Exhibit 10.5
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CREDIT AGREEMENT
Dated as of December 28, 2001
among
SPINNAKER EXPLORATION COMPANY, L.L.C.,
AS BORROWER
and
CERTAIN FINANCIAL INSTITUTIONS,
AS LENDERS,
and
TORONTO DOMINION (TEXAS), INC.,
AS ADMINISTRATIVE AGENT,
and
BANK OF AMERICA, N.A.
AS SYNDICATION AGENT
and
CREDIT SUISSE FIRST BOSTON
and
BANK OF MONTREAL
AS CO-DOCUMENTATION AGENTS
and
THE TORONTO-DOMINION BANK,
AS ISSUING BANK
and
TD SECURITIES (USA) INC.,
AS ARRANGER
$200,000,000
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TABLE OF CONTENTS
Page
ARTICLE I - Definitions and References.................................................................... 2
Section 1.1 Defined Terms.............................................................................. 2
Section 1.2 Exhibits and Schedules; Additional Definitions............................................. 16
Section 1.3 Amendment of Defined Instruments........................................................... 16
Section 1.4 References and Titles...................................................................... 16
Section 1.5 Calculations and Determinations............................................................ 17
ARTICLE II - The Loans..................................................................................... 18
Section 2.1 Loans...................................................................................... 18
Section 2.2 [Reserved]................................................................................. 18
Section 2.3 [Reserved]................................................................................. 18
Section 2.4 Requests for Loans......................................................................... 18
Section 2.5 Use of Proceeds............................................................................ 19
Section 2.6 Rate Elections: Interest Rates............................................................. 19
Section 2.7 Commitment Fees............................................................................ 21
Section 2.8 [Reserved]................................................................................. 21
Section 2.9 [Reserved]................................................................................. 21
Section 2.10 Repayments and Prepayments................................................................. 21
Section 2.11 Payments to Lenders........................................................................ 23
Section 2.12 Initial Borrowing Base..................................................................... 24
Section 2.13 Subsequent Determinations of Borrowing Base................................................ 24
Section 2.14 Borrower's Reduction of Borrowing Base..................................................... 25
Section 2.15 Alternate Rate of Interest................................................................. 26
Section 2.16 Increased Costs............................................................................ 26
Section 2.17 Break Funding Payments..................................................................... 27
Section 2.18 Taxes...................................................................................... 28
Section 2.19 Mitigation Obligations; Replacement of Lenders............................................. 28
ARTICLE III - Letters of Credit............................................................................. 30
Section 3.1 Letters of Credit.......................................................................... 30
Section 3.2 Requesting Letters of Credit............................................................... 30
Section 3.3 Reimbursement and Participations........................................................... 31
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TABLE OF CONTENTS
(continued)
Page
Section 3.4 Letter of Credit Fees...................................................................... 32
Section 3.5 No Duty to Inquire......................................................................... 33
Section 3.6 LC Collateral.............................................................................. 34
ARTICLE IV - Conditions Precedent to Lending............................................................... 35
Section 4.1 Documents to be Delivered.................................................................. 35
Section 4.2 Additional Conditions Precedent............................................................ 36
ARTICLE V - Representations and Warranties................................................................ 38
Section 5.1 Borrower's Representations and Warranties.................................................. 38
ARTICLE VI - Covenants of Borrower......................................................................... 44
Section 6.1 Affirmative Covenants...................................................................... 44
Section 6.2 Negative Covenants......................................................................... 49
ARTICLE VII - Offset; Additional Subsidiaries............................................................... 58
Section 7.1 [Intentionally Omitted].................................................................... 58
Section 7.2 [Intentionally Omitted].................................................................... 58
Section 7.3 [Intentionally Omitted].................................................................... 58
Section 7.4 Bank Accounts; Offset...................................................................... 58
Section 7.5 Additional Subsidiaries.................................................................... 58
ARTICLE VIII - Events of Default and Remedies................................................................ 59
Section 8.1 Events of Default.......................................................................... 59
Section 8.2 Remedies................................................................................... 61
Section 8.3 Payment of Expenses, Indemnities, etc...................................................... 61
ARTICLE IX - Administrative Agent.......................................................................... 64
Section 9.1 Appointment and Authority.................................................................. 64
Section 9.2 Exculpation, Administrative Agent's Reliance,Etc........................................... 64
Section 9.3 Lenders' Credit Decisions.................................................................. 65
Section 9.4 Indemnification............................................................................ 65
Section 9.5 Rights as Lender........................................................................... 65
Section 9.6 Sharing of Set-Offs and Other Payments..................................................... 66
Section 9.7 Investments................................................................................ 66
Section 9.8 Benefit of Article IX...................................................................... 66
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TABLE OF CONTENTS
(continued)
Page
Section 9.9 Resignation............................................................................. 67
Section 9.10 [Reserved.]............................................................................. 67
Section 9.11 Syndication Agent; Co-Documentation Agents; Arranger.................................... 67
ARTICLE X - Miscellaneous................................................................................. 68
Section 10.1 Waivers and Amendments; Acknowledgments................................................. 68
Section 10.2 Survival of Agreements; Cumulative Nature............................................... 69
Section 10.3 Notices................................................................................. 69
Section 10.4 Parties in Interest..................................................................... 70
Section 10.5 Governing Law; Submission to Process.................................................... 70
Section 10.6 Maximum Interest........................................................................ 70
Section 10.7 Termination; Limited Survival........................................................... 71
Section 10.8 Severability............................................................................ 71
Section 10.9 Counterparts............................................................................ 72
Section 10.10 WAIVER OF JURY TRIAL, PUNITIVE DAMAGES, ETC............................................. 72
Section 10.11 Assignments and Participations.......................................................... 72
Section 10.12 Confidentiality......................................................................... 74
Section 10.13 No Oral Agreements...................................................................... 75
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Schedules and Exhibits
Lender Schedule
Schedule 1 - Disclosure Schedule
Schedule 2 - Investment Guidelines
Exhibit A - Form of Note
Exhibit B - Request for Advances
Exhibit C - Rate Election
Exhibit D - Certificate Accompanying Financial Statements
Exhibit E - Form of Opinion of ▇▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P., counsel for the
Related Persons
Exhibit F - Agreement to be Bound
Exhibit G - Terms of Subordination
Exhibit H - Form of Guaranty
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CREDIT AGREEMENT
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THIS CREDIT AGREEMENT, dated as of December 28, 2001, by and among
SPINNAKER EXPLORATION COMPANY, L.L.C., a Delaware limited liability company
("Borrower"), TORONTO DOMINION (TEXAS), INC. ("TD") and such other various
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financial institutions as are or may become parties hereto, as lenders
(collectively, together with their respective successors and permitted assigns,
the "Lenders"), BANK OF AMERICA, N.A., as syndication agent (in such capacity
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together with its successors in such capacity, the "Syndication Agent"), CREDIT
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SUISSE FIRST BOSTON and BANK OF MONTREAL, as co-documentation agents (in such
capacity, the "Co-Documentation Agents") for the Lenders, TORONTO DOMINION
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(TEXAS), INC., as administrative agent for the Lenders (in such capacity
together with its successors in such capacity, the "Administrative Agent"), THE
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TORONTO-DOMINION BANK, as letter of credit issuing bank (in such capacity
together with its successors in such capacity, the "Issuer" or the "Issuing
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Bank"), and TD SECURITIES (USA) INC., as the arranger (the "Arranger").
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W I T N E S S E T H:
WHEREAS, the Borrower desires to enter into this Credit Agreement to
obtain Commitments (as hereinafter defined) from the Lenders pursuant to which
the Lenders shall make Loans ( as hereinafter defined) to the Borrower and the
Issuer shall issue Letters of Credit (as hereinafter defined) under the several
responsibilities of the Lenders for the account of the Borrower from time to
time, all under the terms and conditions contained herein;
WHEREAS, the Lenders and the Issuer are willing, on the terms and
subject to the conditions hereinafter set forth (including, without limitation,
Article IV), to enter into this Credit Agreement, to extend such Commitments and
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make such Loans to the Borrower and issue and participate in such Letters of
Credit for the account of the Borrower; and
WHEREAS, the proceeds of such Loans and Letters of Credit will be used
for general corporate purposes including working capital purposes of the
Borrower.
NOW, THEREFORE, in consideration of the mutual promises herein
contained and for other valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I - Definitions and References
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Section 1.1 Defined Terms. As used in this Agreement, each of the
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following terms has the meaning given in this Section 1.1 or in the sections and
subsections referred to below:
"Adjusted LIBOR Rate" means, with respect to each particular LIBOR Rate
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Portion and the associated LIBOR Rate and Reserve Percentage, the rate per annum
calculated by Administrative Agent (rounded upwards, if necessary, to the next
higher 1/100%) determined on a daily basis pursuant to the following formula:
Adjusted LIBOR Rate =
LIBOR Rate + LIBOR Spread
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100.0% - Reserve Percentage
"Affiliate" means, as to any Person, each other Person that directly or
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indirectly (through one or more intermediaries or otherwise) controls, is
controlled by, or is under common control with, such Person. A Person shall be
deemed to be "controlled by" any other Person if such other Person possesses,
directly or indirectly, power
(a) to vote 20% or more of the securities (on a fully diluted basis)
having ordinary voting power for the election of directors or managing general
partners; or
(b) to direct or cause the direction of the management and policies
of such Person whether by contract or otherwise.
"Administrative Agent" has the meaning given in the preamble.
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"Agreement" means, on any date, this Credit Agreement as originally in
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effect on the Effective Date and as thereafter from time to time amended,
supplemented, restated or otherwise modified.
"Arranger" has the meaning given in the preamble.
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"Base Rate" means, on any date and with respect to all Base Rate Loans,
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a fluctuating rate of interest per annum equal to (a) the higher of (i) the rate
of interest most recently announced by The Toronto-Dominion Bank at its New
York, New York office as its base rate for dollar advances made in the United
States or (ii) the Federal Funds Rate most recently determined by the
Administrative Agent plus 1/2% (0.5%) per annum, plus (b) the Base Rate Spread.
The Base Rate is not necessarily intended to be the lowest rate of interest
determined by The Toronto-Dominion Bank or any Lender in connection with
extensions of credit. Changes in the rate of interest on that portion of any
Loans maintained as Base Rate Loans will take effect simultaneously with each
change in the Base Rate. The Administrative Agent shall give notice to the
Borrower of changes in the Base Rate promptly upon receipt of notice of any such
change from The Toronto-Dominion Bank.
"Base Rate Loan" means any Loan which bears interest at the Base Rate.
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"Base Rate Portion" means that portion of the unpaid principal balance
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of the Loans which is not made up of LIBOR Rate Portions.
"Base Rate Spread" means, with respect to any Loan bearing interest at
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the Base Rate for any time prior to the Final Maturity Date, the applicable
margin set forth below under the caption "Base Rate Spread", determined by
reference to the percentage of the Borrowing Base that the sum of all Loans
outstanding plus all LC Obligations represent at that time.
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Percentage of Borrowing Base Rate Spread
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Base Usage
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* 75% 0.50%
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* 50% but ** 75% 0.25%
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* 25% but ** 50% 0.00%
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** 25% 0.00%
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"Borrower" has the meaning given in the preamble.
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"Borrower's Adjusted Consolidated Net Income" means for any period,
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Borrower's consolidated net income for such period, provided that there shall be
excluded from such net income (to the extent otherwise included therein) the
following: (a) the net income of any Person in which Borrower or any
consolidated Subsidiary of Borrower has an interest (which interest does not
cause the net income of such other Person to be consolidated with the net income
of Borrower in accordance with GAAP), except to the extent of the amount of
dividends or distributions actually paid in such period by such other Person to
the Borrower or to a consolidated Subsidiary of Borrower, as the case may be;
(b) the net income (but not loss) of any consolidated Subsidiary of Borrower 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,
law, rule or regulation applicable to such consolidated Subsidiary, or is
otherwise restricted or prohibited in each case determined in accordance with
GAAP; (c) any extraordinary gains or losses, including gains or losses
attributable to sales of property not in the ordinary course of business; and
(d) the cumulative effect of a change in accounting principles and any gains or
losses attributable to writeups or writedowns of assets to include non-cash
charges to meet any ceiling test writedowns.
"Borrowing Base" means, at any particular time, either the amount
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provided for in Section 2.12 or the amount determined by the Administrative
Agent in accordance with the provisions of Section 2.13, as reduced by Borrower
pursuant to Section 2.14 or as reduced pursuant to Section 2.10(e); provided,
however, that in no event shall the Borrowing Base ever exceed the amount equal
to the Maximum Loan Amount.
"Borrowing Base Deficiency" has the meaning given in Section 2.10.
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* means greater than
** means less than or equal to
3
"Business Day" means a day, other than a Saturday or Sunday, on which
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commercial banks are open for business with the public in Houston, Texas and New
York, New York. Any Business Day in any way relating to LIBOR Rate Portions
(such as the day on which an Interest Period begins or ends) means any Business
Day on which dealings in U.S. dollar deposits are carried on in the London
interbank market and on which commercial banks are open for domestic and
international business (including dealings in U.S. dollar deposits) in London,
England.
"Capitalized Lease Obligations" shall mean as to any Personal monetary
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obligations of such Person or any of its Subsidiaries under any leasing or
similar arrangement which, in accordance with GAAP, would be classified as
capitalized leases, and, for purposes of this Agreement and each other Loan
Document, the amount of such obligations shall be the capitalized amount
thereof, determined in accordance with GAAP.
"Change in Control" means the occurrence of any of the following: (a)
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Spinnaker Exploration Company and WP Spinnaker Holdings, Inc. shall cease to own
100% of the membership interest of the Borrower; (b) the sale, lease or
transfer, in one or a series of related transactions, of all or substantially
all of Borrower's assets to any Person or Group (as such term is used in Section
13(d)(3) of the Exchange Act); (c) the acquisition, directly or indirectly, by
any Person or Group (other than the Sponsors) of beneficial ownership (as
defined in Rule 13d-3 under the Exchange Act) of more than 50% of the aggregate
voting power of the voting stock of Spinnaker Exploration Company (for the
purposes of this definition, such other Person shall be deemed to beneficially
own any voting stock of a specified Person held by a parent Person, if such
other Person is the beneficial owner (as defined above) directly or indirectly,
of more than 35% of the voting power of the membership interests or similar
equity interests of such parent Person); or (d) individuals who at the Closing
Date constituted the Board of Directors of Spinnaker Exploration Company
(together with any new directors whose election by such Board of Directors or
whose nomination for election by the stockholders of Spinnaker Exploration
Company was approved by a vote of 662/3% of the directors of Spinnaker
Exploration Company then still in office who were either directors at the
Closing Date or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Board of
Directors of Spinnaker Exploration Company then in office.
"Change in Law" means (a) the adoption of any law, rule or regulation
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after the date of this Agreement, (b) any change in any law, rule or regulation
or in the interpretation or application thereof by any Governmental Authority
after the date of this Agreement or (c) compliance by any Lender or the Issuing
Bank (or, for purposes of Section 2.16(b), by any lending office of such Lender
or by such Lender's or the Issuing Bank's holding company, if any) with any
request, guideline or directive (whether or not having the force of law) of any
Governmental Authority made or issued after the date of this Agreement.
"Closing Date" means the date on which the conditions specified in
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Section 4.1 are satisfied (or waived in accordance with Section 10.1).
"Co-Documentation Agents" has the meaning given in the preface.
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4
"Commitment Fee Rate" means, for any time prior to the Final Maturity
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Date, a rate equal to the applicable margin set forth below under the caption
"Commitment Fee Rate", determined by reference to the percentage of the
Borrowing Base that the sum of all Loans outstanding plus all LC Obligations
represent at that time.
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Percentage of Borrowing Commitment Fee Rate
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Base Usage
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* 75% 0.500%
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* 50% but ** 75% 0.450%
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* 25% but ** 50% 0.375%
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** 25% 0.300%
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"Commitment" means, at any time prior to the Final Maturity Date and
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relative to any Lender, such Lender's obligation to make Loans pursuant to
Section 2.1 or participate in Letters of Credit pursuant to Section 3.3, as such
commitments may be increased or reduced from time to time pursuant to the terms
hereof; provided that at no time shall the Commitments of all Lenders exceed the
Borrowing Base.
"Consolidated" refers to the consolidation of any Person, in accordance
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with GAAP, with its properly consolidated subsidiaries. References herein to a
Person's consolidated financial statements, financial position, financial
condition, liabilities, etc. is to the consolidated financial statements,
financial position, financial condition, liabilities, etc. of such Person and
its properly consolidated subsidiaries.
"Default" means any Event of Default and any default, event or
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condition which would, with the giving of any requisite notices and the passage
of any requisite periods of time, constitute an Event of Default.
"Deficiency Margin" means (a) during any Deficiency Pay-off Period, 2%
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or (b) at any other time, zero.
"Deficiency Pay-off Period" means a period commencing on the date that
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a Borrowing Base Deficiency occurs and ending on the date on which no Borrowing
Base Deficiency exists.
"Determination Date" has the meaning given in Section 2.13.
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"Disclosure Report" means either a notice given by Borrower under
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Section 6.1(d) or a certificate given by Borrower's chief financial officer
under Section 6.1(b)(ii).
"Disclosure Schedule" means Schedule 1 hereto and the documents
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attached thereto or referred to therein.
"Domestic Office" with respect to the Administrative Agent or any
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Lender, means the office of the Administrative Agent or any Lender specified as
its "Domestic Office" on the
* means greater than
** means less than or equal to
5
signature pages hereto or such other office of the Administrative Agent or any
Lender as the Administrative Agent or any Lender may from time to time specify
to the Borrower and (in the case of a Lender) the Administrative Agent.
"Engineering Report" means the Initial Engineering Report and each
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engineering report delivered pursuant to Section 6.1(b)(iv).
"Environmental Laws" means all laws, rules, regulations, codes,
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ordinances, orders, decrees, judgments, injunctions, notices or binding
agreements issued, promulgated or entered into by any Governmental Authority,
relating in any way to the environment, preservation or reclamation of natural
resources, the management, release or threatened release of any Hazardous
Material or to health and safety matters.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
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amended from time to time, together with all rules and regulations promulgated
with respect thereto.
"ERISA Plan" means any employee pension benefit plan subject to Title
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IV of ERISA maintained by any Related Person or any Affiliate thereof with
respect to which any Related Person has a fixed or contingent liability.
"Evaluation Date" means each of the following:
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(a) Each date which either Borrower or Administrative Agent,
at its respective options, specifies as a date as of which the
Borrowing Base is to be redetermined, provided that neither Borrower
nor Majority Lenders shall be entitled to request any such
redetermination more than once during any Fiscal Year period;
(b) Each date which the Administrative Agent pursuant to
Section 2.13(e) or Section 6.2(d)(iii), at its option, specifies as a
date as of which the Borrowing Base is to be redetermined; and
(c) April 30 and September 30 of each Fiscal Year occurring
prior to the Final Maturity Date, beginning April 30, 2002.
"Event of Default" has the meaning given in Section 8.1.
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"Excluded Taxes" means, with respect to the Administrative Agent, any
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Lender, the Issuing Bank or any other recipient of any payment to be made by or
on account of any obligation of the Borrower hereunder, (a) income or franchise
taxes imposed on (or measured by) its net income by the United States of
America, or by the jurisdiction under the laws of which such recipient is
organized or in which its principal office is located or, in the case of any
Lender, in which its applicable lending office is located, (b) any branch
profits taxes imposed by the United States of America or any similar tax imposed
by any other jurisdiction in which the Borrower is located, (c) any jurisdiction
(or political subdivision thereof) in which any recipient of any payment to be
made by or on account of any obligation of the Borrower hereunder is presently
doing business in which taxes are imposed solely as a result of doing business
in such jurisdiction and (d) in the case of a Foreign Lender (other than an
assignee pursuant to a request by the Borrower under Section 2.19(b) unless such
assignee so agrees in writing), any
6
withholding tax that is imposed on amounts payable to such Foreign Lender at the
time such Foreign Lender becomes a party to this Agreement (or designates a new
lending office) or is attributable to such Foreign Lender's failure to comply
with Section 2.18(e), except to the extent that such Foreign Lender (or its
assignor, if any) was entitled, at the time of designation of a new lending
office (or assignment), to receive additional amounts from the Borrower with
respect to such withholding tax pursuant to Section 2.18(a).
"Federal Funds Rate" means, for any period, a fluctuating interest rate
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per annum equal for each day during such period to the weighted average of the
rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day which is a Business Day, the average of the quotations for such day on such
transactions received by the Administrative Agent from three Federal funds
brokers of recognized standing selected by it. For purposes of this Agreement,
any change in the Base Rate due to a change in the Federal Funds Rate shall be
effective on the effective date of such change in the Federal Funds Rate. If the
Administrative Agent shall have determined (which determination shall be
conclusive and binding, absent manifest error) that it is unable to ascertain
the Federal Funds Rate for any reason, including, without limitation, the
inability or failure of the Administrative Agent to obtain sufficient bids or
publications in accordance with the terms hereof, the Base Rate shall be the
rate described in clause (i) of the definition thereof until the circumstances
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giving rise to such inability no longer exist.
"Final Maturity Date" means December 28, 2004.
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"Fiscal Quarter" means a three-month period ending on March 31, June 30,
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September 30 or December 31 of any year.
"Fiscal Year" means a twelve-month period ending on December 31 of any
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year.
"Foreign Lender" means any Lender that is organized under the laws of a
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jurisdiction other than that in which the Borrower is located. For purposes of
this definition, the United States of America, each State thereof and the
District of Columbia shall be deemed to constitute a single jurisdiction.
"GAAP" means those generally accepted accounting principles and
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practices recognized as such by the Financial Accounting Standards Board (or any
generally recognized successor). Except as otherwise expressly provided herein,
all terms of an accounting or financial nature shall be construed in accordance
with GAAP, as in effect from time to time; provided, however, that if GAAP shall
change after the Closing Date in a manner affecting any of the covenants set
forth herein, then, at the request of Borrower or the Administrative Agent, the
parties shall negotiate in good faith in an effort to agree upon appropriate
adjustments to such covenants and, following the execution of an amendment to
the Loan Documents giving effect to any such agreement, such accounting or
financial terms shall for purposes of determining compliance with such covenants
be construed in accordance with GAAP as so changed (it being understood that
such terms shall be construed in accordance with GAAP as in effect prior to such
change at all times following any such request and before the execution of any
such amendment).
7
"Governmental Authority" means the government of the United States of
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America, any other nation or any political subdivision thereof, whether state or
local, and any agency, authority, instrumentality, regulatory body, court,
central bank or other entity exercising executive, legislative, judicial,
taxing, regulatory or administrative powers or functions of or pertaining to
government.
"Guarantee" of or by any Person shall mean any obligation, contingent or
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otherwise, of such Person guaranteeing or having the economic effect of
guaranteeing any Indebtedness of any other Person (the "primary obligor") in any
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manner, whether directly or indirectly, and including any obligation of such
Person, direct or indirect, (a) to purchase or pay (or advance or supply funds
for the purchase or payment of) such Indebtedness or to purchase (or to advance
or supply funds for the purchase of) any security for the payment of such
Indebtedness, (b) to purchase or lease property, securities or services for the
purpose of assuring the owner of such Indebtedness of the payment of such
Indebtedness or (c) to maintain working capital, equity capital or any other
financial statement condition or liquidity of the primary obligor so as to
enable the primary obligor to pay such Indebtedness; provided, however, that the
term "Guarantee" shall not include endorsements for collection or deposit in the
ordinary course of business.
"Guarantor" means Spinnaker Exploration Company, a Delaware corporation, WP
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Spinnaker Holdings, Inc., a Delaware corporation, or any Subsidiary of Borrower
which now or hereafter executes and delivers a guaranty to Administrative Agent
pursuant to Section 7.5.
"Guaranty" means any guaranty executed and delivered pursuant to Section
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4.1(g) or Section 7.5 by any Guarantor substantially in the form of Exhibit H
hereto with appropriate deletions and insertions acceptable to Administrative
Agent, as amended, supplemented, restated or otherwise modified from time to
time.
"Hazardous Materials" means all explosive or radioactive substances or
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wastes and all hazardous or toxic substances, wastes or other pollutants,
including petroleum or petroleum distillates, asbestos or asbestos containing
materials, polychlorinated biphenyls, radon gas, infectious or medical wastes
and all other substances or wastes of any nature regulated pursuant to any
Environmental Law.
"Hedging Agreement" shall mean any interest rate protection agreement,
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foreign currency exchange agreement, commodity price protection agreement or
other interest or currency exchange rate or commodity price hedging arrangement.
"Highest Lawful Rate" has the meaning given to it in Section 10.6.
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"Indebtedness" of any Person shall mean, without duplication, (a) all
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obligations of such Person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, (c) all obligations of such Person
upon which interest charges are customarily paid, (d) all obligations of such
Person under conditional sale or other title retention agreements relating to
property or assets purchased by such Person, (e) all obligations of such Person
issued or assumed as the deferred purchase price of property or services
(excluding trade accounts payable and accrued obligations incurred in the
ordinary course of business), (f) all Indebtedness of others secured by
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(or for which the holder of such Indebtedness has an existing right, contingent
or otherwise, to be secured by) any Lien on property owned or acquired by such
Person, whether or not the obligations secured thereby have been assumed, (g)
all Guarantees by such Person of Indebtedness of others, (h) all Capital Lease
Obligations of such Person, (i) [reserved], (j) all obligations of such Person
as an account party in respect of letters of credit and bankers' acceptances,
(k) 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 (1) obligations to deliver goods or services including hydrocarbons in
consideration of advance payments other than (i) obligations to sell or purchase
hydrocarbons, (ii) obligations with pipelines for firm transportation of natural
gas of such Person, and (iii) oil and gas balancing agreements, take or pay
agreements or other prepayment obligations in respect of hydrocarbons, in each
case, incurred in the ordinary course of business and which are customary in the
oil and gas industry. The Indebtedness of any Person shall include the
Indebtedness of any partnership in which such Person is a general partner.
"Indemnified Taxes" means Taxes other than Excluded Taxes.
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"Initial Engineering Report" means the engineering report concerning Oil
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and Gas Properties of Related Persons dated June 30, 2001, prepared by ▇▇▇▇▇
▇▇▇▇▇ Company, covering all existing proved reserves of Borrower.
"Initial Financial Statements" means, as to the Related Persons, the
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audited balance sheet, income statement and statement of cash flow of Spinnaker
Exploration Company for the fiscal year ended December 31, 2000 and the balance
sheet, income statement and statement of cash flow of Spinnaker Exploration
Company for the fiscal quarter ended September 31, 2001.
"Interest Payment Date" means (a) with respect to any Base Rate Loan, the
---------------------
last day of each Fiscal Quarter and (b) with respect to any LIBOR Loan, the last
day of the Interest Period applicable to such Loan and, in the case of an
Interest Period of more than three months' duration, each day prior to the last
day of such Interest Period that occurs at intervals of three months' duration
after the first day of such Interest Period.
"Interest Period" means, with respect to each particular LIBOR Rate Portion
---------------
of a Loan, a period of 1, 2, 3 or 6 months, as specified in the Rate Election
applicable thereto, beginning on and including the date specified in such Rate
Election (which must be a Business Day), and ending on but not including the
same day of the month as the day on which it began (e.g., a period beginning on
the third day of one month shall end on but not include the third day of another
month), provided that each Interest Period which would otherwise end on a day
which is not a Business Day shall end on the next succeeding Business Day
(unless such next succeeding Business Day is the first Business Day of a
calendar month, in which case such Interest Period shall end on the immediately
preceding Business Day). No Interest Period may be elected which would extend
past the date on which the associated Note is due and payable in full.
"Issuing Bank" or "Issuer" is defined in the preamble.
------------ ------
9
"Late Payment Rate" means the sum of the Base Rate from time to time in
-----------------
effect plus the Deficiency Margin plus the Base Rate Spread plus two percent
---- ---- ----
(2%) per annum, but in no event to exceed the Highest Lawful Rate.
"LC Application" means any application for a letter of credit hereafter
--------------
made by Borrower to Issuing Bank.
"LC Collateral" has the meaning given in Section 3.6.
-------------
"LC Conditions" has the meaning given in Section 3.1.
-------------
"LC Disbursement" means a payment made by the Issuing Bank pursuant to a
---------------
Letter of Credit.
"LC Obligations" means at the time in question, the sum of the Matured LC
--------------
Obligations plus the Maximum Drawing Amount.
"Lenders" has the meaning given in the preamble.
-------
"Lender Schedule" shall mean the Lender Schedule attached hereto.
---------------
"Letter of Credit" means any standby or commercial letter of credit issued
----------------
by Issuing Bank at the application of Borrower, which may be issued for the
account of any Related Person, provided, any and all reimbursement obligations,
fees and other amounts payable in connection with any and all such Letters of
Credit shall be Obligations of Borrower as set forth in Article III.
"LIBOR Rate" shall mean, with respect to any LIBOR Rate Portion within a
----------
LIBOR Tranche and with respect to the related Interest Period, the rate per
annum determined by the Administrative Agent, at approximately 11:00 a.m.
(London time) on the date which is two Business Days prior to the beginning of
the relevant Interest Period by reference to the British Bankers' Association
Interest Settlement Rate for deposits in U.S. dollars (as set forth by any
service which has been nominated by the British Bankers' Association as an
authorized information vendor for the purpose of displaying such rates) for a
period equal to such Interest Period, provided that, to the extent that an
interest rate is not ascertainable pursuant to the foregoing provision of this
definition, the "LIBOR Rate" shall be the interest rate per annum, determined by
the Administrative Agent to be the average of the rates per annum at which
deposits in U.S. dollars are offered for such relevant Interest Period to major
banks in the London interbank market in London, England by the Administrative
Agent at approximately 11:00 a.m. (London time) on the date which is two
Business Days prior to the beginning of such Interest Period.
"LIBOR Rate Loan" means any Loan which bears interest at the Adjusted LIBOR
---------------
Rate.
"LIBOR Rate Portion" means any portion of the unpaid principal balance of a
------------------
Loan which Borrower designates as such in a Rate Election.
"LIBOR Spread" means with respect to any Loan bearing interest at the LIBOR
------------
Rate for any time prior to the Final Maturity Date, the applicable margin set
forth below under the caption
10
"LIBOR Rate Spread," determined by reference to the percentage of the Borrowing
Base that the sum of all Loans outstanding plus all LC Obligations represents at
that time.
===================================================
Percentage of LIBOR Rate
------------- ----------
Borrowing Base Spread
-------------- ------
Usage
-----
---------------------------------------------------
* 75% 2.00%
---------------------------------------------------
* 50% but ** 75 1.75%
---------------------------------------------------
* 25% but ** 50 1.50%
---------------------------------------------------
** 25% 1.25%
===================================================
"LIBOR Tranche" has the meaning given in Section 2.6.
-------------
"Lien" means, with respect to any property or assets, any right or interest
----
therein of a creditor to secure Indebtedness owed to such creditor or any other
arrangement with such creditor which provides for the payment of such
Indebtedness out of such property or assets or which allows him to have such
Indebtedness satisfied out of such property or assets prior to the general
creditors of any owner thereof, including any lien, mortgage, security interest,
pledge, deposit, production payment, rights of a vendor under any title
retention or conditional sale agreement or lease substantially equivalent
thereto, tax lien, mechanic's or materialman's lien, or any other charge or
encumbrance for security purposes, whether arising by law or agreement or
otherwise, but excluding any right of offset which arises without agreement in
the ordinary course of business. "Lien" also means any filed financing
----
statement, any registration of a pledge (such as with an issuer of
uncertificated securities), or any other arrangement or action which would serve
to perfect a Lien described in the preceding sentence, regardless of whether
such financing statement is filed, such registration is made, or such
arrangement or action is undertaken before or after such Lien exists.
"Loan" has the meaning given in Section 2.1(a).
----
"Loan Documents" means this Agreement, the Notes, the LC Applications, the
--------------
Letters of Credit, the Guaranties and all other written agreements,
certificates, documents, instruments and writings at any time delivered in
connection herewith or therewith and any Hedging Agreement between the Borrower
and any Lender or any Affiliate of any Lender now or hereafter existing.
"Majority Lenders" means, at any time, Lenders holding at least 66 2/3% of
----------------
the unpaid principal amounts outstanding under the Loans or, if no such
principal amounts are then outstanding, Lenders having at least 66 2/3% of the
total Commitments.
"▇▇▇▇ to Market Exposure" means the net amount, from time to time, that
-----------------------
would be required to be paid by the Borrower to terminate all outstanding
transactions then open under Hedging Agreements between the Borrower and any
other Person.
"Material Adverse Effect" means any material adverse effect on (a) the
-----------------------
financial condition, business, properties, assets or operations of the Related
Persons, taken as a whole, or
* means greater than
** means less than or equal to
11
(b) the ability of any Related Person to perform its respective obligations
under any Loan Document to which it is a party on a timely basis or (c) the
ability of Administrative Agent or any Lender to enforce the Obligations of any
Related Person under the Loan Documents; provided, however, that declines in oil
and gas, energy and/or commodities prices shall not constitute a Material
Adverse Effect.
"Matured LC Obligations" means all amounts paid by Issuing Bank on drafts
----------------------
or demands for payment drawn or made under or purported to be under any Letter
of Credit (or under or in connection with any LC Application) which have not
been repaid to Issuing Bank (with the proceeds of a Loan or otherwise).
"Maximum Drawing Amount" means at the time in question the sum of the
----------------------
maximum amounts which Issuing Bank might then or thereafter be called upon to
advance under all Letters of Credit then outstanding.
"Maximum Loan Amount" means the amount of $200,000,000.
-------------------
"Net Proceeds of Debt" means the aggregate amount of all cash proceeds
--------------------
received by or paid to or for the account of any Related Person from time to
time (whether as initial consideration or through payment or disposition of
deferred consideration) from the issuance of promissory notes or other
instruments or debt securities (other than Indebtedness permitted by Section
6.2(a)) deducting therefrom only (without duplication) (a) reasonable
out-of-pocket costs and fees, and (b) the amount of taxes payable in connection
with or as a result of such transaction, in each case to the extent, but only to
the extent that the amounts so deducted are, at the time of receipt of such
cash, actually paid to a Person that is not an Affiliate of such Related Person
and are properly attributable to such transaction.
"Net Proceeds of Equity" means an amount equal to the aggregate amount of
----------------------
all cash proceeds received by or paid to or for the account of any Related
Person thereof (other than from another Related Person) from time to time
(whether as initial consideration or through payment or disposition of deferred
consideration) from the sale of any capital stock or other ownership or profit
interest, any securities convertible into or exchangeable for capital stock or
other ownership or profit interest or any warrants, rights, options or other
securities to acquire capital stock or other ownership or profit interest in any
Related Person (or any other Person which directly or indirectly owns 100% of
Borrower) deducting therefrom only (without duplication) (a) reasonable
out-of-pocket costs and fees, and (b) the amount of taxes payable in connection
with or as a result of such transaction, in each case to the extent, but only to
the extent, that the amounts so deducted are, at the time of receipt of such
cash, actually paid to a Person that is not an Affiliate of such Related Person
and are properly attributable to such transaction.
"Net Sales Proceeds" means, with respect to any sale, lease, transfer or
------------------
other disposition of any asset by any Related Person, the aggregate amount of
cash received by or paid to or for the account of any such Related Person from
time to time (whether as initial consideration or through payment or disposition
of deferred consideration) by or on behalf of such Person in connection with
such transaction after deducting therefrom only (without duplication) (a)
reasonable out-of-pocket costs and fees, (b) the amount of taxes payable in
connection with or as a result of such reaction and (c) the amount of any
Indebtedness permitted by Section 6.2(a)
12
hereof secured by a Lien on such asset permitted by Section 6.2(b) hereof that,
by the terms of the agreement or instrument governing such Indebtedness, is
required to be repaid or may be prepaid upon such disposition, in each case to
the extent, but only to the extent, that the amounts so deducted are, at the
time of receipt of such cash, actually paid to a Person that is not an Affiliate
of such Related Person and are properly attributable to such transaction or to
the asset that is the subject thereof.
"Note" has the meaning given in Section 2.1(c) and also means all other
----
promissory notes accepted from time to time in substitution therefor or renewal
thereof.
"Obligations" means all Indebtedness from time to time owing by any Related
-----------
Person to Administrative Agent, any Lender or any Affiliate of any Lender under
or pursuant to any of the Loan Documents, including all LC Obligations.
"Obligation" means any part of the Obligations.
----------
"Oil and Gas Properties" shall mean all oil, gas and mineral leasehold
----------------------
interests, fee interests, overriding royalty interests, mineral interests,
royalty interests, net profits interests, oil payments, production payments,
carried interests and any and all other interests in hydrocarbons, whether any
of the same be real or personal, now owned or hereafter acquired by the Borrower
or its Subsidiaries, as the case may be.
"Other Taxes" means any and all present or future stamp or documentary
-----------
taxes or any other excise or property taxes, charges or similar levies arising
from any payment made hereunder or from the execution, delivery or enforcement
of, or otherwise with respect to, this Agreement.
"Percentage Share" means, with respect to any Lender (a) when used in
----------------
Sections 2.1, 2.2, 2.6 or 3.3, in any Request for Advance or when no Loans are
outstanding hereunder, the percentage set forth opposite such Lender's name on
the Lender Schedule attached hereto or as otherwise set forth in any assignment
agreement, and (b) when used otherwise, the percentage obtained by dividing (i)
the unpaid principal balance of such Lender's Loans at the time in question plus
the Matured LC Obligations which such Lender has funded pursuant to Section
3.3(c) plus the portion of the Maximum Drawing Amount which such Lender might be
obligated to fund under Section 3.3(c), by (ii) the sum of the aggregate unpaid
principal balance of all Loans at such time plus the aggregate amount of LC
Obligations outstanding at such time.
"Permitted Investments" means investments:
---------------------
(a) in open market commercial paper, maturing within 270 days after
acquisition thereof, which has the highest or second highest credit rating
given by either Rating Agency;
(b) in marketable obligations, maturing within 12 months after
acquisition thereof, issued or unconditionally guaranteed by the United
States of America or an instrumentality or agency thereof and entitled to
the full faith and credit of the United States of America;
(c) in demand deposits, and time deposits (including certificates of
deposit) maturing within 12 months from the date of deposit thereof, with
any office of any
13
Lender or with a domestic office of any national or state bank or trust
company which is organized under the laws of the United States of America
or any state therein, which has capital, surplus and undivided profits of
at least $500,000,000, and whose certificates of deposit have at least the
third highest credit rating given by either Rating Agency;
(d) in money market funds as defined in paragraphs (c)(2) through (4)
of Rule 2a-7 of the Investment Company Act; and
(e) investments pursuant to investment advisory agreements that meet
the investment guidelines set forth on Schedule 2.
"Person" means an individual, corporation, partnership, limited liability
------
company, association, joint stock company, trust or trustee thereof, estate or
executor thereof, unincorporated organization or joint venture, court or
governmental unit or any agency or subdivision thereof, or any other legally
recognizable entity.
"PGS" means Petroleum Geo-Services ASA, a Norwegian joint-stock company.
---
"PGS Data Contract" means that certain Amended and Restated Data
-----------------
Contribution Agreement dated January 6, 1998, by PGS, Seismic Energy Holdings,
Inc., Spinnaker Exploration Company and the Borrower, as amended, modified or
restated from time to time.
"Prohibited Lien" means any Lien not expressly allowed under Section
---------------
6.2(b).
"Rate Election" has the meaning given in Section 2.6.
-------------
"Rating Agency" means either Standard & Poor's Ratings Group (a division of
-------------
McGraw Hill, Inc.) or ▇▇▇▇▇'▇ Investors Service, Inc., or their respective
successors.
"Regulation D" means Regulation D of the Board of Governors of the Federal
------------
Reserve System as from time to time in effect.
"Related Person" means any of Borrower, each Subsidiary of Borrower and
--------------
each Guarantor.
"Request for Advance" means a written or telephonic request, or a written
-------------------
confirmation, made by Borrower which meets the requirements of Section 2.4.
"Required Borrowing Base Lenders" means Lenders having at least 85% of the
-------------------------------
unpaid principal amounts outstanding under the Loans or, if no such principal
amounts are then outstanding, Lenders having at least 85% of the total
Commitments.
"Reserve Percentage" means, on any day with respect to each particular
------------------
LIBOR Rate Portion in a Tranche, the maximum reserve requirement as determined
by Administrative Agent (including without limitation any basic, supplemental,
marginal, emergency or similar reserves and taking into account any transitional
adjustments or other scheduled changes in reserve requirements), expressed as a
percentage, which would then apply under Regulation D with respect to
"Eurocurrency liabilities" (as such term is defined in Regulation D) equal in
amount to
14
each Lender's LIBOR Rate Portion in such Tranche, were such Lender to have any
such "Eurocurrency liabilities". If such reserve requirement shall change after
the date hereof, the Reserve Percentage shall be automatically increased or
decreased, as the case may be, from time to time as of the effective time of
each such change in such reserve requirement.
"Sale" has the meaning given in Section 2.10(e).
----
"Second Amended and Restated Credit Agreement" means that certain Second
--------------------------------------------
Amended and Restated Credit Agreement dated as of July 20, 2000, by and among
the Borrower, and certain financial institutions, as lenders, the Administrative
Agent, Credit Suisse First Boston, as documentation agent, and the "Arrangers"
thereto, as amended.
"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).
"Spinnaker Exploration Company" shall mean Spinnaker Exploration Company, a
-----------------------------
Delaware corporation, and its successors and permitted assigns.
"Sponsors" means PGS and Warburg, together with any successors thereof.
--------
"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 the
happening of any contingency) is at the time directly or indirectly owned or
controlled by a Person or one or more of its Subsidiaries or by a Person and one
or more of its Subsidiaries and (ii) any Special Entity. Unless otherwise
indicated herein or the context otherwise requires, each reference to the term
"Subsidiary" shall mean a Subsidiary of the Borrower.
"Syndication Agent" has the meaning given in the preamble.
-----------------
"Systems" has the meaning given to it in Section 5.1(s).
-------
"Tangible Net Worth" means the consolidated net worth of the Borrower and
------------------
its Subsidiaries after subtracting therefrom the aggregate amount of any
intangible assets of the Borrower and its Subsidiaries classified as such under
GAAP, including goodwill, franchises, licenses, patents, trademarks, trade
names, copyrights, service marks and brand names.
"Taxes" means any and all present or future taxes, levies, imposts, duties,
-----
deductions, charges or withholdings imposed by any Governmental Authority.
15
"TD" has the meaning given to it in the preface.
--
"Termination Event" means (a) the occurrence with respect to any ERISA Plan
-----------------
of (i) a reportable event described in Sections 4043(b)(5) or (6) of ERISA or
(ii) any other reportable event described in Section 4043(b) of ERISA other than
a reportable event not subject to the provision for 30-day notice to the Pension
Benefit Guaranty Corporation pursuant to a waiver by such corporation under
Section 4043(a) of ERISA, or (b) the withdrawal of any Related Person or of any
Affiliate of any Related Person from an ERISA Plan during a plan year in which
it was a "substantial employer" as defined in Section 4001(a)(2) of ERISA, or
(c) the filing of a notice of intent to terminate any ERISA Plan or the
treatment of any ERISA Plan amendment as a termination under Section 4041 of
ERISA, or (d) the institution of proceedings to terminate any ERISA Plan by the
Pension Benefit Guaranty Corporation under Section 4042 of ERISA, or (e) 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
ERISA Plan.
"Warburg" means, collectively, Warburg, ▇▇▇▇▇▇ Ventures, L.P., a Delaware
-------
limited partnership, and WPV, Inc., a Delaware corporation.
Section 1.2 Exhibits and Schedules; Additional Definitions. All Exhibits
----------------------------------------------
and Schedules attached to this Agreement are a part hereof for all purposes.
Section 1.3 Amendment of Defined Instruments. Unless the context otherwise
--------------------------------
requires or unless otherwise provided herein the terms defined in this Agreement
which refer to a particular agreement, instrument or document or related
exhibits, schedules, appendices or similar attachments thereto also refer to and
include all renewals, extensions, modifications, amendments and restatements of
such agreement, instrument or document or related exhibits, schedules,
appendices or similar attachments thereto, provided that nothing contained in
this section shall be construed to authorize any such renewal, extension,
modification, amendment or restatement.
Section 1.4 References and Titles. All references in this Agreement to
---------------------
Exhibits, Schedules, articles, sections, subsections and other subdivisions
refer to the Exhibits, Schedules, articles, sections, subsections and other
subdivisions of this Agreement unless expressly provided otherwise. Titles
appearing at the beginning of any subdivisions are for convenience only and do
not constitute any part of such subdivisions and shall be disregarded in
construing the language contained in such subdivisions. The words "this
Agreement", "this instrument", "herein", "hereof', "hereby", "hereunder" and
words of similar import refer to this Agreement as a whole and not to any
particular subdivision unless expressly so limited. The phrases "this section"
and "this subsection" and similar phrases refer only to the sections or
subsections hereof in which such phrases occur. The word "or" is not exclusive,
and the word "including" (in its various forms) means "including without
limitation". Pronouns in masculine, feminine and neuter genders shall be
construed to include any other gender, and words in the singular form shall be
construed to include the plural and vice versa, unless the context otherwise
requires. Any reference to any Person shall be construed to include such
Person's successors and assigns, provided that such successors and assigns are
permitted pursuant to the Loan Documents.
16
Section 1.5 Calculations and Determinations. All calculations under the
-------------------------------
Loan Documents of interest chargeable with respect to LIBOR Rate Portions shall
be made on the basis of actual days elapsed (including the first day but
excluding the last) and a year of 360 days. All other calculations of interest
made under the Loan Documents and all fees shall be made on the basis of actual
days elapsed (including the first day but excluding the last) and a year of 365
or 366 days, as appropriate. Unless otherwise expressly provided herein or
unless Majority Lenders otherwise consent all financial statements and reports
furnished to Administrative Agent or any Lender hereunder shall be prepared and
all financial computations and determinations pursuant hereto shall be made in
accordance with GAAP.
17
ARTICLE II - The Loans
---------
Section 2.1 Loans. Subject to the terms and conditions hereof, each Lender
-----
agrees to make loans and advances to Borrower as set forth below:
(a) Commitment to Make Loans. Upon request from time to time prior to the
------------------------
Final Maturity Date, each Lender severally agrees to make revolving loans to the
Borrower (such Lender's "Loans") so long as (a) each Loan by such Lender does
-----
not exceed such Lender's Percentage Share of the aggregate amount of Loans then
requested from all Lenders, (b) the sum of (i) the aggregate amount of such
Lender's Loans outstanding at any time plus (ii) the Maximum Drawing Amount for
which such Lender is liable to purchase participations under Section 3.3 (c)
plus (iii) the Matured LC Obligations which have been funded by such Lender
under such section and not repaid plus (iv) such Lender's Percentage Share of
all Indebtedness incurred under Section 6.2(a)(vi) hereof does not exceed such
Lender's Percentage Share of the Borrowing Base then outstanding and (c) the
aggregate amount of all Loans outstanding plus all LC Obligations plus all
Indebtedness incurred under Section 6.2(a)(vi) hereof does not exceed the
Borrowing Base then outstanding. The aggregate amount of all Loans requested of
all Lenders in any Request for Advance must be greater than or equal to
$1,000,000 (or a higher integral multiple of $500,000) or, subject to the
$1,000,000 minimum aggregate amount applicable to any LIBOR Tranche in any Rate
Election, may equal the unadvanced portion of the Borrowing Base or an amount
required to finance the reimbursement of an LC Disbursement as contemplated by
Section 3.3. Subject to provisions of this Agreement, the Loans may be prepaid
and reborrowed prior to the Final Maturity Date.
(b) [Reserved].
(c) Notes. The obligation of Borrower to repay to each Lender the aggregate
-----
amount of all Loans made by such Lender, together with interest accruing in
connection therewith, shall be evidenced by a single promissory note (such
Lender's "Note") made by Borrower payable to the order of such Lender in the
----
form of Exhibit A with appropriate insertions. The amount of principal owing on
any Lender's Note at any given time shall be the aggregate amount of all Loans
theretofore made by such Lender minus all payments of principal theretofore
received by such Lender on such Note. Interest on each Note shall accrue and be
due and payable as provided herein and therein. The entire unpaid principal
balance of the Loans and all interest accrued thereon shall be due and payable
in full on the Final Maturity Date.
Section 2.2 [Reserved].
--------
Section 2.3 [Reserved].
--------
Section 2.4 Requests for Loans. Borrower must give to Administrative Agent
------------------
not later than 11:00 am., Central time, at least one Business Day's prior
written notice of any requested Loans which shall bear interest at the Base Rate
and not later than 11:00 a.m., Central time, at least three Business Day's prior
written notice of any requested Loans which shall bear interest at the Adjusted
LIBOR Rate, after which Administrative Agent shall give each Lender prompt
written notice thereof. Each such written request must be made in the form and
substance of the "Request for Advances" attached hereto as Exhibit B, duly
completed. If all conditions
18
precedent to such Loans have been met, each Lender will not later than 12:00
noon, Central time, on the date requested promptly remit to Administrative Agent
at Administrative Agent's office at the address set forth below its signature or
at such other address as specified in writing to the Administrative Agent, the
amount of such Lender's Loans in immediately available funds, and upon receipt
of such funds, unless to its actual knowledge any conditions precedent to such
Loans have been neither met nor waived as provided herein, Administrative Agent
shall promptly make the Loans available to Borrower in immediately available
funds. Each Request for Loans shall be irrevocable and binding on Borrower.
Unless Administrative Agent shall have received prompt written notice from a
Lender that such Lender will not make available to Administrative Agent such
Lender's Loans, Administrative Agent may in its discretion assume that such
Lender has made such Loans available to Administrative Agent in accordance with
this section and Administrative Agent may if it chooses, in reliance upon such
assumption, make such Loan available to Borrower. If and to the extent such
Lender shall not so make its Loan available to Administrative Agent, such Lender
and Borrower severally agree to pay or repay to Administrative Agent within two
Business Days after demand the amount of such Loan together with interest
thereon, for each day from the date such amount is made available to Borrower
until the date such amount is paid or repaid to Administrative Agent, to be
calculated as to such Lender at the Federal Funds Rate, and to be calculated as
to Borrower at the interest rate applicable at the time to the other Loans made
on such date. If any Lender fails to make such payment to Administrative Agent
within such two Business Day period, such Lender shall in addition to such
amount pay interest thereon, for each day from the date such Loan is made
available to Borrower until the date such amount is paid or repaid to
Administrative Agent, at the interest rate applicable at the time to the other
Loans made on such date. The failure of any Lender to make any Loan to be made
by it hereunder shall not relieve any other Lender of its obligation hereunder,
if any, to make its Loan, but no Lender shall be responsible for the failure of
any other Lender to make any Loan to be made by such other Lender.
Section 2.5 Use of Proceeds. Borrower shall use all funds from Loans for
---------------
general corporate purposes in its existing lines of business (which include the
exploration, operation and development of Oil and Gas Properties) and
acquisition of oil and gas reserves. In no event shall the funds from any Loan
or Letter of Credit be used directly or indirectly by any Person for personal,
family, household or agricultural purposes or for the purpose, whether
immediate, incidental or ultimate, of purchasing, acquiring or carrying any
"margin stock" or any "margin" securities; (as such terms are defined
respectively in Regulation S, G, U and Regulation X promulgated by the Board of
Governors of the Federal Reserve System) or to extend credit to others directly
or indirectly for the purpose of purchasing or carrying any such margin stock or
margin securities. Borrower represents and warrants to Lenders that Borrower is
not engaged principally, or as one of Borrower's important activities, in the
business of extending credit to others for the purpose of purchasing or carrying
such margin stock or margin securities.
Section 2.6 Rate Elections: Interest Rates.
------------------------------
(a) Borrower may from time to time designate all or any portions of the
Loans (including any yet to be made Loans which are to be made prior to or at
the beginning of the designated Interest Period but excluding any portions of
the Loans which are required to be repaid prior to the end of the designated
Interest Period) as a "LIBOR Tranche", which term refers to a set of LIBOR Rate
Portions with identical Interest Periods and with each Lender
19
participating in such LIBOR Tranche in accordance with its Percentage Share.
Borrower may make no such election during the continuance of a Default and
Borrower may make such an election with respect to already existing LIBOR Rate
Portions only if such election will take effect at or after the termination of
the Interest Period applicable thereto. Each election by Borrower of a LIBOR
Tranche shall:
(i) Be made in writing in the form and substance of the "Rate
Election" attached hereto as Exhibit C, duly completed;
(ii) Specify the aggregate amount of the Loans which Borrower desires
to designate as such LIBOR Tranche, the first day of the Interest Period
which is to apply thereto, and the length of such Interest Period; and
(iii) Be received by Administrative Agent not later than 11:00 a.m.,
Central time, on the third Business Day preceding the first day of the
specified Interest Period.
Promptly after receiving any such election (a "Rate Election" ) which meets the
-------------
requirements of this section, Administrative Agent shall notify each Lender
thereof. Each Rate Election shall be irrevocable. Borrower may make no Rate
Election which does not specify an Interest Period complying with the definition
of "Interest Period" in Section 1.1, and the aggregate amount of the LIBOR
Tranche elected in any Rate Election must be $1,000,000 or a higher integral
multiple of $500,000. Upon the termination of each Interest Period the portion
of each Loan within the related LIBOR Tranche shall, unless the subject of a new
Rate Election then taking effect, automatically become a part of the Base Rate
Portion of such Loan and become subject to all provisions of the Loan Documents
governing such Base Rate Portion. Borrower shall have no more than nine (9)
LIBOR Tranches in effect at any time; provided, however, that for purposes of
calculating such limitation, any LIBOR Tranche as to which all Lenders have not
participated shall not be included.
(b) Accrued interest on each Loan shall be payable as follows: (i)
interest on Base Rate Loans shall accrue at a rate per annum equal to the Base
Rate from time to time in effect plus the Base Rate Spread plus the Deficiency
---- ----
Spread, but in no event to exceed the Highest Lawful Rate, (ii) interest on
LIBOR Rate Loans shall accrue at a rate per annum equal to the Adjusted LIBOR
Rate from time to time in effect plus the LIBOR Spread plus the Deficiency
----
Spread, but in no event to exceed the Highest Lawful Rate, and (iii) all LIBOR
Rate Loans shall bear interest from and including the first day of the
applicable Interest Period to (but not including) the last day of such Interest
Period at the interest rate determined as applicable to such LIBOR Rate Loan in
accordance with clause (ii) above.
(c) Interest accrued on each Loan shall be payable, without duplication:
(i) on the Final Maturity Date therefor; (ii) on the date of any payment or
prepayment, in whole or in part, of principal outstanding on such Loan; (iii)
with respect to all Loans, on each Interest Payment Date; (iv) with respect to
any Base Rate Loans converted into LIBOR Rate Loans on a day when interest would
not otherwise have been payable pursuant to clause (iii), on the date of such
-----------
conversion; and (v) on that portion of any Loans the maturity date of which is
accelerated pursuant to Section 8.1, immediately upon such acceleration.
Interest accrued on Loans or other monetary Obligations arising under this
Agreement or any other Loan Document after the date
20
such amount is due and payable (whether on the Final Maturity Date, upon
acceleration or otherwise) shall be payable upon demand.
(d) After the date any principal amount of any Loan is due and payable
(whether on the Final Maturity Date therefor, upon acceleration or otherwise),
the Borrower shall pay, but only to the extent permitted by law, interest (both
after and before judgment) at a rate per annum equal to the lesser of (i) the
Late Payment Rate and (ii) the Highest Lawful Rate.
Section 2.7 Commitment Fees. In consideration of each Lender's commitment
---------------
to make Loans, during the period from the Closing Date through the Final
Maturity Date, Borrower will pay to Administrative Agent for the account of each
Lender a commitment fee determined on a daily basis by applying the applicable
Commitment Fee Rate to such Lender's Percentage Share of the unused portion of
the Borrowing Base on each day, determined for each such day by deducting from
the amount of the Borrowing Base at the end of such day the sum of (i) the
aggregate unpaid principal balance of the Loans at the end of such day plus (ii)
the amount of all LC Obligations at the end of such day. This commitment fee
shall be due and payable in arrears, with the first payment due on March 31,
2002, and thereafter on the last day of each Fiscal Quarter and on the Final
Maturity Date.
Section 2.8 [Reserved].
--------
Section 2.9 [Reserved].
--------
Section 2.10 Repayments and Prepayments. The Borrower shall repay in full
--------------------------
the unpaid principal amount of each Loan on the Final Maturity Date.
(a) [Reserved].
(b) Mandatory Prepayments. Borrower shall make the following prepayments
---------------------
of the Loans:
(i) Borrowing Base Deficiency. If at any time the aggregate unpaid
-------------------------
principal balance of the Loans plus the aggregate amount of LC Obligations
plus the aggregate Indebtedness incurred under Section 6.2(a)(vi) hereof
exceeds the Borrowing Base (such excess a "Borrowing Base Deficiency"),
-------------------------
Borrower shall, within thirty (30) days after the Administrative Agent
sends written notice of such fact to Borrower, either (1) prepay the
principal of the Loans (and, upon repayment of all Loans, shall provide LC
Collateral as set forth in Section 3.6) in an aggregate amount at least
equal to such Borrowing Base Deficiency (in this section, a "Mandatory
---------
Prepayment Amount"), or (2) give notice to Administrative Agent electing to
-----------------
prepay such Mandatory Prepayment Amount in six (6) (or fewer) monthly
installments. If the Borrower elects to prepay such Borrowing Base
Deficiency in installments, each such installment shall equal or exceed
one-sixth of such Borrowing Base Deficiency; Borrower shall pay the first
such installment within sixty (60) days of the giving of written notice by
the Administrative Agent. Subsequent installments shall be due and payable
at one month intervals thereafter until such Borrowing Base Deficiency has
been eliminated.
(ii) Net Sales Proceeds of Asset Sales.
21
(A) Borrower shall prepay the Loans or provide LC Collateral
in an aggregate amount equal to 80% of the Net Sales Proceeds from
the sale of any property included in the Borrowing Base except
pursuant to the first sentence of Section 6.2(d)(iii) within one (1)
Business Day of receipt of any such net proceeds. Such prepayments
shall be applied first to the principal of the Loans until the Loans
are paid in full and then shall be held as LC Collateral in an
amount equal to the aggregate amount of LC Obligations pursuant to
Section 3.6.
(B) If Borrower sells, transfers or otherwise disposes, in one
or more transactions, of assets, which assets have been included in
the most recent Borrowing Base, in excess of $25 million in the
aggregate in any Fiscal Year (any such sale, transfer or disposition
being a "Sale"), any resulting Borrowing Base Deficiency shall be
----
repaid within five (5) Business Days of receipt by the Borrower of
notice of the new Borrowing Base.
(C) In the event a Borrowing Base Deficiency exists and is
continuing, Borrower shall prepay the Loans in an amount equal to
such Borrowing Base Deficiency from the Net Sales Proceeds from the
sale or other disposition of any property (excluding sales or
dispositions of inventory in the ordinary course and sales or
dispositions of equipment permitted by Section 6.2(d)(i)) not
included in the Borrowing Base within one (1) Business Day of
receipt of any such net proceeds. Application of such Net Sales
Proceeds shall be applied to the principal of the Loans until the
Loans are paid in full and then shall be held as LC Collateral in an
amount equal to the aggregate amount of LC Obligations pursuant to
Section 3.6.
(c) Optional Prepayments. Borrower may, upon one Business Day's written
--------------------
notice to Administrative Agent, from time to time and without premium or penalty
prepay the Notes, in whole or in part, so long as the aggregate amounts of all
partial prepayments of principal on the Notes equals $1,000,000 or any higher
integral multiple of $500,000 or the outstanding balance on the applicable
Notes, if less. Such prepayments shall be applied as directed by Borrower.
(d) General Provisions Regarding Payments. Each prepayment of principal
-------------------------------------
of the Loans under this section shall be accompanied by all interest then
accrued and unpaid on the principal so prepaid. Any principal or interest
prepaid pursuant to this Section shall be in addition to, and not in lieu of,
all payments otherwise required to be paid under the Loan Documents at the time
of such prepayment.
(e) Incurrence of Certain Indebtedness. If Borrower incurs unsecured
----------------------------------
subordinated Indebtedness pursuant to Section 6.2(a)(vii), upon the incurrence
of such Indebtedness, (i) Borrower shall immediately apply the proceeds of such
Indebtedness (less reasonable and customary fees and commissions less, if such
unsecured subordinated Indebtedness is a refinancing of prior unsecured
subordinated Indebtedness permitted pursuant to Section 6.2(a)(vii), amounts
used to repay such prior permitted unsecured subordinated Indebtedness that is
being refinanced) to the prepayment of the Loans (and interest accrued thereon)
and (ii) the Borrowing Base shall be automatically reduced by the amount of such
proceeds. Following such prepayment of Loans and interest accrued thereon and
reduction in the Borrowing Base,
22
Borrower shall have the right, by written notice delivered to the Administrative
Agent delivered not later than ten (10) days following such prepayment and
reduction, to ask the Lenders to redetermine the Borrowing Base using the
existing information, reports and data delivered by Borrower in connection with
the most recent redetermination of the Borrowing Base. Subject to Section
2.13(e), the Borrowing Base Required Lenders shall, within thirty (30) days
following delivery of such notice, agree on a new Borrowing Base.
(f) Sale of Equity. If Borrower raises capital through the sale of any
--------------
equity security, including but not limited to, common equity, preferred equity
or other equity interests or equity securities including warrants, options and
the like, Borrower shall first apply the proceeds of such sale (less reasonable
and customary fees and commissions) to cure any Borrowing Base Deficiency.
Section 2.11 Payments to Lenders. Borrower will make each payment which
-------------------
it owes under the Loan Documents to Administrative Agent for the account of the
Lender to whom such payment is owed. Each such payment must be received by
Administrative Agent not later than 11:00 a.m., Central time, on the date such
payment becomes due and payable, in lawful money of the United States of
America, without set-off, deduction or counterclaim, and in immediately
available funds. Any payment received by Administrative Agent after such time
will be deemed to have been made on the next following Business Day. Should any
such payment become due and payable on a day other than a Business Day, the
maturity of such payment shall be extended to the next succeeding Business Day,
and, in the case of a payment of principal or past due interest, interest shall
accrue and be payable thereon for the period of such extension as provided in
the Loan Document under which such payment is due. When Administrative Agent
collects or receives money on account of the Obligations, Administrative Agent
shall distribute all money so collected or received, and Lenders shall apply all
such money they receive from Administrative Agent, as follows:
(a) first, for the payment of all Obligations which are then due (and if
such money is insufficient to pay all such Obligations, first to any
reimbursements due Administrative Agent under Sections 6.1(i) or 8.3 or Issuing
Bank under Section 3.3(a), and then to the partial payment of all other
Obligations then due in proportion to the amounts thereof, or as Lenders shall
otherwise agree);
(b) then for the prepayment of amounts owing under the Loan Documents
(other than principal on the Notes) if so specified by Borrower;
(c) then for the prepayment of principal on the Notes, together with
accrued and unpaid interest on the principal so prepaid; and
(d) then for the payment or prepayment of any other Obligations.
All payments applied to principal or interest on any Note shall be applied first
to any interest then due and payable, then to principal then due and payable,
and last to any prepayment of principal and interest in compliance with Section
2.10. All distributions of amounts described in any of subsections (b), (c) or
(d) above shall be made by Administrative Agent pro rata to Administrative Agent
and each Lender then owed Obligations described in such subsection in
23
proportion to all amounts owed to Administrative Agent and all Lenders which are
described in such subsection; provided that if any Lender then owes payments to
Issuing Bank for the purchase of a participation under Section 3.3(c) hereof,
any amounts otherwise distributable under this section to such Lender shall be
deemed to belong to Issuing Bank, to the extent of such unpaid payments, and
Administrative Agent shall apply such amounts to make such unpaid payments
rather than such amounts to such Lender.
Section 2.12 Initial Borrowing Base. During the period from the date
----------------------
hereof to the first Evaluation Date the Borrowing Base shall be $125,000,000.
Section 2.13 Subsequent Determinations of Borrowing Base.
-------------------------------------------
(a) At least forty-five (45) days prior to each Evaluation Date,
Borrower shall furnish to each Lender all information, reports and data that the
Administrative Agent has then reasonably requested concerning Related Persons'
businesses and properties (including Related Persons' Oil and Gas Properties and
interests and the reserves and production relating thereto), together with the
Engineering Report described in Section 6.1(b)(iv), if an Engineering Report is
then due. Within thirty (30) days after receiving such information, reports and
data (including an Engineering Report, if then due), or as promptly thereafter
as practicable, the Administrative Agent shall notify the Lenders of
Administrative Agent's proposed value for the Borrowing Base. After having
received notice of such proposal by the Administrative Agent, each Lender shall
have fifteen (15) days to agree or disagree with such proposal. If at the end of
the fifteen (15) days, any Lender has not communicated its approval or
disapproval, such silence shall be deemed to be an approval. If however, the
Required Borrowing Base Lenders shall not have approved or shall not have been
deemed to have approved the new Borrowing Base within fifteen (15) days, the
Administrative Agent and the Required Borrowing Base Lenders shall, within a
reasonable period of time, agree on a new Borrowing Base. The Administrative
Agent shall by notice to Borrower designate such amount as the new Borrowing
Base available to Borrower hereunder, which designation shall take effect
immediately on the date such notice is sent (a "Determination Date") and which
------------------
Borrowing Base shall remain in effect until but not including the next date as
of which the Borrowing Base is redetermined. If Borrower does not furnish all
such information, reports and data by the date specified in the first sentence
of this section, the Required Borrowing Base Lenders may nonetheless designate
the Borrowing Base at any amount which the Required Borrowing Base Lenders
determine, and may redesignate the Borrowing Base from time to time thereafter
at any amount which Required Borrowing Base Lenders redetermine, until each
Lender receives all such information, reports and data, whereupon Required
Borrowing Base Lenders shall designate a new Borrowing Base as described above.
Subject to clause (e) below, the Borrowing Base shall be that amount of debt
which the Required Borrowing Base Lenders shall agree can be supported, after
taking into account other fixed charges such as subordinated debt interest
payments, capital lease payments, obligations in respect of operating leases and
preferred dividends payable in cash, by the cash flows of the Borrower's
producing and non-producing proved oil and gas reserves after an engineering and
economic review of such reserves conducted by the Lenders using their customary
standards for oil and gas lending practices (including consideration of oil and
gas, energy and/or commodities price forecasts as they may change from time to
time), and gas sales contracts and hedging agreements will be taken into
consideration to arrive at appropriate price projections; provided, however,
that it is expressly understood that Lenders (or the Required
24
Borrowing Base Lenders, as the case may be) and Administrative Agent have no
obligation to agree upon or designate the Borrowing Base at any particular
amount, whether in relation to the Maximum Loan Amount or otherwise, and that
Lenders' commitments (or those of the Required Borrowing Base Lenders, as the
case may be) to advance funds hereunder is determined by reference to the
Borrowing Base from time to time in effect, which Borrowing Base shall be used
for calculating commitment fees under Section 2.7(a) and, to the extent
permitted by law and regulatory authorities, for the purposes of Section 2.15.
Semiannual redeterminations and additional redeterminations at the request of
the Lenders or Administrative Agent shall be at no cost to Borrower. Additional
redeterminations at Borrower's request shall be subject to a $5,000 engineering
fee payable by Borrower to the Administrative Agent for its own account.
(b) The Borrower may include additional Oil and Gas Properties of the
Borrower in the calculation of the Borrowing Base, by the Borrower (A) giving
written notice to the Administrative Agent of such properties to be included,
and (B) including such properties in an Engineering Report submitted to the
Administrative Agent.
(c) In addition to any scheduled determination or discretionary
determination of the Borrowing Base, the Borrowing Base may be redetermined upon
the sale, transfer or disposition of the assets of Borrower included in the
Borrowing Base in the amount as required by Section 6.2(d)(iii).
(d) The Borrower may, and the Administrative Agent may (and shall, if so
directed by the Majority Lenders), once annually, request an additional
Borrowing Base redetermination (a "Requested Redetermination") by delivering to
-------------------------
the other party a notice requesting such Requested Redetermination. Following
delivery of such request from Administrative Agent to Borrower or from Borrower
to Administrative Agent, Borrower shall provide all information, data and
reports described in clause (b) above; provided, that, any Requested
Redetermination made at the option of Administrative Agent will be calculated
using a company-prepared Engineering Report that has been updated from the most
recently provided Engineering Report; provided, further, that redeterminations
pursuant to clause (e) below and pursuant to Section 6.2(d)(iii) shall not count
toward the Administrative Agent's ability to request a Borrowing Base
redetermination pursuant to this clause (d). Upon receipt of such information,
data and reports, the Borrowing Base shall be redetermined in accordance with
the appropriate procedures described in clause (b) above.
(e) Notwithstanding anything herein to the contrary (including clause
(a) above), any increase in the Borrowing Base from the then immediately
effective Borrowing Base shall require the approval of all Lenders.
Section 2.14 Borrower's Reduction of Borrowing Base. Until the Final
--------------------------------------
Maturity Date, Borrower may, during the fifteen-day period beginning on each
Determination Date (each such period in this section, an "Option Period"),
-------------
reduce the Borrowing Base from the amount designated by Administrative Agent to
any lesser amount. To exercise such option Borrower must within an Option Period
send written notice to Administrative Agent of the amount of the Borrowing Base
chosen by Borrower. If Borrower does not affirmatively exercise this option
during an Option Period the Borrowing Base shall be the amount designated by
Administrative Agent. Any choice by Borrower of a Borrowing Base shall be
effective as of the first day of the
25
Option Period during which such choice was made and shall continue in effect the
next date as of which the Borrowing Base is redetermined.
Section 2.15 Alternate Rate of Interest. If prior to the commencement
--------------------------
of any Interest Period for a LIBOR Rate Portion:
(a) the Administrative Agent determines (which determination shall be
conclusive absent manifest error) that adequate and reasonable means do not
exist for ascertaining the Adjusted LIBOR Rate or the LIBOR Rate, as applicable,
for such Interest Period; or
(b) the Administrative Agent is advised by the Majority Lenders that the
Adjusted LIBOR Rate for such Interest Period will not adequately and fairly
reflect the cost to such Lenders (or Lender) of making or maintaining their
Loans (or its Loan) included in such LIBOR Rate Portion for such Interest
Period;
then the Administrative Agent shall give written notice thereof to the Borrower
and the Lenders by telephone or telecopy as promptly as practicable thereafter
and, until the Administrative Agent notifies the Lenders that the circumstances
giving rise to such written notice no longer exist, (i) any Rate Election that
requests the conversion of any Base Rate Portion to, or continuation of any
LIBOR Rate Portion as, a LIBOR Rate Portion shall be ineffective and (ii) any
requests for a Loan as a LIBOR Rate Portion shall be made as a Base Rate
Portion.
Section 2.16 Increased Costs. (a) If any Change in Law shall:
---------------
(i) impose, modify or deem applicable any reserve, special
deposit or similar requirement against assets of, deposits with or for
the account of, or credit extended by, any Lender (except any such
reserve requirement reflected in the Adjusted LIBOR Rate) or the Issuing
Bank; or
(ii) impose on any Lender or the Issuing Bank or the London
interbank market any other condition affecting this Agreement or LIBOR
Rate Loans made by such Lender or any Letter of Credit or participation
therein;
and the result of any of the foregoing shall be to increase the cost to such
Lender of making or maintaining any LIBOR Rate Loan (or of maintaining its
obligation to make any such Loan) or to increase the cost to such Lender or the
Issuing Bank of participating in, issuing or maintaining any Letter of Credit or
to reduce the amount of any sum received or receivable by such Lender or the
Issuing Bank hereunder (whether of principal, interest or otherwise), then the
Borrower will pay to such Lender or the Issuing Bank, as the case may be, such
additional amount or amounts as will compensate such Lender or the Issuing Bank,
as the case may be, for such additional costs incurred or reduction suffered.
(b) If any Lender or the Issuing Bank determines that any Change in Law
regarding capital requirements has or would have the effect of reducing the rate
of return on such Lender's or the Issuing Bank's capital or on the capital of
such Lender's or the Issuing Bank's holding company, if any, as a consequence of
this Agreement or the Loans made by, or participations in Letters of Credit held
by, such Lender, or the Letters of Credit issued by the Issuing Bank, to a level
below that which such Lender or the Issuing Bank or such Lender's or the Issuing
Bank's
26
holding company could have achieved but for such Change in Law (taking into
consideration such Lender's or the Issuing Bank's policies and the policies of
such Lender's or the Issuing Banks holding company with respect to capital
adequacy), then from time to time the Borrower will pay to such Lender or the
Issuing Bank, as the case may be, such additional amount or amounts as will
compensate such Lender or the Issuing Bank or such Lender's or the Issuing Banks
holding company for any such reduction suffered.
(c) A certificate of a Lender or the Issuing Bank setting forth in
reasonable detail the amount or amounts necessary to compensate such Lender or
the Issuing Bank or its holding company, as the case may be, as specified in
paragraph (a) or (b) of this Section shall be delivered to the Borrower and
shall be conclusive absent manifest error. The Borrower shall pay such Lender or
the Issuing Bank, as the case may be, the amount shown as due on any such
certificate within ten (10) days after receipt thereof.
(d) Failure or delay on the part of any Lender or the Issuing Bank to
demand compensation pursuant to this Section shall not constitute a waiver of
such Lender's or the Issuing Bank's right to demand such compensation; provided
that the Borrower shall not be required to compensate a Lender or the Issuing
Bank pursuant to this Section for any increased costs or reductions incurred
more than ninety (90) days prior to the date that such Lender or the Issuing
Bank, as the case may be, notifies the Borrower of the Change in Law giving rise
to such increased costs or reductions and of such Lender's or the Issuing Bank's
intention to claim compensation therefor; provided further that, if the Change
in Law giving rise to such increased costs or reductions is retroactive, then
the 90-day period referred to above shall be extended to include the period of
retroactive effect thereof.
Section 2.17 Break Funding Payments. In the event of (a) the payment of
----------------------
any principal of any LIBOR Rate Loan other than on the last day of an Interest
Period applicable thereto (including as a result of an Event of Default), (b)
the conversion of any LIBOR Rate Loan other than on the last day of the Interest
Period applicable thereto, (c) the failure to borrow, convert, continue or
prepay any LIBOR Rate Loan on the date specified in any notice delivered
pursuant hereto, or (d) the assignment of any LIBOR Rate Loan other than on the
last day of the Interest Period applicable thereto as a result of a request by
the Borrower pursuant to Section 2.19, then, in any such event, the Borrower
shall compensate each Lender for the loss, cost and expense attributable to such
event. In the case of a LIBOR Rate Loan, such loss, cost or expense to any
Lender shall be deemed to include an amount determined by such Lender to be the
excess, if any, of (i) the amount of interest which would have accrued on the
principal amount of such Loan had such event not occurred, at the LIBOR Rate
that would have been applicable to such Loan, for the period from the date of
such event to the last day of the then current Interest Period therefor (or, in
the case of a failure to borrow, convert or continue, for the period that would
have been the Interest Period for such Loan), over (ii) the amount of interest
which would accrue on such principal amount for such period at the interest rate
which such Lender would bid were it to bid, at the commencement of such period,
for dollar deposits of a comparable amount and period from other banks in the
eurodollar market. A certificate of any Lender setting forth in reasonable
detail any amount or amounts that such Lender is entitled to receive pursuant to
this Section shall be delivered to the Borrower and shall be conclusive absent
manifest error. The Borrower shall pay such Lender the amount shown as due on
any such certificate within ten (10) days after receipt thereof.
27
Section 2.18 Taxes. (a) Any and all payments by or on account of any
-----
obligation of the Borrower hereunder shall be made free and clear of and without
deduction for any Indemnified Taxes or Other Taxes; provided that if the
Borrower shall be required to deduct any Indemnified Taxes or Other Taxes from
such payments, then (i) the sum payable shall be increased as necessary so that
after making all required deductions (including deductions applicable to
additional sums payable under this Section) the Administrative Agent, Lender or
Issuing Bank (as the case may be) receives 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 Governmental Authority in accordance with applicable law.
(b) In addition, the Borrower shall pay any Other Taxes to the relevant
Governmental Authority in accordance with applicable law.
(c) The Borrower shall indemnify the Administrative Agent each Lender
and the Issuing Bank, within ten (10) days after written demand therefor, for
the full amount of any Indemnified Taxes or Other Taxes paid by the
Administrative Agent, such Lender or the Issuing Bank, as the case may be, on or
with respect to any payment by or on account of any obligation of the Borrower
hereunder (including Indemnified Taxes or Other Taxes imposed or asserted on or
attributable to amounts payable under this Section) and any penalties, interest
and removable expenses arising therefrom or with respect thereto, whether or not
such Indemnified Taxes or Other Taxes were correctly or legally imposed or
asserted by the relevant Governmental Authority. A certificate as to the amount
of such payment or liability delivered to the Borrower by a Lender or the
Issuing Bank, or by the Administrative Agent on its own behalf or on behalf of a
Lender or the Issuing Bank, shall be conclusive absent manifest error.
(d) As soon as practicable after any payment of Indemnified Taxes or
Other Taxes by the Borrower to a Governmental Authority, the Borrower shall
deliver to the Administrative Agent the original or a certified copy of a
receipt issued by such Governmental Authority evidencing such payment, a copy of
the return reporting such payment or other evidence of such payment reasonably
satisfactory to the Administrative Agent.
(e) Any Foreign Lender that is entitled to an exemption from or
reduction of withholding tax under the law of the jurisdiction in which the
Borrower is located, or any treaty to which such jurisdiction is a party, with
respect to payments under this Agreement shall deliver to the Borrower (with a
copy to the Administrative Agent), at the time or times prescribed by applicable
law, such properly completed and executed documentation prescribed by applicable
law or reasonably requested by the Borrower as will permit such payments to be
made without withholding or at a reduced rate.
Section 2.19 Mitigation Obligations; Replacement of Lenders. (a) If any
----------------------------------------------
Lender requests compensation under Section 2.16, or if the Borrower is required
to pay any additional amount to any Lender or any Governmental Authority for the
account of any Lender pursuant to Section 2.17, then such Lender shall use
reasonable efforts to designate a different lending office for funding or
booking its Loans hereunder or to assign its rights and obligations hereunder to
another of its offices, branches or affiliates, if, in the judgment of such
Lender, such designation or assignment (i) would eliminate or reduce amounts
payable pursuant to Section 2.16 or 2.18, as
28
the case may be, in the future and (ii) would not subject such Lender to any
unreimbursed cost or expense and would not otherwise be disadvantageous to such
Lender.
(b) If any Lender requests compensation under Section 2.16, or if the
Borrower is required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 2.18,
or if any Lender defaults in its obligation to fund Loans hereunder, then the
Borrower may, at its sole expense and effort, upon written notice to such Lender
and the Administrative Agent, require such Lender to assign and delegate,
without recourse (in accordance with and subject to the restrictions contained
in Section 10.11), all its interests, rights and obligations under this
Agreement to an assignee that shall assume such obligations (which assignee may
be another Lender, if a Lender accepts such assignment); provided that (i) the
Borrower shall have received the prior written consent of the Administrative
Agent and the Issuing Bank, which consent shall not unreasonably be withheld,
(ii) such Lender shall have received payment of an amount equal to the
outstanding principal of its Loans and participations in LC Disbursements,
accrued interest thereon, accrued fees and all other amounts payable to it
hereunder, from the assignee (to the extent of such outstanding principal and
accrued interest and fees) or the Borrower (in the case of all other amounts)
and (iii) in the case of any such assignment resulting from a claim for
compensation under Section 2.16 or payments required to be made pursuant to
Section 2.18, such assignment will result in a reduction in such compensation or
payments.
29
ARTICLE III - Letters of Credit
-----------------
Section 3.1 Letters of Credit. Subject to the terms and conditions
-----------------
hereof, Borrower may, until the Final Maturity Date, request Issuing Bank to
issue one or more Letters of Credit, provided that, after taking such Letter of
Credit into account:
(a) the sum of the aggregate amount of Loans outstanding at such time
plus the amount of Indebtedness incurred pursuant to Section 6.2(a)(vi) hereof
plus the aggregate amount of LC Obligations at such time, does not exceed the
Borrowing Base at such time;
(b) the aggregate amount of LC Obligations at such time does not exceed
$25,000,000;
(c) the expiration date of such Letter of Credit is on or prior to the
Final Maturity Date;
(d) such Letter of Credit is to be used for general corporate purposes
of Related Persons;
(e) such Letter of Credit is not directly or indirectly used to assure
payment of or otherwise support any Person's Indebtedness for borrowed money;
(f) the issuance of such Letter of Credit will be in compliance with all
applicable governmental restrictions, policies, and guidelines and will not
subject Issuing Bank to any cost not anticipated on the date hereof;
(g) the form and terms of such Letter of Credit are acceptable to
Administrative Agent and Issuing Bank in their sole and absolute discretion; and
(h) all other conditions in this Agreement to the issuance of such
Letter of Credit have been satisfied.
Issuing Bank will honor any such request if the foregoing conditions (a) through
(h) (in this Section 3.1 called the "LC Conditions") have been met as of the
-------------
date of issuance of such Letter of Credit. The expiration date of a Letter of
Credit may not be extended on or after the Final Maturity Date and no Letter of
Credit may be renewed, replaced or increased on or after the Final Maturity
Date.
Section 3.2 Requesting Letters of Credit. Borrower must make written
----------------------------
application for any Letter of Credit at least three Business Days before the
date on which Borrower desires for Issuing Bank to issue such Letter of Credit.
By making any such written application Borrower shall be deemed to have
represented and warranted that the LC Conditions described in Section 3.1 will
be met as of the date of issuance of such Letter of Credit. Each such written
application for a standby or commercial Letter of Credit must be made in writing
using the forms therefor customarily used by Issuing Bank, the terms and
provisions of which are hereby incorporated herein by reference (or in such
other form as may mutually be agreed upon by Issuing Bank and Borrower).
30
Section 3.3 Reimbursement and Participations.
--------------------------------
(a) Reimbursement by Borrower. Each Matured LC Obligation shall
-------------------------
constitute a Loan by Issuing Bank to Borrower. The Borrower hereby agrees to
reimburse the Issuing Bank, forthwith, for each payment or disbursement made by
the Issuing Bank to settle its obligations under any draft drawn under any
Letter of Credit, with interest on the amount so paid or disbursed by the
Issuing Bank from and including the date of payment or disbursement to, but not
including, the date the Issuing Bank is reimbursed therefor or the Lenders are
deemed to have made a Loan in respect thereof pursuant to the following proviso,
as the case may be, at the rate set forth for Base Rate Loans; provided,
however, that (i) if any such payment or disbursement shall not be reimbursed to
the Issuing Bank after any grace period for the payment thereof as provided in
Section 8.1 herein and if the Final Maturity Date shall not have occurred or
(ii) if any Matured LC Obligation shall be outstanding on the Final Maturity
Date, then the Matured LC Obligation in respect thereof shall automatically,
without notice from or to the Borrower and without any further authorization
from the Borrower (and whether or not the amount thereof satisfies the
conditions of Section 2.1 and whether or not the conditions of Article IV are
satisfied), be deemed to be a Loan, made by each of the Lenders to the Borrower
in their respective Percentage Shares of the Issuing Bank's payments or
disbursements bearing interest determined pursuant to Section 2.6 and the
related Matured LC Obligation shall be deemed paid simultaneously with such
funding of the deemed Loan; provided further, however, that if any such payment
or disbursement shall not be reimbursed to the Issuing Bank and a Loan shall not
be deemed to have been made notwithstanding the preceding proviso for any
reason, then the Matured LC Obligation in respect thereof shall be due and
payable, with interest accruing thereon at the Late Payment Rate.
(b) Letter of Credit Loans. If the beneficiary of any Letter of
----------------------
Credit makes a draft or other demand for payment thereunder prior to the Final
Maturity Date then Borrower may, during the interval between the making thereof
and the honoring thereof by Issuing Bank, request Lenders to make Loans to
Borrower in the amount of such draft or demand, which Loans shall be made
concurrently with Issuing Bank's payment of such draft or demand and shall be
immediately used by Issuing Bank to repay the amount of the resulting Matured LC
Obligation. Such a request by Borrower shall be made in compliance with all of
the provisions hereof, provided that for the purposes of clauses (b) and (c) of
the first sentence of Section 2.1 the amount of such Loans shall be considered
but the amount of the Matured LC Obligation to be concurrently paid by such
Loans shall not be considered.
(c) Participation by Lenders. Issuing Bank irrevocably agrees to
------------------------
grant and hereby grants to each Lender, and to induce Issuing Bank to issue
Letters of Credit hereunder, each Lender irrevocably agrees to accept and
purchase and hereby accepts and purchases from Issuing Bank, on the terms and
conditions hereinafter stated and for such Lender's own account and risk an
undivided interest equal to such Lender's Percentage Share of Issuing Bank's
obligations and rights under each Letter of Credit issued hereunder and the
amount of each Matured LC Obligation paid by Issuing Bank thereunder. Each
Lender unconditionally and irrevocably agrees with Issuing Bank that, if a
Matured LC Obligation is paid under any Letter of Credit for which Issuing Bank
is not reimbursed in full by Borrower in accordance with the terms of this
Agreement and the related LC Application (including any reimbursement by means
of concurrent Loans or by the application of LC Collateral), such Lender shall
within two (2)
31
Business Days (in all circumstances and without set-off or counterclaim) pay to
Issuing Bank on demand, in immediately available funds at Issuing Bank's address
for notices hereunder, such Lender's Percentage Share of such Matured LC
Obligation (or any portion thereof which has not been reimbursed by Borrower),
together with interest thereon, for each day from the date such amount was paid
by Issuing Bank under such Letter of Credit until the date such amount is paid
to Administrative Agent at the Federal Funds Rate. If any Lender fails to make
such payment to Issuing Bank within such two Business Day period, such Lender
shall in addition to such amount pay interest thereon, for each day from the
date such amount was paid by Issuing Bank under such Letter of Credit until the
date such amount is paid or repaid to Administrative Agent, at the Base Rate.
Each Lender's obligation to pay Issuing Bank pursuant to the terms of this
subsection is irrevocable and unconditional.
(d) Distributions to Participants. Whenever Issuing Bank has in
-----------------------------
accordance with this section received from any Lender payment of such Lender's
Percentage Share of any Matured LC Obligation, if Issuing Bank thereafter
receives any payment of such Matured LC Obligation or any payment of interest
thereon (whether directly from Borrower or by application of LC Collateral or
otherwise, and excluding only interest for any period prior to Issuing Bank's
demand that such Lender make such payment of its Percentage Share), Issuing Bank
will distribute to such Lender its Percentage Share of the amounts so received
by Issuing Bank; provided, however, that if any such payment received by Issuing
Bank must thereafter be returned by Issuing Bank, such Lender shall return to
Issuing Bank the portion thereof which Issuing Bank has previously distributed
to it.
(e) Calculations. A written advice setting forth in reasonable
------------1
detail the amounts owing under this section, submitted by Issuing Bank to
Borrower or any Lender from time to time, shall be conclusive, absent manifest
error, as to the amounts thereof.
Section 3.4 Letter of Credit Fees. In consideration of Issuing
---------------------
Bank's issuance of Letters of Credit, Borrower agrees to pay (i) to the
Administrative Agent for the account of each Lender a participation fee with
respect to its participations in Letters of Credit, which shall accrue at the
LIBOR Spread then in effect with respect to Loans after giving effect thereto on
the average daily amount of such Lender's Percentage Share of the LC Obligations
during the period from and including the Closing Date to but excluding the later
of the date on which such Lender's Commitment to make Loans terminates and the
date on which such Lender ceases to participate in any LC Obligations, and (ii)
to the Issuing Bank a fronting fee, which shall accrue at the rate of 0.125% per
annum on the average daily amount of the LC Obligations during the period from
and including the Closing Date to but excluding the later of the date of
termination of the Commitments and the date on which there cease to be any LC
Obligations, as well as the Issuing Bank's standard fees with respect to the
amendment, renewal or extension of any Letter of Credit or processing of
drawings thereunder. Participation fees and fronting fees shall be due and
payable in arrears, on the last Business Day of each Fiscal Quarter and on the
Final Maturity Date commencing on the first such date to occur after the Closing
Date; provided that all such fees shall be payable on the date on which the
Commitments terminate and any such fees accruing after the date on which the
Commitments terminate shall be payable on demand. Any other fees payable to the
Issuing Bank pursuant to this paragraph shall be payable within ten (10) days
after demand. All participation fees and fronting fees shall be computed on the
basis of a
32
year of 360 days and shall be payable for the actual number of days elapsed
(including the first day but excluding the last day).
Section 3.5 No Duty to Inquire.
------------------
(a) Drafts and Demands. Issuing Bank is authorized and instructed to
------------------
accept and pay drafts and demands for payment under any Letter of Credit without
requiring, and without responsibility for, any determination as to the existence
of any event giving rise to said draft, either at the time of acceptance of
payment or thereafter. Issuing Bank and Lenders may act in reliance upon any
drafts or demand for payment believed in good faith to have been authorized,
whether or not made by an authorized officer, representative or agent of any
beneficiary under any Letter of Credit, and payment by Issuing Bank to a
beneficiary when requested by any such purported officer, representative or
agent is hereby authorized and approved. Borrower agrees to hold Issuing Bank
and each Lender harmless and indemnified against any liability or claim in
connection with or arising out of the subject matter of this section, WHICH
INDEMNITY SHALL APPLY WHETHER OR NOT ANY SUCH LIABILITY OR CLAIM IS IN ANY WAY
OR TO ANY EXTENT CAUSED, IN WHOLE OR IN PART, BY ANY NEGLIGENT ACT OR OMISSION
OF ANY KIND BY ISSUING BANK OR ANY LENDER, provided only that Issuing Bank or
such Lender shall not be entitled to indemnification for that portion, if any,
of any liability or claim which is proximately caused by its own individual
gross negligence or willful misconduct as determined in a final judgment.
(b) Extension of Maturity. If the maturity of any Letter of Credit
---------------------
is extended by its terms or by law or governmental action, if any extension of
the maturity or time for presentation of drafts or any other modification of the
terms of any Letter of Credit is made at the request of any Related Person, or
if the amount of any Letter of Credit is increased at the request of any Related
Person, this Agreement shall be binding upon all Related Persons with respect to
such Letter of Credit as so extended, increased or otherwise modified, with
respect to drafts and property covered thereby, and with respect to any action
taken by Issuing Bank or any of Issuing Bank's correspondents in accordance with
such extension, increase or other modification.
(c) Transferees of Letters of Credit. If any Letter of Credit
--------------------------------
provides that it is transferable (provided that the Issuing Bank agrees to such
provision of transferability), Issuing Bank shall have no duty to determine the
proper identity of anyone appearing as transferee of such Letter of Credit, nor
shall Issuing Bank be charged with responsibility of any nature or character for
the validity or correctness of any transfer or successive transfers, and payment
by Issuing Bank to any purported transferee or transferees as determined by
Issuing Bank is hereby authorized and approved, and Borrower further agrees to
hold Issuing Bank and each Lender harmless and indemnified against any liability
or claim in connection with or arising out of the foregoing, WHICH INDEMNITY
SHALL APPLY WHETHER OR NOT ANY SUCH LIABILITY OR CLAIM IS IN ANY WAY OR TO ANY
EXTENT CAUSED, IN WHOLE OR IN PART, BY ANY NEGLIGENT ACT OR OMISSION OF ANY KIND
BY ISSUING BANK OR ANY LENDER, provided only that Issuing Bank or such Lender
shall not be entitled to indemnification for that portion, if any, of any
liability or claim which is caused by its own individual gross negligence or
willful misconduct.
33
Section 3.6 LC Collateral.
-------------
(a) LC Obligations in Excess of Borrowing Base or upon Termination
--------------------------------------------------------------
of Commitments. (i) If, after the making of all mandatory prepayments required
--------------
under Section 2.10, the aggregate amount of all Loans outstanding plus all LC
Obligations outstanding excluding LC Obligations secured by cash collateral
pursuant to Section 3.6 plus all Indebtedness permitted pursuant to Section
-------
6.2(a)(vi) hereof will exceed the Borrowing Base, then Borrower will immediately
----------
pay to Issuing Bank an amount in cash equal to such excess, or (ii) should any
LC Obligations remain outstanding on the Final Maturity Date, then Borrower will
immediately pay Issuing Bank an amount in cash equal to the aggregate amount of
such Issuing Bank's LC Obligations. Issuing Bank will hold such amount as
security for the remaining LC Obligations ("LC Collateral") until such LC
-------------
Obligations become Matured LC Obligations, at which time such LC Collateral may
be applied to such Matured LC Obligations. Neither this subsection nor the
following subsection shall, however, limit or impair any rights which Issuing
Bank may have under any other document or agreement relating to any Letter of
Credit or LC Obligation, including any LC Application, or any rights which
Issuing Bank or Lenders may have to otherwise apply any payments by Borrower and
LC Collateral under Section 2.11.
(b) Acceleration of LC Obligations. If the Obligations or any part
------------------------------
thereof become immediately due and payable pursuant to Section 8.1 then, unless
Majority Lenders otherwise specifically elect to the contrary (which election
may thereafter be retracted by Majority Lenders at any time), all LC Obligations
shall become immediately due and payable without regard to whether or not actual
drawings or payments on the Letters of Credit have occurred, and Borrower shall
be obligated to pay to Issuing Bank immediately an amount equal to the aggregate
LC Obligations which are then outstanding. All amounts so paid shall first be
applied to Matured LC Obligations and then held by Issuing Bank as LC Collateral
until such LC Obligations become Matured LC Obligations, at which time such LC
Collateral shall be applied to such Matured LC Obligations.
(c) Investment of LC Collateral. Pending application thereof, all LC
---------------------------
Collateral shall be invested by Issuing Bank in such interest-bearing
investments as Issuing Bank may choose in its sole discretion reasonably
exercised. All interest on such investments shall be reinvested or applied to
Matured LC Obligations. When all Obligations have been satisfied in full,
including all LC Obligations, all Letters of Credit have expired or been
terminated, and all of Borrower's reimbursement obligations in connection
therewith have been satisfied in full, Issuing Bank shall release any remaining
LC Collateral. Borrower hereby assigns and grants to Issuing Bank a continuing
security interest in all LC Collateral paid by it to Issuing Bank, all
investments purchased with such LC Collateral, and all proceeds thereof to
secure its Matured LC Obligations and its Obligations under this Agreement, the
Notes, and the other Loan Documents. Borrower further agrees that Issuing Bank
shall have all of the rights and remedies of a secured party under the Uniform
Commercial Code as adopted in the State of Texas with respect to such security
interest and that an Event of Default under this Agreement shall constitute a
default for purposes of such security interest.
34
ARTICLE IV - Conditions Precedent to Lending
-------------------------------
Section 4.1 Documents to be Delivered. No Lender has any obligation
-------------------------
to make its first Loan and Issuing Bank shall have no obligation to issue, and
no Lender shall have an obligation to participate in, the first Letter of
Credit, unless Administrative Agent shall have received all of the following
duly executed and delivered in multiple counterparts for each Lender and in
form, substance and date satisfactory to Administrative Agent or, with respect
to clauses (), unless the conditions specified therein in such clauses shall
have been satisfied or waived by the Administrative Agent:
(a) This Agreement and any other documents that Lenders are to
execute in connection herewith.
(b) Each Note.
(c) The following certificates of Borrower:
(i) An "Omnibus Certificate" of the Secretary or Assistant
Secretary of Borrower, as applicable, which shall certify as to the
names, offices and signatures of the officers of Borrower authorized to
execute Loan Documents and which shall certify to the truth, correctness
and completeness of the following exhibits attached thereto: (1) a copy
of resolutions duly adopted by the members of Borrower and in full force
and effect at the time this Agreement is entered into, authorizing the
execution of this Agreement and the other Loan Documents delivered or to
be delivered in connection herewith and the consummation of the
transactions contemplated herein and therein, (2) a copy of the Limited
Liability Company Agreement of Borrower and all amendments thereto,
certified by the Secretary of State of Delaware, and (3) a copy of the
regulations of Borrower; and
(ii) A "Compliance Certificate" of the Chief Financial
Officer of the Borrower of even date with such Loan in which such
officer certifies to the satisfaction of the conditions set out in
subsections (a) and (b) of Section 4.2.
(d) A certificate (or certificates) of the due formation, valid
existence and good standing of Borrower in its state of organization, issued by
the appropriate authorities of such jurisdiction.
(e) A favorable opinion of ▇▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P., counsel for the
Related Persons, substantially in the form set forth in Exhibit E.
(f) The Initial Engineering Report.
(g) Guaranties, dated as of the date hereof, duly executed and
delivered by each of Spinnaker Exploration Company, a Delaware corporation, and
WP Spinnaker Holdings, Inc., a Delaware corporation.
(h) [Reserved].
(i) [Reserved].
35
(j) [Reserved].
(k) Certificates of Borrower's good standing and due qualification
to do business, issued by appropriate officials in any states in which Borrower
owns property.
(l) Documents similar to those specified in subsections (c)(i), (d)
and (e) of this section with respect to each Guarantor and its Guaranty.
(m) True and correct copies of such other documents or instruments
as may be reasonably requested by Administrative Agent including, without
limitation, any debt instrument, security agreement or other material contract
to which any Related Party may be a party.
(n) True and complete copies of the detailed annual projections for
the Borrower, which projections shall have been prepared as of October 2001 and
which shall be certified as of the Closing Date by the chief financial officer
of Borrower as having been prepared in good faith by Borrower, which certificate
shall state that such officer has no reason to believe that the projections are
incorrect or misleading in any material respect, it being recognized by
Administrative Agent and Lenders that such projections depend on assumptions as
to future events and are not to be viewed as facts and that actual results
during the period covered by any such projections may differ from the
projections.
(o) [Reserved].
(p) Borrower's payment to Administrative Agent and the Lenders of
all fees then due to Administrative Agent and Lenders in connection with the
execution, delivery and performance of the Loan Documents and all reasonable
legal fees of Administrative Agent's counsel for which invoices in reasonable
detail are received at least ten (10) days prior to the date of the first Loan.
(q) A certificate of insurance of the Borrower evidencing that the
Borrower is carrying insurance in accordance with Section 6.1 (h) hereof and as
to the insurance of each Related Person set forth in the Disclosure Schedule and
that such insurance is in full force and effect.
(r) [Reserved].
(s) Evidence that the obligations under the Second Amended and
Restated Credit Agreement and the "Loan Documents" thereunder been repaid in
full, that the Second Amended and Restated Credit Agreement and the "Loan
Documents" thereunder have been terminated, and that all Liens securing
obligations thereunder under the Second Amended and Restated Credit Agreement
have been released.
(t) Such other assurances, certificates, documents, consents or
opinions as the Administrative Agent or any of the Lenders may require.
Section 4.2 Additional Conditions Precedent. No Lender has any
-------------------------------
obligation to make any Loan (including its first) or to participate in any
Letter of Credit, and Issuing Bank has no
36
obligation to issue any Letter of Credit (including the first) unless the
following conditions precedent have been satisfied:
(a) In the case of all Loans and Letters of Credit, both before and
after giving effect to the making of such Loan or the issuance of such Letter of
Credit, all representations and warranties made by any Related Person in any
Loan Document shall be true on and as of the date of such Loan or the date of
issuance of such Letter of Credit as if such representations and warranties had
been made as of the date of such Loan or the date of issuance of such Letter of
Credit, unless any such representation or warranty was expressly limited to an
earlier date (in which case such representation or warranty shall be true on and
as of such earlier date).
(b) In the case of all Loans and Letters of Credit, no Default shall
exist at the date of such Loan or the date of issuance of such Letter of Credit
or result therefrom.
(c) [Reserved].
(d) The making of such Loans or the issuance of such Letters of
Credit shall not be prohibited by any law, regulation, order of any court,
governmental agency or authority, and shall not subject any Lender or the
Issuing Bank to any penalty or other onerous condition under or pursuant to any
such law, regulation or order.
(e) No suit, action, investigation, inquiry or other proceeding
(including, without limitation, the enactment or promulgation of a statute or
rule) by or before any arbitrator or any Governmental Authority shall be pending
and no preliminary or permanent injunction or order by a state or federal court
shall have been entered in connection with any Loan Document or any of the
transactions contemplated hereby or thereby, which, in the judgment of
Administrative Agent, would have a Material Adverse Effect.
(f) The Administrative Agent shall have received (i) with respect to
each Loan, a Request for Advance duly completed, executed and delivered by
Borrower as required by Section 2.4, and (ii) with respect to Letters of Credit,
a written application as required by Section 3.2.
(g) All documents executed or submitted pursuant to Section 4.2 by
or on behalf of the Borrower any of its Subsidiaries or any other Related Person
shall be reasonably satisfactory in form and substance to the Administrative
Agent.
37
ARTICLE V - Representations and Warranties
------------------------------
Section 5.1 Borrower's Representations and Warranties. To confirm each
-----------------------------------------
Lender's understanding concerning Related Persons and Related Persons'
businesses, properties and obligations, and to induce Administrative Agent, the
Issuing Bank and each Lender to enter into this Agreement and to make the Loans
and issue or participate in Letters of Credit, Borrower represents and warrants
to Administrative Agent, the Issuing Bank and each Lender that:
(a) No Default. No Borrower, Guarantor or Subsidiary is in default
----------
in the performance of any of the covenants and agreements contained herein or in
any other Loan Documents. No event has occurred and is continuing that
constitutes a Default.
(b) Organization and Good Standing. Each Related Person is duly
------------------------------
organized, validly existing and in good standing under the laws of its state of
organization, having all powers required to carry on its business and enter into
and carry out the transactions contemplated hereby. Each Related Person is duly
qualified, in good standing, and authorized to do business in all other
jurisdictions within the United States wherein the character of the properties
owned or held by it, if any, or the nature of the business transacted by it
makes such qualification necessary, except where the failure so to qualify will
not have any Material Adverse Effect. Each Related Person has taken all actions
and procedures customarily taken in order to enter, for the purpose of
conducting business or owning property, each jurisdiction outside the United
States wherein the character of the properties owned or held by it, if any, or
the nature of the business transacted by it, if any, makes such actions and
procedures desirable.
(c) Authorization. Each Related Person has duly taken all action
-------------
necessary to authorize the execution and delivery by it of the Loan Documents to
which it is a party, and to authorize the consummation of the transactions
contemplated thereby and the performance of its obligations thereunder. Borrower
is duly authorized to borrow funds hereunder.
(d) No Conflicts or Consents. The execution and delivery by the
------------------------
various Related Persons of the Loan Documents to which each is a party, the
performance by each of its obligations under such Loan Documents, and the
consummation of the transactions contemplated by the various Loan Documents, do
not and will not (i) conflict with any provision of (1) any domestic or foreign
law, statute, rule or regulation, (2) the organizational documents of any
Related Person, or (3) any agreement, judgment, license, order or permit
applicable to or binding upon any Related Person, (ii) result in the
acceleration of any Indebtedness owed by any Related Person, or (iii) result in
or require the creation of any Lien upon any assets or properties of any Related
Person except as expressly contemplated in the Loan Documents. Except as
expressly contemplated in the Loan Documents, no consent, approval,
authorization or order of, and no notice to or filing with any court or
Governmental Authority or third party is required in connection with the
execution, delivery or performance by any Related Person of any Loan Document or
to consummate any transactions contemplated by the Loan Documents.
(e) Enforceable Obligations. This Agreement is, and the other Loan
-----------------------
Documents when duly executed and delivered will be, legal, valid and binding
obligations of each Related Person which is a party hereto or thereto,
enforceable in accordance with their terms except as such enforcement may be
limited by bankruptcy, insolvency or similar laws of general
38
application relating to the enforcement of creditors' rights and subject to
general principles of equity, regardless of whether considered in a proceeding
in equity or at law.
(f) Initial Financial Statements. The Initial Financial Statements
----------------------------
of Spinnaker Exploration Company fairly present (i) Spinnaker Exploration
Company's consolidated, financial position at the date thereof, (ii) the
consolidated results of Spinnaker Exploration Company, and (iii) Spinnaker
Exploration Company's consolidated cash flows for the period thereof. Since the
date of the audited annual Initial Financial Statements no act, event or
condition has occurred which would have a Material Adverse Effect. The Initial
Financial Statements of Spinnaker Exploration Company were prepared in
accordance with GAAP.
(g) Other Restrictions. No Related Person is subject to or
------------------
restricted by any franchise, contract, deed, charter restriction, or other
instrument or restriction that may be reasonably expected to have a Material
Adverse Effect.
(h) Full Disclosure. No certificate, statement or other information
---------------
delivered in writing herewith or heretofore by any Related Person to
Administrative Agent or any Lender in connection with the negotiation of this
Agreement or in connection with any transaction contemplated hereby contains any
untrue statement known to a Related Person of a material fact or omits to state
any material fact known to any Related Person necessary to make the statements
contained herein or therein not materially misleading as of the date made or
deemed made, taken as a whole. There is no fact known to any Related Person that
has not been disclosed to Administrative Agent and each Lender in writing (other
than industry-wide risks normally associated with the types of businesses
conducted by the Related Persons) that could materially and adversely affect
Borrower's consolidated properties, assets, operations businesses, or condition
(financial or otherwise). To the best knowledge of Borrower, there are no
statements or conclusions in any Engineering Report that are based upon or
include misleading information or fail to take into account material information
regarding the matters reported therein, it being understood that each
Engineering Report is necessarily based upon professional opinions, estimates
and projections and that Borrower does not warrant that such opinions, estimates
and projections will ultimately prove to be accurate. Borrower has heretofore
delivered to Administrative Agent and each Lender true, correct and complete
copies of the Initial Financial Statements and the Initial Engineering Report.
(i) Litigation. There are no actions, suits or legal, equitable,
----------
arbitrative or administrative proceedings pending, or to the knowledge of any
Related Person threatened, against any Related Person before any federal, state,
municipal or other court, department, commission, body, board, bureau, agency,
or instrumentality, domestic or foreign, which do or may have a Material Adverse
Effect, and there are no outstanding judgments, injunctions, writs, rulings or
orders by any such governmental entity against any Related Person or any Related
Person's property, which have or may have a reasonable possibility of causing a
Material Adverse Effect.
(j) ERISA Liabilities. No Termination Event has occurred with
-----------------
respect to any ERISA Plan. The Related Persons are in compliance with ERISA in
all material respects. No Related Person is required to contribute to, or has
any other absolute or contingent liability with respect to, any "multiemployer
plan" as defined in Section 4001 of ERISA. Except as disclosed
39
in Item 5.1(j) ("ERISA Liabilities") of the Disclosure Schedule, no "accumulated
funding deficiency" (as defined in Section 412(a) of the Internal Revenue Code
of 1986, as amended) exists with respect to any ERISA Plan, whether or not
waived by the Secretary of the Treasury or his delegate, and the current value
of each ERISA Plan's benefits does not exceed by more than $500,000 the current
value of such ERISA Plan's assets available for the payment of such benefits.
(k) Environmental and Other Laws. Except as could not reasonably be
----------------------------
expected to have a Material Adverse Effect (or with respect to (iii), (iv) and
(v) below, where the failure to take such actions would not have a Material
Adverse Effect):
(i) Neither any property of any Related Person or any
Subsidiary nor the operations conducted thereon violate any
Environmental Laws;
(ii) Without limitation of clause (i) above, no property of
any Related Person or any Subsidiary nor the operations currently
conducted thereon or, to the best knowledge of any of the Related
Persons, by any prior owner or operator of such property or operation,
are in violation of or subject to any existing, pending or, to the
Related Person's knowledge, threatened action, suit, investigation,
inquiry or proceeding by or before any Governmental Authority or to any
remedial obligations under Environmental Laws;
(iii) All notices, permits, licenses or similar
authorizations, if any, required pursuant to Environmental Laws to be
obtained or filed in connection with the operation or use of the
property of any Related Persons and each Subsidiary have been duly
obtained or filed, and the Related Persons and each Subsidiary are in
compliance with the terms and conditions of all such notices, permits,
licenses and similar authorizations;
(iv) All Hazardous Materials, solid waste, and oil and gas
exploration and production wastes, if any, generated at the property of
any Related Person 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 each Related
Person, 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, to each Related Person's knowledge, threatened
action, investigation or inquiry by any Governmental Authority in
connection with any Environmental Laws;
(v) Each of the Related Persons has taken all steps
reasonably necessary to determine, and has determined, that no Hazardous
Materials, 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 Materials on or to any property
of the Related Persons or any Subsidiary except, in each case, 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
40
(vi) No Related Person or Subsidiary has any known contingent
liability in connection with any release or threatened release of any
oil, Hazardous Materials or solid waste into the environment.
(l) Names and Places of Business. No Related Person has, during the
----------------------------
preceding five years, been known by, or used any other corporate, trade, or
fictitious name (except that Spinnaker Exploration Company's name previously was
Spinco Exploration Corp.). The chief executive office and principal place of
business of each Related Person is located at the address set out on the
signature pages hereto. Except as indicated in the Disclosure Schedule or a
Disclosure Report, no Related Person has any other office or place of business.
(m) Borrower's Subsidiaries. As of the Closing Date, Borrower has no
-----------------------
Subsidiary and does not own any interest in any other Person, except those
listed in the Disclosure Schedule or a Disclosure Report. As of the Closing
Date, no Related Person is a member of any general or limited partnership, joint
venture or association of any type whatsoever except associations, joint
ventures or other relationships (i) that are established pursuant to a standard
form operating agreement or similar agreement or which are partnerships for
purposes of federal income taxation only, (ii) which are not corporations or
partnerships (or subject to the Uniform Partnership Act) under applicable state
law, and (iii) whose businesses are limited to the exploration, development and
operation of oil, gas or mineral properties and interests owned directly by the
parties in such associations, joint ventures or relationships. As of the Closing
Date, Borrower owns, directly or indirectly, the equity interest in each of its
Subsidiaries which is indicated in the Disclosure Schedule.
(n) Title to Properties. Each Related Person has valid and
-------------------
defensible title to, or a valid leasehold or like interest in, all of the real
property interests constituting the Oil and Gas Properties constituting proved
reserves and all of its other material properties and assets, free and clear of
any Prohibited Lien and of all material impediments to the use of such
properties and assets in such Related Person's ordinary course of business.
(o) Government Regulation. No Related Person is subject to
---------------------
regulation under the Public Utility Holding Company Act of 1935, the Federal
Power Act, the Investment Company Act of 1940 (as any of the preceding acts have
been or may be amended) or any other statute, law, regulation or decree that
regulates the incurring by such Person of Indebtedness, including statutes,
laws, regulations or decrees relating to common contract carriers or the sale of
electricity, gas, steam, water or other public utility services.
(p) Permits and Licenses. Each Related Person possesses all permits,
--------------------
licenses, patents, patent rights or licenses, trademarks, trademark rights,
trade names and copyrights which are material to the conduct of its business.
(q) Taxes. Each Related Person has filed or caused to be filed all
-----
tax returns that, to the knowledge of such Related Person, are required to be
filed. Each Related Person has paid all taxes shown to be due and payable on
said returns or on any assessments made against it or any of its property and
all other taxes, fees or other charges imposed on it or any of its property by
any Governmental Authority (other than (i) where extensions have been obtained
and (ii) any such impositions as to which the amount or validity is currently
being contested in good faith by
41
appropriate proceedings and with respect to which reserves in conformity with
GAAP have been provided on the books of such Related Person); no tax Lien has
been filed, and, to the knowledge of Borrower, no claim is being asserted, with
respect to any such tax, fee or other charge.
(r) Insurance. The Disclosure Schedule sets forth a complete and
---------
correct list of all insurance policies and programs in effect on the Closing
Date with respect to the properties and businesses of each Related Person
specifying for each such policy and program, (i) the amount thereof, (ii) the
risks insured against thereby, (iii) the name of the insurer and each insured
party thereunder and (iv) the policy or other identification number thereof.
(s) Priority of Obligations. The obligations of the Borrower to pay
-----------------------
the principal of and interest on the Loans made hereunder and the Notes and all
other amounts payable by the Borrower hereunder constitute direct and general
obligations of the Borrower and rank in right of payment prior to or pari passu
with all indebtedness and liabilities for borrowed money, or other obligations
arising out of the extension of credit, of the Borrower. The Borrower does not
have outstanding any such indebtedness, liability or obligation that is
subordinated to any other such indebtedness, liability or obligation but that is
not subordinated to all indebtedness of the Borrower for money borrowed
hereunder and under the Notes.
(t) Compliance with Laws and Agreements. Each of the Related Persons
-----------------------------------
is in material compliance with all laws, regulations, and orders applicable to
it (including all Environmental Laws and ERISA) applicable to such Person or its
assets, and all indentures, agreements and other instruments binding upon it or
its assets, except where the failure to do so, individually or in the aggregate,
could not reasonably be expected to result in a Material Adverse Effect.
(u) Solvency. Upon the consummation of the transactions
--------
contemplated by the Loan Documents, based upon certain valuations and the most
recently delivered financial statements:
(i) The present fair salable value of the assets of the
Borrower on a consolidated basis will exceed the amount that the
Borrower will be required to pay (after giving effect to amounts that
reasonably could be received by reason of indemnity, offset, insurance
or similar arrangements) because of the probable liability on the
existing Indebtedness (whether matured or unmatured, liquidated or
unliquidated, absolute, fixed or contingent) of the Borrower on a
consolidated basis as they become absolute and matured;
(ii) The sum of the debts (whether matured or unmatured,
liquidated or unliquidated, absolute, fixed or contingent) of the
Borrower on a consolidated basis (after giving effect to amounts that
reasonably could be received by reason of indemnity, offset, insurance
or similar arrangements) will not exceed all of the property of the
Borrower on a consolidated basis at a fair valuation;
(iii) The capital of the Borrower is not and will not be
unreasonably small for the Borrower to carry on its businesses; and
(iv) The Borrower does not intend to, or believe it will, by
virtue of consummating the transactions and incurring obligations
contemplated hereby or by any
42
other of the Loan Documents, incur Indebtedness that will be beyond its ability
to pay as they mature.
43
ARTICLE VI - Covenants of Borrower
---------------------
Section 6.1 Affirmative Covenants. To conform with the terms and conditions
---------------------
under which each Lender is willing to have credit outstanding to Borrower, and
to induce Administrative Agent and each Lender and Issuing Bank to enter into
this Agreement and make the Loans and issue or participate in Letters of Credit,
Borrower warrants, covenants and agrees that, until the full and final payment
of the Obligations and the termination of this Agreement, unless Majority
Lenders have previously agreed otherwise:
(a) Payment and Performance. Borrower shall pay all amounts due by
-----------------------
Borrower under the Loan Documents to which it is a party in accordance with the
terms thereof and will observe, perform and comply with every covenant, term and
condition expressed or implied in the Loan Documents applicable to Borrower.
Borrower will cause the other Related Persons to observe, perform and comply
with every such term, covenant and condition applicable to the other Related
Persons in the Loan Documents to which they are a party.
(b) Books, Financial Statements and Reports. Each Related Person shall at
---------------------------------------
all times obtain full and accurate books of account and records. Borrower shall
maintain, and shall cause each Related Person to maintain, a standard system of
accounting and shall furnish the following statements and reports to
Administrative Agent and Lender at Borrower's sole expense:
(i) As soon as available, and in any event within ninety (90) days
after the end of each Fiscal Year, complete audited consolidated financial
statements of Spinnaker Exploration Company, as well as all notes thereto,
together with an annual budget for the current year in form and substance
satisfactory to the Administrative Agent in its sole discretion, as well as
all notes thereto, prepared in reasonable detail in accordance with GAAP in
all material respects, together with an opinion, based on an audit using
generally accepted auditing standards, by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ or other
independent certified public accountants of recognized national standing
selected by Spinnaker Exploration Company and acceptable to the
Administrative Agent, stating that such consolidated financial statements
have been so prepared. These financial statements shall contain a
consolidated balance sheet as of the end of such Fiscal Year and
consolidated statements of earnings, of cash flows, and of changes in
owners' equity for such Fiscal Year, each setting forth in comparative form
the corresponding figures for the preceding Fiscal Year.
(ii) As soon as available, and in any event within sixty (60) days
after the end of each Fiscal Quarter, complete unaudited consolidated
financial statements from Spinnaker Exploration Company and consolidated
balance sheet as of the end of such Fiscal Quarter and consolidated
statements of earnings and cash flows for the period from the beginning of
the then current Fiscal Year to the end of such Fiscal Quarter, all in
reasonable detail and prepared in accordance with GAAP, subject to changes
resulting from normal year-end adjustments and without footnotes. In
addition, Borrower shall, together with each such set of financial
statements and each set of financial statements furnished under subsection
(b)(i) of this Section, furnish a certificate in the form of Exhibit D
signed by the chief financial officer of Borrower stating that such
financial statements are accurate and complete in all material respects,
stating that he/she has reviewed the Loan Documents, containing
calculations showing compliance (or non-
44
compliance) at the end of such Fiscal Quarter with the requirements of
Sections 6.2(a), (k) and (1), and stating that no Default exists at the end
of such Fiscal Quarter or at the time of such certificate or specifying the
nature and period of existence of any such Default.
(iii) Promptly upon their becoming available, copies of all (A)
financial statements, reports, notices and proxy statements sent by any
Related Person to its stockholders or members and (B) all statements and
reports sent to any Related Person or filed with or otherwise provided to
any Governmental Authority (including without limitation, the Federal
Energy Regulatory Commission or the Texas Natural Resource Conservation
Committee and any successor agencies) that describe or relate to any event
that could reasonably be expected to have a Material Adverse Effect.
(iv) By March 15 of each year, an Engineering Report prepared as of
December 31 of the previous year by ▇▇▇▇▇ ▇▇▇▇▇ Company, or other
independent petroleum engineers chosen by Borrower and reasonably
acceptable to Administrative Agent; and by August 15 of each year, an
Engineering Report prepared by any of the following, as determined by
Borrower in its sole discretion: Borrower's in-house engineering staff or
▇▇▇▇▇ ▇▇▇▇▇ Company or any other independent engineer approved by
Administrative Agent as of June 30 of such year; provided, however, that
such report as of June 30 may be an update of the Engineering Report
prepared as of December 31 of the previous year. Each such report shall
cover all proved oil and gas reserves attributable to the properties and
interests owned by any Related Person which are (i) located in or offshore
of the United States and (ii) to comprise the Borrowing Base. Each such
report shall take into account any "over-produced" status under gas
balancing arrangements, and shall contain information and analysis
comparable in scope to that contained in the Initial Engineering Report,
and shall be accompanied by such additional data concerning pricing,
operating costs, quantities of production from the Oil and Gas Properties
of the Related Persons, purchasers of production, and other information and
engineering and geological data as Administrative Agent may reasonably
request.
(v) As soon as available, and in any event within thirty (30) days
after the end of each Fiscal Quarter, a hedging report prepared by Borrower
regarding any Hedging Agreement entered into by Borrower and in effect as
of the end of such Fiscal Quarter. Each such hedging report shall be in
form satisfactory to Administrative Agent and shall include unit volumes,
pricing, term, counterparty and date of such contracts.
(vi) Within ten (10) days after entering into a contract, whether
written or oral, for the sale or transfer of any Oil and Gas Property, a
schedule of all of the Oil and Gas Property so sold since the date of the
most recent Engineering Report, cross-referencing same to the Engineering
Report last delivered hereunder, and the details of such sales including
the Net Sales Proceeds received by the Borrower in connection with each
sale. Contemporaneously with the consummation of any such sale or transfer
with respect to Oil and Gas Property included in the Borrowing Base, the
Borrowing Base shall be subject to adjustment, if any, pursuant to Section
6.2(d)(iii) hereof.
45
(vii) Promptly after sending or filing thereof, copies of all reports
that the Borrower sends to any of its security holders, and all reports and
registration statements that the Borrower or any of its Subsidiaries files
with the Securities and Exchange Commission or any successor agency, or any
national securities exchange.
(c) Other Information and Inspections. Each Related Person shall, and
---------------------------------
shall cause each of its Subsidiaries to, keep books and records that accurately
reflect all its business affairs and transactions. Each Related Person shall
furnish to Administrative Agent and each Lender any information that
Administrative Agent may from time to time reasonably request in writing
concerning any covenant, provision or condition of the Loan Documents or any
matter in connection with the Related Persons' businesses and operations. At any
reasonable time and from time to time, upon reasonable notice, each Related
Person shall, and shall cause its Subsidiaries to, permit the Administrative
Agent or any Lender or any of its agents or representatives thereof, to (a)
examine and make copies of and abstracts from the records and books of account
of, and visit and inspect at its reasonable discretion the properties of, any
such Related Person and any such Subsidiary, and (b) discuss the affairs,
finances and accounts of any such Related Person and any such Subsidiary with
any of their respective officers or directors; provided, however,
notwithstanding the provisions of 8.3, the Administrative Agent or the Lender
for whose benefit such inspection and visitation is made assumes sole
responsibility for the condition of any property of any such Related Person or
its Subsidiaries so visited and inspected, the access and egress thereto
(including, but not limited to wharves, docks, and helicopter landing areas),
and any vice or defect therein or thereon, and assumes all responsibility for
and hereby releases and indemnifies each Related Person, its Affiliates, and
their officers, directors, employees, and agents against any claim for damage or
injury to or by the Administrative Agent or such Lender (or the representatives
thereof) or to any such Related Person's or its Subsidiaries' property which may
be occasioned by inspection and visitation of any such Related Person's or its
Subsidiaries' property; provided, however, that neither any Related Person nor
any of its Subsidiaries shall be required to disclose to the Administrative
Agent, any Lender or any agents or representatives thereof any information which
is the subject of attorney-client privilege or attorney's work-product privilege
properly asserted by the applicable Person to prevent the loss of such privilege
in connection with such information. The expense of any exercise by the
Administrative Agent or any Lender of its rights under this Section 6.1(c) shall
not be incurred by the Borrower unless a Default has occurred and is continuing
at the time of the request or visit.
(d) Notice of Material Events and Change of Address. Borrower shall
-----------------------------------------------
promptly (but in no event later than five (5) Business Days after knowledge
thereof), after it has knowledge, notify Administrative Agent and each Lender:
(i) of the occurrence of any act, condition or event that is
reasonably likely to have a Material Adverse Effect;
(ii) of the occurrence of any Default;
(iii) of the acceleration of the maturity of any Indebtedness owed by
any Related Person or of any default by any Related Person under any
indenture, mortgage, agreement, contract or other instrument to which any
of them is a party or by which any
46
of them or any of their properties is bound, if such acceleration or
default might have a Material Adverse Effect;
(iv) of the occurrence of any Termination Event;
(v) of any claim in an amount equal to 1% of Spinnaker Exploration
Company's consolidated shareholder equity (based upon the most recent
financial statements delivered pursuant to Section 6.1(b)), or more, any
notice of potential liability under any Environmental Laws which might
exceed such amount, or any other claim asserted against any Related Person
or with respect to any Related Person's properties which might exceed such
amount;
(vi) of the institution of any material action, suit, proceedings,
governmental investigation or arbitration against or affecting any Related
Person not previously disclosed in writing to Administrative Agent pursuant
to this Section 6.1 or any material development in action, suit,
proceeding, governmental investigation or arbitration already disclosed in
either case which is likely to constitute a Material Adverse Effect; and
(vii) the creation, acquisition or other formation of a Subsidiary of
the Borrower.
Upon the occurrence of any of the foregoing the Related Persons shall take all
necessary or appropriate steps to remedy promptly any such Material Adverse
Effect, Default, acceleration, default or Termination Event to protect against
any such adverse claim, to defend any such suit or proceeding, and to resolve
all controversies on account of any of the foregoing. Borrower shall also notify
Administrative Agent in writing at least thirty (30) days prior to the date that
any Related Person changes its name or the location of its chief executive
office or principal place of business or the place where it keeps its books and
records concerning the properties and assets of the Borrower and its
Subsidiaries, furnishing with such notice any necessary financing statement
amendments or requesting Administrative Agent and its counsel to prepare the
same.
(e) Maintenance of Properties. Each Related Person shall, subject to the
-------------------------
last sentence of Section 6.1(g), maintain, preserve, protect, and keep all
properties and assets of the Borrower and its Subsidiaries and all other
material property (specifically excluding properties no longer capable of
producing hydrocarbons in economically reasonable quantities) used or useful in
the conduct of its business in good condition, ordinary wear and tear excepted,
and in compliance with all applicable laws, rules and regulations (except where
non-compliance is not reasonably likely to have a Material Adverse Effect), and
will from time to time make all repairs, renewals and replacements needed to
enable the business and operations carried on in connection therewith to be
conducted at all times. Without limitation of the foregoing, (i) each Related
Person shall, or shall make reasonable and customary efforts to, cause its Oil
and Gas Properties to be maintained, developed, protected and operated in a good
and workmanlike manner in material compliance with all title documents, laws and
contracts and (ii) each Related Person shall, or shall make reasonable and
customary efforts to, use its reasonable efforts to cause its Oil and Gas
Properties to be developed in accordance with Spinnaker Exploration Company's
annual budget provided to Administrative Agent (A) prior to the Closing Date and
(B) subsequent to the Closing Date pursuant to subsection (b)(i) above, in each
case as such plans and projections may
47
be revised by Borrower thereafter (such revisions to be delivered to
Administrative Agent upon its reasonable request). All hydrocarbons which any
Related Person takes and/or markets from its Oil and Gas Properties shall be
sold at such prices and on such terms as would be sought and obtained by a
reasonably prudent operator.
(f) Maintenance of Valid Title, Existence and Qualifications. Each Related
--------------------------------------------------------
Person shall maintain valid and defensible title to, or a valid leasehold or
like interest in, its material Oil and Gas Properties constituting proved
reserves, free and clear of any Prohibited Lien and of all material impediments
to the use of such properties and assets in such Related Person's ordinary
course of business, except where non-compliance would not have any Material
Adverse Effect. Each Related Person shall maintain and preserve its existence
and its material rights, privileges, permits, licenses and franchises necessary
to conduct its business in full force and effect and shall qualify to do
business in all states or jurisdictions where required by applicable law, except
where the failure so to qualify would not have any Material Adverse Effect.
(g) Payment of Trade Debt, Taxes, etc. Each Related Person shall (i) timely
---------------------------------
file (including any automatic extensions for filing) all required tax returns;
(ii) timely pay all taxes, assessments, and other governmental charges or levies
imposed upon it or upon its income, profits or property; (iii) within ninety
(90) days after the same becomes due pay all Indebtedness owed by it on ordinary
trade terms to vendors, suppliers and other Persons providing goods and services
used by it in the ordinary course of its business; (iv) pay all other material
claims (including, without limitation, claims for labor, services, materials and
supplies) that have become due and payable and that by law have or may become a
Lien on its such property or assets, prior to the time when any penalty or fine
may be incurred with respect thereto; and (v) maintain appropriate accruals and
reserves for all of the foregoing in accordance with GAAP. Each Related Person
may, however, delay paying or discharging and of the foregoing so long as it is
in good faith contesting the validity thereof by appropriate proceedings and has
set aside on its books adequate reserves therefor.
(h) Insurance. Each Related Person shall keep or cause to be kept
---------
adequately insured by financially sound and reputable insurers its equipment,
vehicles and all other property of a character usually insured by similar
Persons engaged in the same or similar businesses and reasonably satisfactory to
Administrative Agent. Each Related Person shall at all times maintain insurance
against its liability for injury to persons or property as is customary for the
industry, which insurance shall be by financially sound and reputable insurers
and reasonably satisfactory to Administrative Agent.
(i) Payment of Expenses. Whether or not the transactions contemplated by
-------------------
this Agreement are consummated, Borrower shall promptly (and in any event,
within thirty (30) days after any invoice or other statement or notice) pay all
reasonable costs (excluding advertising costs) and expenses incurred by or on
behalf of (i) Administrative Agent and its Affiliates (including reasonable
attorneys' fees) in connection with (1) the negotiation, syndication,
preparation, execution and delivery of the Loan Documents, and any and all
consents, waivers or other documents or instruments relating thereto, (2) the
filing, recording, refiling and re-recording of any Loan Documents and any other
documents or instruments or further assurances required to be filed or recorded
or refiled or rerecorded by the terms of any Loan Document, and (3) the
borrowings hereunder and other action reasonably required in the course of
48
administration hereof, and (ii) Administrative Agent or any Lender (including
reasonable attorneys' fees) in connection with the defense or enforcement of the
Loan Documents or the defense of Administrative Agent's or any Lender's exercise
of its rights thereunder (including costs and expenses of determining whether
and how to carry out such defense or enforcement).
(j) Preservation of Oil and Gas Properties. Borrower shall at all times
--------------------------------------
and at Borrower's own expense use reasonable commercial efforts to do all things
reasonably necessary to keep unimpaired each Related Person's rights and
remedies in its Oil and Gas Properties. Without limiting the foregoing, each
Related Person shall use reasonable commercial efforts to pay or cause to be
paid, promptly as and when due and payable, all delay rentals, royalties and
other indebtedness payable to the lessor of such Oil and Gas Properties. Should
any adverse claim be made against, or a cloud develop upon, or material title
defect exist upon, the title of any Related Person to any part of its Oil and
Gas Properties, such Related Person agrees that it will promptly defend such
claim or take appropriate action to remove such cloud or clear such title defect
at such Related Person's expense. Subject to Section 6.2(d), each Related Person
shall maintain at all times title to all their respective properties as
represented by Section 5.1(n), free and clear of Liens, other than the Liens
permitted by Section 6.2(b). Notwithstanding the foregoing, nothing in this
Section 6.1(j) shall prevent any Related Person from plugging and abandoning any
▇▇▇▇▇ if, based on its good faith assessment, it is economical to do so, or
prevent any Related Person from assigning leases by customary farm-ins or
non-consent provisions in the good faith exercise of the prudent operator
standard.
(k) Compliance with Agreements and Law. Each Related Person will perform
----------------------------------
all material obligations it is required to perform under the terms of each
indenture, mortgage, deed of trust, security agreement, lease, franchise,
agreement, contract or other instrument or obligation to which it is a party or
by which it or any of its properties is bound. Each Related Person will conduct
its business and affairs in material compliance with all laws, regulations, and
orders applicable thereto, including Environmental Laws and ERISA.
Section 6.2 Negative Covenants. To conform with the terms and conditions
------------------
under which each Lender is willing to have credit outstanding to Borrower, and
to induce Administrative Agent and each Lender and Issuing Bank to enter into
this Agreement and make the Loans and issue or participate in Letters of Credit,
Borrower warrants, covenants and agrees that until the full and final payment of
the Obligations and the termination of this Agreement, unless Majority Lenders
have previously agreed otherwise:
(a) Indebtedness. No Related Person shall create, incur, assume or suffer
------------
to exist any Indebtedness except:
(i) the Obligations;
(ii) Indebtedness arising under Hedging Agreements as permitted
hereunder;
(iii) miscellaneous items of Indebtedness not described in
subsections (i) and (ii), incurred for purchase money indebtedness,
Capitalized Lease Obligations and leases substantially equivalent to title
retention or conditional sales agreements, sales and leasebacks, and other
Indebtedness incurred in the ordinary course of business for the
49
purchase of equipment, computers, furniture, automobiles and similar
incidentals (and not for working capital or acquisitions) that do not in
the aggregate (taking into account all such Indebtedness of all Related
Persons) exceed $1,000,000 at any one time outstanding;
(iv) Indebtedness owing to another Related Person permitted by
Section 6.2(g);
(v) unsecured vendor Indebtedness of Borrower (but not of any of its
Subsidiaries) or of Spinnaker Exploration Company related to purchases of
2-D and 3-D seismic data made in the ordinary course of business in an
amount not to exceed $25,000,000 in the aggregate, except that such vendor
Indebtedness may be secured by such 2-D and 3-D seismic data;
(vi) other unsecured Indebtedness of Borrower (but not of any of its
respective Subsidiaries) or Spinnaker Exploration Company in an amount not
to exceed $10,000,000 in the aggregate; and
(vii) other unsecured subordinated Indebtedness of Borrower (but not
of any of its respective Subsidiaries) or Spinnaker Exploration Company;
provided that (A) contemporaneously with the incurrence of such
Indebtedness, Borrower shall provide written notice to Administrative Agent
of the general terms of such Indebtedness and certify to Administrative
Agent as to the amount of such incurred Indebtedness, the aggregate amount
of all Indebtedness incurred under this clause (vii) and the unsecured and
subordinated nature of such Indebtedness, (B) such Indebtedness shall have
a scheduled maturity date occurring after the Final Maturity Date, and
principal on such Indebtedness shall not be paid or prepaid until after the
Final Maturity Date (except as permitted pursuant to Section 2.10(e),
provided that the requirements of Section 2.10(e) and this Section
6.2(a)(vii) are otherwise satisfied), (C) such Indebtedness shall be
subordinated pursuant to subordination provisions of the type customarily
associated with subordinated Indebtedness that is issued by public oil and
gas exploration and production companies that are similar to the Borrower
(including subordination provisions with respect to subordinated
Indebtedness that is issued in connection with securities offerings made
under Rule 144A of the Securities Act of 1933, as amended), and (D) the
Borrower shall prepay the Loans and the Borrowing Base shall be
automatically reduced, in each case in accordance with Section 2.10(e).
(b) Limitation on Liens. No Related person shall create, incur, assume or
-------------------
suffer or permit to exist any Lien upon any of the properties or assets that it
now owns or hereafter acquires, except:
(i) Liens that secure Obligations;
(ii) Liens that secure Indebtedness permitted by Section 6.2(a)(iii);
(iii) Liens for taxes or assessments on real or personal property that
are not yet past due, or Liens for taxes and assessments on real or
personal property that are past due but for which adequate reserves with
respect thereto are maintained on its books in
50
accordance with GAAP and that are being diligently contested in good faith
by appropriate proceedings and have not proceeded to judgment;
(iv) imperfections and irregularities in title to any property
(which indirectly or together with any other such property has an aggregate
fair market value in excess of $500,000) that in the aggregate do not
materially impair the fair market value or use of such property for the
purposes for which it is or may reasonably be expected to be held;
(v) easements, exceptions, reservations, servitudes, permits,
surface leases and other rights in respect of surface leases, zoning,
planning, environmental and similar restrictions, laws or ordinances or
agreements for the purpose of pipelines, conduits, cables, wire
communication lines, power lines and substations, streets, roads, trails,
walkways, drainage, irrigation, water, and sewage purposes, dikes, canals,
ditches, the removal of oil, gas, coal, or other minerals, or for the joint
or common use of real property or rights-of-way and other like purposes
affecting real property (that indirectly or together with any other such
property has an aggregate fair market value in excess of $500,000) which in
the aggregate, are not substantial in amount, and that do not, in any case,
materially burden or impair the fair market value or use of such property
for the purposes for which it is or may reasonably be expected to be held;
(vi) non-consensual Liens imposed by law (other than a Lien imposed
by ERISA), including carrier's, mechanics', materialmen's, landlord's,
warehousemen's or other similar Liens, with respect to obligations not
incurred in connection with any violations of law and which are not
delinquent or, if delinquent, are being diligently contested in good faith
by appropriate proceedings, and for which adequate reserves with respect
thereto are maintained on its books in accordance with GAAP;
(vii) Liens consisting of pledges or deposits made in connection with
obligations under unemployment insurance, social security, workers'
compensation laws or similar legislation;
(viii) Liens consisting of pledges or deposits of property to secure
insurance in the ordinary course of business, the performance of bids,
tenders, contracts (other than contracts for the payment of money), leases,
licenses, franchises, performance bonds and other obligations of a like
nature incurred in the ordinary course of business;
(ix) Liens consisting of deposits of property to secure statutory
obligations of Borrower in the ordinary course of its business;
(x) Liens consisting of pledges or deposits of cash or cash
equivalents to secure Hedging Agreements with counterparties that are not
Lenders or affiliates of Lenders; provided that no more than $15,000,000 is
subject to such Liens at any one time in the aggregate; provided further
that the conditions of Section 6.2(n)(iii) are satisfied;
(xi) Liens consisting of deposits of property to secure (or in lieu
of surety, appeal or customer bonds) in proceedings to which Borrower is a
party in the ordinary course of its business;
51
(xii) Liens arising under operating, farmout, pooling or unitization
agreements of Borrower of the scope and nature customary in the oil and gas
industry;
(xiii) Liens for lessor's royalties, overriding royalties, and
division orders and sales contracts covering hydrocarbons, reversionary
interests and similar burdens; and any operator's Liens or similar Liens
arising in the ordinary course of the oil and gas operations of the Related
Persons and securing obligations that are not past due;
(xiv) Liens permitted by Section 6.2(a)(v); and
(xv) Liens on property classified by GAAP as owned by Persons other
than a Related Person, which Liens were required as a condition to such
Related Person's entering into a synthetic lease transaction in the
ordinary course of business;
provided that no Lien referred to above in subsections (ii) through (iii),
inclusive, shall (1) secure Indebtedness (except in subsection (ii)), (2) in the
aggregate materially detract from the value of the Oil and Gas Properties of the
Related Persons or materially impair the use thereof in the operation of the
business of the Related Persons, (3) individually or in the aggregate, operate
to reduce the net revenue interest of the Related Persons in any of the Oil and
Gas Property owned by the Related Persons to less than the net revenue interest
set forth in the Engineering Report most recently delivered by Borrower to the
Administrative Agent, or (4) be disadvantageous in any material respect to
Administrative Agent and the Lenders.
(c) Limitation on Fundamental Changes, Issuances of Securities. Except as
----------------------------------------------------------
expressly provided in this subsection, no Related Person shall enter into any
transaction or acquisition of a Person or merger, consolidation or amalgamation,
or liquidate, wind up or dissolve itself (or suffer any liquidation or
dissolution), or convey, sell lease, assign, transfer or otherwise dispose of,
all or substantially all of its property, business or assets. Any Subsidiary of
Borrower may, however, be merged into or consolidated with (i) another
Subsidiary of Borrower, so long as a direct wholly-owned Subsidiary of Borrower
which is a Guarantor is the surviving business entity, or (ii) Borrower, so long
as Borrower is the surviving business entity. In addition, any Person may be
merged into or consolidated with any Related Person so long as such Related
Person is the surviving business entity and no Default exists or will be created
thereby. Any wholly-owned Subsidiary of Borrower may sell, lease, transfer or
otherwise dispose of any or all of its assets (upon voluntary liquidation or
otherwise) to Borrower or any other direct wholly-owned Subsidiary of Borrower
which is a Guarantor. Borrower shall not issue any membership interests other
than common membership interests in Borrower and any options or warrants giving
the holders thereof only the right to acquire such interests. No Subsidiary of
Borrower shall issue any additional securities or any options, warrants or other
rights to acquire such additional securities except to Borrower and only to the
extent not otherwise forbidden under the terms hereof. No Subsidiary of Borrower
shall allow any diminution of Borrower's interest (direct or indirect) therein.
Borrower shall not suffer to exist any sale, transfer or other disposition of
the stock of or rights with respect to Borrower or any Subsidiary, and Borrower
shall not issue any additional securities or any options, warrants or other
rights to acquire such additional securities.
52
(d) Limitation on Sales of Property. No Related Person shall sell,
-------------------------------
transfer, lease, exchange, alienate or dispose of any properties valued in the
Borrowing Base or any of its other assets or properties or any interest therein
except:
(i) equipment that is worthless or obsolete or that is replaced by
equipment of equal suitability and value;
(ii) inventory (including oil and gas sold as produced and seismic
data) that is sold for cash only in the ordinary course of business on
ordinary trade terms;
(iii) during any Fiscal Year, sales, transfers or dispositions of
interests in Oil and Gas Properties, or portions thereof, that are included
in the Borrowing Base the value of which, if any, as set forth in the
Engineering Report most recently furnished to Administrative Agent and
Lenders as of the time of sale does not in the aggregate in such Fiscal
Year exceed $25,000,000 for all such sales, transfers or dispositions. In
the event the Required Borrowing Base Lenders, in their sole discretion,
permit any Related Person to sell any such properties that are included in
the Borrowing Base in excess of such $25,000,000 in any such period, (1)
Administrative Agent shall have the right to require a Borrowing Base
redetermination, at Borrower's cost, and (2) 80% of the Net Sales Proceeds
therefrom shall be applied as set forth in Section 2.10(b)(ii), as
appropriate;
(iv) provided that no Event of Default exists and is continuing,
sales of interests in Oil and Gas Properties, or portions thereof, which
are not proved reserves as shown in the most recent Engineering Report
delivered pursuant hereto; and
(v) second licenses to information under the PGS Data Contract,
provided that in the event a Borrowing Base Deficiency exists and is
continuing, Borrower shall prepay the Loans (and, upon payment of all
Loans,) shall in an amount equal to the lesser of such Borrowing Base
Deficiency or the Net Sales Proceeds from the sale of such second licenses
within one (1) Business Day of receipt of any such net proceeds.
Application of such Net Sales Proceeds shall be applied to the principal of
the Loans until the Loans are paid in full and then to be held as LC
Collateral in an amount equal to the aggregate amount of Matured LC
Obligations pursuant to Section 3.6.
(e) Limitation on Dividends and Redemption. No Related Person shall
--------------------------------------
declare or pay any dividends on or make any other distribution in respect of any
interest in it, nor will any Related Person directly or indirectly make any
capital contribution to or purchase, redeem, acquire or retire any securities
issued by any Related Person (whether such interests are now or hereafter
issued, outstanding or created), or cause or permit any reduction or retirement
of the capital stock of any Related Person, except as expressly provided in this
Section or to redeem, purchase or defease any Indebtedness that is subordinated
in right of payment to any Indebtedness hereunder. Such dividends,
distributions, contributions, purchases, redemptions, acquisitions, retirements
or reductions may be made (i) by any Related Person other than Borrower without
limitation to Borrower; (ii) by any Related Person to Guarantors which are
Subsidiaries of Borrower, to the extent that such Guarantors are using funds so
contributed or paid for activities in which Borrower could invest directly under
Section 6.2(f); (iii) by Borrower to members of Borrower by way of distributions
or dividends only, provided that such
53
distributions or dividends either (A) are solely used directly or indirectly to
pay either current taxes or employee compensation paid within the ordinary
course of business (including bonuses and payments under employment contracts
existing on the Closing Date) or (B) do not exceed $10,000,000 in the aggregate
during any Fiscal Year; and (iv) by Spinnaker Exploration Company with the
proceeds received from the Borrower pursuant to clause (B) immediately above;
provided that no such dividends, distributions, contributions, purchases,
redemptions, acquisitions, retirements or reductions shall be permitted if (a) a
Default or Event of Default has occurred and is continuing, (b) a Default or
Event of Default would occur as a result thereof, or (c) a Borrowing Base
Deficiency exists.
(f) Limitation on Investments. No Related Person shall make any
-------------------------
significant acquisitions or, or capital contributions to, or other investments
in, any properties or Person, other than:
(i) Permitted Investments and investments permitted by Section
6.2(g);
(ii) in its existing lines of business;
(iii) to Subsidiaries of the Borrower that are Guarantors;
(iv) pledges or deposits of cash or cash equivalents to secure
Hedging Agreements with counterparties that are not Lenders or affiliates
of Lenders; provided that no more than $15,000,000 is subject to such Liens
at any one time in the aggregate; provided further that the conditions of
Section 6.2(n)(iii) are satisfied;
(v) investments in connection with or related to farm-out, farm-in,
joint operating, joint venture or area of mutual interest agreements,
gathering systems, pipelines or other similar or customary arrangements
entered into in the ordinary course of business only insofar as they do not
(i) reduce the net revenue interest of the Related Persons in any property
included in the Borrowing Base below the undivided net revenue interest
specified for such Related Persons in the most recent Engineering Report
utilized by the Lenders in determining the then effective Borrowing Base
and/or (ii) increase the undivided working interest without a corresponding
increase in the net revenue interest specified for such Related Persons in
the most recent Engineering Report utilized by the Lenders in determining
the then effective Borrowing Base.
Notwithstanding the foregoing, investments by Spinnaker Exploration Company
and WP Spinnaker Holdings, Inc. shall be limited to their interests in Borrower
or Permitted Investments and investments permitted by Section 6.2(g).
(g) Limitation on Credit Extensions. Except for Permitted Investments, no
-------------------------------
Related Person shall extend credit, make advances or make loans other than (i)
normal and prudent extensions of credit to customers buying goods and services
in the ordinary course of business, which extensions shall not be for longer
periods than those extended by similar businesses operated in a normal and
prudent manner, (ii) loans to another Related Person that is a Guarantor or to
the Borrower (to the extent (and only to the extent) repayment thereof shall be
subordinated by an agreement in the form of Exhibit G to payment of the
Obligations); provided that, in addition to the limits set forth in Exhibit G,
any payment of interest made before the Final
54
Maturity Date on any such subordinated debt shall be permitted only if (A) such
payment is solely used directly or indirectly to pay either current taxes or
employee compensation paid within the ordinary course of business (including
bonuses and payments under employment contracts existing on the Closing Date and
(B) no Borrowing Base Deficiency exists, and (iii) advances to operators under
operating agreements entered into by the Borrower in the ordinary course of
business.
(h) Transactions with Affiliates. No Related Person shall engage in any
----------------------------
transaction with any of its Affiliates on terms that are less favorable to it
than those which would have been obtainable at the time in arm's-length dealing
with Persons other than such Affiliates, provided that such restrictions shall
not apply to transactions among Related Persons.
(i) Certain Contracts; Amendments; Multiemployer ERISA Plans. Except as
--------------------------------------------------------
expressly provided for in the Loan Documents, no Related Person shall, directly
or indirectly, enter into, create, or otherwise allow to exist any contract or
other consensual restriction on the ability of any Subsidiary of Borrower: (i)
to pay dividends or make other distributions to Borrower, (ii) to redeem equity
interests held in it by Borrower, (iii) to repay loans and other indebtedness
owing by it to Borrower, or (iv) to transfer any of its assets to Borrower. No
Related Person shall enter into any "take-or-pay" contract or other contract or
arrangement for the purchase of goods or services which obligates it to pay for
such goods or service regardless of whether they are delivered or furnished to
it. No Related Person shall amend or permit any amendment to its charter
documents or bylaws to the material detriment of Administrative Agent or any
Lender. No Related Person shall incur any obligation to contribute to any
"multiemployer plan" as defined in Section 4001 of ERISA.
(j) Fiscal Year. No Related Person shall change its fiscal year.
-----------
(k) Current Ratio. The ratio of Borrower's consolidated current assets
-------------
(excluding ▇▇▇▇ to Market Exposure) as of the end of each Fiscal Quarter to
Borrower's consolidated current liabilities (excluding ▇▇▇▇ to Market Exposure)
as of the end of such Fiscal Quarter shall never be less than 1.00 to 1.00. For
purposes of this subsection, Borrower's consolidated current ratio will be
calculated (i) including availability under this Agreement as current assets,
and (ii) excluding as current liabilities any payments of principal on the Notes
which are required to be repaid within one year from the time of calculation.
(l) Minimum Tangible Net Worth. Borrower shall not permit its Tangible Net
--------------------------
Worth at any time to be less than the sum of (i) 80% of its Tangible Net Worth
as of September 30, 2001 plus (ii) 50% of the Borrower's Adjusted Consolidated
----
Net Income for each Fiscal Quarter since the Closing Date plus (iii) 75% of the
----
proceeds (less reasonable and customary fees and commissions) from the sale of
any security (including without limitation, common equity, preferred equity or
other equity interests or equity securities including warrants, options and the
like) issued after the Closing Date.
(m) Change in Business. The Borrower shall not, and shall not permit any
------------------
of its Subsidiaries to, engage in any business activities except the exploration
for, production of and sale of oil and gas, and such activities as may be
incidental or related thereto.
55
(n) Hedging. Borrower will not enter into any Hedging Agreement except for
-------
Hedging Agreements that do not violate the following requirements:
(i) at no time from the transaction date of such Hedging Agreement
will the aggregate amounts hedged in any month under any floor hedging
contracts, collar hedging contracts, forward sales transactions, calls or
other derivative products entered into by Borrower exceed the estimated
production volumes for such month from total internally-projected proved
reserves of Related Persons as follows:
--------------------------------------
Months from and
after Hedging
Agreement
transaction date Maximum %
--------------------------------------
1 - 3 100%
--------------------------------------
4 - 18 66 2/3%
--------------------------------------
19 - 36 33 1/3%
--------------------------------------
(ii) at no time will any Hedging Agreement of any nature have a
counterparty with a minimum long-term senior unsecured Indebtedness rating
less than "BBB+" by Standard & Poors Corporation or "Baa1" by ▇▇▇▇▇'▇
Investors Services, Inc, at the time that such counterparty entered into
the relevant transaction under such Hedging Agreement; and
(iii) at no time will exposure to any single counterparty exceed
twenty-five percent (25%) of the estimated production volumes from total
internally-projected proved reserves of Related Persons.
(o) Negative Pledges, Restrictive Agreements, etc. Borrower shall not, and
---------------------------------------------
will not permit any of its Subsidiaries to, enter into any agreement (excluding
this Agreement, any other Loan Document and any agreement governing any
Indebtedness permitted by Section 6.2(a)(iii) and (v) as to the assets financed
with the proceeds of such Indebtedness) prohibiting
(i) the creation or assumption of any Lien upon its properties,
revenues or assets, whether now owned or hereafter acquired, or the ability
of the Borrower or any other Related Person to amend or otherwise modify
this Agreement or any other Loan Document; or
(ii) the ability of any Subsidiary to make any payments, directly or
indirectly, to the Borrower by way of dividends, advances, repayments of
loans or advances, reimbursements of management and other intercompany
charges, expenses and accruals or other returns on investments, or any
other agreement or arrangement which restricts the ability of any such
Subsidiary to make any payment, directly or indirectly, to the Borrower;
provided, however, that with respect to Indebtedness permitted by Section
6.2(a)(vi), Borrower may ▇▇▇▇▇ ▇ ▇▇▇▇ on the assets financed by the proceeds of
such Indebtedness in favor of the
56
lender of such Indebtedness so long as (A) Borrower shall have previously or
concurrently therewith granted a Lien on such assets in favor of the
Administrative Agent for the benefit of the Lenders and (B) such lender is
entitled to share with the Administrative Agent and the Lenders in the proceeds
of the collateral security secured by such Lien on not better terms than a pari
passu basis.
57
ARTICLE VII - Offset; Additional Subsidiaries
-------------------------------
Section 7.1 [Intentionally Omitted].
Section 7.2 [Intentionally Omitted].
Section 7.3 [Intentionally Omitted].
Section 7.4 Bank Accounts; Offset. To ensure the repayment of the
---------------------
Obligations, Borrower hereby grants to Administrative Agent, each of its
Affiliates and each Lender and Issuing Bank a security interest, a lien, and a
right of offset, each of which shall be in addition to all other interests,
liens, and rights of Administrative Agent or any Lender or Issuing Bank at
common law, under the Loan Documents, or otherwise, and each of which shall be
upon and against (a) any and all moneys, securities or other property (and the
proceeds therefrom) of Borrower now or hereafter held or received by or in
transit to Administrative Agent or any Lender or Issuing Bank from or for the
account of Borrower, whether for safekeeping, custody, pledge, transmission,
collection or otherwise, (b) any and all deposits (general or special, time or
demand, provisional or final), other than deposits of funds held by Borrower for
the benefit of third parties, of Borrower with Administrative Agent or any
Lender or Issuing Bank, and (c) any other credits and claims of Borrower at any
time existing against Administrative Agent or any Lender or Issuing Bank,
including claims under certificates of deposit. At any time and from time to
time after the occurrence of any Default, each of Administrative Agent and any
Lender and Issuing Bank is hereby authorized to foreclose upon, or to offset
against the Obligations then due and payable (in either case without notice to
Borrower), any and all items hereinabove referred to. The remedies of
foreclosure and offset are separate and cumulative, and either may be exercised
independently of the other without regard to procedures or restrictions
applicable to the other.
Section 7.5 Additional Subsidiaries. Within five (5) Business Days after
-----------------------
Borrower or any Subsidiary creates, acquires or otherwise forms a Subsidiary,
Borrower shall: (a) cause such Subsidiary to execute and deliver to
Administrative Agent on behalf of the Lenders a guaranty substantially similar
to the guaranties executed and delivered on the Closing Date; (b) deliver or
cause to be delivered to Administrative Agent on behalf of the Lenders all
agreements, documents, instruments and other writings described in Section
4.1(c)(i), (d) and (k), with respect to such Subsidiary; and (c) deliver or
cause to be delivered to Administrative Agent on behalf of the Lenders all such
information regarding the condition (financial or otherwise), business and
operations of such Subsidiary as Administrative Agent or any Lender through
Administrative Agent may reasonably request.
58
ARTICLE VIII - Events of Default and Remedies
------------------------------
Section 8.1 Events of Default. Each of the following events constitutes an
-----------------
Event of Default under this Agreement:
(a) The failure of any Related Person to pay any interest within three (3)
days of the date when due, or any Related Person fails to pay any other
Obligation when due and payable, whether at a date for the payment of a fixed
installment or as a contingent or other payment becomes due and payable or as a
result of acceleration or otherwise;
(b) The failure of any Related Person (other than as referred to in
subsection (a) above) to duly observe, perform or comply with any covenant,
agreement, condition or provision of Section 6.2.
(c) The failure of any Related Person (other than as referred to in
subsection (a) and (b) above) to duly observe, perform or comply with any
covenant, agreement, condition or provision of this Agreement or any other Loan
Document and such failure remains unremedied for a period of thirty (30) days
from such failure;
(d) Any representation or warranty previously, presently or hereafter made
in writing by or on behalf of any Related Person in connection with any Loan
Document shall prove to have been false or incorrect in any material respect on
any date on or as of which made, or any Loan Document at any time ceases to be
valid, binding and enforceable as warranted in Section 5.1(e) for any reason
other than its release or subordination by Administrative Agent, or any Related
Person or any Affiliate thereof shall so assert;
(e) The failure of any Related Person to pay any obligations in excess of
$1,000,000 in the aggregate in respect of any Hedging Agreement entered into by
such Related Person when such obligations become due and payable (or, if
permitted by the terms of the relevant document, within any applicable grace
period), whether such obligations shall become due by scheduled maturity, by
required prepayment, by acceleration, by termination, by demand or otherwise;
(f) The failure of any Related Person duly to comply with any material
term of any agreement or instrument, if such agreement or instrument is
materially significant to Spinnaker Exploration Company on a consolidated basis,
and such failure is not remedied within the applicable period of grace (if any)
provided in such agreement or instrument;
(g) The failure of any Related Person to (i) pay Indebtedness having a
principal amount in excess of $1,000,000 in the aggregate (other than the
amounts referred to in Section 8.1 (a)), or any interest or premium thereon,
when due (or, if permitted by the terms of the relevant document, within any
applicable grace period), whether such Indebtedness shall become due by
scheduled maturity, by required prepayment, by acceleration, by demand or
otherwise; or (ii) perform any term, covenant or condition on its part to be
performed under any agreement or instrument evidencing, securing or relating to
Indebtedness having a principal amount in excess of $1,000,000 in the aggregate,
when required to be performed, and such failure shall continue after the
applicable grace period, if any, specified in such agreement or instrument, if
the effect of such failure is to accelerate, or to permit the holder or holders
of such Indebtedness to accelerate, the maturity of such Indebtedness;
59
(h) A Change in Control shall occur;
(i) Either (i) any "accumulated funding deficiency" (as defined in Section
412(a) of the Internal Revenue Code of 1986, as amended) in excess of $100,000
exists with respect to any ERISA Plan, whether or not waived by the Secretary of
the Treasury or his delegate, or (ii) any Termination Event occurs with respect
to any ERISA Plan and the then current value of such ERISA Plan's benefit
liabilities exceeds the then current value of such ERISA Plan's assets available
for the payment of such benefit liabilities by more than $100,000 (or in the
case of a Termination Event involving the withdrawal of a substantial employer,
the withdrawing employer's proportionate share of such excess exceeds such
amount);
(j) [Intentionally Omitted];
(k) Any Related Person:
(i) suffers the entry against it of a judgment, decree or order for
relief by a court of competent jurisdiction in an involuntary proceeding
commenced under any applicable bankruptcy, insolvency or other similar law
of any jurisdiction now or hereafter in effect, including the federal
Bankruptcy Code, as from time to time amended, or has any such proceeding
commenced against it which remains undismissed for a period of sixty (60)
days; or
(ii) commences a voluntary case under any applicable bankruptcy,
insolvency or similar law now or hereafter in effect, including the federal
Bankruptcy Code, as from time to time amended; or applies for or consents
to the entry of an order for relief in an involuntary case under any such
law; or makes a general assignment for the benefit of creditors; or fails
generally to pay (or admits in writing its inability to pay) its debts as
such debts become due; or takes action to authorize any of the foregoing;
or
(iii) suffers the appointment of or taking possession by a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar official
of all or a substantial part of its assets or of any part of the assets of
such Related Person in a proceeding brought against or initiated by it, and
such appointment or taking possession is neither made ineffective nor
discharged within sixty (60) days after the making hereof, or such
appointment or taking possession is at any time consented to, requested by,
or acquiesced to by it; or
(iv) suffers the entry against it of one or more final judgments,
orders, writs, warrants of attachment or similar process for the payment of
money in excess of $100,000 in the aggregate, unless the same is discharged
within thirty (30) days after the date of entry thereof or an appeal or
appropriate proceeding for review thereof is taken within such period and a
stay of execution pending such appeal is obtained; or
(v) suffers a writ or warrant of attachment or any similar process
to be issued by any court against all or any substantial part of its assets
or any part of the assets of such Related Person, and such writ or warrant
of attachment or any similar process is not stayed or released within
fifteen (15) days after the entry or levy thereof or after any stay is
vacated or set aside; or
60
(l) (i) any of the Guaranties shall cease, for any reason, to be in full
force and effect, or any Related Person or any Affiliate thereof shall so
assert, and such shall not be remedied with fifteen (15) days after notice from
Administrative Agent or (ii) any Guarantor shall have failed to make a payment
when due under its Guaranty or shall have otherwise materially defaulted under
its Guaranty.
Upon the occurrence of an Event of Default described in subsection (k)(i),
(k)(ii) or (k)(iii) of this section, all of the Obligations shall thereupon be
immediately due and payable, without demand, presentment, notice of demand or of
dishonor and nonpayment, protest, notice of protest, notice of intention to
accelerate, declaration or notice of acceleration, or any other notice or
declaration of any kind, all of which are hereby expressly waived by Borrower
and each other Related Person who at any time ratifies or approves this
Agreement. During the continuance of any other Event of Default, Administrative
Agent at any time and from time to time may (and upon written instructions from
Majority Lenders, Administrative Agent shall), without notice to Borrower and
any other Related Person, declare any or all of the Obligations immediately due
and payable, and all such Obligations shall thereupon be immediately due and
payable (including the Obligation of the Borrower to pay all LC Obligations
pursuant to Section 3.6(b)), without demand, presentment, notice of demand or of
dishonor and nonpayment, protest, notice of protest, notice of intention to
accelerate, declaration or notice of acceleration, or any other notice or
declaration of any kind, all of which are hereby expressly waived by Borrower
and each other Related Person who at any time ratifies or approves this
Agreement. After any such acceleration (whether automatic or due to any
declaration by Administrative Agent), any obligation of any Lender to make any
further Loans or Issuing Bank to issue any additional Letters of Credit shall be
permanently terminated.
Section 8.2 Remedies. If any Default shall occur, each Lender may protect
--------
and enforce its rights under the Loan Documents by any appropriate proceedings,
including proceedings for specific performance of any covenant or agreement
contained in any Loan Document, and each Lender may enforce the payment of any
Obligations due it; or enforce any other legal or equitable right which it may
have. All rights, remedies and powers conferred upon Administrative Agent and
Lenders under the Loan Documents shall be deemed cumulative and not exclusive of
any other rights, remedies or powers available under the Loan Documents or at
law or in equity.
Section 8.3 Payment of Expenses, Indemnities, etc. The Borrower agrees:
-------------------------------------
(a) whether or not the transactions hereby contemplated are consummated,
to pay all reasonable expenses of the Administrative Agent in the 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, 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
61
Agent or the Lenders to satisfy any obligation of the Borrower under this
Agreement or any other Loan Document, including without limitation, all costs
and expenses of foreclosure;
(b) 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 RELATED PERSON AND
THE SUBSIDIARIES, (IV) THE FAILURE OF ANY RELATED PERSON TO COMPLY WITH THE
TERMS OF ANY OTHER LOAN DOCUMENT OR THIS AGREEMENT, OR WITH ANY GOVERNMENTAL
REQUIREMENT, (V) ANY INACCURACY OF ANY REPRESENTATION OR ANY BREACH OF ANY
WARRANTY OF ANY RELATED PERSON 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, (VII) ANY ASSERTION THAT THE LENDERS WERE NOT
ENTITLED TO RECEIVE THE PROCEEDS RECEIVED PURSUANT TO THE LOAN DOCUMENTS OR
(VIII) ANY OTHER ASPECT OF THE LOAN DOCUMENTS, INCLUDING, WITHOUT LIMITATION,
THE REASONABLE FEES AND DISBURSEMENTS OF COUNSEL AND ALL OTHER REASONABLE
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 AGENT OR A LENDER'S SHAREHOLDERS AGAINST THE AGENT OR LENDER OR,
AS TO ANY INDEMNIFIED PARTY, BY REASON OF THE GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT ON THE PART OF SUCH INDEMNIFIED PARTY; AND
(c) TO INDEMNIFY AND HOLD HARMLESS FROM TIME TO TIME THE INDEMNIFIED PARTY
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 ANY
RELATED PERSON OR ANY OF ITS 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 ANY RELATED PERSON WITH ANY
ENVIRONMENTAL LAW
62
APPLICABLE TO ANY RELATED PERSON, (III) DUE TO PAST OWNERSHIP BY ANY RELATED
PERSON OF ANY OF ITS PROPERTIES OR PAST ACTIVITY ON ANY OF ITS PROPERTIES WHICH,
THOUGH LAWFUL AND FULLY PERMISSIBLE AT THE TIME, RESULTS 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 ANY RELATED
PERSON 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 8.3(C) IN RESPECT OF ANY PROPERTY FOR ANY OCCURRENCE ARISING FROM
THE ACTS OR OMISSIONS OF THE AGENT OR ANY LENDER DURING THE PERIOD AFTER WHICH
SUCH PERSON, ITS SUCCESSORS OR ASSIGNS, OR THEIR AGENTS OR REPRESENTATIVES,
SHALL HAVE OBTAINED POSSESSION OF SUCH PROPERTY (WHETHER BY FORECLOSURE OR DEED
IN LIEU OF FORECLOSURE, AS MORTGAGEE-IN-POSSESSION OR OTHERWISE).
(d) No Indemnified Party may settle any claim to be indemnified without
the consent of the indemnitor, such consent not to be unreasonably withheld;
provided, that the indemnitor may not reasonably withhold consent to any
settlement that an Indemnified Party proposes, if the indemnitor does not have
the financial ability to pay all its obligations outstanding and asserted
against the indemnitor at that time, including, without limitation, the maximum
potential claims pending or to the knowledge of the indemnitee threatened
against the Indemnified Party to be indemnified pursuant to this Section 8.3.
(e) In the case of any indemnification hereunder, the Administrative Agent
or Lender, as appropriate shall give written 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.
(f) 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 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 SUCH
INDEMNIFIED PARTY.
63
ARTICLE IX - Administrative Agent
--------------------
Section 9.1 Appointment and Authority. Each Lender hereby irrevocably
-------------------------
authorizes Administrative Agent, and Administrative Agent hereby undertakes, to
receive payments of principal, interest and other amounts due hereunder as
specified herein and to take all other actions and to exercise such powers under
the Loan Documents as are specifically delegated to Administrative Agent by the
terms hereof or thereof, together with all other powers reasonably incidental
thereto. The relationship of Administrative Agent to Lenders is only that of one
commercial bank acting as administrative agent for others, and nothing in the
Loan Documents shall be construed to constitute Administrative Agent a trustee
or other fiduciary for any holder of any of the Notes or of any participation
therein nor to impose on Administrative Agent duties and obligations other than
those expressly provided for in the Loan Documents. With respect to any matters
not expressly provided for in the Loan Documents and any matters which the Loan
Documents place within the discretion of Administrative Agent, Administrative
Agent shall not be required to exercise any discretion or take any action, and
it may request instructions from Lenders with respect to any such matter, in
which case it shall be required to act or to refrain from acting (and shall be
fully protected and free from liability to all Lenders in so acting or
refraining from acting) upon the instructions of Majority Lenders (including
itself), provided, however, that Administrative Agent shall not be required to
take any action which exposes it to a risk of personal liability that it
considers unreasonable or which is contrary to the Loan Documents or to
applicable law. Upon receipt by Administrative Agent from Borrower of any
communication calling for action on the part of Lenders or upon notice from any
Lender to Administrative Agent of any Default or Event of Default,
Administrative Agent shall promptly notify each Lender thereof.
Section 9.2 Exculpation, Administrative Agent's Reliance, Etc. None of the
-------------------------------------------------
Administrative Agent, any Arranger or any of the directors, officers, agents,
attorneys, or employees of either, shall be liable for any action taken or
omitted to be taken by any of them under or in connection with the Loan
Documents, INCLUDING THEIR NEGLIGENCE OF ANY KIND, except that each shall be
liable for its own gross negligence or willful misconduct. Without limiting the
generality of the foregoing, (a) Administrative Agent may treat the payee of any
Note as the holder thereof until Administrative Agent receives written notice of
the assignment or transfer thereof in accordance with this Agreement, signed by
such payee and in form satisfactory to Administrative Agent; (b) each of the
Administrative Agent and each Arranger may consult with legal counsel (including
counsel for Borrower), independent public accountants and other experts selected
by it and shall not be liable for any action taken or omitted to be taken in
good faith by it in accordance with the advice of such counsel, accountants or
experts; (c) neither the Administrative Agent nor any Arranger makes any
warranty or representation to any Lender and shall not be responsible to any
Lender for any statements, warranties or representations made in or in
connection with the Loan Documents; (d) neither the Administrative Agent nor any
Arranger shall have any duty to ascertain or to inquire as to the performance or
observance of any of the terms, covenants or conditions of the Loan Documents on
the part of any Related Person, or to inspect the property (including the books
and records) of any Related Person; (e) neither the Administrative Agent nor any
Arranger shall be responsible to any Lender for the due execution, legality,
validity, enforceability, genuineness, sufficiency or value of any Loan Document
or any instrument or document furnished in connection therewith; (f) may rely
upon the representations and warranties of the Related Persons and the Lenders
in
64
exercising its powers hereunder; and (g) neither the Administrative Agent nor
any Arranger shall incur any liability under or in respect of the Loan Documents
by acting upon any notice, consent, certificate or other instrument or writing
(including any telecopy, telegram, cable or telex) believed by it to be genuine
and signed or sent by the proper Person or Persons.
Section 9.3 Lenders' Credit Decisions. Each Lender acknowledges that it
-------------------------
has, independently and without reliance upon Administrative Agent, any Arranger
or any other Lender, made its own analysis of Borrower and the transactions
contemplated hereby and its own independent decision to enter into this
Agreement and the other Loan Documents. Each Lender also acknowledges that it
will independently and without reliance upon Administrative Agent, any Arranger
or any other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under the Loan Documents.
Section 9.4 Indemnification. Each Lender agrees to indemnify
---------------
Administrative Agent and each Arranger (to the extent not reimbursed by Borrower
within ten (10) days after demand) from and against such Lenders' Percentage
Share of any and all liabilities, obligations, claims, losses, damages,
penalties, fines, actions, judgments, suits, settlements, costs, expenses or
disbursements (including reasonable fees of attorneys, accountants, experts and
advisors) of any kind or nature whatsoever (in this section collectively called
"liabilities and costs") which to any extent (in whole or in part) may be
imposed on, incurred by, or asserted against Administrative Agent or any
Arranger growing out of, resulting from or in any other way associated with any
of the properties and assets of the Related Persons, the Loan Documents and the
transactions and events (including the enforcement thereof) at any time
associated therewith or contemplated therein (including any violation or
noncompliance with any Environmental Laws by any Person or any liabilities or
duties of any Person with respect to Hazardous Materials found in or released
into the environment). THE FOREGOING INDEMNIFICATION SHALL APPLY WHETHER OR NOT
SUCH LIABILITIES AND COSTS ARE IN ANY WAY OR TO ANY EXTENT CAUSED, IN WHOLE OR
IN PART, BY ANY NEGLIGENT ACT OR OMISSION OF ANY KIND BY ADMINISTRATIVE AGENT OR
ANY ARRANGER, PROVIDED ONLY THAT NO LENDER SHALL BE OBLIGATED UNDER THIS SECTION
TO INDEMNIFY ADMINISTRATIVE AGENT OR ANY ARRANGER FOR THAT PORTION, IF ANY, OF
ANY LIABILITIES AND COSTS WHICH IS PROXIMATELY CAUSED BY SUCH PERSON'S OWN
INDIVIDUAL GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, AS DETERMINED IN A FINAL
JUDGMENT. Cumulative of the foregoing, each Lender agrees to reimburse
Administrative Agent promptly upon demand for such Lender's Percentage Share of
any costs and expenses to be paid to Administrative Agent by Borrower under
Section 6.1(i) to the extent that Administrative Agent is not timely reimbursed
for such expenses by Borrower as provided in such section. As used in this
section the term "Administrative Agent" and "Arranger" shall refer not only to
the Person designated as such in Section 1.1. but also to each director,
officer, agent, attorney, employee, representative and Affiliate of such Person.
Section 9.5 Rights as Lender. In its capacity as a Lender, Administrative
----------------
Agent shall have the same rights and obligations as any Lender and may exercise
such rights as though it were not Administrative Agent. TD, any successor
Administrative Agent, or any of their respective Affiliates may accept deposits
from, lend money to, act as Trustee under indentures
65
of, and generally engage in any kind of business with any Related Person or
their Affiliates, including without limitation equity investments by TD or any
of its Affiliates, all as if TD were not Administrative Agent hereunder and
without any duty to account therefor to any other Lender.
Section 9.6 Sharing of Set-Offs and Other Payments. Each of Administrative
--------------------------------------
Agent and Lenders agrees that if it shall, whether through the exercise of
rights of banker's lien, set off, or counterclaim against any Related Person or
otherwise, obtain payment of a portion of the aggregate Obligations owed to it
which, taking into account all distributions made by Administrative Agent under
Section 2.11, causes Administrative Agent or such Lender to have received more
than it would have received had such payment been received by Administrative
Agent and distributed pursuant to Section 2.11, then (a) it shall be deemed to
have simultaneously purchased and shall be obligated to purchase interests in
the Obligations as necessary to cause Administrative Agent and all lenders to
share all payments as provided for in Section 2.11, and (b) such other
adjustments shall be made from time to time as shall be equitable to ensure that
Administrative Agent and all Lenders share all payments of Obligations as
provided in Section 2.11; provided, however, that nothing herein contained shall
in any way affect the right of Administrative Agent or any Lender to obtain
payment (whether by exercise of rights of banker's lien, set-off or counterclaim
or otherwise) of indebtedness other than the Obligations. Borrower expressly
consents to the foregoing arrangements and agrees that any holder of any such
interest or other participation in the Obligations, whether or not acquired
pursuant to the foregoing arrangements, may to the fullest extent permitted by
law exercise any and all rights of banker's lien, set-off, or counterclaim as
fully as if such holder were a holder of the Obligations in the amount of such
interest or other participation. If all or any part of any funds transferred
pursuant to this section is thereafter recovered from the seller under this
section which received the same, the purchase provided for in this section shall
be deemed to have been rescinded to the extent of such recovery, together with
interest, if any, if interest is required pursuant to court order to be paid on
account of the possession of such funds prior to such recovery.
Section 9.7 Investments. Whenever Administrative Agent in good faith
-----------
determines that it is uncertain about how to distribute to Lenders any funds
which it has received, or whenever Administrative Agent in good faith determines
that there is any dispute among Lenders about how such funds should be
distributed, Administrative Agent may choose to defer distribution of the funds
which are the subject of such uncertainty or dispute. If Administrative Agent in
good faith believes that the uncertainty or dispute will not be promptly
resolved, or if Administrative Agent is otherwise required to invest funds
pending distribution to Lenders, Administrative Agent shall invest such funds
pending distribution; all interest on any such investment shall be distributed
upon the distribution of such investment and in the same proportion and to the
same Persons as such investment. All moneys received by Administrative Agent for
distribution to Lenders (other than to the Person which is Administrative Agent
in its separate capacity as a Lender) shall be held by Administrative Agent
pending such distribution solely as Administrative Agent for such Lenders, and
Administrative Agent shall have no equitable title to any portion thereof.
Section 9.8 Benefit of Article IX. The provisions of this Article (other
---------------------
than the following Section 9.9) are intended solely for the benefit of
Administrative Agent and Lenders,
66
and no Related Person shall be entitled to rely on any such provisions or assert
any such provision in a claim or defense against Administrative Agent or any
Lender. Administrative Agent and Lenders may waive or amend such provisions as
they desire without any notice to or consent of Borrower or any other Related
Person.
Section 9.9 Resignation. Administrative Agent may (and upon written
-----------
direction of Directing Lenders collectively having Percentage Shares totaling in
the aggregate (i) prior to the occurrence of an Event of Default, eighty percent
(80%) of all Directing Lenders' Percentage Shares and (ii) upon the occurrence
and during the continuance of an Event of Default, at least sixty-six and
two-thirds percent (66 2/3%) of all Directing Lenders' Percentage Shares,
Administrative Agent shall) resign at any time by giving written notice thereof
to Lenders and Borrower. For purposes of the foregoing sentence, "Directing
Lenders" means all Lenders other than Administrative Agent. Each such written
notice shall set forth the date of such resignation. Upon any such resignation
Majority Lenders shall have the right to appoint a successor Administrative
Agent, subject to Borrower's written consent, such consent not to be
unreasonably withheld. A successor must be appointed for any retiring
Administrative Agent, and such Administrative Agent's resignation shall become
effective when such successor accepts such appointment. If, within thirty (30)
days after the date of the retiring Administrative Agent's resignation, no
successor Administrative Agent has been appointed and has accepted such
appointment then the refiring Administrative Agent may appoint a successor
Administrative Agent, which shall be a commercial bank organized or licensed to
conduct a banking or trust business under the laws of the United States of
America or of any state thereof. Upon the acceptance of any appointment as
Administrative Agent hereunder by a successor Administrative Agent, the retiring
Administrative Agent shall be discharged from its duties and obligations under
this Agreement and other Loan Documents. After any retiring Administrative
Agent's resignation hereunder the provisions of this Article IX shall continue
to inure to its benefit as to any actions taken or omitted to be taken by it
while it was Administrative Agent under the Loan Documents.
Section 9.10 [Reserved.]
---------
Section 9.11 Syndication Agent; Co-Documentation Agents; Arranger. None of
----------------------------------------------------
the Syndication Agent, the Co-Documentation Agents or the Arranger shall have
any obligations, liabilities, responsibilities or duties under this Agreement or
the other Loan Documents. Without limiting the foregoing, none of the
Syndication Agent, the Co-Documentation Agents or the Arranger shall have or be
deemed to have any fiduciary relationship with any Lender or the Administrative
Agent. Each Lender acknowledges that it has not relied, and will not rely, on
any of the Lenders so identified or on the Syndication Agent, the
Co-Documentation Agents or the Arranger in deciding to enter into this Agreement
or in taking or not taking action hereunder.
67
ARTICLE X - Miscellaneous
-------------
Section 10.1 Waivers and Amendments; Acknowledgments.
---------------------------------------
(a) Waivers and Amendments. No failure or delay (whether by course of
----------------------
conduct or otherwise) by Administrative Agent or any Lender in exercising any
right, power or remedy which Administrative Agent or such Lender may have under
any of the Loan Documents shall operate as a waiver thereof or of any other
right, power or remedy, nor shall any single or partial exercise by
Administrative Agent or such Lender of any such right, power or remedy preclude
any other or further exercise thereof or of any other right, power or remedy. No
waiver of any provision of any Loan Document and no consent to any departure
therefrom shall ever be effective unless it is in writing and signed as provided
below in this section, and then such waiver or consent shall be effective only
in the specific instances and for the purposes for which given and to the extent
specified in such writing. No notice to or demand on any Related Person shall in
any case of itself entitle any Related Person to any other or further notice or
demand in similar or other circumstances. This Agreement and the other Loan
Documents set forth the entire understanding between the parties hereto with
respect to the transactions contemplated herein and therein and supersede all
prior discussions and understandings with respect to the subject matter hereof
and thereof, and no waiver, consent, release, modification or amendment or of
supplement to this Agreement or the other Loan Documents shall be valid or
effective against any party hereto unless the same is in writing and signed by
(i) if such party is Borrower, by Borrower, (ii) if such party is Administrative
Agent, by Administrative Agent, and (iii) if such party is a Lender, by such
Lender or by Administrative Agent on behalf of Lenders with the written consent
of Majority Lenders. Notwithstanding the foregoing or anything to the contrary
herein, Administrative Agent shall not, without the prior consent of each
individual Lender, execute and deliver on behalf of such Lender any waiver or
amendment which would: (1) waive any of the conditions specified in Article IV,
(2) increase the Maximum Loan Amount applicable to Lender, as the case may be,
or subject such Lender to any additional obligations, (3) reduce any fees
hereunder, or the principal of, or interest on, such Lender's Notes or
Percentage Share of such Lender's LC Obligations, (4) postpone any date fixed
for any payment of any fees hereunder, or principal of, or interest on, such
Lender's Notes or Percentage Share of such Lender's LC Obligations, (5) amend
the definition herein of "Majority Lenders" or "Borrowing Base Required Lenders"
or amend Section 2.10(e), or otherwise change the aggregate amount of Percentage
Shares which is required for Administrative Agent, Lenders or any of them to
take any particular action under the Loan Documents, (6) release Borrower from
its obligation to pay such Lender's Notes or any Guarantor from its guaranty of
such payment, (7) reduce the number of Lenders required to agree on the
Borrowing Base, or (8) reduce the number of Lenders required to or to consent to
an assignment or transfer of any Related Person's rights, duties or obligations
under Section 10.4 to less than all Lenders.
(b) Acknowledgments and Admissions. Borrower hereby represents, warrants,
------------------------------
acknowledges and admits that (i) it has been advised by counsel in the
negotiation, execution and delivery of the Loan Documents to which it is a
party, (ii) it has made an independent decision to enter into this Agreement and
the other Loan Documents to which it is a party, without reliance on any
representation, warranty, covenant or undertaking by Administrative Agent or any
Lender, whether written, oral or implicit, other than as expressly set out in
this Agreement or in another Loan Document delivered on or after the date
hereof, (iii) there are no representations,
68
warranties, covenants, undertakings or agreements by Administrative Agent or any
Lender as to the Loan Documents except as expressly set out in this Agreement or
in another Loan Document delivered on or after the date hereof, (iv) neither
Administrative Agent nor any Lender has any fiduciary obligation toward Borrower
with respect to any Loan Document or the transactions contemplated thereby, (v)
the relationship pursuant to the Loan Documents between Borrower, on one hand,
and Administrative Agent and each Lender, on the other hand, is and shall be
solely that of debtor and creditor, respectively, (vi) no partnership or joint
venture exists with respect to the Loan Documents between any of Borrower,
Administrative Agent and Lenders, (vii) Administrative Agent is not Borrower's
Administrative Agent, but Administrative Agent for Lenders, (viii) should an
Event of Default or Default occur or exist Administrative Agent and each Lender
will determine in its sole discretion and for its own reasons what remedies and
actions it will or will, not exercise or take at that time, (ix) without
limiting any of the foregoing, Borrower is not relying upon any representation
or covenant by Administrative Agent or any Lender, or any representative thereof
and no such representation or covenant has been made, that Administrative Agent
or any Lender will, at the time of an Event of Default or Default, or at any
other time, waive, negotiate, discuss, or take or refrain from taking any action
permitted under the Loan Documents with respect to any such Event of Default or
Default or any other provision of the Loan Documents, and (x) Administrative
Agent and all Lenders have relied upon the truthfulness of the acknowledgments
in this section in deciding to execute and deliver this Agreement and to make
their Loans.
Section 10.2 Survival of Agreements; Cumulative Nature. All of the Related
-----------------------------------------
Persons' various representations, warranties, covenants and agreements in the
Loan Documents shall survive the execution and delivery of this Agreement and
the other Loan Documents and the performance hereof and thereof, including the
making or granting of the Loans and the delivery of the Notes and the other Loan
Documents, and shall further survive until all of the Obligations are paid in
full to Administrative Agent, Lenders and Issuing Bank and all of Administrative
Agent's, Lenders' and Issuing Bank's obligations to Borrower are terminated. The
rights, powers, and privileges granted to Administrative Agent, Lenders and
Issuing Bank in the Loan Documents, are cumulative, and, except for expressly
specified waivers and consents, no Loan Document shall be construed in the
context of another to diminish, nullify, or otherwise reduce the benefit to
Administrative Agent, any Lender or Issuing Bank of any such right, power or
privilege.
Section 10.3 Notices. All notices, requests, consents, demands and other
-------
communications or documents required or permitted under any Loan Document shall
be in writing, unless otherwise specifically provided in such Loan Document
(provided that Administrative Agent may give telephonic notices to Lenders), and
shall be deemed sufficiently given or furnished if delivered by personal
delivery, by telecopy or telex, by delivery service with proof of delivery, or
by registered or certified United States mail, postage prepaid, to Borrower and
the other Related Persons at the address of Borrower specified on the signature
pages hereto and to Administrative Agent, Issuing Bank and the other Lenders at
their addresses specified on the signature pages hereto (unless changed by
similar notice in writing given by the particular Person whose address is to be
changed). Any such notice or communication shall be deemed to have been given
(a) in the case of personal delivery or delivery service, as of the date of
first attempted delivery during regular business hours at the address provided
herein, (b) in the case of telecopy of telex, upon receipt, or (c) in the case
of registered or certified United States
69
mail, three (3) days after deposit in the mail; provided, however, that no
Request for Advance or Rate Election shall become effective until actually
received by Administrative Agent.
Section 10.4 Parties in Interest. All grants, covenants and agreements
-------------------
contained in the Loan Documents shall bind and inure to the benefit of the
parties thereto and their respective successors and assigns; provided, however,
that no Related Person may assign or transfer any of its rights or delegate any
of its duties or obligations under any Loan Document without the prior written
consent of all Lenders. Neither Borrower nor any Affiliates of Borrower shall
directly or indirectly purchase or otherwise retire any Obligations owed to any
Lender nor will any lender accept any offer to do so, unless each Lender shall
have received substantially the same offer with respect to the same Percentage
Share of the Obligations owed to it. If Borrower or any Affiliate of Borrower at
any time purchases some but less than all of the Obligations owed to
Administrative Agent, Issuing Bank and all Lenders, such purchaser shall not be
entitled to any rights of Administrative Agent, Issuing Bank or Lender under the
Loan Documents unless and until Borrower or its Affiliates have purchased all of
the Obligations.
Section 10.5 Governing Law; Submission to Process.
------------------------------------
Except to the extent that the law of another jurisdiction is expressly
elected in a Loan Document, the Loan Documents shall be deemed contracts and
instruments made under the laws of the State of Texas and shall be construed and
enforced in accordance with and governed by the laws of the State of Texas and
the laws of the United States of America. Borrower hereby irrevocably submits
itself to the non-exclusive jurisdiction of the state and federal courts sitting
in the State of Texas or in the United States District Court for the Southern
District of Texas and agrees and consents that service of process may be made
upon it, in any legal proceeding relating to the Loan Documents or the
Obligations by any means allowed under Texas or federal law. The parties hereto
hereby waive and agree not to assert, by way of motion, as a defense or
otherwise, that any such proceeding is brought in an inconvenient forum or that
venue thereof is improper and further agrees to a transfer of any such
proceeding to a federal court sitting in the Southern District for the State of
Texas, to the extent that it has subject matter jurisdiction, and otherwise to a
state court in Texas, upon request therefor by Administrative Agent, if such
proceeding is originally brought in another court.
Section 10.6 Maximum Interest. It is the intention of the parties hereto
----------------
to conform strictly to applicable usury laws and, anything herein to the
contrary notwithstanding, the obligations of each Borrower to each Lender and
the Issuer under this Agreement shall be subject to the limitation that payments
of interest shall not be required to the extent that receipt thereof would be
contrary to provisions of law applicable to such Lender or the Issuer limiting
rates of interest which may be charged or collected by such Lender or the
Issuer. Accordingly, if the transactions contemplated hereby would be usurious
under applicable law (including the Federal and state laws of the United States
of America, or of any other jurisdiction whose laws may be mandatorily
applicable) with respect to a Lender or the Issuer then, in that event,
notwithstanding anything to the contrary in this Agreement, it is agreed as
follows: (i) the provisions of this Section 10.6 shall govern and control; (ii)
the aggregate of all consideration which constitutes interest under applicable
law that is contracted for, charged or received under this Agreement, or under
any of the other aforesaid agreements or otherwise in connection with this
Agreement by such Lender or the Issuer shall under no circumstances exceed the
maximum
70
amount of interest allowed by applicable law (such maximum lawful interest rate,
if any, with respect to such Lender or the Issuer herein called the "Highest
-------
Lawful Rate"), and any excess shall be credited to such Borrower by such Lender
-----------
or the Issuer (or, if such consideration shall have been paid in full, such
excess promptly refunded to such Borrower); (iii) all sums paid, or agreed to be
paid, to such Lender or the Issuer for the use, forbearance and detention of the
indebtedness of such Borrower to such Lender or the Issuer hereunder shall, to
the extent permitted by applicable law, be amortized, prorated, allocated and
spread throughout the full term of such indebtedness until payment in full so
that the actual rate of interest is uniform throughout the full term thereof;
and (iv) if at any time the interest provided pursuant to Article II together
with any other fees payable pursuant to this Agreement and deemed interest under
applicable law, exceeds that amount which would have accrued at the Highest
Lawful Rate, the amount of interest and any such fees to accrue to such Lender
or the Issuer pursuant to this Agreement shall be limited, notwithstanding
anything to the contrary in this Agreement to that amount which would have
accrued at the Highest Lawful Rate, but any subsequent reductions, as
applicable, shall not reduce the interest to accrue to such Lender or the Issuer
pursuant to this Agreement below the Highest Lawful Rate until the total amount
of interest accrued pursuant to this Agreement and such fees deemed to be
interest equals the amount of interest which would have accrued to such Lender
or the Issuer if a varying rate per annum equal to the interest provided
pursuant to Article II had at all times been in effect, plus the amount of fees
----
which would have been received but for the effect of this Section 10.6. For
purposes of Tex. Fin. Code ▇▇▇. Ch. 303, as amended, to the extent, if any,
applicable to a Lender or the Issuer, each Borrower agrees that the Highest
Lawful Rate shall be the "weekly ceiling" as defined in said Article, provided
that such Lender and the Issuer may also rely, to the extent permitted by
applicable laws, on alternative maximum rates of interest under other laws
applicable to such Lender or such Issuer, as the case may be, if greater. Tex.
Fin. Code ▇▇▇. Ch. 346 (which regulates certain revolving credit loan accounts
and revolving tri-party accounts) shall not apply to this Agreement or the
Notes.
Section 10.7 Termination; Limited Survival. In its sole and absolute
-----------------------------
discretion Borrower may, at any time that no Obligations are owing, elect in a
notice delivered to Administrative Agent to terminate this Agreement. Upon
receipt by Administrative Agent of such a notice, if no obligations are then
owing this Agreement and all other Loan Documents shall thereupon be terminated
and the parties thereto released from all prospective obligations thereunder.
Notwithstanding the foregoing or anything herein to the contrary, any waivers or
admissions made by any Related Person in any Loan Document any Obligations under
Sections 2.15 through 2.19, and any obligations which any Person may have to
indemnify or compensate Administrative Agent or any Lender shall survive any
termination of this Agreement or any other Loan Document. At the request and
expense of Borrower, Administrative Agent shall prepare and execute all
necessary instruments to reflect and effect such termination of the Loan
Documents. Administrative Agent is hereby authorized to execute all such
instruments on behalf of all Lenders, without the joinder of or further action
by any Lender.
Section 10.8 Severability. If any term or provision of any Loan Document
------------
shall be determined to be illegal or unenforceable all other terms and
provisions of the Loan Documents shall nevertheless remain effective and shall
be enforced to the fullest extent permitted by applicable law.
71
Section 10.9 Counterparts. This Agreement may be separately executed in
------------
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to constitute one
and the same Agreement.
Section 10.10 WAIVER OF JURY TRIAL, PUNITIVE DAMAGES, ETC. EACH OF
--------------------------------------------
BORROWER, ADMINISTRATIVE AGENT AND LENDERS HEREBY KNOWINGLY, VOLUNTARILY,
INTENTIONALLY, AND IRREVOCABLY (a) WAIVES, TO THE MAXIMUM EXTENT IT MAY LAWFULLY
AND EFFECTIVELY DO SO, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF
ANY LITIGATION BASED HEREON, OR DIRECTLY OR INDIRECTLY AT ANY TIME ARISING OUT
OF, UNDER OR IN CONNECTION WITH THE LOAN DOCUMENTS OR ANY TRANSACTION
CONTEMPLATED THEREBY OR ASSOCIATED THEREWITH, BEFORE OR AFTER MATURITY; (b)
WAIVES, TO THE MAXIMUM EXTENT IT MAY LAWFULLY AND EFFECTIVELY DO SO, 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; AND (c) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS
AGREEMENT, THE OTHER LOAN DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND
THEREBY BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED
IN THIS SECTION.
Section 10.11 Assignments and Participations.
------------------------------
(a) Assignments. Each Lender shall have the right to sell, assign or
-----------
transfer all or any part of such Lender's Notes, commitment to make Loans and
rights and obligations relating to Letters of Credit and the associated rights
and obligations under all Loan Documents to one or more purchasers; provided,
(i) each assignment shall be with the consent of Borrower and the consent of
Administrative Agent (unless such assignment is to another Lender or to an
Affiliate of a Lender, in which case no consent shall be necessary), which in
each case will not be unreasonably withheld, (ii) no such consent of the
Borrower shall be required if an Event of Default exists, and (iii) any such
sale, assignment or transfer shall be pro rata among the Commitments. The
assignee, transferee or recipient shall have, to the extent of such sale,
assignment, or transfer, the same rights, benefits and obligations as it would
if it were such Lender and a holder of such Notes, including, without
limitation, the right to vote on decisions requiring consent or approval of all
Lenders or Majority Lenders and the obligation to fund its Percentage Share of
any Loans and payments made under Letters of Credit. Each Lender in making each
such sale, assignment, or transfer must dispose of a pro rata portion of each
Loan made by such Lender and such Lender's LC Obligations, each such sale,
assignment or transfer shall be in a principal amount not less than $5,000,000
(except assignments to Affiliates of Administrative Agent or any Lender which
may be in an amount equal to or greater than $1,000,000) and no Lender may offer
to sell its Notes and Loans or interests therein in violation of any securities
laws. No such assignment shall become effective until (i) the assigning Lender
delivers to Administrative Agent copies of all written assignments and other
documents evidencing any such assignment or related thereto and an Agreement to
be Bound in the form of Exhibit F, providing for the assignee's ratification and
agreement to be bound by the terms of
72
this Agreement and the other Loan Documents and (ii) Administrative Agent shall
have received from assignor or assignee an assignment fee in the amount of
$3,500. Within five (5) Business Days after its receipt of notice that the
Administrative Agent has received copies of any assignment and the other
documents relating thereto, the assignee shall notify Borrower of the
outstanding principal balance of the Notes payable to such Lender and shall
execute and deliver to Administrative Agent (for delivery to the relevant
assignee) new Notes evidencing such assignee's assigned Loans and, if the
assignor Lender has retained a portion of its Loans, replacement Notes in the
principal amount of the Loans retained by the assignor Lender (such Notes to be
in exchange for, but not in payment of, the Notes held by such Lender). Anything
in this Section 10.11 to the contrary notwithstanding, any Lender may at any
time, without the consent of Borrower or Administrative Agent, assign and pledge
all or any portion of its Commitments and the Loans owing to it to any Federal
Reserve Bank (and its transferees) as collateral security pursuant to Regulation
A and any Operating Circular issued by the Federal Reserve Bank. No such
assignment shall release the assigning Lender from its obligations hereunder.
(b) Participations. Each Lender shall have the right to grant
--------------
participations in all or any part of such Lender's Notes, commitment to make
Loans and rights and Obligations relating to Letters of Credit and the
associated rights and obligations under all Loan Documents to one or more
purchasers; provided that (i) each Lender granting a participation shall retain
the right to vote hereunder, and no participant shall be entitled to vote
hereunder on decisions requiring consent or approval of Majority Lenders (except
as set forth in (iii) below) or with respect to determining the Borrowing Base,
(ii) each Lender and Borrower shall be entitled to deal with the Lender granting
a participation in the same manner as if no participation had been granted,
(iii) no participant shall ever have any right by reason of its participation to
exercise any of the rights of Lenders hereunder, except that any Lender may
agree with any participant that such Lender will not, without the consent of
such participant, consent to any amendment or waiver described in Section
10.1(a) requiring approval of 100% of the Lenders, and (iv) without the
Borrower's prior written consent (not to be unreasonably withheld) no Lender
will offer any participation to any prospective participant if such participant
or any affiliates thereof, to the knowledge of the Lenders selling the
participations, is in the energy industry. Borrower agrees that if amounts
outstanding under this Agreement and the Notes are due or unpaid, or shall have
been declared or shall have become due and payable upon the occurrence of an
Event of Default, each participant shall be deemed to have the right of set off
in respect of its participating interest in amounts owing under this Agreement
and any Note to the same extent as if the amount of its participating interest
were owing directly to it as a Lender under this Agreement or any Note, provided
that such participant shall only be entitled to such right of set off if it
shall have agreed in the agreement pursuant to which it shall have acquired its
participating interest to share with the Lenders and the proceeds thereof as
provided in subsection 9.6. The Company also agrees that each participant shall
be entitled to the benefits of subsections 2.15, 2.16, 2.18 and 8.3 with respect
to its participation in the Commitments and the Loans outstanding from time to
time; provided, that no participant shall be entitled to receive any greater
amount pursuant to such subsections than the transferor Lender would have been
entitled to receive in respect of the amount of the participation transferred by
such transferor Lender to such participant had no such transfer occurred.
73
(c) Distribution of Information. It is understood and agreed that any
---------------------------
Lender may provide to assignees and participants and prospective assignees and
participants financial information and reports and data concerning the Related
Persons and their and properties and operations which was provided to such
Lender pursuant to this Agreement, subject to Section 10.12.
(d) Blue Sky Limitation. Notwithstanding any other provision of Section
-------------------
10.11(a) or (b), 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 Securities and Exchange Commission or to qualify the Loans
under the "Blue Sky" laws of any state.
Section 10.12 Confidentiality. In the event that the Borrower or any other
---------------
Related Person (hereinafter called the "Subject Entities") provides to the
----------------
Administrative Agent or the Lenders written confidential information or, if
communicated as confidential, oral confidential information belonging to any
Subject Entity, 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 any Subject Entity, (iii) are previously known
by the Administrative Agent or the Lenders from some source other than any
Subject Entity, (iv) are hereafter developed by the Administrative Agent or the
Lenders without using a Subject Entity'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 any Subject Entity with respect to such
information, (vi) are disclosed with a Subject Entity'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 independent petroleum engineers or consultants, any independent
certified public accountants, any legal counsel employed by such Person in
Connection with this Agreement or any other Loan Document, including without
limitation, the enforcement or exercise of all rights and remedies thereunder,
or any assignee or participant (including prospective assignees to which the
Borrower has consented and participants) in the Loans; provided, however, that
the Administrative Agent or the Lenders shall receive a written confidentiality
agreement with the same terms as this confidentiality provision 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 and 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.
74
Section 10.13 No Oral Agreements. THIS WRITTEN AGREEMENT AND THE OTHER 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.
75
IN WITNESS WHEREOF, this Agreement is executed as of the date first written
above.
BORROWER: SPINNAKER EXPLORATION COMPANY, L.L.C.
--------
By: SPINNAKER EXPLORATION COMPANY
as Managing Member
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President, Chief Financial
Officer and Secretary
Address:
Two ▇▇▇▇▇ Center
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention:
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
S-1
ADMINISTRATIVE AGENT: TORONTO DOMINION (TEXAS), INC.,
-------------------- Administrative Agent
By: /s/ ▇▇▇ ▇▇▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇ ▇▇▇▇▇▇▇▇
--------------------------
Title: Vice President
--------------------------
Address:
▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
S-2
SYNDICATION AGENT: BANK OF AMERICA, N.A.
----------------- Syndication Agent
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------
Title: Vice President
--------------------------
Address:
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇/▇▇/ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: 214/▇▇▇-▇▇▇▇
Telecopy: 214/290-9415
With a copy to:
BANK OF AMERICA, N.A.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: 713/▇▇▇-▇▇▇▇
Telecopy: 713/651-4841
S-3
CO-DOCUMENTATION AGENT: CREDIT SUISSE FIRST BOSTON,
---------------------- Co-Documentation Agent
By: /s/ ▇▇▇ ▇▇▇▇▇
---------------------------------
Name: ▇▇▇ ▇▇▇▇▇
--------------------------
Title: Director
--------------------------
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------
Title: Vice President
--------------------------
Address:
S-4
CO-DOCUMENTATION AGENT: BANK OF MONTREAL
---------------------- Co-Documentation Agent
By: /s/ ▇. ▇. ▇▇▇▇▇▇▇▇
------------------------------
Name: ▇. ▇. ▇▇▇▇▇▇▇▇
-----------------------
Title: Managing Director
-----------------------
Address:
S-5
LENDERS: TORONTO DOMINION (TEXAS), INC.
------- as a Lender
By: /s/ ▇▇▇▇ ▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇
----------------------------
Title: Vice President
----------------------------
Address:
▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
S-6
BANK OF AMERICA, N.A.,
as a Lender
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------
Title: Vice President
----------------------------
Address:
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇/▇▇/ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: 214/▇▇▇-▇▇▇▇
Telecopy: 214/290-9415
With a copy to:
BANK OF AMERICA, N.A.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: 713/▇▇▇-▇▇▇▇
Telecopy: 713/651-4841
S-7
BANK OF MONTREAL,
as a Lender
By: /s/ ▇.▇. ▇▇▇▇▇▇▇▇
----------------------------------
Name: ▇.▇. ▇▇▇▇▇▇▇▇
----------------------------
Title: Managing Director
----------------------------
Address:
S-8
CREDIT SUISSE FIRST BOSTON,
as a Lender
By: /s/ ▇▇▇ ▇▇▇▇▇
----------------------------------
Name: ▇▇▇ ▇▇▇▇▇
----------------------------
Title: Director
----------------------------
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------
Title: Vice President
----------------------------
Address:
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
S-9
ABN AMRO BANK, N.V.,
as a Lender
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇
----------------------------
Title: Vice President
----------------------------
Address: ▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇; ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇
----------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇
Title: Assistant Vice President
Address: ▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇; ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
▇-▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇▇,
as a Lender
By: /s/ A. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
----------------------------------
Name: A. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
----------------------------
Title: Senior Vice President
----------------------------
Address: ▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
S-11
COMERICA BANK -- TEXAS,
as a Lender
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇
----------------------------
Title: Corporate Bank Officer
----------------------------
Address: ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇-▇▇▇-▇▇▇▇
713-220-5650-fax
S-12
ISSUER: THE TORONTO-DOMINION BANK,
------
as Issuer
By: /s/ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
----------------------------------------
Name: ▇▇▇▇ ▇▇▇▇
Title: Manager, Syndication &
Credit Administration
Address:
▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
S-13
LENDER SCHEDULE
Lender Percentage Share Principal Amount
------ ---------------- ----------------
Toronto Dominion (Texas), Inc. 20.00% $ 40,000,000.00
Bank of America, N.A. 17.50% $ 35,000,000.00
Bank of Montreal 17.50% $ 35,000,000.00
Credit Suisse First Boston 17.50% $ 35,000,000.00
ABN AMRO Bank, N.V. 12.50% $ 25,000,000.00
Southwest Bank of Texas 7.50% $ 15,000,000.00
ComericaBank - Texas 7.50% $ 15,000,000.00
----- ---------------
Total: 100.00% $200,000,000.00
------