be in the amount of at
least $5,000,000 or such lesser amount to which the Borrower has
consented; (ii) the assignee or assignor shall pay to the Administrative
Agent a processing and recordation fee of $3,500 for each assignment and
(iii) no consent of the Administrative Agent of the Borrower shall be
required for any assignment by a Lender to any Lender or any nominee
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or Affiliate of any Lender. Any such assignment will become effective upon
the execution and delivery to the Administrative Agent of the Assignment
and the consent of the Administrative Agent and, if applicable, the
Borrower. Promptly after receipt of an executed Assignment, the
Administrative Agent shall send to the Borrower a copy of such executed
Assignment. Upon receipt of such executed Assignment, the Borrower, will,
at its own expense, execute and deliver new Notes to the assignor and/or
assignee, as appropriate, in accordance with their respective interests as
they appear. Upon the effectiveness of any assignment pursuant to this
Section 12.06(b), the assignee will become a "Lender," if not already a
"Lender," for all purposes of this Agreement and the Loan Documents. The
assignor shall be relieved of its obligations hereunder to the extent of
such assignment (and if the assigning Lender no longer holds any rights or
obligations under this Agreement, such assigning Lender shall cease to be
a "Lender" hereunder except that its rights under Sections 4.06, 5.01,
5.05 and 12.03 shall not be affected). The Administrative Agent will
prepare on the last Business Day of each month during which an assignment
has become effective pursuant to this Section 12.06(b), a new Annex I
giving effect to all such assignments effected during such month, and will
promptly provide the same to the Borrower and each of the Lenders.
(c) Each Lender may transfer, grant or assign participations in all
or any part of such Lender's interests hereunder pursuant to this Section
12.06(c) to any Person, provided that: (i) such Lender shall remain a
"Lender" for all purposes of this Agreement and the transferee of such
participation shall not constitute a "Lender" hereunder; and (ii) no
participant under any such participation shall have rights to approve any
amendment to or waiver of any of the Loan Documents except to the extent
such amendment or waiver would (x) forgive any principal owing on any
Obligations or extend the final maturity of the Loans, (y) reduce the
interest rate (other than as a result of waiving the applicability of any
post-default increases in interest rates) or fees applicable to any of the
Commitments or Loans or Letters of Credit in which such participant is
participating, or postpone the payment of any thereof, or (z) release any
guarantor of the Obligations or release all or substantially all of the
collateral (except as provided in the Loan Documents) supporting any of
the Commitments or Loans or Letters of Credit in which such participant is
participating. In the case of any such participation, the participant
shall not have any rights under this Agreement or any of the Security
Instruments (the participant's rights against the granting Lender in
respect of such participation to be those set forth in the agreement with
such Lender creating such participation), and all amounts payable by the
Borrower hereunder shall be determined as if such Lender had not sold such
participation, provided that such participant shall be entitled to receive
additional amounts under Article V on the same basis as if it were a
Lender and be indemnified under Section 12.03 as if it were a Lender. In
addition, each agreement creating any participation must include an
agreement by the participant to be bound by the provisions of Section
12.15.
(d) The Lenders may furnish any information concerning the Borrower
in the possession of the Lenders from time to time to assignees and
participants (including prospective assignees and participants); provided
that, such Persons agree to be bound by the provisions of Section 12.15.
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(e) Notwithstanding anything in this Section 12.06 to the contrary,
any Lender may assign and pledge its Note to any Federal Reserve Bank. No
such assignment and/or pledge shall release the assigning and/or pledging
Lender from its obligations hereunder.
(f) Notwithstanding any other provisions of this Section 12.06, no
transfer or assignment of the interests or obligations of any Lender or
any grant of participations therein shall be permitted if such transfer,
assignment or grant would require the Borrower to file a registration
statement with the SEC or to qualify the Loans under the "Blue Sky" laws
of any state.
Section 12.07 Invalidity. In the event that any one or more of the
provisions contained in any of the Loan Documents the Letters of Credit, or the
Letter of Credit Agreements shall, for any reason, be held invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of the Notes, this Agreement or any other
Loan Document.
Section 12.08 Counterparts. This Agreement may be executed in any number
of counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.
Section 12.09 References; Use of Word "Including". The words "herein,"
"hereof," "hereunder" and other words of similar import when used in this
Agreement refer to this Agreement as a whole, and not to any particular article,
section or subsection. Any reference herein to a Section or Article shall be
deemed to refer to the applicable Section or Article of this Agreement unless
otherwise stated herein. Any reference herein to an exhibit, schedule, or other
attachment shall be deemed to refer to the applicable exhibit, schedule, or
other attachment attached hereto unless otherwise stated herein. The word
"including", "includes" and words of similar import means "including, without
limitation".
Section 12.10 Survival. The obligations of the parties under Section 4.06,
Article V, and Sections 11.05 and 12.03 shall survive the repayment of the Loans
and the termination of the Commitments. To the extent that any payments on the
Obligations or proceeds of any collateral are subsequently invalidated, declared
to be fraudulent or preferential, set aside or required to be repaid to a
trustee, debtor in possession, receiver or other Person under any bankruptcy
law, common law or equitable cause, then to such extent, the Obligations so
satisfied shall be revived and continue as if such payment or proceeds had not
been received and the Administrative Agent's and the Lenders' Liens, security
interests, rights, powers and remedies under this Agreement and each Security
Instrument shall continue in full force and effect. In such event, each Security
Instrument shall be automatically reinstated and the Borrower shall take such
action as may be reasonably requested by the Administrative Agent and the
Lenders to effect such reinstatement.
Section 12.11 Captions. Captions and section headings appearing herein are
included solely for convenience of reference and are not intended to affect the
interpretation of any provision of this Agreement.
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SECTION 12.12 NO ORAL AGREEMENTS. THE LOAN DOCUMENTS EMBODY THE ENTIRE
AGREEMENT AND UNDERSTANDING BETWEEN THE PARTIES AND SUPERSEDE ALL OTHER
AGREEMENTS AND UNDERSTANDINGS BETWEEN SUCH PARTIES RELATING TO THE SUBJECT
MATTER HEREOF AND THEREOF. THE LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
SECTION 12.13 GOVERNING LAW; SUBMISSION TO JURISDICTION.
(a) THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS, EXCEPT TO THE EXTENT
THAT UNITED STATES FEDERAL LAW PERMITS ANY LENDER TO CHARGE INTEREST AT
THE RATE ALLOWED BY THE LAWS OF THE STATE WHERE SUCH LENDER IS LOCATED.
CH. 346 OF THE TEXAS FINANCE CODE (WHICH REGULATES CERTAIN REVOLVING
CREDIT LOAN ACCOUNTS AND REVOLVING TRI-PARTY ACCOUNTS) SHALL NOT APPLY TO
THIS AGREEMENT OR THE NOTES.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THE LOAN
DOCUMENTS SHALL BE BROUGHT IN THE COURTS OF THE STATE OF TEXAS OR OF THE
UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF TEXAS, AND, BY
EXECUTION AND DELIVERY OF THIS AGREEMENT, THE BORROWER HEREBY ACCEPTS FOR
ITSELF AND (TO THE EXTENT PERMITTED BY LAW) IN RESPECT OF ITS PROPERTY,
GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS.
THE BORROWER HEREBY IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING, WITHOUT
LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS
OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE
JURISDICTIONS. THIS SUBMISSION TO JURISDICTION IS NON-EXCLUSIVE AND DOES
NOT PRECLUDE THE ADMINISTRATIVE AGENT OR ANY LENDER FROM OBTAINING
JURISDICTION OVER THE BORROWER IN ANY COURT OTHERWISE HAVING JURISDICTION.
(c) THE BORROWER HEREBY IRREVOCABLY CONSENTS TO THE SERVICE OF
PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR
PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED
MAIL, POSTAGE PREPAID, TO THE BORROWER AT ITS SAID ADDRESS, SUCH SERVICE
TO BECOME EFFECTIVE THIRTY (30) DAYS AFTER SUCH MAILING. NOTHING HEREIN
SHALL AFFECT THE RIGHT OF THE ADMINISTRATIVE AGENT, ANY LENDER OR ANY
HOLDER OF A NOTE TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR
TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE BORROWER OR
ITS PROPERTIES IN ANY OTHER JURISDICTION.
(d) THE BORROWER, THE ADMINISTRATIVE AGENT AND EACH LENDER HEREBY
(I) IRREVOCABLY AND UNCONDITIONALLY WAIVE, TO THE FULLEST EXTENT PERMITTED
BY LAW, TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS
AGREEMENT OR ANY LOAN DOCUMENT AND FOR ANY COUNTERCLAIM
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THEREIN; (II) IRREVOCABLY WAIVE, TO THE MAXIMUM EXTENT NOT PROHIBITED BY
LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY
SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES, OR DAMAGES OTHER
THAN, OR IN ADDITION TO, ACTUAL DAMAGES; (III) CERTIFY THAT NO PARTY
HERETO NOR ANY REPRESENTATIVE, AGENT OR COUNSEL FOR ANY PARTY HERETO HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD NOT,
IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS, AND
(IV) ACKNOWLEDGE THAT IT HAS BEEN INDUCED TO ENTER INTO THIS CREDIT
AGREEMENT AND THE OTHER LOAN DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED
HEREBY AND THEREBY BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS CONTAINED IN THIS SECTION 12.13.
Section 12.14 Interest. It is the intention of the parties hereto that
each Lender shall conform strictly to usury laws applicable to it. Accordingly,
if the transactions contemplated hereby would be usurious as to any Lender under
laws applicable to it (including the laws of the United States of America and
the State of Texas or any other jurisdiction whose laws may be mandatorily
applicable to such Lender notwithstanding the other provisions of this
Agreement), then, in that event, notwithstanding anything to the contrary in any
of the Loan Documents or any agreement entered into in connection with or as
security for the Notes, it is agreed as follows: (i) the aggregate of all
consideration which constitutes interest under law applicable to any Lender that
is contracted for, taken, reserved, charged or received by such Lender under any
of the Loan Documents or agreements or otherwise in connection with the Notes
shall under no circumstances exceed the maximum amount allowed by such
applicable law, and any excess shall be canceled automatically and if
theretofore paid shall be credited by such Lender on the principal amount of the
Obligations (or, to the extent that the principal amount of the Obligations
shall have been or would thereby be paid in full, refunded by such Lender to the
Borrower); and (ii) in the event that the maturity of the Notes is accelerated
by reason of an election of the holder thereof resulting from any Event of
Default under this Agreement or otherwise, or in the event of any required or
permitted prepayment, then such consideration that constitutes interest under
law applicable to any Lender may never include more than the maximum amount
allowed by such applicable law, and excess interest, if any, provided for in
this Agreement or otherwise shall be canceled automatically by such Lender as of
the date of such acceleration or prepayment and, if theretofore paid, shall be
credited by such Lender on the principal amount of the Obligations (or, to the
extent that the principal amount of the Obligations shall have been or would
thereby be paid in full, refunded by such Lender to the Borrower). All sums paid
or agreed to be paid to any Lender for the use, forbearance or detention of sums
due hereunder shall, to the extent permitted by law applicable to such Lender,
be amortized, prorated, allocated and spread throughout the full term of the
Loans evidenced by the Notes until payment in full so that the rate or amount of
interest on account of any Loans hereunder does not exceed the maximum amount
allowed by such applicable law. If at any time and from time to time (i) the
amount of interest payable to any Lender on any date shall be computed at the
Highest Lawful Rate applicable to such Lender pursuant to this Section 12.14 and
(ii) in respect of any subsequent interest computation period the amount of
interest otherwise payable to such Lender would be less than the amount of
interest payable to such Lender computed at the Highest Lawful Rate applicable
to such Lender, then the amount of interest payable to such Lender in respect of
such subsequent interest computation period shall continue to be computed at the
Highest Lawful Rate applicable to such Lender until the total amount of interest
payable to such Lender shall equal the total amount of
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interest which would have been payable to such Lender if the total amount of
interest had been computed without giving effect to this Section 12.14. To the
extent that Chapter 303 of the Texas Finance Code is relevant for the purpose of
determining the Highest Lawful Rate, such Lender elects to determine the
applicable rate ceiling under such Chapter by the weekly ceiling from time to
time in effect.
Section 12.15 Confidentiality. In the event that the Borrower or any
Subsidiary provides to the Administrative Agent or the Lenders confidential
information belonging to the Borrower or such Subsidiary, which the Borrower or
any Subsidiary shall designate in writing as "confidential", the Administrative
Agent and the Lenders shall thereafter maintain such information in confidence
in accordance with the standards of care and diligence that each utilizes in
maintaining its own confidential information. This obligation of confidence
shall not apply to such portions of the information which (i) are in the public
domain, (ii) hereafter become part of the public domain without the
Administrative Agent or the Lenders breaching their obligation of confidence to
the Borrower, (iii) are previously known by the Administrative Agent or the
Lenders from some source other than the Borrower, (iv) are hereafter developed
by the Administrative Agent or the Lenders without using the Borrower's
information, (v) are hereafter obtained by or available to the Administrative
Agent or the Lenders from a third party who owes no obligation of confidence to
the Borrower with respect to such information or through any other means other
than through disclosure by the Borrower, (vi) are disclosed with the Borrower's
consent, (vii) must be disclosed either pursuant to any Governmental Requirement
or to Persons regulating the activities of the Administrative Agent or the
Lenders, or (viii) as may be required by law or regulation or order of any
Governmental Authority in any judicial, arbitration or governmental proceeding.
Further, the Administrative Agent or a Lender may disclose any such information
to any other Lender, any Affiliate of any Lender, any independent petroleum
engineers or consultants, any independent certified public accountants, any
legal counsel employed by such Person in connection with this Agreement or any
Security Instrument, including without limitation, the enforcement or exercise
of all rights and remedies thereunder, or any assignee or participant (including
prospective assignees and participants) in the Loans; provided, however, that
the Administrative Agent or the Lenders shall receive a confidentiality
agreement from the Person to whom such information is disclosed such that said
Person shall have the same obligation to maintain the confidentiality of such
information as is imposed upon the Administrative Agent or the Lenders
hereunder. Notwithstanding anything to the contrary provided herein, this
obligation of confidence shall cease three (3) years from the date the
information was furnished, unless the Borrower requests in writing at least
thirty (30) days prior to the expiration of such three year period, to maintain
the confidentiality of such information for an additional three year period. The
Borrower waives any and all other rights it may have to confidentiality as
against the Administrative Agent and the Lenders arising by contract, agreement,
statute or law except as expressly stated in this Section 12.15.
SECTION 12.16 EXCULPATION PROVISIONS. EACH OF THE PARTIES HERETO
SPECIFICALLY AGREES THAT IT HAS A DUTY TO READ THIS AGREEMENT AND THE SECURITY
INSTRUMENTS AND AGREES THAT IT IS CHARGED WITH NOTICE AND KNOWLEDGE OF THE TERMS
OF THIS AGREEMENT AND THE SECURITY INSTRUMENTS; THAT IT HAS IN FACT READ THIS
AGREEMENT AND IS FULLY INFORMED AND HAS FULL NOTICE AND KNOWLEDGE OF THE TERMS,
CONDITIONS AND EFFECTS OF THIS AGREEMENT; THAT IT HAS BEEN REPRESENTED BY
INDEPENDENT LEGAL COUNSEL OF ITS CHOICE THROUGHOUT THE NEGOTIATIONS PRECEDING
-79-
ITS EXECUTION OF THIS AGREEMENT AND THE SECURITY INSTRUMENTS; AND HAS RECEIVED
THE ADVICE OF ITS ATTORNEY IN ENTERING INTO THIS AGREEMENT AND THE SECURITY
INSTRUMENTS; AND THAT IT RECOGNIZES THAT CERTAIN OF THE TERMS OF THIS AGREEMENT
AND THE SECURITY INSTRUMENTS RESULT IN ONE PARTY ASSUMING THE LIABILITY INHERENT
IN SOME ASPECTS OF THE TRANSACTION AND RELIEVING THE OTHER PARTY OF ITS
RESPONSIBILITY FOR SUCH LIABILITY. EACH PARTY HERETO AGREES AND COVENANTS THAT
IT WILL NOT CONTEST THE VALIDITY OR ENFORCEABILITY OF ANY EXCULPATORY PROVISION
OF THIS AGREEMENT AND THE SECURITY INSTRUMENTS ON THE BASIS THAT THE PARTY HAD
NO NOTICE OR KNOWLEDGE OF SUCH PROVISION OR THAT THE PROVISION IS NOT
"CONSPICUOUS."
Section 12.17 Hedging Agreement Substitution of Collateral. If the
Obligations are paid in full and this Agreement is terminated, the
Administrative Agent and the Lenders shall execute and deliver or cause to be
executed and delivered such instruments of satisfaction and reassignment as may
be appropriate in order to release all liens and security interests created by
the Security Instruments, provided, however, that in lieu of paying off any such
Obligations arising under any Hedging Agreement with any Lender or Affiliate of
any Lender, the Borrower may provide substitute credit support under a standard
form ISDA Credit Support Annex acceptable to such Lender (or its Affiliate) in
the form of a letter of credit or cash equivalents in an amount equal to 110% of
the then current exposure under such Hedging Agreement.
Section 12.18 Amendment, Restatement and Rearrangement of Prior Debt. The
parties hereto agree that to the extent the Prior Debt is refinanced with
proceeds of Loans hereunder, this Agreement amends, restates and rearranges such
Prior Debt pursuant to the terms and conditions of this Agreement.
Section 12.19 Obligations as Senior Indebtedness; Specified Senior
Indebtedness. It is the intent of all the parties hereto that all of the
Obligations arising under this Agreement and the other Loan Documents shall
constitute (and to the extent, if any, required are hereby designated by
Borrower to constitute) "Senior Indebtedness" and "Specified Senior
Indebtedness" as such terms are defined in the indentures governing the Existing
Other Debt. This Agreement and the other Loan Documents represent the "Credit
Facility" or the "Senior Secured Credit Facility", as the case may be, as
defined in the indentures governing the Existing Other Debt. Notwithstanding the
foregoing, the acknowledgment of intent contained in this Section 12.19 shall
not be deemed to modify or amend any provision of this Agreement or any of the
other Loan Documents.
[SIGNATURES BEGIN ON NEXT PAGE]
-80-
The parties hereto have caused this Agreement to be duly executed as of
the day and year first above written.
BORROWER: ▇▇▇▇▇▇ PETROLEUM COMPANY
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Senior Vice President and Chief
Financial Officer
Address for Notices:
▇.▇. ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ 1287;
or
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier No.: ▇▇▇ ▇▇▇ ▇▇▇▇
Telephone No.: ▇▇▇ ▇▇▇ ▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Treasurer
ADMINISTRATIVE AGENT
and LENDER: UNION BANK OF CALIFORNIA, N.A.,
individually and as Administrative Agent
By: /s/ ▇▇▇ ▇▇▇▇▇
-------------------------------------------
Name: ▇▇▇ ▇▇▇▇▇
Title: Assistant Vice President
By: /s/ ▇▇▇ ▇▇▇▇▇
-------------------------------------------
Name: ▇▇▇ ▇▇▇▇▇
-----------------------------------------
Title: Assistant Vice President
----------------------------------------
Lending Office for Base Rate Loans and
LIBOR Loans:
Energy Capital Services - Monterey Park ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, #▇ 957 161
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Address for Notices:
Energy Capital Services - Dallas ▇▇▇▇▇▇
▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇ ▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇ ▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇▇
With copy to:
Energy Capital Services - Dallas ▇▇▇▇▇▇
▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇ ▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇ ▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇
CONSENT OF GUARANTORS
Each Guarantor hereby consents and agrees to the terms of this Agreement
and agrees that each and every guaranty executed in connection with this
Agreement shall be legal, valid, and binding obligations of each Guarantor
enforceable against each Guarantor in accordance with its terms.
WITNESS THE EXECUTION HEREOF, as of the 11th day of June, 2004.
▇▇▇▇▇▇ PETROLEUM OPERATING COMPANY,
a Delaware corporation
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
------------------------------------
Title: Senior Vice President and Chief
Financial Officer
-----------------------------------
▇▇▇▇▇▇ OFFSHORE PRODUCTION, INC.,
a Mississippi corporation
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
------------------------------------
Title: Senior Vice President and Chief
Financial Officer
-----------------------------------
MISSISSIPPI MARKETING, INC.,
a Mississippi corporation
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
------------------------------------
Title: Senior Vice President and Chief
Financial Officer
-----------------------------------
ANNEX I
LIST OF PERCENTAGE SHARES AND
MAXIMUM CREDIT AMOUNTS
PERCENTAGE
NAME OF LENDER SHARE MAXIMUM CREDIT AMOUNT
-------------- ----- ---------------------
Union Bank of California, N.A. 100% $175,000,000
TOTAL 100% $175,000,000
EXHIBITS
CERTAIN IMMATERIAL EXHIBITS TO THIS CREDIT AGREEMENT HAVE BEEN CONSIDERED
IMMATERIAL AND HAVE BEEN DELETED FROM THIS FILING. THESE EXHIBITS WILL BE
PROVIDED TO THE SEC UPON REQUEST.
SCHEDULE 7.02
LIABILITIES
None
SCHEDULE 7.03
LITIGATION
AS OF
April 14, 2004
[ ] ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ET AL VS CHEVRON U.S.A., CONOCO, INC., SHELL OIL
COMPANY, LLOG EXPLORATION CO., SUNDANCE ACQUISITION CORP., ▇▇▇▇▇▇ OFFSHORE
PRODUCTION, INC., AND ▇▇▇▇ PETROLEUM CORPORATION, 16TH JDC, IBERIA PARISH, LA
(CASE #101332-B)
Filed: 4/09/01
[ ] THE ORLEANS LEVEE DISTRICT VS. THE ESTATE OF ▇▇▇▇▇▇▇ G HELIS, CHEVRON USA
AND ▇▇▇▇▇▇ OFFSHORE PRODUCTION, INC., 25TH JDC, PARISH OF PLAQUEMINES (CASE
#47843)
Filed: 9/28/01
SCHEDULE 7.09
TAXES
None
SCHEDULE 7.10
TITLES, ETC.
None
SCHEDULE 7.14
SUBSIDIARIES AND PARTNERSHIPS
▇▇▇▇▇▇ Petroleum Company is a Delaware corporation and is qualified to do
business as foreign corporations in the following states: Alabama, Arkansas,
California, Colorado, Florida, Louisiana, Michigan, Mississippi, Montana, New
Mexico, North Dakota, Ohio, Oklahoma, Texas, Utah, and Wyoming. The jurisdiction
of incorporation of all of ▇▇▇▇▇▇ Petroleum Company's directly and indirectly
owned subsidiaries, the jurisdictions where such subsidiaries are qualified to
do business as foreign corporations, and the authorized and outstanding capital
stock of such subsidiaries is listed in the following table.
STATE OF JURISDICTIONS QUALIFIED AUTHORIZED OUTSTANDING
SUBSIDIARY INCORPORATION TO DO BUSINESS CAPITAL STOCK CAPITAL STOCK
---------- ------------- -------------- ------------- -------------
▇▇▇▇▇▇ Petroleum Delaware Alabama, Arkansas, California, 3,000 shares of 2,680 shares of
Operating Company Colorado, Florida, Louisiana, Common Stock Common Stock
Michigan, Mississippi, Montana,
New Mexico, North Dakota, Ohio,
Oklahoma, Texas, Utah, Wyoming
Callon Offshore Mississippi Alabama, Louisiana, Texas 5,000 shares of 5,000 shares of
Production, Inc. Common Stock Common Stock
Mississippi Mississippi Louisiana, Mississippi 1,000 shares of 1,000 shares of
Marketing, Inc. Common Stock Common Stock
The principal place of business of each of the subsidiaries listed in the
preceding table is: ▇.▇. ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇ or ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇.
▇▇▇▇▇▇ Offshore Production, Inc. and Mississippi Marketing, Inc. are wholly
owned subsidiaries of ▇▇▇▇▇▇ Petroleum Operating Company. ▇▇▇▇▇▇ Petroleum
Operating Company is a wholly owned subsidiary of ▇▇▇▇▇▇ Petroleum Company.
In addition, Callon Mineral Properties, Inc. is wholly owned subsidiary of
▇▇▇▇▇▇ Petroleum Operating Company. This subsidiary is inactive and has no
assets other than cash equivalent to the value of outstanding common stock.
▇▇▇▇▇▇ Petroleum Operating Company is a party to the Gulfstar 3-D Seismic
Partnership I, dated February 21, 2001 between Gulfstar Energy, Inc., Cheyenne
Petroleum Company, Gulfstar Seismic, Inc., Range Energy Ventures Corporation,
and Cheyenne International Corporation. ▇▇▇▇▇▇ Petroleum Operating Company owns
50.00% of this partnership.
SCHEDULE 7.17
ENVIRONMENTAL MATTERS
None
SCHEDULE 7.19
INSURANCE
See attached Insurance Schedule
SCHEDULE 7.20
HEDGING AGREEMENTS
QUANTITY COLLARS FAIR MARKET
(MMBTU TIME ---------------- VALUE AS OF
GAS CONTRACTS DATE PER MONTH) PERIOD CALL PUT SWAP 3/31/2004
------------- ---- ---------- ------ ---- --- ---- ---------
▇▇▇▇▇▇▇ ▇▇▇▇▇
04DL00590/04DL00592 1/14/04 100,000 4/04-11/04 $6.00 $5.00 ($199,300)
04DL00591/04DL00592 1/14/04 100,000 12/04-3/05 $7.15 $5.00 ($152,200)
04DL00504/04DL00509 1/13/04 100,000 4/04-11/04 $6.25 $5.00 ($199,300)
04DL00506/04DL00509 1/13/04 100,000 12/04-3/05 $7.07 $5.00 ($159,100)
1558928/1558933 1/6/04 250,000 4/04-11/04 $6.00 $5.00 ($665,000)
FIMAT
1885/1887 1/13/04 50,000 4/04-11/04 $6.25 $5.00 ($ 99,650)
1833/1835 12/5/03 100,000 1/04-3/04 $7.20 $5.00 $ 0
3979/3981 10/3/04 100,000 12/03-3/04 $7.25 $5.25 $ 0
1915/1917 2/11/04 100,000 6/04-11/04 $5.60 $5.00 ($370,600)
1911/1913 2/11/04 100,000 12/04-3/05 $6.50 $5.00 ($225,600)
QUANTITY COLLARS FAIR MARKET
(BBLS PER TIME ---------------- VALUE AS OF
OIL CONTRACTS DATE MONTH) PERIOD CALL PUT SWAP 3/31/2004
------------- ---- ------ ------ ---- --- ---- ---------
▇▇▇▇▇▇▇ ▇▇▇▇▇
04DL01961 2/11/04 15,000 7/04-12/04 $30.00 ($274,352)
04DL01873 2/10/04 15,000 4/04-3/05 $30.00 ($573,923)
1558971/1558983 1/6/04 30,000 2/04-1/05 $32.00 $29.00 ($874,200)
04DL00596/04DL00595 1/14/04 15,000 2/04-10/04 $32.50 $30.00 ($299,325)
04DL00651/04DL00650 1/15/04 15,000 2/04-1/05 $32.50 $30.00 ($350,550)
FIMAT
1893 1/13/04 5,000 2/04-1/05 $31.25 ($112,900)
1891 1/13/04 10,000 2/04-1/05 $31.00 ($250,799)
1895 1/20/04 15,000 2/04-1/05 $31.50 ($301,199)
ALL CURRENT CONTRACTS HAVE MARGIN REQUIREMENTS
SCHEDULE 7.22
MATERIAL AGREEMENTS
1. Indenture and note for 11.0% Senior Subordinated Notes due December 15, 2005
and related Supplemental Indenture for the Company's 11% Senior Subordinated
Notes due 2005.
2. Indenture and note for 9.75% Senior Notes due December 8, 2010.
3. ▇▇▇▇▇▇ Petroleum Operating Company Deferred Compensation Plan dated as of
December 1,1996 and letter to employees dated December 13, 1996, relating
thereto.
4. The Prior Credit Agreement and related loan documents.
5. Capital Lease by and between ▇▇▇▇▇▇ Petroleum Company and Hanover Compression
Limited Partnership dated December 14, 2001 for a ten-year gas processing
agreement.
6. Medusa Gas Pipeline Delineation of Responsibilities Agreement by and between
UK Deepwater Gathering Company L.L.C. and ▇▇▇▇▇▇ Exploration and Production
Company, British-Borneo Deepwater L.L.C. and ▇▇▇▇▇▇ Petroleum Operating Company
dated as of September 1, 2001.
7. Medusa Gas Pipeline Dedication Agreement by and between UK Deepwater
Gathering Company L.L.C. and ▇▇▇▇▇▇ Exploration and Production Company,
British-Borneo Deepwater L.L.C. and ▇▇▇▇▇▇ Petroleum Operating Company dated as
of June 1, 2002.
8. Medusa Gas Pipeline Performance Guaranty Agreement by and between UK
Deepwater Gathering Company L.L.C. and ▇▇▇▇▇▇ Petroleum Company dated as of June
1, 2002.
9. Medusa Gas Pipeline Performance Guaranty Agreement by and between EL Paso
Energy Partners, L.P. and ▇▇▇▇▇▇ Exploration and Production Company,
British-Borneo Deepwater L.L.C. and ▇▇▇▇▇▇ Petroleum Operating Company dated as
of June 1, 2002.
10. Medusa Gas Pipeline Amendment and Supplement to Delineation of
Responsibilities Agreement by and between UK Deepwater Gathering Company, L.L.C.
(now Gulf Terra Field Services, L.L.C.) and ▇▇▇▇▇▇ Exploration and Production
Company, British-Borneo Deepwater L.L.C. and ▇▇▇▇▇▇ Petroleum Operating Company
dated as of August 7, 2003.
11. Medusa Oil Pipeline Provision and Ownership Agreement by and between Shell
Pipeline Company LP and ▇▇▇▇▇▇ Exploration and Production Company,
British-Borneo Deepwater L.L.C. and ▇▇▇▇▇▇ Petroleum Operating Company dated as
of November 15, 2002.
12. Medusa Oil Pipeline Tie-In and Transportation Agreement by and between Shell
Pipeline Company LP and ▇▇▇▇▇▇ Exploration and Production Company British-Borneo
Deepwater L.L.C. and ▇▇▇▇▇▇ Petroleum Operating Company dated as of November 15,
2002.
13. Medusa Spar Ownership and Operation Letter of Intent among ▇▇▇▇▇▇
Exploration and Production Company, ▇▇▇▇▇▇ Petroleum Operating Company and
Oceaneering International, Inc. dated as of April 29, 2003.
14. Medusa Spar Agreement among ▇▇▇▇▇▇ Exploration and Production Company,
▇▇▇▇▇▇ Petroleum Operating Company and Oceaneering International, Inc. dated as
of August 8, 2003.
15. Guaranty and Consent Agreement by ▇▇▇▇▇▇ Petroleum Company in favor of
Medusa Spar LLC dated as of December 18, 2003.
16. Minimum Throughput Guarantee and Consent Agreement by and among ▇▇▇▇▇▇
Exploration and Production Company, ▇▇▇▇▇▇ Petroleum Operating Company,
Oceaneering International, Inc., Medusa Spar LLC and The Bank of Nova Scotia
dated as of December 18, 2003.
17. Limited Liability Company Agreement by and between ▇▇▇▇▇▇ Exploration and
Production Company, ▇▇▇▇▇▇ Petroleum Operating Company and Oceaneering
International, Inc. dated as of December 18, 2003.
18. Pledge Agreement by and between ▇▇▇▇▇▇ Exploration and Production Company,
▇▇▇▇▇▇ Petroleum Operating Company, Oceaneering International, Inc. and The Bank
of Nova Scotia dated as of December 18, 2003.
SCHEDULE 7.23
GAS IMBALANCES
▇▇▇▇▇▇ PETROLEUM COMPANY
BALANCING AS OF MARCH 31, 2004
VOLUME
MCFE
(UNDER)
OVER
---------
Main Pass 234 (5,819)
Mobile 864 (24,216)
▇▇▇▇▇▇ Island 335 3,718
High Island A-494 (8,960)
Matagorda Island 558 (3,126)
Mobile 952/953 30,188
South ▇▇▇▇▇ Island 261 17,163
East Cameron 275 (20,344)
East Cameron 294 (2,399)
East Cameron 374 2,514
Ship Shoal 28/35 (7,480)
Main Pass 36 (529)
Mississippi Canyon 538/582 - Medusa (348)
Bayou Postillion - Cotton ▇▇▇▇▇ 29
Bayou ▇▇▇▇▇▇▇▇▇▇ - ▇▇▇▇▇▇▇▇ 4-4 (11,178)
Garden City (2,540)
South Bosco 967
---------
Total (32,360)
=========
Production for 1st Quarter 2004 5,742,600
5% of 1st Quarter Production 287,130
SCHEDULE 9.01
DEBT
Any Debt arising under the Prior Credit Agreement and related loan documents
(which Debt, if any, is being repaid and refinanced under this Agreement on the
Closing Date).
The Borrower has issued and outstanding $33,000,000 of 11.00% Senior
Subordinated Notes due December 15, 2005. Interest is payable quarterly.
The Borrower has outstanding a Capital Lease with Hanover Compression Limited
Partnership for a ten-year gas processing agreement.
The Borrower has issued and outstanding $200,000,000 of 9.75 % Senior Notes due
December 8, 2010. Interest is payable quarterly.
Any Debt arising from or related to the Guaranty and Consent Agreement by ▇▇▇▇▇▇
Petroleum Company in favor of Medusa Spar LLC dated as of December 18, 2003.
Any Debt arising from or related to the Minimum Throughput Guarantee and Consent
Agreement by and among ▇▇▇▇▇▇ Exploration and Production Company, ▇▇▇▇▇▇
Petroleum Operating Company, Oceaneering International, Inc., Medusa Spar LLC
and The Bank of Nova Scotia dated as of December 18, 2003.
Any Debt arising from or related to other Medusa Documents in items 6-18 on
Schedule 7.22.
SCHEDULE 9.02
LIENS
Liens on ▇▇▇▇▇▇ Petroleum Operating Company's ownership interests in Medusa Spar
LLC securing indebtedness of Medusa Spar LLC.
Any other Liens arising under Medusa Documents listed as items 6-18 on Schedule
7.22.
Any other Liens arising under the Capital Lease by and between ▇▇▇▇▇▇ Petroleum
Company and Hanover Compression Limited Partnership dated December 14, 2001.
SCHEDULE 9.03
INVESTMENTS, LOANS AND ADVANCES
Investment in Medusa Spar LLC of 10%
Investment in Gulfstar 3-D Seismic Partnership