CREDIT AGREEMENT by and among STORM CAT ENERGY (USA) CORPORATION as Borrower, THE LENDERS THAT ARE SIGNATORIES HERETO as the Lenders, and WELLS FARGO FOOTHILL, LLC as Agent Dated as of December 27, 2007
Exhibit
4.1
by
and among
STORM
CAT ENERGY (USA) CORPORATION
as
Borrower,
THE
LENDERS THAT ARE SIGNATORIES HERETO
as
the Lenders,
and
▇▇▇▇▇
FARGO FOOTHILL, LLC
as
Agent
Dated
as of December 27, 2007
THIS
CREDIT AGREEMENT (this “Agreement”), is entered into as of
December 27, 2007, by and among the lenders identified on the signature
pages hereof (such lenders, together with their respective successors and
permitted assigns, are referred to hereinafter each individually as a “Lender”
and collectively as the “Lenders”), ▇▇▇▇▇ FARGO FOOTHILL, LLC,
a Delaware limited liability company, as administrative agent for the Lenders
(in such capacity, together with its successors and assigns in such capacity,
“Agent”), and STORM CAT ENERGY (USA) CORPORATION, a Colorado corporation
(“Borrower”).
The
parties agree as follows:
1. DEFINITIONS
AND CONSTRUCTION
1.1 Definitions. Capitalized
terms used in this Agreement shall have the meanings specified therefor on
Schedule 1.1.
1.2 Accounting
Terms. All
accounting terms not specifically defined herein shall be construed in
accordance with GAAP. When used herein, the term “financial
statements” shall include the notes and schedules thereto. Whenever
the term “Borrower” is used in respect of a financial covenant or a related
definition, it shall be understood to mean Borrower and its Subsidiaries
on a
consolidated basis, unless the context clearly requires otherwise.
1.3 Code. Any
terms used in this Agreement that are defined in the Code shall be construed
and
defined as set forth in the Code unless otherwise defined herein; provided,
however, that to the extent that the Code is used to define any term herein
and
such term is defined differently in different Articles of the Code, the
definition of such term contained in Article 9 of the Code shall
govern.
1.4 Construction. Unless
the context of this Agreement or any other Loan Document clearly requires
otherwise, references to the plural include the singular, references to the
singular include the plural, the terms “includes” and “including” are
not limiting, and the term “or” has, except where otherwise indicated, the
inclusive meaning represented by the phrase “and/or.” The words
“hereof,” “herein,” “hereby,” “hereunder,” and similar terms in this Agreement
or any other Loan Document refer to this Agreement or such other Loan Document,
as the case may be, as a whole and not to any particular provision of this
Agreement or such other Loan Document, as the case may be. Section,
subsection, clause, schedule, and exhibit references herein are to this
Agreement unless otherwise specified. Any reference in this Agreement
or in any other Loan Document to any agreement, instrument, or document shall
include all alterations, amendments, changes, extensions, modifications,
renewals, replacements, substitutions, joinders, and supplements, thereto
and
thereof, as applicable (subject to any restrictions on such alterations,
amendments, changes, extensions, modifications, renewals, replacements,
substitutions, joinders, and supplements set forth herein). Any
reference herein or in any other Loan Document to the satisfaction or repayment
in full of the Obligations shall mean the repayment in full in cash (or,
in the
case of Letters of Credit or Bank Products, the cash collateralization or
support by a standby letter of credit in accordance with the terms hereof)
of
all Obligations other than unasserted contingent indemnification Obligations
and
other than any Bank Product Obligations that, at such time, are allowed by
the
applicable Bank Product Provider to remain outstanding and that are not required
by the provisions of this Agreement to be repaid or cash
collateralized. Any reference herein to any Person shall be construed
to include such Person’s successors and assigns. Any requirement of a
writing contained herein or in any other Loan Document shall be satisfied
by the
transmission of a Record and any Record so transmitted shall constitute a
representation and warranty as to the accuracy and completeness of the
information contained therein.
1.5 Schedules
and Exhibits. All
of the schedules and exhibits attached to this Agreement shall be deemed
incorporated herein by reference.
2. LOAN
AND TERMS OF PAYMENT.
2.1 Revolver
Advances.
(a) Subject
to the terms and conditions of this Agreement, and during the term of this
Agreement, each Lender with a Revolver Commitment agrees (severally, not
jointly
or jointly and severally) to make advances (“Advances”) to Borrower in an amount
at any one time outstanding not to exceed such Lender’s Pro Rata Share of an
amount equal to the lesser of (i) the Maximum Revolver Amount less
the Letter of Credit Usage at such time less the sum of (x) the
Bank Product Reserve and (y) the aggregate amount of reserves, if any,
established by Agent under Section 2.1(b), and (ii) the Borrowing Base at
such
time less the Letter of Credit Usage at such time, it being understood
that, pursuant to Section 2.1(c) below, the initial borrowing amount in respect
of Revolver Usage shall be Twenty-Five Million Dollars
($25,000,000).
(b) Anything
to the contrary in this Section 2.1 notwithstanding, Agent shall have the
right
to establish reserves against the then-existing Borrowing Base or the Maximum
Revolver Amount in such amounts, and with respect to such matters, as Agent
in
its Permitted Discretion shall determine to be necessary or appropriate,
including reserves with respect to (i) sums that Borrower or its Subsidiaries
are required to pay under any Section of this Agreement or any other Loan
Document (such as taxes, assessments, insurance premiums, or, in the case
of
leased assets, rents or other amounts payable under such leases) and has
failed
to pay, and (ii) amounts owing by Borrower or its Subsidiaries to any Person
to
the extent secured by a Lien on, or trust over, any of the Collateral (including
proceeds thereof or collections from the sale of Hydrocarbons which may from
time to time come into the possession of Lenders or their agent(s)) (other
than
a Permitted Lien), which Lien or trust, in the Permitted Discretion of Agent
likely would have a priority superior to Agent’s Liens (such as Liens or trusts
in favor of landlords, warehousemen, carriers, mechanics, materialmen, laborers,
or suppliers, or Liens or trusts for ad valorem, excise, sales, or
other taxes where given priority under applicable law) in and to such item
of
the Collateral.
(c) For
the
period from and including the Closing Date to but excluding the first
Redetermination Date, the amount of the Borrowing Base shall be Twenty-Five
Million Dollars ($25,000,000), subject
to adjustment
as provided in Section
2.1(b). Notwithstanding the foregoing, the Borrowing Base may
be subject to further adjustments from time to time pursuant to Section 5.21(d)
or clause (g) of the definition of “Permitted Dispositions.”
(d) The
Borrowing Base shall be redetermined semi-annually in accordance with this
Section 2.1 (each, a “Scheduled Redetermination”), and subject to
Section 2.1(e)(iii)(A), such redetermined Borrowing Base shall become
effective and applicable to Borrower, Agent, the Issuing Lenders and the
Lenders
on April 3 and October 3 of each year, commencing April 3, 2008. In
addition, Borrower may, by notifying Agent thereof, and Agent may, at the
direction of the Required Lenders, by notifying Borrower thereof, one time
during any 12-month period, each elect to cause the Borrowing Base to be
redetermined between Scheduled Redeterminations (an “Interim Redetermination”)
in accordance with this Section 2.1.
(e)
(i) Each
Scheduled Redetermination and each Interim Redetermination shall be effectuated
as follows: Upon receipt by Agent of (A) the Reserve Report and the
certificate required to be delivered by Borrower to Agent, in the case of
a
Scheduled Redetermination, pursuant to Sections 5.20(a) and (c), and, in
the case of an Interim Redetermination, pursuant to Sections 5.20(b) and
(c), and (B) such other reports, data and supplemental information, as may,
from
time to time, be reasonably requested by Agent or any Lender (the Reserve
Report, such certificate and such other reports, data and supplemental
information being the “Engineering Reports”), Agent shall evaluate the
information contained in the Engineering Reports and shall, in good faith,
propose a new Borrowing Base (the “Proposed Borrowing Base”), based upon the
Reserve Reports and such other information (including, without limitation,
the
status of title information with respect to the Oil and Gas Properties as
described in the Engineering Reports and the existence of any other Indebtedness
other than the Convertible Subordinated Notes) as Agent deems appropriate
in its
Permitted Discretion. In no event shall the Proposed Borrowing Base exceed
the
Maximum Revolver Amount.
(ii) Agent
shall notify Borrower and the Lenders of the Proposed Borrowing Base (the
“Proposed Borrowing Base Notice”):
(A) in
the
case of a Scheduled Redetermination (a) if Agent shall have received the
Engineering Reports required to be delivered by Borrower pursuant to Sections
5.20(a) and (c) in a timely and complete manner, then on or before March
22 and
September 22 of such year following the date of delivery or (b) if Agent
shall
not have received the Engineering Reports required to be delivered by Borrower
pursuant to Sections 5.20(a) and (c) in a timely and complete manner, then
promptly after Agent has received complete Engineering Reports from Borrower
and
has had a reasonable opportunity to determine the Proposed Borrowing Base
in
accordance with Section 2.1(e)(i); provided, that if such Engineering
Reports are not delivered as required pursuant to Sections 5.20(a) and (c),
until the next Scheduled Redetermination, Agent shall determine the Borrowing
Base in its sole discretion, subject to the provisions of Section 2.1(e)(iii);
and
(B) in
the
case of an Interim Redetermination, promptly, and in any event, within thirty
(30) days after Agent has received the required Engineering Reports from
Borrower.
(iii) Any
Proposed Borrowing Base that would increase the Borrowing Base then in effect
must be approved or deemed to have been approved by all of the Lenders as
provided in this Section 2.1(e)(iii) and any Proposed Borrowing Base that
would maintain or decrease the Borrowing Base then in then in effect must
be
approved or deemed to have been approved by the Required Lenders as provided
in
this Section 2.1(e)(iii). Upon receipt of the Proposed Borrowing
Base Notice, each Lender shall have ten (10) days to agree with the Proposed
Borrowing Base or disagree with the Proposed Borrowing Base by proposing
an
alternate Borrowing Base. If at the end of such ten (10) days, any
Lender has not communicated its approval or disapproval in writing to Agent,
such silence shall be deemed to be an approval of the Proposed Borrowing
Base. If, at the end of such ten (10)-day period, all of the Lenders,
in the case of a Proposed Borrowing Base that would increase the Borrowing
Base
then in effect, or the Required Lenders, in the case of a Proposed Borrowing
Base that would decrease or maintain the Borrowing Base then in effect, have
approved or deemed to have approved, as aforesaid, then the Proposed Borrowing
Base shall become the new Borrowing Base and made available to Borrower,
effective on the date specified in Section 2.1(e)(iii)(A). If,
however, at the end of such ten (10)-day period, all of the Lenders or the
Required Lenders, as applicable, have not approved or deemed to have approved,
as aforesaid, then Agent shall poll the Lenders to ascertain the highest
Borrowing Base then acceptable to all of the Lenders or the Required Lenders
and, so long as such amount does not increase the Borrowing Base then in
effect,
such amount shall become the new Borrowing Base, effective on the date specified
in Section 2.1(e)(iii)(A).
(A) After
a
redetermined Borrowing Base is approved or is deemed to have been approved
by
all of the Lenders or the Required Lenders pursuant to Section 2.1(e)(iii),
Agent shall notify Borrower and the Lenders of the amount of the redetermined
Borrowing Base (the “New Borrowing Base Notice”), and such amount shall become
the new Borrowing Base, effective and applicable to Borrower, Agent, the
Issuing
Lenders and the Lenders.
(iv) Within
three (3) Business Days after receipt from Agent of the New Borrowing Base
Notice, Borrower shall have the right to request that the Required Lenders
reduce the Borrowing Base until the next Scheduled Redetermination Date or
Interim Redetermination Date occurs by giving written notification to Agent
(which shall promptly notify the Lenders); and with the consent of the Required
Lenders the Borrowing Base will be the amount set forth in such notice until
the
next Scheduled Redetermination Date or Interim Redetermination Date (subject
to
adjustment under Section 5.21(d) or clause (g) of the definition of “Permitted
Dispositions”).
(f) Amounts
borrowed pursuant to this Section 2.1 may be repaid and, subject to the terms
and conditions of this Agreement, reborrowed at any time during the term
of this
Agreement. The outstanding principal amount of the Advances, together
with interest accrued and unpaid thereon, shall be due and payable on the
Maturity Date or, if earlier, on the date on which they are declared due
and
payable pursuant to the terms of this Agreement.
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2.2 Term
Loan. Subject
to the terms and conditions of this Agreement, on the Closing Date each Lender
with a Term Loan Commitment agrees (severally, not jointly or jointly and
severally) to make term loans (collectively, the “Term Loan”) to Borrower in an
amount equal to such Lender’s Pro Rata Share of the Term Loan
Amount. The principal of the Term Loan shall be repaid annually in
accordance with Section 2.4(c)(iii)(D), with the outstanding unpaid principal
balance and all accrued and unpaid interest on the Term Loan becoming due
and
payable on the earliest of (i) the Maturity Date, (ii) the date of the
acceleration of the Term Loan in accordance with the terms hereof, and (iii)
the
date of termination of this Agreement pursuant to Section 8.1(d). All
principal of, interest on, and other amounts payable in respect of the Term
Loan
shall constitute Obligations. Term Loan amounts borrowed and repaid hereunder
may not be reborrowed.
2.3 Borrowing
Procedures and Settlements.
(a) Procedure
for Borrowing. Each Borrowing shall be made by an
irrevocable written request by an Authorized Person delivered to
Agent. Unless Swing Lender is obligated to make a Swing Loan pursuant
to Section 2.3(b) below, such notice must be received by Agent no later than
10:00 a.m. (Georgia time) on the Business Day prior to the date that is the
requested Funding Date specifying (i) the amount of such Borrowing, and (ii)
the
requested Funding Date, which shall be a Business Day; provided, however,
that
if Swing Lender elects to make a Swing Loan as to a requested Borrowing,
such
notice must be received by Agent no later than 10:00 a.m. (Georgia time)
on the
date that is the requested Funding Date. At Agent’s election, in lieu
of delivering the above-described written request, any Authorized Person
may
give Agent telephonic notice of such request by the required time. In
such circumstances, Borrower agrees that any such telephonic notice will
be
confirmed in writing within 24 hours of the giving of such telephonic notice,
but the failure to provide such written confirmation shall not affect the
validity of the request.
(b) Making
of Swing Loans. In the case of a request for an Advance and
so long as either (i) the aggregate amount of Swing Loans made since the
last
Settlement Date, minus the amount of Collections or payments applied to Swing
Loans since the last Settlement Date, plus the amount of the requested Advance
does not exceed Five Million Dollars ($5,000,000), or (ii) Swing Lender,
in its
sole discretion, shall agree to make a Swing Loan notwithstanding the foregoing
limitation, Swing Lender shall make an Advance in the amount of such Borrowing
(any such Advance made solely by Swing Lender pursuant to this Section 2.3(b)
being referred to as a “Swing Loan” and such Advances being referred to
collectively as “Swing Loans”) available to Borrower on the Funding Date
applicable thereto by transferring immediately available funds to Borrower’s
Designated Account. Each Swing Loan shall be deemed to be an Advance
hereunder and shall be subject to all the terms and conditions applicable
to
other Advances, except that all payments on any Swing Loan shall be payable
to
Swing Lender solely for its own account. Subject to the provisions of
Section 2.3(d)(ii), Swing Lender shall not make and shall not be obligated
to
make any Swing Loan if Swing Lender has actual knowledge that (i) one or
more of
the applicable conditions precedent set forth in Section 3 will not be satisfied
on the requested Funding Date for the applicable Borrowing, or (ii) the
requested Borrowing would exceed the Availability on such Funding
Date. Swing Lender shall not otherwise be required to determine
whether the applicable conditions precedent set forth in Section 3 have been
satisfied on the Funding Date applicable thereto prior to making any Swing
Loan. The Swing Loans shall be secured by Agent’s Liens, constitute
Obligations hereunder, and bear interest at the rate applicable from time
to
time to Advances that are Base Rate Loans.
(c) Making
of Loans.
(i) In
the
event that Swing Lender is not obligated to make a Swing Loan and does not
elect
to make a Swing Loan it is not obligated to make, then promptly after receipt
of
a request for a Borrowing pursuant to Section 2.3(a), Agent shall notify
the
Lenders, not later than 1:00 p.m. (Georgia time) on the Business Day immediately
preceding the Funding Date applicable thereto, by telecopy, telephone, or
other
similar form of transmission, of the requested Borrowing. Each Lender
shall make the amount of such Lender’s Pro Rata Share of the requested Borrowing
available to Agent in immediately available funds, to Agent’s Account, not later
than 1:00 p.m. (Georgia time) on the Funding Date applicable
thereto. After Agent’s receipt of the proceeds of such Advances,
Agent shall make the proceeds thereof available to Borrower on the applicable
Funding Date by transferring immediately available funds equal to such proceeds
received by Agent to the Designated Account; provided, however, that, subject
to
the provisions of Section 2.3(d)(ii), Agent shall not request any Lender
to
make, and no Lender shall have the obligation to make, any Advance if Agent
shall have actual knowledge that (1) one or more of the applicable conditions
precedent set forth in Section 3 will not be satisfied on the requested Funding
Date for the applicable Borrowing unless such condition has been waived,
or (2)
the requested Borrowing would exceed the Availability on such Funding
Date.
(ii) Unless
Agent receives notice from a Lender prior to 9:00 a.m. (Georgia time) on
the
date of a Borrowing, that such Lender will not make available as and when
required hereunder to Agent for the account of Borrower the amount of that
Lender’s Pro Rata Share of the Borrowing, Agent may assume that each Lender has
made or will make such amount available to Agent in immediately available
funds
on the Funding Date and Agent may (but shall not be so required), in reliance
upon such assumption, make available to Borrower on such date a corresponding
amount. If and to the extent any Lender shall not have made its full
amount available to Agent in immediately available funds and Agent in such
circumstances has made available to Borrower such amount, that Lender shall
on
the Business Day following such Funding Date make such amount available to
Agent, together with interest at the Defaulting Lender Rate for each day
during
such period. A notice submitted by Agent to any Lender with respect
to amounts owing under this subsection shall be conclusive, absent manifest
error. If such amount is so made available, such payment to Agent
shall constitute such Lender’s Advance on the date of Borrowing for all purposes
of this Agreement. If such amount is not made available to Agent on
the Business Day following the Funding Date, Agent will notify Borrower of
such
failure to fund and, upon demand by Agent, Borrower shall pay such amount
to
Agent for Agent’s account, together with interest thereon for each day elapsed
since the date of such Borrowing, at a rate per annum equal to the interest
rate
applicable at the time to the Advances composing such Borrowing. The
failure of any Lender to make any Advance on any Funding Date shall not relieve
any other Lender of any obligation hereunder to make an Advance on such Funding
Date, but no Lender shall be responsible for the failure of any other Lender
to
make the Advance to be made by such other Lender on any Funding
Date.
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(iii) Agent
shall not be obligated to transfer to a Defaulting Lender any payments made
by
Borrower to Agent for the Defaulting Lender’s benefit, and, in the absence of
such transfer to the Defaulting Lender, Agent shall transfer any such payments
to each other non-Defaulting Lender member of the Lender Group ratably in
accordance with their Commitments (but only to the extent that such Defaulting
Lender’s Advance was funded by the other members of the Lender Group) or, if so
directed by Borrower and if no Default or Event of Default had occurred and
is
continuing (and to the extent such Defaulting Lender’s Advance was not funded by
the Lender Group), retain same to be re-advanced to Borrower as if such
Defaulting Lender had made Advances to Borrower. Subject to the
foregoing, Agent may hold and, in its Permitted Discretion, re-lend to Borrower
for the account of such Defaulting Lender the amount of all such payments
received and retained by Agent for the account of such Defaulting
Lender. Solely for the purposes of voting or consenting to matters
with respect to the Loan Documents, such Defaulting Lender shall be deemed
not
to be a “Lender” and such Lender’s Commitment shall be deemed to be
zero. This Section shall remain effective with respect to such Lender
until (x) the Obligations under this Agreement shall have been declared or
shall
have become immediately due and payable, (y) the non-Defaulting Lenders,
Agent,
and Borrower shall have waived such Defaulting Lender’s default in writing, or
(z) the Defaulting Lender makes its Pro Rata Share of the applicable Advance
and
pays to Agent all amounts owing by Defaulting Lender in respect
thereof. The operation of this Section shall not be construed to
increase or otherwise affect the Commitment of any Lender, to relieve or
excuse
the performance by such Defaulting Lender or any other Lender of its duties
and
obligations hereunder, or to relieve or excuse the performance by Borrower
of
its duties and obligations hereunder to Agent or to the Lenders other than
such
Defaulting Lender. Any such failure to fund by any Defaulting Lender
shall constitute a material breach by such Defaulting Lender of this Agreement
and shall entitle Borrower at its option, upon written notice to Agent, to
arrange for a substitute Lender to assume the Commitment of such Defaulting
Lender, such substitute Lender to be acceptable to Agent. In
connection with the arrangement of such a substitute Lender, the Defaulting
Lender shall have no right to refuse to be replaced hereunder, and agrees
to
execute and deliver a completed form of Assignment and Acceptance in favor
of
the substitute Lender (and agrees that it shall be deemed to have executed
and
delivered such document if it fails to do so) subject only to being repaid
its
share of the outstanding Obligations (other than Bank Product Obligations,
but
including an assumption of its Pro Rata Share of the Risk Participation
Liability) without any premium or penalty of any kind whatsoever; provided,
however, that any such assumption of the Commitment of such Defaulting Lender
shall not be deemed to constitute a waiver of any of the Lender Groups’ or
Borrower’s rights or remedies against any such Defaulting Lender arising out of
or in relation to such failure to fund.
(d) Protective
Advances and Optional Overadvances.
(i) Agent
hereby is authorized by Borrower and the Lenders, from time to time in Agent’s
sole discretion, (A) after the occurrence and during the continuance of a
Default or an Event of Default, or (B) at any time that any of the other
applicable conditions precedent set forth in Section 3 are not satisfied,
to
make Advances to Borrower on behalf of the Lenders that Agent, in its Permitted
Discretion deems necessary or desirable (1) to preserve or protect the
Collateral, or any portion thereof, (2) to enhance the likelihood of repayment
of the Obligations (other than the Bank Product Obligations), or (3) to pay
any
other amount due and payable by Borrower pursuant to the terms of this
Agreement, including, without duplication, Lender Group Expenses (when due
and
payable in accordance with Section 17.10) and the costs, fees, and expenses
described in Section 9 (any of the Advances described in this Section 2.3(d)(i)
shall be referred to as “Protective Advances”).
(ii) Any
contrary provision of this Agreement notwithstanding, the Lenders hereby
authorize Agent or Swing Lender, as applicable, and either Agent or Swing
Lender, as applicable, may, but is not obligated to, knowingly and
intentionally, continue to make Advances (including Swing Loans) to Borrower
notwithstanding that an Overadvance exists or thereby would be created, so
long
as (A) after giving effect to such Advances, the outstanding Revolver Usage
does
not exceed the Borrowing Base by more than Three Million Dollars ($3,000,000),
and (B) after giving effect to such Advances, the outstanding Revolver Usage
(except for and excluding amounts charged to the Loan Account for interest,
fees, or Lender Group Expenses) does not exceed the Maximum Revolver
Amount. In the event Agent obtains actual knowledge that the Revolver
Usage exceeds the amounts permitted by the immediately foregoing provisions,
regardless of the amount of, or reason for, such excess, Agent shall notify
the
Lenders as soon as practicable (and prior to making any (or any additional)
intentional Overadvances (except for and excluding amounts charged to the
Loan
Account for interest, fees, or Lender Group Expenses) unless Agent determines
that prior notice would result in imminent harm to the Collateral or its
value),
and the Lenders with Revolver Commitments thereupon shall, together with
Agent,
jointly determine the terms of arrangements that shall be implemented with
Borrower intended to reduce, within a reasonable time, the outstanding principal
amount of the Advances to Borrower to an amount permitted by the preceding
sentence. In such circumstances, if any Lender with a Revolver
Commitment objects to the proposed terms of reduction or repayment of any
Overadvance, the terms of reduction or repayment thereof shall be implemented
according to the determination of the Required Lenders. Each Lender
with a Revolver Commitment shall be obligated to settle with Agent as provided
in Section 2.3(e) for the amount of such Lender’s Pro Rata Share of any
unintentional Overadvances by Agent reported to such Lender, any intentional
Overadvances made as permitted under this Section 2.3(d)(ii), and any
Overadvances resulting from the charging to the Loan Account of interest,
fees,
or Lender Group Expenses.
(iii) Each
Protective Advance and each Overadvance shall be deemed to be an Advance
hereunder, except that no Protective Advance or Overadvance shall be eligible
to
be a LIBOR Rate Loan and, prior to Settlement therefor, all payments on the
Protective Advances shall be payable to Agent solely for its own
account. The Protective Advances and Overadvances shall be repayable
on demand, secured by Agent’s Liens, constitute Obligations hereunder, and bear
interest at the rate applicable from time to time to Advances that are Base
Rate
Loans. The provisions of this Section 2.3(d) are for the exclusive
benefit of Agent, Swing Lender, and the Lenders and are not intended to benefit
Borrower in any way.
(e) Settlement. It
is agreed that each Lender’s funded portion of the Advances is intended by the
Lenders to equal, at all times, such Lender’s Pro Rata Share of the outstanding
Advances. Such agreement notwithstanding, Agent, Swing Lender, and
the other Lenders agree (which agreement shall not be for the benefit of
Borrower) that in order to facilitate the administration of this Agreement
and
the other Loan Documents, settlement among the Lenders as to the Advances,
the
Swing Loans, and the Protective Advances shall take place on a periodic basis
in
accordance with the following provisions:
-4-
(i) Agent
shall request settlement (“Settlement”) with the Lenders on a weekly basis, or
on a more frequent basis if so determined by Agent (1) on behalf of Swing
Lender, with respect to the outstanding Swing Loans, (2) for itself, with
respect to the outstanding Protective Advances, and (3) with respect to
Borrower’s or its Subsidiaries’ Collections or payments received, as to each by
notifying the Lenders by telecopy, telephone, or other similar form of
transmission, of such requested Settlement, no later than 2:00 p.m. (Georgia
time) on the Business Day immediately prior to the date of such requested
Settlement (the date of such requested Settlement being the “Settlement
Date”). Such notice of a Settlement Date shall include a summary
statement of the amount of outstanding Advances, Swing Loans, and
Protective Advances for the period since the prior Settlement
Date. Subject to the terms and conditions contained herein (including
Section 2.3(c)(iii)): (y) if a Lender’s balance of the Advances (including
Swing Loans and Protective Advances) exceeds such Lender’s Pro Rata Share of the
Advances (including Swing Loans and Protective Advances) as of a Settlement
Date, then Agent shall, by no later than 3:00 p.m. (Georgia time) on the
Settlement Date, transfer in immediately available funds to a Deposit Account
of
such Lender (as such Lender may designate), an amount such that each such
Lender
shall, upon receipt of such amount, have as of the Settlement Date, its Pro
Rata
Share of the Advances (including Swing Loans and Protective Advances), and
(z)
if a Lender’s balance of the Advances (including Swing Loans and Protective
Advances) is less than such Lender’s Pro Rata Share of the Advances (including
Swing Loans and Protective Advances) as of a Settlement Date, such Lender
shall
no later than 12:00 p.m. (Georgia time) on the Settlement Date transfer in
immediately available funds to Agent’s Account, an amount such that each such
Lender shall, upon transfer of such amount, have as of the Settlement Date,
its
Pro Rata Share of the Advances (including Swing Loans and Protective
Advances). Such amounts made available to Agent under clause (z) of
the immediately preceding sentence shall be applied against the amounts of
the
applicable Swing Loans or Protective Advances and, together with the portion
of
such Swing Loans or Protective Advances representing Swing Lender’s Pro Rata
Share thereof, shall constitute Advances of such Lenders. If any such
amount is not made available to Agent by any Lender on the Settlement Date
applicable thereto to the extent required by the terms hereof, Agent shall
be
entitled to recover for its account such amount on demand from such Lender
together with interest thereon at the Defaulting Lender Rate.
(ii) In
determining whether a Lender’s balance of the Advances, Swing Loans, and
Protective Advances is less than, equal to, or greater than such Lender’s Pro
Rata Share of the Advances, Swing Loans, and Protective Advances as of a
Settlement Date, Agent shall, as part of the relevant Settlement, apply to
such
balance the portion of payments actually received in good funds by Agent
with
respect to principal, interest, fees payable by Borrower and allocable to
the
Lenders hereunder, and proceeds of Collateral. To the extent that a
net amount is owed to any such Lender after such application, such net amount
shall be distributed by Agent to that Lender as part of such next
Settlement.
(iii) Between
Settlement Dates, Agent, to the extent Protective Advances or Swing Loans
are
outstanding, may pay over to Agent or Swing Lender, as applicable, any
Collections or payments received by Agent, that in accordance with the terms
of
this Agreement would be applied to the reduction of the Advances, for
application to the Protective Advances or Swing Loans. Between
Settlement Dates, Agent, to the extent no Protective Advances or Swing Loans
are
outstanding, may pay over to Swing Lender any payments received by Agent,
that
in accordance with the terms of this Agreement would be applied to the reduction
of the Advances, for application to Swing Lender’s Pro Rata Share of the
Advances. If, as of any Settlement Date, Collections of Borrower or
its Subsidiaries received since the then immediately preceding Settlement
Date
have been applied to Swing Lender’s Pro Rata Share of the Advances other than to
Swing Loans, as provided for in the previous sentence, Swing Lender shall
pay to
Agent for the accounts of the Lenders, and Agent shall pay to the Lenders,
to be
applied to the outstanding Advances of such Lenders, an amount such that
each
Lender shall, upon receipt of such amount, have, as of such Settlement Date,
its
Pro Rata Share of the Advances. During the period between Settlement
Dates, Swing Lender with respect to Swing Loans, Agent with respect to
Protective Advances, and each Lender (subject to the effect of agreements
between Agent and individual Lenders) with respect to the Advances other
than
Swing Loans and Protective Advances, shall be entitled to interest at the
applicable rate or rates payable under this Agreement on the daily amount
of
funds employed by Swing Lender, Agent, or the Lenders, as
applicable.
(f) Notation. Agent
shall record on its books the principal amount of the Advances (or portion
of
the Term Loan, as applicable) owing to each Lender, including the Swing Loans
owing to Swing Lender, and Protective Advances owing to Agent, and the interests
therein of each Lender, from time to time and such records shall, absent
manifest error, conclusively be presumed to be correct and
accurate.
(g) Lenders’
Failure to Perform. All Advances (other than Swing Loans and
Protective Advances) shall be made by the Lenders contemporaneously and in
accordance with their Pro Rata Shares. It is understood that (i) no
Lender shall be responsible for any failure by any other Lender to perform
its
obligation to make any Advance (or other extension of credit) hereunder,
nor
shall any Commitment of any Lender be increased or decreased as a result
of any
failure by any other Lender to perform its obligations hereunder, and (ii)
no
failure by any Lender to perform its obligations hereunder shall excuse any
other Lender from its obligations hereunder.
2.4 Payments.
(a) Payments
by Borrower.
(i) Except
as
otherwise expressly provided herein, all payments by Borrower shall be made
to
Agent’s Account for the account of the Lender Group and shall be made in
immediately available funds, no later than 2:00 p.m. (Georgia time) on the
date
specified herein. Any payment received by Agent later than 2:00 p.m. (Georgia
time) shall be deemed to have been received on the following Business Day
and
any applicable interest or fee shall continue to accrue until such following
Business Day.
(ii) Unless
Agent receives notice from Borrower prior to the date on which any payment
is
due to the Lenders that Borrower will not make such payment in full as and
when
required, Agent may assume that Borrower has made (or will make) such payment
in
full to Agent on such date in immediately available funds and Agent may (but
shall not be so required), in reliance upon such assumption, distribute to
each
Lender on such due date an amount equal to the amount then due such
Lender. If and to the extent Borrower does not make such payment in
full to Agent on the date when due, each Lender severally shall repay to
Agent
on demand such amount distributed to such Lender, together with interest
thereon
at the Defaulting Lender Rate for each day from the date such amount is
distributed to such Lender until the date repaid.
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(b) Apportionment
and Application.
(i) So
long
as no Event of Default has occurred and is continuing and except as otherwise
provided with respect to Defaulting Lenders who would otherwise be entitled
to
receive such payments as provided herein, all principal and interest payments
shall be apportioned ratably among the applicable Lenders (according to the
unpaid principal balance of the Obligations to which such payments relate
held
by each Lender) and all payments of fees and expenses (other than fees or
expenses that are for Agent’s separate account) shall be apportioned ratably
among the Lenders having a Pro Rata Share of the type of Commitment or
Obligation to which a particular fee or expense relates. Except as
otherwise specifically provided in Section 2.4(b)(iv) hereof or in Section
2.4(d) hereof, all payments to be made hereunder by Borrower shall be remitted
to Agent and, subject to Section 2.4(b)(iv), all such payments, and all proceeds
of Collateral received by Agent, shall be applied, so long as no Event of
Default has occurred and is continuing, to reduce the balance of the Advances
outstanding or to make scheduled payments to repay the Term Loan as provided
herein and, thereafter, to Borrower (to be wired to the Designated Account)
or
such other Person entitled thereto under applicable law.
(ii) At
any
time that an Event of Default has occurred and is continuing and except as
otherwise provided with respect to Defaulting Lenders, all payments remitted
to
Agent and all proceeds of Collateral received by Agent shall be applied as
follows:
(A) first,
to
pay any Lender Group Expenses (including cost or expense reimbursements)
or
indemnities then due to Agent under the Loan Documents, until paid in
full,
(B) second,
to pay any fees or premiums then due to Agent under the Loan Documents until
paid in full,
(C) third,
to
pay interest due in respect of all Protective Advances until paid in
full,
(D) fourth,
to pay the principal of all Protective Advances until paid in full,
(E) fifth,
ratably to pay any Lender Group Expenses (including cost or expense
reimbursements) or indemnities then due to any of the Lenders under the Loan
Documents, until paid in full,
(F) sixth,
ratably to pay any fees or premiums then due to any of the Lenders with a
Revolver Commitment or holding any Advance, until paid in full,
(G) seventh,
ratably to pay interest due in respect of the Advances (other than Protective
Advances), and the Swing Loans, until paid in full,
(H) eighth,
ratably (i) to pay the principal of all Swing Loans until paid in full, (ii)
to
pay the principal of all Advances until paid in full, (iii) to Agent, to
be held
by Agent, for the ratable benefit of Issuing Lender and those Lenders having
a
Revolver Commitment or holding any Advance, as cash collateral in an amount
up
to one hundred five percent (105%) of the Letter of Credit Usage, (iv) to Agent, to be held
by Agent, for
the benefit of the Bank Product Providers, as cash collateral in an amount
up to
one hundred five percent (105%) of the amount of Bank Product Obligations
in
respect of Swap Agreements, and (v) to Agent to be held by Agent for the
benefit
of the Bank Product Obligations as cash collateral in an amount not to
exceed the amount of the Bank Product Reserve established prior to the
occurrence of, and not in contemplation of, the subject Event of
Default,
(I) ninth,
ratably to pay any fees or premiums then due to any of the Lenders with a
Term
Loan Commitment or holding any Term Loan, until paid in full,
(J) tenth,
ratably to pay interest due in respect of the Term Loan, until paid in
full,
(K) eleventh,
to pay the outstanding principal balance of the Term Loan (in the inverse
order
of the maturity of the installments due thereunder) until the Term Loan is
paid
in full,
(L) twelfth,
to pay any other Obligations (including the provision of amounts to Agent,
to be
held by Agent, for the benefit of the Bank Product Providers, as cash collateral
in an amount up to the amount determined by Agent in its Permitted Discretion
as
the amount necessary to secure Parent’s and its Subsidiaries’ obligations in
respect of Bank Products), and
(M) thirteenth,
to Borrowers (to be wired to the Designated Account) or such other Person
entitled thereto under applicable law.
(iii) Agent
promptly shall distribute to each Lender, pursuant to the applicable wire
instructions received from each Lender in writing, such funds as it may be
entitled to receive, subject to a Settlement delay as provided in Section
2.3(e).
(iv) In
each
instance, so long as no Event of Default has occurred and is continuing,
Section
2.4(b)(i) and Section 2.4(b)(ii) shall not apply to any payment made
by Borrower to Agent and specified by Borrower to be for the payment of specific
Obligations then due and payable (or prepayable) under any provision of this
Agreement.
-6-
(v) For
purposes of Section 2.4(b)(ii) (other than clause (L) thereof), “paid in full”
means payment of all amounts owing under the Loan Documents according to
the
terms thereof, including loan fees, service fees, professional fees, interest
(and specifically including in each case interest and such fees
accrued after the commencement of any Insolvency Proceeding), default
interest, interest on interest, and expense reimbursements, whether or not
any
of the foregoing (other than disallowed interest and disallowed loan fees,
if
any) would be allowed or disallowed in whole or in part in any Insolvency
Proceeding; provided however, that for the purposes of Section 2.4(b)(ii)(L),
“paid in full” means payment of all amounts owing under the Loan Documents
according to the terms hereof, including loan fees, service fees, professional
fees, interest (and specifically including interest and fees accrued after
the
commencement of any Insolvency Proceeding), default interest, interest on
interest, and expense reimbursements, whether or not any of the foregoing
would
be or is allowed or disallowed in whole or in part in any Insolvency
Proceeding.
(vi) In
the
event of a direct conflict between the priority provisions of this Section
2.4
and any other provision contained in any other Loan Document, it is the
intention of the parties hereto that such provisions be read together and
construed, to the fullest extent possible, to be in concert with each
other. In the event of any actual, irreconcilable conflict that
cannot be resolved as aforesaid, the terms and provisions of this Section
2.4
shall control and govern.
(c) Prepayments.
(i) Excess
Revolver Usage. If at any time the sum of the
aggregate principal amount of the outstanding Advances, the outstanding Letter
of Credit Usage, the Bank Product Reserve and the aggregate amount of reserves,
if any, established by Agent under Section 2.1 exceeds the lesser of (x)
the
Borrowing Base and (y) the Maximum Revolver Amount, Borrower shall prepay
the
Obligations in an amount equal to such excess which prepayments shall be
applied
in the manner set forth in Section 2.4(d).
(ii) Optional
Prepayments. The Term Loan may be voluntarily prepaid in
full or in part at any time; provided that in the case of any prepayment
not associated with a termination pursuant to Section 3.4, (x) no Event of
Default shall have occurred or be continuing either immediately before or
immediately after such prepayment and (y) there shall be at least Ten Million
Dollars ($10,000,000) of Availability both immediately before and after such
prepayment. Each such prepayment shall be in an amount which is an
integral multiple of Five Million Dollars ($5,000,000) or any greater amount
which is a multiple of Five Hundred Thousand Dollars ($500,000), shall be
made
by Borrower and shall be irrevocable.
(iii) Mandatory
Prepayments.
(A) Dispositions.
Promptly, and in any event not later than one (1) Business Day following
the
receipt by Parent or any of its Subsidiaries of the proceeds of any voluntary
or
involuntary sale or disposition by Parent or any of its Subsidiaries of property
or assets (including casualty losses or condemnations but excluding sales
or
dispositions which qualify as Permitted Dispositions under clauses (a), (b),
(c), (d), (e) or (f) of the definition of Permitted Dispositions), Borrower
shall prepay the outstanding principal amount of the Obligations in accordance
with Section 2.4(d) in an amount equal to one hundred percent (100%) of
such Net Cash Proceeds (including condemnation awards and payments in lieu
thereof) received by such Person in connection with such sales or dispositions;
provided that, so long as (A) no Default or Event of Default shall have occurred
and is continuing, (B) Borrower shall have given Agent prior written notice
of
Parent’s or its Subsidiaries’ intention to apply such monies to the costs of
replacement of the properties or assets that are the subject of such sale
or
disposition, (C) the monies are held in a cash collateral account in which
Agent
has a perfected first-priority security interest, and (D) Parent or its
Subsidiaries, as applicable, complete such replacement within one hundred
eighty
(180) days after the initial receipt of such monies, Parent and its Subsidiaries
shall have the option to apply such monies to the costs of replacement of
the
property or assets that are the subject of such sale or disposition unless
and
to the extent that such applicable period shall have expired without such
replacement, purchase or construction being made or completed, in which case,
any amounts remaining in the cash collateral account shall be paid to Agent
and
applied in accordance with Section 2.4(d). Nothing contained in this
Section 2.4(c)(iii)(A) shall permit Parent or any of its Subsidiaries to
sell or otherwise dispose of any property or assets other than in accordance
with Section 6.4.
(B) Extraordinary
Receipts. (i) Promptly, and in any event not later than one (1) Business
Day
following the receipt by Parent or any of its Subsidiaries of any Extraordinary
Receipts, Borrower shall prepay the outstanding principal amount of the
Obligations in accordance with Section 2.4(d) in an amount equal to 100%
of such
Extraordinary Receipts, net of any reasonable expenses incurred in collecting
such Extraordinary Receipts; provided however that Borrower shall not be
obligated to prepay the Obligations in connection with the receipt by Parent’s
or any of its Subsidiaries’ of a Tax Refunds that is less than $100,000 at any
one time. Notwithstanding the foregoing, if the amount of
Extraordinary Receipts from Tax Refunds not used to prepay the Obligations
in
accordance with this subsection (B) shall exceed $2,000,000 in the aggregate
over the term of this Agreement, all Tax Refunds received above such $2,000,000
(regardless of whether they exceed $100,000 at any one time) shall be applied
to
prepay the Obligations as set forth in this subsection (B).
(C) Debt
or
Issuances of Disqualified Stock. Promptly, and in any event not later
than one (1) Business Day, following the issuance or incurrence by Parent
or any of its Subsidiaries of any Indebtedness (other than Indebtedness
permitted under Section 6.1) or the issuance by Parent or any of its
Subsidiaries of any shares of its or their Stock (other than in the event
that
Parent or any Subsidiary thereof forms a Subsidiary in accordance with the
terms
hereof, the issuance by such Subsidiary of Stock to Parent or such Subsidiary,
as applicable), Borrower shall prepay the outstanding principal amount of
the
Obligations in accordance with Section 2.4(d) in an amount equal to 100%
of the
Net Cash Proceeds received by such Person in connection with such incurrence of
Indebtedness or such issuance of Stock. The provisions of this Section
2.4(c)(iv)(C) shall not be deemed to be implied consent to any such issuance
or
incurrence otherwise prohibited by the terms and conditions of this
Agreement.
(D) Excess
Cash Flow. Within ten (10) days of delivery to Agent and the Lenders
of audited annual financial statements pursuant to Section 5.3, commencing
with
the delivery to Agent and the Lenders of the financial statements for Parent’s
fiscal year ended December 31, 2008 or, if such financial statements are
not
delivered to Agent and the Lenders on the date such statements are required
to
be delivered pursuant to Section 5.3, ten (10) days after the date such
statements are required to be delivered to Agent and the Lenders pursuant
to
Section 5.3, Borrower shall prepay the outstanding principal amount of the
Obligations in accordance with Section 2.4(d) in an amount equal to fifty
percent (50%) of the Excess Cash Flow of Parent and its Subsidiaries for
such
fiscal year.
-7-
(d) Application
of Payments. Each prepayment pursuant to any clause of
Section 2.4(c)(iii) above shall (A) so long as no Event of Default shall
have occurred and be continuing and subject to the last sentence of this
subsection, be applied, first, to the outstanding principal amount of
the Advances, but solely to the extent necessary to increase the Availability
at
such time to Ten Million Dollars ($10,000,000) (with no reduction to the
Maximum
Revolver Amount), second, to the outstanding principal amount of the
Term Loan until paid in full, third, to the outstanding principal
amount of the Advances until paid in full, and fourth, to cash
collateralize the Letters of Credit in an amount equal to one hundred five
percent (105%) of the then extant Letter of Credit Usage, and (B) if an
Event of Default shall have occurred and be continuing, be applied in the
manner
set forth in Section 2.4(b)(ii). Notwithstanding the foregoing,
any prepayment resulting from the sale of any Collateral comprising the
Borrowing Base shall be applied first to the outstanding principal amount
of the
Advances, and then to the Term Loans to be apportioned among the Term Loan
Lenders pro rata.
2.5 Overadvances. If,
at any time or for any reason, the amount of Obligations owed by Borrower
to the
Lender Group pursuant to Section 2.1 or Section 2.12 is greater than any
of the
limitations set forth in Section 2.1 or Section 2.12, as applicable (an
“Overadvance”), Borrower immediately shall pay to Agent, in cash, the amount of
such excess, which amount shall be used by Agent to reduce the Obligations
in
accordance with the priorities set forth in Section 2.4(b). Borrower
promises to pay the Obligations (including principal, interest, fees, costs,
and
expenses) in Dollars in full on the Maturity Date or, if earlier, on the
date on
which the Obligations are declared due and payable pursuant to the terms
of this
Agreement.
2.6 Interest
Rates and Letter of Credit Fee: Rates, Payments, and
Calculations.
(a) Interest
Rates. Except as provided in Section 2.6(c), all Obligations
(except for undrawn Letters of Credit and except for Bank Product Obligations)
that have been charged to the Loan Account pursuant to the terms hereof shall
bear interest on the Daily Balance thereof as follows:
(i) if
the
relevant Obligation is an Advance that is (A) a LIBOR Rate Loan, at a per
annum
rate equal to the LIBOR Rate plus the LIBOR Rate Margin applicable to an
Advance
(except to the extent an Advance is converted from a LIBOR Rate Loan to a
Base
Rate Loan pursuant to Section 2.13(a)) or (B) a Base Rate Loan, at a per
annum rate equal to the Base Rate plus the Base Rate Margin applicable to
an
Advance; or
(ii) if
the
relevant Obligation relates to the Term Loan that is (A) a LIBOR Rate Loan,
at a
per annum rate equal to (a) the LIBOR Rate plus the LIBOR Rate Margin applicable
to the Term Loan; provided that if an event described in Section 2.13(d)(ii)
shall occur, the interest on the Term Loan shall accrue at a per annum rate
equal to the Base Rate plus the Base Rate Margin applicable to the Term Loan
or
(B) a Base Rate Loan, at a per annum rate equal to the Base Rate plus the
Base
Rate Margin applicable to an Advance.
(b) Letter
of Credit Fee. Borrower shall pay Agent (for the ratable
benefit of the Lenders with a Revolver Commitment, subject to any agreements
between Agent and individual Lenders), a Letter of Credit fee (in addition
to
the charges, commissions, fees, and costs set forth in Section 2.12(e)) which
shall accrue at a rate equal to 2.0% per annum times the Daily Balance
of the undrawn amount of all outstanding Letters of Credit.
(c) Default
Rate. At the election of Agent or the Required Lenders upon
the occurrence and during the continuation of an Event of Default,
(i) all
unpaid Obligations (except for undrawn Letters of Credit and except for Bank
Product Obligations) that have been charged to the Loan Account pursuant
to the
terms hereof shall bear interest on the Daily Balance thereof at a per annum
rate equal to two (2) percentage points above the per annum rate otherwise
applicable hereunder, and
(ii) the
Letter of Credit fee provided for in Section 2.6(b) shall be increased to
two
(2) percentage points above the per annum rate otherwise applicable
hereunder.
(d) Payment. Except
as provided to the contrary in Section 2.11 or Section 2.13(a), interest,
Letter
of Credit fees, and all other fees payable hereunder shall be due and payable,
in arrears, on the first day of each calendar month at any time that Obligations
or Commitments are outstanding. Borrower hereby authorizes Agent to
charge all interest and fees (when due and payable), all Lender Group Expenses
(after the same become due and payable in accordance with Section 17.10),
all
charges, commissions, fees, and costs provided for in Section 2.12(e) (as
and when due and payable), all fees and costs provided for in
Section 2.11 (as and when due and payable), and all other payments as
and when due and payable under any Loan Document (including the amounts due
and
payable with respect to the Term Loan and including any amounts due and payable
to the Bank Product Providers in respect of Bank Products up to the amount
of
the Bank Product Reserve) to the Loan Account, which amounts thereafter shall
constitute Advances hereunder and shall accrue interest at the rate then
applicable to Advances that are Base Rate Loans. Any interest not
paid when due shall be compounded by being charged to the Loan Account and
shall
thereafter constitute Advances hereunder and shall accrue interest at the
rate
then applicable to Advances that are Base Rate Loans; provided, however that
if,
at any time that any amounts due in respect of interest on the Term Loan
or any
amount due and payable to the Bank Product Reserve are charged to the Loan
Account, an Event of Default or Overadvance exists, or would result therefrom,
such amounts shall not constitute Advances but instead shall continue to
remain
outstanding as amounts due in respect of the Term Loan or any amount due
and
payable to the Bank Product Providers in respect of the Bank Products up
to the
amount of the Bank Product Reserve, and such amounts shall be compounded
and
added to the outstanding principal balance of the Term Loan; provided, further,
however, that the failure to make any such payment and the compounding of
such
interest shall nonetheless constitute an Event of Default under Section
7.1.
(e) Computation. All
interest and fees chargeable under the Loan Documents shall be computed on
the
basis of a 360 day year for the actual number of days elapsed. In the
event the Base Rate is changed from time to time hereafter, the rates of
interest hereunder based upon the Base Rate automatically and immediately
shall
be increased or decreased by an amount equal to such change in the Base
Rate.
-8-
(f) Intent
to Limit Charges to Maximum Lawful Rate. In no event shall
the interest rate or rates payable under this Agreement, plus any other amounts
paid in connection herewith, exceed the highest rate permissible under any
law
that a court of competent jurisdiction shall, in a final determination, deem
applicable. Borrower and the Lender Group, in executing and
delivering this Agreement, intend legally to agree upon the rate or rates
of
interest and manner of payment stated within it; provided, however, that,
anything contained herein to the contrary notwithstanding, if said rate or
rates
of interest or manner of payment exceeds the maximum allowable under applicable
law, then, ipso facto, as of the date of this Agreement, Borrower is
and shall be liable only for the payment of such maximum as allowed by law,
and
payment received from Borrower in excess of such legal maximum, whenever
received, shall be applied to reduce the principal balance of the Obligations
to
the extent of such excess.
2.7 Cash
Management.
(a) Borrower
shall and shall cause each of its Subsidiaries to (i) establish and maintain
cash management services of a type and on terms satisfactory to Agent (it
being
agreed that the terms in effect on the Closing Date are satisfactory) at
one or
more of the banks set forth on Schedule 2.7(a) (each a “Cash Management Bank”),
and shall request in writing and otherwise take such reasonable steps to
ensure
that, except as permitted by Section 6.12, all of its and its Subsidiaries’
Account Debtors forward payment of the amounts owed by them directly to such
Cash Management Bank, and (ii) deposit or cause to be deposited promptly,
and in
any event no later than three Business Days after the date of receipt thereof,
all of their Collections (including those sent directly by their Account
Debtors
to Borrower or one of its Subsidiaries) into a bank account (the “Cash
Management Accounts”) at one of the Cash Management Banks.
(b) Each
Cash
Management Bank shall establish and maintain Cash Management Agreements with
Agent and Borrower. Unless otherwise approved by the Agent, each such
Cash Management Agreement shall provide, among other things, that (i) the
Cash
Management Bank will comply with any instructions originated by Agent directing
the disposition of the funds in such Cash Management Account without further
consent by Borrower or its Subsidiaries, as applicable, (ii) the Cash Management
Bank has no rights of setoff or recoupment or any other claim against the
applicable Cash Management Account other than for payment of its service
fees
and other charges directly related to the administration of such Cash Management
Account and for returned checks or other items of payment, and (iii) upon
the
instruction of the Agent (an “Activation Instruction”), it will forward by daily
sweep all amounts in the applicable Cash Management Account to the Agent’s
Account. Agent agrees not to issue an Activation Instruction with
respect to the Cash Management Accounts unless a Triggering Event has occurred
and is continuing at the time such Activation Instruction is
issued.
(c) So
long
as no Default or Event of Default has occurred and is continuing, Borrower
may
amend Schedule 2.7(a) to add or replace a Cash Management Bank or Cash
Management Account; provided, however, that (i) such prospective Cash Management
Bank shall be reasonably satisfactory to Agent, and (ii) prior to the time
of
the opening of such Cash Management Account, Borrower (or its Subsidiary,
as
applicable) and such prospective Cash Management Bank shall have executed
and
delivered to Agent a Cash Management Agreement. Borrower (or its
Subsidiaries, as applicable) shall close any of its Cash Management Accounts
(and establish replacement cash management accounts in accordance with the
foregoing sentence) promptly and in any event within thirty (30) days of
notice
from Agent that the creditworthiness of any Cash Management Bank is no longer
acceptable in Agent’s reasonable judgment, or as promptly as practicable and in
any event within sixty (60) days of notice from Agent that the operating
performance, funds transfer, or availability procedures or performance of
the
Cash Management Bank with respect to Cash Management Accounts or Agent’s
liability under any Cash Management Agreement with such Cash Management Bank
is
no longer acceptable in Agent’s reasonable judgment.
(d) Each
Cash
Management Account shall be a cash collateral account subject to a Control
Agreement.
2.8 Crediting
Payments. The
receipt of any payment item by Agent (whether from transfers to Agent by
the
Cash Management Banks pursuant to the Cash Management Agreements or otherwise)
shall not be considered a payment on account unless such payment item is
a wire
transfer of immediately available federal funds made to Agent’s Account or
unless and until such payment item is honored when presented for
payment. Should any payment item not be honored when presented for
payment, then Borrower shall be deemed not to have made such payment and
interest shall be calculated accordingly. Anything to the contrary
contained herein notwithstanding, any payment item shall be deemed received
by
Agent only if it is received into Agent’s Account on a Business Day on or before
2:00 p.m. (Georgia time). If any payment item is received into
Agent’s Account on a non-Business Day or after 2:00 p.m. (Georgia time) on a
Business Day, it shall be deemed to have been received by Agent as of the
opening of business on the immediately following Business
Day.
2.9 Designated
Account. Agent
is authorized to make the Advances, and Issuing Lender is authorized to issue
or
cause the issuance the Letters of Credit, under this Agreement based upon
telephonic or other instructions received from anyone purporting to be an
Authorized Person or, without instructions, if pursuant to Section
2.6(d). Borrower agrees to establish and maintain the Designated
Account with the Designated Account Bank for the purpose of receiving the
proceeds of the Advances requested by Borrower and made by Agent or the Lenders
hereunder. Unless otherwise directed in writing by Borrower and
agreed to by Agent, any Advance, Protective Advance, or Swing Loan requested
by
Borrower and made by Agent or the Lenders hereunder shall be made to the
Designated Account.
2.10 Maintenance
of Loan Account; Statements of Obligations. Agent
shall maintain an account on its books in the name of Borrower (the “Loan
Account”) on which Borrower will be charged with the Term Loan, all Advances
(including Protective Advances and Swing Loans) made by Agent, Swing Lender,
or
the Lenders to Borrower or for Borrower’s account, the Letters of Credit issued
by Issuing Lender for Borrower’s account, and with all other payment Obligations
hereunder or under the other Loan Documents (except for Bank Product
Obligations), including, accrued interest, fees and expenses, and Lender
Group
Expenses. In accordance with Section 2.8, the Loan Account will be
credited with all payments received by Agent from Borrower or for Borrower’s
account, including all amounts received in Agent’s Account from any Cash
Management Bank. Agent shall render monthly statements regarding the
Loan Account to Borrower, including principal, interest, fees, and including
an
itemization in reasonable detail of all charges and expenses constituting
Lender
Group Expenses owing, and such statements, absent manifest error, shall be
conclusively presumed to be correct and accurate and constitute an account
stated between Borrower and the Lender Group unless, within 30 days after
receipt thereof by Borrower, Borrower shall deliver to Agent written objection
thereto describing the error or errors contained in any such
statements.
2.11 Fees. Borrower
shall pay to Agent, as and when due and payable under the terms of the Fee
Letter, the fees set forth in the Fee Letter.
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2.12 Letters
of Credit.
(a) Subject
to the terms and conditions of this Agreement, the Issuing Lender agrees
to
cause the Underlying Issuer to issue letters of credit for the account of
Borrower or its Subsidiaries (each, an “L/C”), whether by purchasing
participations, executing indemnities or reimbursement obligations, or otherwise
(each such commitment, an “L/C Undertaking”) with respect to letters of credit
issued by an Underlying Issuer (the Underlying Issuer shall be ▇▇▇▇▇ Fargo
or
such other bank acceptable to Agent and as may be reasonably approved by
Borrower) for the account of Borrower. Each request for the issuance
of a Letter of Credit, or the amendment, renewal, or extension of any
outstanding Letter of Credit, shall be made in writing by an Authorized Person
and delivered to the Issuing Lender and Agent via hand delivery, telefacsimile,
or other electronic method of transmission reasonably in advance of the
requested date of issuance, amendment, renewal, or extension. Each
such request shall be in form and substance satisfactory to the Issuing Lender
in its Permitted Discretion and shall specify (i) the amount of such Letter
of
Credit, (ii) the date of issuance, amendment, renewal, or extension of such
Letter of Credit, (iii) the expiration date of such Letter of Credit, (iv)
the
name and address of the beneficiary thereof (or the beneficiary of the
Underlying Letter of Credit, as applicable), and (v) such other information
(including, in the case of an amendment, renewal, or extension, identification
of the outstanding Letter of Credit to be so amended, renewed, or extended)
as
shall be necessary to prepare, amend, renew, or extend such Letter of
Credit. If requested by the Issuing Lender, Borrower also shall be an
applicant under the application with respect to any Underlying Letter of
Credit
that is to be the subject of an L/C Undertaking. The Issuing Lender
shall have no obligation to issue a Letter of Credit if any of the following
would result after giving effect to the issuance of such requested Letter
of
Credit:
(i) the
Letter of Credit Usage would exceed the Borrowing Base less the
outstanding amount of Advances, less the Bank Product Reserve, and
less the aggregate amount of reserves, if any, established
by Agent
under Section 2.1(b), or
(ii) the
Letter of Credit Usage would exceed Five Million Dollars ($5,000,000),
or
(iii) the
Letter of Credit Usage would exceed the Maximum Revolver Amount less
the outstanding amount of Advances less the Bank Product Reserve,
and less the aggregate amount of reserves, if any, established by Agent
under Section 2.1(b).
Each
Letter of Credit (and corresponding Underlying Letter of Credit) shall be
in
form and substance acceptable to the Issuing Lender (in the exercise of its
Permitted Discretion), including the requirement that the amounts payable
thereunder must be payable in Dollars. If Issuing Lender is obligated
to advance funds under a Letter of Credit, Borrower immediately shall reimburse
such L/C Disbursement to Issuing Lender by paying to Agent an amount equal
to
such L/C Disbursement (i) not later than 2:00 p.m., Georgia time, on the
date
that such L/C Disbursement is made, if Borrower shall have received written
or
telephonic notice of such L/C Disbursement prior to 1:00 p.m., Georgia time,
on
such date, or, (ii) if such notice has not been received by Borrower prior
to
such time on such date, then not later than 2:00 p.m., Georgia time, on the
Business Day that Borrower receives such notice, if such notice is received
prior to 1:00 p.m., Georgia time, on the date of receipt, and, in the absence
of
such reimbursement, the L/C Disbursement immediately and automatically shall
be
deemed to be an Advance hereunder and, initially, shall bear interest at
the
rate then applicable to Advances that are Base Rate Loans. To the
extent an L/C Disbursement is deemed to be an Advance hereunder, Borrower’s
obligation to reimburse such L/C Disbursement shall be discharged and replaced
by the resulting Advance. Promptly following receipt by Agent of any
payment from Borrower pursuant to this paragraph, Agent shall distribute
such
payment to the Issuing Lender or, to the extent that Lenders have made payments
pursuant to Section 2.12(b) to reimburse the Issuing Lender, then to such
Lenders and the Issuing Lender as their interests may appear.
(b) Promptly
following receipt of a notice of L/C Disbursement pursuant to
Section 2.12(a), each Lender with a Revolver Commitment agrees to fund its
Pro Rata Share of any Advance deemed made pursuant to the foregoing subsection
on the same terms and conditions as if Borrower had requested such Advance
and
Agent shall promptly pay to Issuing Lender the amounts so received by it
from
the Lenders. By the issuance of a Letter of Credit (or an amendment
to a Letter of Credit increasing the amount thereof) and without any further
action on the part of the Issuing Lender or the Lenders with Revolver
Commitments, the Issuing Lender shall be deemed to have granted to each Lender
with a Revolver Commitment, and each Lender with a Revolver Commitment shall
be
deemed to have purchased, a participation in each Letter of Credit, in an
amount
equal to its Pro Rata Share of the Risk Participation Liability of such Letter
of Credit, and each such Lender agrees to pay to Agent, for the account of
the
Issuing Lender, such Lender’s Pro Rata Share of any payments made by the Issuing
Lender under such Letter of Credit. In consideration and in
furtherance of the foregoing, each Lender with a Revolver Commitment hereby
absolutely and unconditionally agrees to pay to Agent, for the account of
the
Issuing Lender, such Lender’s Pro Rata Share of each L/C Disbursement made by
the Issuing Lender and not reimbursed by Borrower on the date due as provided
in
Section 2.12(a), or of any reimbursement payment required to be refunded
to
Borrower for any reason. Each Lender with a Revolver Commitment
acknowledges and agrees that its obligation to deliver to Agent, for the
account
of the Issuing Lender, an amount equal to its respective Pro Rata Share of
each
L/C Disbursement made by the Issuing Lender pursuant to this Section 2.12(b)
shall be absolute and unconditional and such remittance shall be made
notwithstanding the occurrence or continuation of an Event of Default or
Default
or the failure to satisfy any condition set forth in Section 3. If
any such Lender fails to make available to Agent the amount of such Lender’s Pro
Rata Share of each L/C Disbursement made by the Issuing Lender in respect
of
such Letter of Credit as provided in this Section, such Lender shall be deemed
to be a Defaulting Lender and Agent (for the account of the Issuing Lender)
shall be entitled to recover such amount on demand from such Lender together
with interest thereon at the Defaulting Lender Rate until paid in
full.
(c) Borrower
hereby agrees to indemnify, save, defend, and hold the Lender Group harmless
from any loss, cost, expense, or liability, and reasonable attorneys fees
incurred by the Lender Group arising out of or in connection with any Letter
of
Credit; provided, however, that Borrower shall not be obligated hereunder
to
indemnify for any loss, cost, expense, or liability to the extent that it
is
caused by the gross negligence or willful misconduct of the Issuing Lender
or
any other member of the Lender Group. Borrower agrees to be bound by
the Underlying Issuer’s regulations and interpretations of any Underlying Letter
of Credit or by Issuing Lender’s interpretations of any L/C issued by Issuing
Lender to or for Borrower’s account, even though this interpretation may be
different from Borrower’s own, and Borrower understands and agrees that the
Lender Group shall not be liable for any error, negligence, or mistake, whether
of omission or commission, in following Borrower’s instructions or those
contained in the Letter of Credit or any modifications, amendments, or
supplements thereto. Borrower understands that the L/C Undertakings
may require Issuing Lender to indemnify the Underlying Issuer for certain
costs
or liabilities arising out of claims by Borrower against such Underlying
Issuer. Borrower hereby agrees to indemnify, save, defend, and hold
the Lender Group harmless with respect to any loss, cost, expense (including
reasonable attorneys fees), or liability incurred by the Lender Group under
any
L/C Undertaking as a result of the Lender Group’s indemnification of any
Underlying Issuer; provided, however, that Borrower shall not be obligated
hereunder to indemnify for any loss, cost, expense, or liability to the extent
that it is caused by the gross negligence or willful misconduct of the Issuing
Lender or any other member of the Lender Group. Borrower hereby
acknowledges and agrees that neither the Lender Group nor the Issuing Lender
shall be responsible for delays, errors, or omissions resulting from the
malfunction of equipment in connection with any Letter of Credit.
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(d) Borrower
hereby authorizes and directs any Underlying Issuer to deliver to the Issuing
Lender all instruments, documents, and other writings and property received
by
such Underlying Issuer pursuant to such Underlying Letter of Credit and to
accept and rely upon the Issuing Lender’s instructions with respect to all
matters arising in connection with such Underlying Letter of Credit and the
related application.
(e) Any
and
all issuance charges, commissions, fees, and costs incurred by the Issuing
Lender relating to Underlying Letters of Credit shall be Lender Group Expenses
for purposes of this Agreement and shall be reimbursable by Borrower to Agent
for the account of the Issuing Lender; it being acknowledged and agreed by
Borrower that, as of the Closing Date, the issuance charge imposed by the
Underlying Issuer is 0.825% per annum times the undrawn amount of each
Underlying Letter of Credit, that such issuance charge may be changed from
time
to time, and that the Underlying Issuer also imposes a schedule of charges
for
amendments, extensions, drawings, and renewals.
(f) If
by
reason of (i) any change after the Closing Date in any applicable law, treaty,
rule, or regulation or any change in the interpretation or application thereof
by any Governmental Authority, or (ii) compliance by the Underlying Issuer
or
the Lender Group with any direction, request, or requirement (irrespective
of
whether having the force of law) of any Governmental Authority or monetary
authority including, Regulation D of the Federal Reserve Board as from time
to
time in effect (and any successor thereto):
(i) any
reserve, deposit, or similar requirement is or shall be imposed or modified
in
respect of any Letter of Credit issued hereunder, or
(ii) there
shall be imposed on the Underlying Issuer or the Lender Group any other
condition regarding any Underlying Letter of Credit or any Letter of Credit
issued pursuant hereto,
and
the
result of the foregoing is to increase, directly or indirectly, the cost
to the
Lender Group of issuing, making, guaranteeing, or maintaining any Letter
of
Credit or to reduce the amount receivable in respect thereof by the Lender
Group, then, and in any such case, Agent may, at any time within a reasonable
period after the additional cost is incurred or the amount received is reduced,
notify Borrower, and Borrower shall pay on demand such amounts as Agent may
specify to be necessary to compensate the Lender Group for such additional
cost
or reduced receipt, together with interest on such amount from the date of
such
demand until payment in full thereof at the rate then applicable to Base
Rate
Loans hereunder. The determination by Agent of any amount due
pursuant to this Section, as set forth in a certificate setting forth the
calculation thereof in reasonable detail, shall, in the absence of manifest
or
demonstrable error, be final and conclusive and binding on all of the parties
hereto.
2.13 LIBOR
Option.
(a) Interest
and Interest Payment Dates. In lieu of having interest on
any Advance charged at a rate based upon the Base Rate, Borrower shall have
the
option (the “LIBOR Option”) to have interest on all or a portion of the Advances
be charged (whether at the time when made (unless otherwise provided herein),
upon conversion from a Base Rate Loan to a LIBOR Rate Loan, or upon continuation
of a LIBOR Rate Loan as a LIBOR Rate Loan) at a rate of interest based upon
the
LIBOR Rate. Interest on LIBOR Rate Loans shall be payable on the
earliest of (i) the last day of the Interest Period applicable thereto,
(provided, however, that, subject to the following clauses (ii) and (iii),
in
the case of any Interest Period greater than three (3) months in duration,
interest shall be payable at three (3) month intervals after the commencement
of
the applicable Interest Period and on the last day of such Interest Period),
(ii) the date on which all or any portion of the Obligations are accelerated
pursuant to the terms hereof, or (iii) the date on which this Agreement is
terminated pursuant to the terms hereof. On the last day of each
applicable Interest Period, unless Borrower properly has exercised the LIBOR
Option with respect thereto, the interest rate applicable to such LIBOR Rate
Loan automatically shall convert to the rate of interest then applicable
to Base
Rate Loans of the same type hereunder. At any time that an Event of
Default has occurred and is continuing, Borrower no longer shall have the
option
to request that Advances bear interest at a rate based upon the LIBOR Rate
and
Agent shall have the right to convert the interest rate on all outstanding
LIBOR
Rate Loans (other than Term Loan) to the rate then applicable to Base Rate
Loans
hereunder.
(b) LIBOR
Election.
(i) Borrower
may, at any time and from time to time, so long as no Event of Default has
occurred and is continuing, elect to exercise the LIBOR Option by notifying
Agent prior to 2:00 p.m. (Georgia time) at least three (3) Business Days
prior
to the commencement of the proposed Interest Period (the “LIBOR
Deadline”). Notice of Borrower’s election of the LIBOR Option for a
permitted portion of the Advances and an Interest Period pursuant to this
Section shall be made by delivery to Agent of a LIBOR Notice received by
Agent
before the LIBOR Deadline, or by telephonic notice received by Agent before
the
LIBOR Deadline (to be confirmed by delivery to Agent of a LIBOR Notice received
by Agent prior to 5:00 p.m. (Georgia time) on the same day). Promptly
upon its receipt of each such LIBOR Notice, Agent shall provide a copy thereof
to each of the affected Lenders.
(ii) Each
LIBOR Notice shall be irrevocable and binding on Borrower. In
connection with each LIBOR Rate Loan, Borrower shall indemnify, defend, and
hold
Agent and the Lenders harmless against any loss, cost, or expense incurred
by
Agent or any Lender as a result 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,
or (C) the failure to borrow, convert, continue or prepay any LIBOR Rate
Loan on
the date specified in any LIBOR Notice delivered pursuant hereto (such losses,
costs, or expenses, “Funding Losses”). Funding Losses shall, with
respect to Agent or any Lender, be deemed to equal the amount determined
by
Agent or such Lender to be the excess, if any, of (1) the amount of interest
that would have accrued on the principal amount of such LIBOR Rate Loan had
such
event not occurred, at the LIBOR Rate that would have been applicable thereto,
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 therefor),
minus (2) the amount of interest that would accrue on such principal
amount for such period at the interest rate which Agent or such Lender would
be
offered were it to be offered, at the commencement of such period, Dollar
deposits of a comparable amount and period in the London interbank
market. A certificate of Agent or a Lender delivered to Borrower
setting forth any amount or amounts that Agent or such Lender is entitled
to
receive pursuant to this Section 2.13 shall be conclusive absent manifest
error.
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(iii) Borrower
shall have not more than five (5) LIBOR Rate Loans in effect at any given
time,
of which no more than one LIBOR Rate Loan may be the Term
Loan. Borrower only may exercise the LIBOR Option for LIBOR Rate
Loans of at least One Million Dollars ($1,000,000) and integral multiples
of Five Hundred Thousand Dollars ($500,000) in excess thereof.
(c) Conversion. Borrower
may convert LIBOR Rate Loans (other than Term Loan) to Base Rate Loans at
any
time; provided, however, that in the event that LIBOR Rate Loans are converted
or prepaid on any date that is not the last day of the Interest Period
applicable thereto, including as a result of any automatic prepayment through
the required application by Agent of proceeds of Borrower’s and its
Subsidiaries’ Collections in accordance with Section 2.4(b) or for any other
reason, including early termination of the term of this Agreement or
acceleration of all or any portion of the Obligations pursuant to the terms
hereof, Borrower shall indemnify, defend, and hold Agent and the Lenders
and
their Participants harmless against any and all Funding Losses in accordance
with Section 2.13 (b)(ii) above.
(d) Special
Provisions Applicable to LIBOR Rate.
(i) The
LIBOR
Rate may be adjusted by Agent with respect to any Lender on a prospective
basis
to take into account any additional or increased costs to such Lender of
maintaining or obtaining any eurodollar deposits or increased costs, in each
case, due to changes in applicable law occurring subsequent to the commencement
of the then applicable Interest Period, including changes in tax laws (except
changes in taxes constituting taxes of the type described in clauses (a)
and (b)
of the definition of “Excluded Taxes”)) and changes in the reserve requirements
imposed by the Board of Governors of the Federal Reserve System (or any
successor), excluding the Reserve Percentage, which additional or increased
costs would increase the cost of funding or maintaining loans bearing interest
at the LIBOR Rate. In any such event, the affected Lender shall give
Borrower and Agent notice of such a determination and adjustment and Agent
promptly shall transmit the notice to each other Lender and, upon its receipt
of
the notice from the affected Lender, Borrower may, by notice to such affected
Lender (x) require such Lender to furnish to Borrower a statement setting
forth
the basis for adjusting such LIBOR Rate and the method for determining the
amount of such adjustment, or (y) repay the LIBOR Rate Loans with respect
to
which such adjustment is made (together with any amounts due under this Section
2.13(d)(i). Failure or delay on the part of any Lender to demand
compensation pursuant to this Section shall not constitute a waiver of such
Lender’s right to demand such compensation; provided that Borrower shall not be
required to compensate a Lender pursuant to this Section for any additional
or
increased costs incurred more than one hundred eighty (180) days prior to
the
date that such Lender notifies the Borrower of such law giving rise to such
additional or increased costs and of such Lender’s intention to claim
compensation therefor; providedfurther that if such claim arises by reason
of
the adoption of or change in any law that is retroactive, then the one hundred
eighty (180) day period day period referred to above shall be extended to
include the period of retroactive effect thereof.
(ii) In
the
event that any change in market conditions or any law, regulation, treaty,
or
directive, or any change therein or in the interpretation of application
thereof, shall at any time after the date hereof, in the reasonable opinion
of
any Lender, make it unlawful or impractical for such Lender to fund or maintain
LIBOR Rate Loans or to continue such funding or maintaining, or to determine
or
charge interest rates at the LIBOR Rate, such Lender shall give notice of
such
changed circumstances to Agent and Borrower and Agent promptly shall transmit
the notice to each other Lender and (y) in the case of any LIBOR Rate Loans
of
such Lender that are outstanding, the date specified in such Lender’s notice
shall be deemed to be the last day of the Interest Period of such LIBOR Rate
Loans, and interest upon the LIBOR Rate Loans of such Lender thereafter shall
accrue interest at the rate then applicable to Base Rate Loans, and (z) Borrower
shall not be entitled to elect the LIBOR Option until such Lender determines
that it would no longer be unlawful or impractical to do so.
(e) No
Requirement of Matched Funding. Anything to the contrary
contained herein notwithstanding, neither Agent, nor any Lender, nor any
of
their Participants, is required actually to acquire eurodollar deposits to
fund
or otherwise match fund any Obligation as to which interest accrues at the
LIBOR
Rate. The provisions of this Section shall apply as if each Lender or
its Participants had match funded any Obligation as to which interest is
accruing at the LIBOR Rate by acquiring eurodollar deposits for each Interest
Period in the amount of the LIBOR Rate Loans.
2.14 Capital
Requirements. If,
after the date hereof, any Lender determines that (i) the adoption of or
change
in any law, rule, regulation or guideline regarding capital requirements
for
banks or bank holding companies, or any change in the interpretation or
application thereof by any Governmental Authority charged with the
administration thereof, or (ii) compliance by such Lender or its parent bank
holding company with any guideline, request, or directive of any such entity
regarding capital adequacy (whether or not having the force of law), has
the
effect of reducing the return on such Lender’s or such holding company’s capital
as a consequence of such Lender’s Commitments hereunder to a level below that
which such Lender or such holding company could have achieved but for such
adoption, change, or compliance (taking into consideration such Lender’s or such
holding company’s then existing policies with respect to capital adequacy and
assuming the full utilization of such entity’s capital) by any amount deemed by
such Lender to be material, then such Lender may notify Borrower and Agent
thereof. Following receipt of such notice, Borrower agrees to pay
such Lender on demand the amount of such reduction of return of capital as
and
when such reduction is determined, payable within ninety (90) days after
presentation by such Lender of a statement in the amount and setting forth
in
reasonable detail such Lender’s calculation thereof and the assumptions upon
which such calculation was based (which statement shall be deemed true and
correct absent manifest error). In determining such amount, such
Lender may use any reasonable averaging and attribution
methods. Failure or delay on the part of any Lender to demand
compensation pursuant to this Section shall not constitute a waiver of such
Lender’s right to demand such compensation; provided that Borrower shall not be
required to compensate a Lender pursuant to this Section for any reduction
in
return incurred more than one hundred eighty (180) days prior to the date
that
such Lender notifies the Borrower of such law, rule, regulation or guideline
giving rise to such reductions and of such Lender’s intention to claim
compensation therefor; provided further that if such claim arises by reason
of
the adoption of or change in any law, rule, regulation or guideline that
is
retroactive, then the one hundred eighty (180) day period referred to above
shall be extended to include the period of retroactive effect
thereof.
3. CONDITIONS;
TERM OF AGREEMENT.
3.1 Conditions
Precedent to the Initial Extension of Credit. The
obligation of each Lender to make its initial extensions of credit provided
for
hereunder, is subject to the fulfillment, to the satisfaction of Agent and
each
Lender of each of the conditions precedent set forth on Schedule 3.1 (the
making
of such initial extension of credit by a Lender being conclusively deemed
to be
its satisfaction or waiver of the conditions precedent ).
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3.2 Conditions
Precedent to all Extensions of Credit. The
obligation of the Lender Group (or any member thereof) to initially make
the
Term Loan, any Closing Date Advance and thereafter any future Advances hereunder
(or to extend any other credit hereunder) at any time shall be subject to
the
following conditions precedent:
(a) the
representations and warranties of Parent or its Subsidiaries or any Guarantor
contained in this Agreement or in the other Loan Documents, certificate or
other
writing delivered to the Agent or any Lender pursuant hereto or thereto shall
be
true and correct in all respects on and as of the date of such extension
of
credit, as though made on and as of such date (except to the extent that
such
representations and warranties relate solely to an earlier date);
(b) no
Default or Event of Default shall have occurred and be continuing on the
date of
such extension of credit, nor shall either result from the making
thereof;
(c) no
injunction, writ, restraining order, or other order of any nature restricting
or
prohibiting, directly or indirectly, the extending of such credit shall have
been issued and remain in force by any Governmental Authority against Borrower,
Agent, or any Lender; and
(d) no
Material Adverse Change shall have occurred since December 31,
2006.
3.3 Term. This
Agreement shall continue in full force and effect for a term ending on September
27, 2011; provided that if, on or prior to such date, the Convertible
Subordinated Notes are (i) converted, in their entirety, into equity and
there
are no cash payment obligations (contingent or otherwise) or future commitments
outstanding with respect thereto at such time, or (ii) otherwise refinanced
or
replaced pursuant to Refinancing Indebtedness with a maturity date not earlier
than June 27, 2013, the term of this Agreement shall end on December 27,
2012
(the “Maturity Date”). The foregoing notwithstanding, the Lender
Group, upon the election of the Required Lenders, shall have the right to
terminate its obligations under this Agreement immediately and without notice
upon the occurrence and during the continuation of an Event of
Default.
3.4 Effect
of Termination. On
the date of termination of this Agreement, all Obligations (including contingent
reimbursement obligations of Borrower with respect to outstanding Letters
of
Credit and including all Bank Product Obligations) immediately shall become
due
and payable without notice or demand (including the requirement that Borrower
provide (a) Letter of Credit Collateralization, and (b) Bank Product
Collateralization). No termination of this Agreement, however, shall
relieve or discharge Borrower or its Subsidiaries of their duties, Obligations,
or covenants hereunder or under any other Loan Document and Agent’s Liens in the
Collateral shall remain in effect until all Obligations have been paid in
full
and the Lender Group’s obligations to provide additional credit hereunder have
been terminated. When this Agreement has been terminated and all of
the Obligations have been paid in full and the Lender Group’s obligations to
provide additional credit under the Loan Documents have been terminated
irrevocably, Agent will, at Borrower’s sole expense, without recourse,
representation or warranty, execute and deliver any payoff letters, termination
statements, lien releases, mortgage releases, re-assignments of trademarks,
discharges of security interests, and other similar discharge or release
documents (and, if applicable, in recordable form) as are reasonably necessary
to release, as of record, Agent’s Liens and all notices of security interests
and liens previously filed by Agent with respect to the
Obligations. Any remaining cash collateral relating to Letter of
Credit Usage and Bank Product Obligations and any back up letter of credit
with
an undrawn amount shall be returned to Borrower (a) in the case of any Letter
of
Credit surrendered for termination, no later than ten (10) Business Days
following such surrender to Agent or the Issuing Lender of such Letters of
Credit, (b) in the case of any Letter of Credit that expires, no later than
thirty (30) days of the expiration of such Letters of Credit, and (c) in
the
case of the Bank Product Reserve, no later than ten (10) Business Days following
the termination of the Bank Product Obligations.
3.5 Early
Termination by Borrower. Borrower
has the option, at any time upon ten (10) Business Days’ prior written notice to
Agent, to terminate this Agreement and terminate the Commitments hereunder
by
paying to Agent, in cash, the Obligations (including (a) providing Letter
of
Credit Collateralization with respect to the then existing Letter of Credit
Usage and (b) providing Bank Product Collateralization with respect to the
then
existing Bank Products), in full. If Borrower has sent a notice of
termination pursuant to the provisions of this Section, then, unless otherwise
agreed by the Agent, the Commitments shall terminate and Borrower shall be
obligated to repay the Obligations (including (a) providing Letter of Credit
Collateralization with respect to the then existing Letter of Credit Usage
and
(b) providing Bank Product Collateralization with respect to the then existing
Bank Products), in full on the date set forth as the date of termination of
this Agreement in such notice.
4. REPRESENTATIONS
AND WARRANTIES.
In
order
to induce the Lender Group to enter into this Agreement, Borrower makes the
following representations and warranties to the Lender Group which shall
be
true, correct, and complete, in all respects, as of the date hereof, and
at and
as of the date of the making of each Advance (or other extension of credit)
made
thereafter, as though made on and as of the date of such Advance (or other
extension of credit) (except to the extent that such representations and
warranties relate solely to an earlier date which shall have been true, correct
and complete as of such earlier date) and such representations and
warranties shall survive the execution and delivery of this
Agreement:
4.1 No
Encumbrances. Schedule
4.1 (as updated from time to time) sets forth all Real Property (other than
Oil
and Gas Properties) owned, leased, subleased or used by Parent or any of
its
Subsidiaries. Parent and its Subsidiaries have good and
indefeasible title to, or a valid leasehold interest in, their personal property
assets and good and marketable title to, or a valid leasehold interest in,
their
Real Property (other than Oil and Gas Properties), in each case, free and
clear
of Liens except for Permitted Liens. Schedule 4.1 (as updated from
time to time) also describes any purchase options, rights of first refusal
or
other similar contractual rights in favor of any Parent or any of its
Subsidiaries pertaining to any Real Property (other than Oil and Gas Properties)
owned or leased by Parent or any of its Subsidiaries. As of the
Closing Date, no portion of any Real Property (other than Oil and Gas
Properties) has suffered any material damage by fire or other casualty loss
which has not heretofore been repaired and restored in all material respects
to
its original condition or otherwise remedied. Except as could not
reasonably be expected to cause a Material Adverse Change, all permits required
to have been issued or appropriate to enable the Real Property (other than
Oil
and Gas Properties) to be lawfully occupied and used for all of the purposes
for
which they are currently occupied and used have been lawfully issued and
are in
full force and effect in all respects.
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4.2 Margin
Stock. No
Loan Party nor any Subsidiary of a Loan Party is engaged, nor will it engage,
principally or as one of its important activities, in the business of extending
credit for the purpose of “purchasing” or “carrying” any “margin security” as
such terms are defined in Regulation U of the Federal Reserve Board as now
and
from time to time hereafter in effect (such securities being referred to
herein
as “Margin Stock”). No Loan Party nor any Subsidiary of a Loan Party
owns any Margin Stock, and none of the proceeds of the Term Loan, Advances
or
other extensions of credit under this Agreement will be used, directly or
indirectly, for the purpose of purchasing or carrying any Margin Stock, for
the
purpose of reducing or retiring any Indebtedness which was originally incurred
to purchase or carry any Margin Stock or for any other purpose which might
cause
any of the Term Loan, Advances or other extensions of credit under this
Agreement to be considered a “purpose credit” within the meaning of Regulation
T, U or X of the Federal Reserve Board.
4.3 Brokers. No
broker or finder acting on behalf of any Loan Party brought about the obtaining,
making or closing of the Loans and no Loan Party has any obligation to any
Person in respect of any finder’s or brokerage fees in connection
therewith.
4.4 Jurisdiction
of Organization; Location of Chief Executive Office; Organizational
Identification Number; Commercial Tort Claims.
(a) The
name
of (within the meaning of Section 9-503 of the Code) and jurisdiction of
organization of Parent and each of its Subsidiaries is set forth on
Schedule 4.4(a) or as otherwise notified to the Agent pursuant to and as
permitted by Section 6.5.
(b) The
chief
executive office of Parent and each of its Subsidiaries is located at the
address indicated on Schedule 4.4(b) or as otherwise notified to the Agent
pursuant to and as permitted by Section 6.5.
(c) Parent’s
and each of its Subsidiaries’ tax identification numbers and organizational
identification numbers, if any, are identified on Schedule 4.4(c) or as
otherwise notified to the Agent pursuant to and as permitted by Section
6.5.
(d) As
of the
Closing Date, neither Borrower nor any of its Subsidiaries holds any commercial
tort claims, except as set forth on Schedule 4.4(d).
4.5 Due
Organization and Qualification; Compliance with Laws;
Subsidiaries.
(a) Borrower
is duly organized and existing and in good standing under the laws of the
jurisdiction of its organization and qualified to do business in any state
where
the failure to be so qualified reasonably could be expected to result in
a
Material Adverse Change.
(b) Set
forth
on Schedule 4.5(b), is a complete and accurate description of the authorized
capital Stock of Parent, by class, as of the Closing Date, and a description
of
the number of shares of each such class that are issued and outstanding as
of
the Closing Date. As of the Closing Date, other than relating to the
Convertible Subordinated Notes and other than as described on Schedule 4.5(b),
there are no subscriptions, options, warrants, or calls relating to any shares
of Parent’s capital Stock, including any right of conversion or exchange under
any outstanding security or other instrument. Other than relating to
the Convertible Subordinated Notes and other than as described on Schedule
4.5(b), Parent is not subject to any obligation (contingent or otherwise)
to
repurchase or otherwise acquire or retire any shares of its capital Stock
or any
security convertible into or exchangeable for any of its capital
Stock.
(c) Set
forth
on Schedule 4.5(c), is a complete and accurate description of the authorized
capital Stock of Borrower, by class, and a description of the number of shares
of each such class that are issued and outstanding. There are no
subscriptions, options, warrants, or calls relating to any shares of Borrower’s
capital Stock, including any right of conversion or exchange under any
outstanding security or other instrument. Borrower is not subject to
any obligation (contingent or otherwise) to repurchase or otherwise acquire
or
retire any shares of its capital Stock or any security convertible into or
exchangeable for any of its capital Stock. Set forth on Schedule 4.5(c) or
as otherwise notified to the Agent pursuant to Section 5.15, is a complete
and
accurate list of Borrower’s direct and indirect Subsidiaries, showing: (i) the
jurisdiction of their organization, (ii) the number of shares of each class
of
common and preferred Stock authorized for each of such Subsidiaries, and
(iii)
the number and the percentage of the outstanding shares of each such class
owned
directly or indirectly by Borrower. Borrower has no joint ventures or
similar arrangements with any Person. All of the outstanding capital Stock
of
each such Subsidiary has been validly issued and is fully paid and
non-assessable.
(d) Except
as
set forth on Schedule 4.5(d), there are no subscriptions, options,
warrants, or calls relating to any shares of Borrower’s Subsidiaries’ capital
Stock, including any right of conversion or exchange under any outstanding
security or other instrument. Neither Borrower nor any of its
Subsidiaries is subject to any obligation (contingent or otherwise) to
repurchase or otherwise acquire or retire any shares of Borrower’s Subsidiaries’
capital Stock or any security convertible into or exchangeable for any such
capital Stock.
(e) (i) Neither
Parent nor any Subsidiary of Parent is in violation of any law, statute,
regulation, ordinance, judgment, order, or decree applicable to it (other
than Environmental Law which is addressed in Section 4.11 below), which
violation could reasonably be expected to cause a Material Adverse
Change.
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(ii) Neither
Parent nor any of its Subsidiaries has violated any law in any respect or
failed
to obtain any license, permit, franchise or other authorization from any
Governmental Authority (other than pursuant to any Environmental Law which
is
addressed in Section 4.11 below) necessary for the ownership of any of its
Oil
and Gas Properties or the conduct of its business which failure could not
reasonably be expected to cause a Material Adverse Change. Except as
could not reasonably be expected to cause a Material Adverse Change, the
Oil and
Gas Properties of Parent and its Subsidiaries (and assets and properties
utilized therewith) have been maintained, operated and developed in a good
and
workmanlike manner and in conformity with all applicable laws and all rules,
regulations and orders of all Governmental Authorities having jurisdiction
(other than pursuant to any Environmental Law which is addressed in Section
4.11
below) and in conformity with the provisions of all leases, subleases or
other
contracts comprising a part of the Hydrocarbon Interests and other contracts
and
agreements forming a part of such Oil and Gas Properties; specifically in
this
connection, (A) no Oil and Gas Property of Parent (or any of its Subsidiaries)
is subject to having allowable production reduced below the full and regular
allowable production (including the maximum permissible tolerance) because
of
any overproduction (whether or not the same was permissible at the time)
prior
to the Closing Date and (B) none of the ▇▇▇▇▇ comprising a part of any Oil
and
Gas Property (or assets and properties utilized therewith) is deviated from
the
vertical, except to the extent such deviation could not reasonably be expected
to result in a Material Adverse Change, and such ▇▇▇▇▇ are, in fact, bottomed
under and are producing from, and the well bores are wholly within, such
Oil and
Gas Properties (or in the case of ▇▇▇▇▇ located on Real Property utilized
therewith, such utilized Real Property) covered by the leases.
4.6 Due
Authorization; No Conflict.
(a) The
execution, delivery, and performance by Borrower of this Agreement and the
Loan
Documents to which it is a party have been duly authorized by all necessary
action on the part of Borrower and Borrower has full power and authority
to own
and hold under lease its property and to conduct its business substantially
as
currently conducted by it.
(b) The
execution, delivery, and performance by Borrower of this Agreement and the
other
Loan Documents to which it is a party do not and will not (i) violate any
provision of federal, state, or local law or regulation applicable to Borrower,
the Governing Documents of Borrower, or any order, judgment, or decree of
any
court or other Governmental Authority binding on Borrower, (ii) conflict
with,
result in a breach of, or constitute (with due notice or lapse of time or
both)
a default under any Material Contract of Borrower or require any approval
or
consent of any Person under any Material Contract of Borrower, other than
consents or approvals that have been obtained and that are still in force
and
effect, (iii) result in or require the creation or imposition of any Lien
of any
nature whatsoever upon any properties or assets of Borrower, other than
Permitted Liens, or (iv) require any approval of Borrower’s interest holders,
other than approvals that have been obtained and that are still in force
and
effect.
(c) Except
as
set forth on Schedule 4.6, and other than the filing of financing statements,
the recordation of the Mortgages, and other filings or actions necessary
to
perfect Liens granted to Agent in the Collateral, the execution, delivery,
and
performance by Borrower of this Agreement and the other Loan Documents to
which
Borrower is a party do not and will not require any registration with, consent,
or approval of, or notice to, or other action with or by, any Governmental
Authority, other than consents or approvals that have been obtained and that
are
still in force and effect and the necessary filings, notices and recording
of
Mortgages and other actions necessary to reflect the Liens granted to the
Agent
in the Collateral.
(d) This
Agreement and the other Loan Documents to which Borrower is a party, and
all
other documents contemplated hereby and thereby, when executed and delivered
by
Borrower will be the legally valid and binding obligations of Borrower,
enforceable against Borrower in accordance with their respective terms, except
as enforcement may be limited by equitable principles or by bankruptcy,
insolvency, reorganization, moratorium, or similar laws relating to or limiting
creditors’ rights generally.
(e) Agent’s
Liens on all of the assets of the Loan Parties, including the Oil and Gas
Properties (other than the Oil and Gas Properties that are not expressly
required to be mortgaged under the terms of this Agreement and the other
Loan
Documents), are validly created, perfected (other than any Deposit Accounts
and
Securities Accounts not subject to a Control Agreement as permitted by Section
6.12, and subject only to the filing of financing statements and the recordation
of the Mortgages), and first priority Liens, subject only to Permitted
Liens.
(f) The
execution, delivery, and performance by each Guarantor of the Loan Documents
to
which it is a party have been duly authorized by all necessary action on
the
part of such Guarantor and each Guarantor has full power and authority to
own
and hold under lease its property and to conduct its business substantially
as
currently conducted by it.
(g) The
execution, delivery, and performance by each Guarantor of the Loan Documents
to
which it is a party do not and will not (i) violate any provision of federal,
state, or local law or regulation applicable to such Guarantor, the Governing
Documents of such Guarantor, or any order, judgment, or decree of any court
or
other Governmental Authority binding on such Guarantor, (ii) conflict with,
result in a breach of, or constitute (with due notice or lapse of time or
both)
a default under any Material Contract of such Guarantor or require any
approval or consent of any Person under any Material Contract of such Guarantor,
other than consents or approvals that have been obtained and that are still
in
force and effect, (iii) result in or require the creation or imposition of
any
Lien of any nature whatsoever upon any properties or assets of such Guarantor,
other than Permitted Liens, or (iv) require any approval of such Guarantor’s
interest holders other than approvals that have been obtained and that are
still in force and effect.
(h) Other
than the filing of financing statements, the recordation of the Mortgages,
and
other filings or actions necessary to perfect Liens granted to Agent in the
Collateral, the execution, delivery, and performance by each Guarantor of
the
Loan Documents to which such Guarantor is a party do not and will not require
any registration with, consent, or approval of, or notice to, or other action
with or by, any Governmental Authority, other than as expressly contemplated
by
the Loan Documents, and consents or approvals that have been obtained and
that
are still in force and effect.
(i) The
Loan
Documents to which each Guarantor is a party, and all other documents
contemplated hereby and thereby, when executed and delivered by such Guarantor
will be the legally valid and binding obligations of such Guarantor, enforceable
against such Guarantor in accordance with their respective terms, except
as
enforcement may be limited by equitable principles or by bankruptcy, insolvency,
reorganization, moratorium, or similar laws relating to or limiting creditors’
rights generally.
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(j) No
Default or Event of Default exists.
4.7 Litigation. Other
than those matters disclosed on Schedule 4.7 and other than matters arising
after the Closing Date that reasonably could not be expected to result in
a
Material Adverse Change, there are no actions, suits, or proceedings pending
or,
to the best knowledge of Borrower, threatened against Borrower or any of
its
Subsidiaries.
4.8 No
Material Adverse Change.
(a) All
of
Parent’s consolidated financial statements that have been delivered by Borrower
to the Lender Group have been prepared in accordance with GAAP (except, in
the
case of unaudited financial statements, for the lack of footnotes and being
subject to year-end audit adjustments) and present fairly in all material
respects, the Parent’s and its consolidated Subsidiaries’ financial condition as
of the date thereof and results of operations for the period then
ended. Since the date of the most recent financial statements
included in Parent’s reports filed with the SEC on Form 10-K and 10-Q, as
applicable, there has not been a Material Adverse Change.
(b) The
Projections, including any Projections delivered on or before the Closing
Date,
when submitted to Agent as required pursuant to the Loan Documents represent
Parent’s and Borrower’s good faith estimate of the future financial performance
of Parent and its consolidated Subsidiaries for the periods set forth
therein. The Projections have been prepared on the basis of the
assumptions set forth therein, which Parent and Borrower believe were fair
and reasonable in light of current and reasonably foreseeable business
conditions at the time submitted to Agent.
4.9 Fraudulent
Transfer.
(a) Each
of
Parent and each of its Subsidiaries is Solvent.
(b) No
transfer of property is being made by Parent or its Subsidiaries and no
obligation is being incurred by Parent or its Subsidiaries in connection
with
the transactions contemplated by this Agreement or the other Loan Documents
with
the intent to hinder, delay, or defraud either present or future creditors
of
Parent or its Subsidiaries.
4.10 Employee
Benefits. None
of Parent, any of its Subsidiaries, or any of their ERISA Affiliates maintains
or contributes to any Pension Plan, Multiemployer Plan or other Benefit
Plan.
4.11 Environmental
Condition. Except
as set forth on Schedule 4.11, or after the date of this Agreement, otherwise
disclosed in writing, pursuant to Section 5.12, by Parent or Borrower to
the
Agent, and except as would not reasonably be expected to cause a Material
Adverse Change.
(a) Parent,
its Subsidiaries and their businesses and operations, including such businesses
and operations at any Real Property and any former business and operations
at
real property formerly owned, leased, operated, managed, or occupied by Parent,
its Subsidiaries or any of their predecessors in interest (the “Former Real
Property”) are and have been in compliance with, and none of Parent nor any of
its Subsidiaries has liability under, any applicable Environmental
Laws;
(b) Parent
and its Subsidiaries have obtained all permits required for the conduct of
their
business and operations, and the ownership, operation and use of the Real
Property, under all applicable Environmental Laws (the “Environmental
Permits”). Parent and its Subsidiaries are in compliance with the
terms and conditions of such Environmental Permits, and all such Environmental
Permits are valid and in good standing. No expenditures or
operational adjustments, other than those in the ordinary course of business,
are reasonably anticipated to be required to remain in compliance with the
terms
and conditions of, or to renew or modify such Environmental
Permits;
(c) There
has
been no Release or threatened Release or any handling, management, generation,
treatment, storage or disposal of Hazardous Materials on, at, under or from
any
Real Property or Former Real Property that has resulted in, or is reasonably
likely to result in, a material Environmental Liability for Parent or any
of its
Subsidiaries;
(d) There
is
no Environmental Action or Environmental Liability pending or, to the knowledge
of Parent or its Subsidiaries, threatened against Parent or its Subsidiaries,
or
relating to the operations of Parent or its Subsidiaries, and, to the knowledge
of Parent or its Subsidiaries, there are no actions, activities, circumstances,
conditions, events or incidents that are reasonably likely to form the basis
of
such an Environmental Action or Environmental Liability against Parent or
any of
its Subsidiaries, including with respect to operations at any Real Property
and
former operations at any Former Real Property;
(e) To
the
knowledge of Parent and its Subsidiaries, no person with an indemnity,
contribution or other obligation to any of Parent or its Subsidiaries relating
to compliance with or liability under Environmental Law is in default with
respect to any such indemnity, contribution or other obligation;
(f) None
of
Parent or its Subsidiaries is conducting, financing or is obligated to perform
any Response Action or otherwise incur any expense under Environmental Law
pursuant to any Environmental Action or agreement by which it is bound or
has
expressly assumed by contract or agreement;
-16-
(g) No
Real
Property or facility owned, operated or leased by Parent or its Subsidiaries
and, to the knowledge of Parent or its Subsidiaries, no Former Real Property
is
(i) listed or proposed for listing on the National Priorities List as defined
in
and promulgated pursuant to the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. §9601 et seq. (“CERCLA”) or (ii)
included on any similar list maintained by any Governmental Authority that
indicates that any Parent or Subsidiary has or may have an obligation to
undertake any Response Action;
(h) No
Environmental Lien has been recorded with respect to any owned Real Estate
Property or, to the knowledge of Parent or any of its Subsidiaries, with
respect
to any facility leased or operated by Parent or its Subsidiaries, and to
the
knowledge of Parent and its Subsidiaries, no Environmental Lien has been
threatened with respect to any Real Property;
(i) Parent
or
its Subsidiaries have made available to the Lenders all records and files
in the
possession, custody or control of, or otherwise reasonably available to,
Parent
or its Subsidiaries concerning compliance with or liability or obligation
under
Environmental Law, including those concerning the environmental condition
of the
Real Property or the existence of Hazardous Materials at the Real Property
or
Former Real Property; and
(j) The
representations and warranties set forth in this Section 4.11 shall be the
sole
representations and warranties of Parent and its Subsidiaries under the Loan
Documents relating to environmental matters.
4.12 Intellectual
Property. Except
with respect to Seismic Licenses, Parent and its Subsidiaries own, or hold
licenses in, all trademarks, trade names, copyrights, patents, patent rights,
and licenses that are necessary to the conduct of its business as currently
conducted, and attached hereto as Schedule 4.12 (as updated from time to
time)
is a true, correct, and complete listing of all material patents, patent
applications, trademarks, trademark applications, copyrights, and copyright
registrations as to which Parent or one of its Subsidiaries is the owner
or is
an exclusive licensee; provided, however, that Borrower may amend Schedule 4.12
to add additional property so long as such amendment occurs by written notice
to
Agent not less than 10 days after the date on which Parent or any Subsidiary
of
Parent acquires any such property after the Closing Date.
4.13 Leases.
Parent and its Subsidiaries enjoy peaceful and
undisturbed possession under all leases covering any Proved Oil and Gas Property
and any other Real Property material to their business and to which they
are
parties or under which they are operating, and all of such leases are valid
and
subsisting and no material default by Parent or its Subsidiaries exists under
any of them. Except as set forth on Schedule 4.13, there are no
leases, subleases, contracts or other operating agreements that allocate
operating expenses to Parent or any of its Subsidiaries in excess of its
working
interest as reflected in the most recent Reserve Report in the particular
Oil
and Gas Property subject to such lease, the sublease, contract or other
operating agreement.
4.14 Deposit
Accounts and Securities Accounts. Set
forth on Schedule 4.14 is a listing of all of Parent’s and its Subsidiaries’
Deposit Accounts and Securities Accounts, including, with respect to each
bank
or securities intermediary (a) the name and address of such Person, and (b)
the
account numbers of the Deposit Accounts or Securities Accounts maintained
with
such Person. So long as no Default or Event of Default has occurred
and is continuing, Borrower may amend Schedule 4.14 to add or replace a Deposit
Account or Securities Account; provided, however, that (i) such prospective
bank
or securities intermediary shall be reasonably satisfactory to Agent, and
(ii)
prior to the time of the opening of such Deposit Account or Securities Account,
Parent (or its Subsidiary, as applicable) and such prospective bank or
securities intermediary shall have executed and delivered to Agent a Control
Agreement.
4.15 Complete
Disclosure. None
of the factual information (taken as a whole) furnished by or on behalf of
Parent or its Subsidiaries in writing to Agent or any Lender (including all
information contained in the Schedules hereto or in the other Loan Documents)
for purposes of or in connection with this Agreement, the other Loan Documents,
or any transaction contemplated herein or therein contains, and none of the
other factual information (taken as a whole) hereafter furnished by or on
behalf
of Parent or its Subsidiaries in writing to Agent or any Lender will contain,
any material misstatement of fact or omits, or will omit, to state any fact
necessary to make such information not misleading in any material respect
at
such time in light of the circumstances under which such information was
provided, it being understood that the factual information referenced in
this
sentence shall not include the Projections or other forecasts or forward
looking
statements provided to the Agent or the Lender Group. On the Closing
Date, the Projections provided represent, and as of the date on which any
other
projections are delivered to Agent, such additional projections represent,
Borrower’s good faith estimate of its and its Subsidiaries future performance
for the periods covered thereby based upon assumptions believed by Borrower
to
be reasonable at the time of the delivery thereof to Agent (it being understood
that such projections and forecasts are subject to uncertainties and
contingencies, many of which are beyond the control of Borrower and its
Subsidiaries and no assurances can be given that such projections or forecasts
will be realized and further understood that projections concerning reserves
or
production volumes attributable to the Oil and Gas Properties and production
and
cost estimates contained in the projections are necessarily based upon
professional opinions, estimates and projections and that Borrower and the
Subsidiaries do not warrant that such opinions, estimates and projections
will
ultimately prove to have been accurate, provided that all such projections
shall
be prepared in good faith based upon assumptions believed by Borrower to
be
reasonable at the time of the delivery thereof to Agent and consistent with
industry standards).
4.16 Indebtedness. Set
forth on Schedule 4.16 is a true and complete list of all Indebtedness of
Parent
and its Subsidiaries outstanding immediately prior to the Closing Date that
is
to remain outstanding after the Closing Date and such Schedule accurately
sets
forth the aggregate principal amount of such Indebtedness as of the Closing
Date.
4.17 Material
Contracts. As
of the Closing Date, set forth on Schedule 4.17 is a list of all Material
Contracts of Parent and its Subsidiaries. Borrower has complied with
its obligations pursuant to Section 5.17. Except for matters which, either
individually or in the aggregate, could not reasonably be expected to result
in
a Material Adverse Change, each Material Contract (other than those that
have
expired at the end of their normal terms) (a) is in full force and effect,
and
is binding upon and enforceable against Parent or its Subsidiary, as applicable,
and, to the Borrower’s knowledge, each other Person that is a party thereto in
accordance with its terms, (b) has not been otherwise amended or modified
(other
than amendments or modifications permitted by Section 6.7(c)) and (c) is
not in
default due to the action or inaction of Parent or any of its
Subsidiaries.
-17-
4.18 Government
Regulation. Neither
Parent nor any Subsidiary of Parent is an “investment company” or an “affiliated
person” of, or “promoter” or “principal underwriter” for, an “investment
company,” as such terms are defined in the Investment Company Act of 1940 as
amended. Neither Parent nor any Subsidiary of Parent is subject to
regulation under the Public Utility Holding Company Act of 2005, the Federal
Power Act, or any other federal or state statute that restricts or limits
its
ability to incur Indebtedness or to perform its obligations hereunder. The
Advances and the other transactions contemplated hereunder, the application
of
the proceeds thereof and repayment thereof comply in all material respects
with
any such statute or any rule, regulation or order issued by the
SEC.
4.19 Foreign
Assets Control Regulations, Etc.
(a) Neither
Parent nor any Subsidiary of Parent is in violation in any material respect
of
the Trading with the Enemy Act, as amended, or any of the foreign assets
control
regulations of the United States Treasury Department (31 CFR, Subtitle B,
Chapter V, as amended) or any enabling legislation or executive order relating
thereto.
(b) Neither
Parent nor any of its respective Subsidiaries (i) is, or will become, a Person
described or designated in the Specially Designated Nationals and Blocked
Persons List of the Office of Foreign Assets Control or in Section 1 of the
Anti-Terrorism Order or (ii) engages or will engage in any dealings or
transactions, or is or will be otherwise associated, with any such
Person. Parent and its Subsidiaries are in compliance, in all
material respects, with the USA Patriot Act.
(c) No
part
of the proceeds from the loans made hereunder will be used by Borrower, directly
or indirectly, for any payments to any governmental official or employee,
political party, official of a political party, candidate for political office,
or anyone else acting in an official capacity, in order to obtain, retain
or
direct business or obtain any improper advantage, in violation of the United
States Foreign Corrupt Practices Act of 1977, as amended.
4.20 Insurance
and Bonds. Schedule
4.20 lists, as of the Closing Date, all insurance policies of any nature
maintained for current occurrences by Borrower and each Guarantor, as well
as a
summary of the terms of each such policy. Neither Borrower nor any
Guarantor is in default of any obligation under any such
policy. Except as set forth on Schedule 4.20, all such policies are
in full force and effect, all premiums with respect thereto covering all
periods
up to and including the Closing Date have been paid, and no notice of
cancellation or termination has been received with respect to any such
policy. Schedule 4.20 contains an accurate and complete description,
as of the Closing Date, of all performance bonds related to operations on
or
pertaining to the Oil and Gas Properties of Parent and its Subsidiaries.
Such
bonds and insurance policies comply with all requirements of law and all
agreements to which Parent and each of its Subsidiaries is a party, except
to
the extent that such noncompliance can not reasonably be expected to cause
a
Material Adverse Change; are valid, outstanding and enforceable policies;
provide adequate coverage in at least such amounts and against at least such
risks (but including in any event public liability) as are required by
Governmental Authorities and/or usually insured or bonded against in the
same
general area by companies engaged in the same or a similar business for the
assets and operations of Parent and its Subsidiaries in the same or similar
locations; will remain in full force and effect through the respective dates
set
forth in Schedule 4.20 without the payment of additional premiums except
as set
forth on Schedule 4.20; and will not in any way be affected by, or terminate
or
lapse by reason of, the transactions contemplated by this
Agreement. Neither Parent nor any Subsidiary has been refused any
bonds or insurance with respect to its assets or operations, nor has its
coverage been limited below usual and customary bond or policy limits, by
any
bonding company or insurance carrier to which it has applied for any such
bond
or insurance or with which it has carried insurance during the three years
prior
to the Closing Date. To the extent any insurance policy has a cash
surrender, rebate or similar value, there is no restriction, Lien or other
encumbrance affecting any of Parent’s or its Subsidiaries receipt or claim of
such value, and no obligation or agreement to pay, directly or indirectly,
such
value to any other party exists other in favor of the Lenders.
4.21 Government
Contracts. Except
as set forth in Schedule 4.21 and other than leases and other agreements
(but
not excluding agreements pursuant to which or by which receivables are created
in favor of any Loan Party) relating to Oil and Gas Properties, neither Parent
nor any of its Subsidiaries is a party to any contract or agreement with
any
Governmental Authority and neither Parent’s nor any Subsidiary’s Accounts are
subject to the Federal Assignment of Claims Act, as amended (31
U.S.C. Section 3727).
4.22 Taxes. All
tax returns, reports and statements, including information returns, required
by
any Governmental Authority to be filed by Parent and its Subsidiaries have
been
filed with the appropriate Governmental Authority (and all such returns,
reports
and statements accurately reflect in all material respects all liabilities
of
each respective Parent and its Subsidiaries for the periods covered thereby)
and
all charges have been paid prior to the date on which any material fine,
penalty, interest or late charge may be added thereto for nonpayment thereof
(or
any such fine, penalty, interest, late charge or loss has been paid), excluding
charges or other amounts that are subject to a Permitted
Protest. Proper and accurate amounts have been withheld by Parent and
its Subsidiaries from its respective employees for all periods in full and
complete compliance with all applicable federal, state, local and foreign
law
and such withholdings have been timely paid to the respective Governmental
Authorities. Schedule 4.22 sets forth as of the Closing Date those
taxable years for which Parent’s and its Subsidiaries’ tax returns are currently
being audited by the IRS or any other applicable Governmental Authority and
any
assessments or threatened assessments in connection with such audit, or
otherwise currently outstanding. As of the Closing Date and except as
set forth on Schedule 4.22, there is no action, suit, proceeding, investigation,
audit or claim now pending or threatened by any authority regarding any taxes
relating to Parent or its Subsidiaries, which, either individually or in
the
aggregate, could reasonably be expected to cause a Material Adverse Change
or to
result in a material liability to Parent or its Subsidiaries. Except
as described on Schedule 4.22, neither Parent nor any of its Subsidiaries
has
executed or filed with the IRS or any other Governmental Authority any agreement
or other document extending, or having the effect of extending, the period
for
assessment or collection of any charges or other amounts. None of
Parent or its Subsidiaries and their respective predecessors (or to Borrower’s
knowledge, as a transferee) are liable for any charges or other amounts under
any tax agreement (including any tax sharing agreements). As of the
Closing Date, neither Parent nor its Subsidiaries has agreed or been requested
to make any adjustment under IRC Section 481(a), by reason of a change in
accounting method or otherwise, which could cause a Material Adverse
Change.
4.23 Gas,
Imbalances, Prepayments. As
of the date hereof, except as set forth on Schedule 4.23 or on the most recent
certificate delivered pursuant to Section 5.20(c), on a net basis there are
no
gas imbalances, take or pay or other similar arrangements or any prepayment
with
respect to any of the Oil and Gas Properties of Parent or any of its
Subsidiaries, which would require such Person either to make cash settlements
for such production or require Parent or any of its Subsidiaries to deliver
Hydrocarbons produced from the Oil and Gas Properties at some future time
in any
case without then or thereafter receiving full payment therefor exceeding
the
amount permitted pursuant to Section 6.17.
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4.24 Swap
Agreements. Schedule
4.24 sets forth, as of the Closing Date, a true and complete list of all
Swap
Agreements (including any commodity price swap agreements, forward agreements
or
contracts of sale which provide for prepayment for deferred shipment or delivery
of Hydrocarbons or other commodities) of Parent and its Subsidiaries, the
material terms thereof (including the type, term, effective date, termination
date and notional amounts or volumes), all credit support agreements relating
thereto (including any margin required or supplied), and the counterparty
to
each such agreement.
4.25 Location
of Real Property and Leased Premises.
(a) Schedule
4.25 lists completely and correctly as of the Closing Date all material Oil
and
Gas Properties that are Real Property whether leased or owned by Parent (and
its
Subsidiaries, as applicable) and the lands covered or respective addresses
(if
any), as applicable, counties and states thereof.
(b) Parent
(and each of its Subsidiaries) has Defensible Title to all of its Proved
Oil and
Gas Properties set forth on Schedule 4.25 which constitute Real Property
and
good and indefeasible title to all of its Proved Oil and Gas Properties which
constitute personal property, except for (i) such imperfections of title
which do not in the aggregate materially detract from the value thereof to,
or
the use thereof in, the business of Parent (or its Subsidiaries, as applicable)
and (ii) Permitted Liens. The quantum and nature of the interest of
Parent and its Subsidiaries in and to the Oil and Gas Properties as set forth
in
the Initial Reserve Report or the most recent Reserve Report, as the case
may
be, includes the entire interest of Parent and its Subsidiaries in such Oil
and
Gas Properties as of the date of the Initial Reserve Report or such applicable
Reserve Report delivered by Borrower to Agent pursuant to Section 5.20, as
the
case may be, and are complete and accurate in all material respects as of
the
date of the Initial Reserve Report or such applicable Reserve Report, as
the
case may be; and there are no “back-in” or “reversionary” interests held by
third parties which could materially reduce the interest of Parent (or any
of
its Subsidiaries, as the case may be) in such Oil and Gas Properties except
as
expressly set forth in the Initial Reserve Report or the most recent Reserve
Report, as the case may be. Except as set forth on Schedule 4.25, the
ownership of the Oil and Gas Properties by Parent and each of its Subsidiaries
shall not in any material respect obligate Parent or any such Subsidiary
to bear
the costs and expenses relating to the maintenance, development or operations
of
each such Oil and Gas Property in an amount in excess of the working interest
of
record of Parent (or any such Subsidiary, as applicable) in each Oil and
Gas
Property set forth in the Initial Reserve Report or the most recent Reserve
Report, as the case may be.
(c) Parent’s
and each of its Subsidiaries’ marketing, gathering, transportation, processing
and treating facilities and equipment, together with any marketing, gathering,
transportation, processing and treating contracts in effect between and/or
among
Parent, its Subsidiaries and any other Person, are or are reasonably anticipated
to be sufficient to gather, transport, process and/or treat, volumes of
production of Hydrocarbons from the Oil and Gas Properties of Parent and
its
Subsidiaries, as applicable, that are contemplated by the Initial Reserve
Report
or most recent Reserve Report, as the case may be.
4.26 Nature
of Business. Neither
Parent nor any of its Subsidiaries is engaged in any business other than
the Oil
and Gas Business within the continental United States and Canada.
4.27 Seismic
Licenses. To
the extent not prohibited by the terms thereof, or any confidentiality
agreement, Schedule 4.27 identifies all of the license agreements relating
to
the performance of seismic exploration on the Oil and Gas Properties (“Seismic
Licenses”) to which Parent and its Subsidiaries are a party as of the date
hereof. With respect to the Seismic Licenses: (i) all Seismic
Licenses are in effect and have not expired or terminated; (ii) neither Parent
nor any Subsidiary is in material breach or material default, and there has
occurred no event, fact, or circumstance, that, with the lapse of time or
the
giving of notice, or both, would constitute such a material breach or material
default by Parent or any of its Subsidiaries, as applicable, with respect
to the
terms of any Seismic License; and (iii) neither Parent, nor any Subsidiary
thereof, nor, to the knowledge of Parent and its Subsidiaries, any other
party
to any Seismic License has given written notice of any action to terminate,
cancel, rescind, or procure a judicial reformation of any Seismic License
or any
provision thereof.
4.28 Marketing
of Production. Except
for contracts listed and in effect on the date hereof on Schedule 4.28, and
thereafter either disclosed in writing to Agent or included in the most recently
delivered Reserve Report (with respect to all of which contracts Borrower
represents that it, the Parent and its Subsidiaries are receiving a price
for
all production sold thereunder which is computed substantially in accordance
with the terms of the relevant contract and are not having deliveries curtailed
substantially below the subject Property’s delivery capacity), no material
agreements exist which are not cancelable on sixty (60) days notice or less
without penalty or detriment for the sale of production from Borrower’s or its
Subsidiaries’ (or Parent’s) Hydrocarbons (including, without limitation, calls
on or other rights to purchase, production, whether or not the same are
currently being exercised) that (a) pertain to the sale of production at
a fixed
price and (b) have a maturity or expiry date of more than six (6) months
from
the date hereof. All proceeds from the sale of Borrower’s (and its
Subsidiaries’ and Parent’s) Hydrocarbon Interests from their Oil and Gas
Properties will be paid in full to the applicable party by the purchaser
thereof
on a timely basis, and none of such proceeds are currently being held in
suspense by such purchaser or any other Person. Except as set forth
in Schedule 4.28, none of the Oil and Gas Properties of Parent or any Subsidiary
thereof are subject to any contractual or other arrangement whereby payment
for
production therefrom is to be deferred for a substantial period of time after
the month in which such production is delivered (i.e., in the case of oil,
not
in excess of sixty (60) days, and in the case of gas, not in excess of ninety
(90) days).
4.29 Senior
Indebtedness. The Obligations constitute “Senior
Indebtedness” under the terms of the Subordination and Intercreditor Agreement,
the Loan Documents constitute “Bank Loan Documents” , the Lenders and Agent
constitute “Senior Lenders” and the Bank Product Providers constitute “Senior
Affiliates” each under the terms of the Subordination and Intercreditor
Agreement.
5. AFFIRMATIVE
COVENANTS.
Borrower
covenants and agrees that, until termination of all of the Commitments and
repayment in full of the Obligations, Borrower shall and shall cause Parent
and
each of its Subsidiaries to do all of the following:
5.1 Accounting
System. Maintain
a system of accounting that enables Parent to produce financial statements
in
accordance with GAAP and maintain records pertaining to the Collateral in
accordance with customary industry practice.
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5.2 Collateral
Reporting. Provide
Agent (and if so requested by Agent, with copies for each Lender) with each
of
the reports set forth on Schedule 5.2 at the times specified
therein.
5.3 Financial
Statements, Reports, Certificates. Deliver
to Agent, with copies to each Lender, each of the financial statements, reports,
or other items set forth on Schedule 5.3 at the times specified
therein. In addition, Borrower agrees that no Subsidiary of Borrower
or Parent will have a fiscal year different from that of Borrower.
5.4 Guarantor
Reports. Cause
each Guarantor to deliver its annual financial statements at the time when
Borrower provides its audited financial statements to Agent, but only to
the
extent such Guarantor’s financial statements are not consolidated with
Borrower’s financial statements.
5.5 Inspection. Permit
Agent, each Lender, and each of their duly authorized representatives or
agents,
at the sole cost of Borrower, to visit any of the properties of Parent or
its
Subsidiaries and inspect any of the assets or books and records of Parent
or any
of its Subsidiaries, to examine and make copies of the books and records
of
Parent or its Subsidiaries, and to discuss the affairs, finances, and accounts
with, and to be advised as to the same by, the officers and employees of
Parent
or its Subsidiaries at such reasonable times and intervals as Agent or any
such
Lender may designate and, so long as no Event of Default exists, with reasonable
prior notice to Borrower; provided, however, that so long as no Event of
Default
shall have occurred and be continuing, Borrower shall not be responsible
for the
costs of more than two (2) inspection visits per calendar year.
5.6 Maintenance
of Properties. Borrower
will, and will cause each of its Subsidiaries and Parent to:
(a) prudently
operate its Proved Oil and Gas Properties for the production of Hydrocarbons,
operate its other Properties and, to the extent Parent or one of its
Subsidiaries is not the operator of a Property in which it has an interest,
Borrower shall use commercially reasonable efforts to cause the operator
to
operate such Property, in each case in accordance with the practices of the
industry, in material compliance with all applicable Material Contracts,
in the
case of Proved Oil and Gas Properties in accordance with good engineering
practices consistent with industry practice except as could not reasonably
be
expected to result in a Material Adverse Change, and in all cases, in compliance
with all applicable laws, including, without limitation, applicable proration
requirements (other than Environmental Laws, which are addressed in Section
5.12
below), and all other applicable laws, rules and regulations of every other
Governmental Authority from time to time constituted to regulate the development
and operation of its Oil and Gas Properties and the production and sale of
Hydrocarbons and other minerals therefrom except for the non-compliance of
which
could not reasonably be expected to result in a Material Adverse
Change;
(b) keep
and
maintain all Property material to the conduct of its business in good working
order and condition, ordinary wear and tear and casualty events excepted,
preserve, maintain and keep in good repair, working order (ordinary wear
and
tear and casualty events excepted) all of its material Proved Oil and Gas
Properties and other material Properties, including, without limitation,
all
equipment, machinery, facilities, and marketing, gathering, transportation
and
processing assets and, from time to time, will make all the reasonably necessary
repairs, renewals and replacements so that at all times the state and conditions
of such Oil and Gas Properties and other material Properties will be fully
preserved and maintained in a manner sufficient to permit reasonable operation
in accordance with good oilfield practices, except to the extent a portion
of
such assets is no longer capable of producing Hydrocarbons in economically
reasonable amounts;
(c) except
for payments subject to a Permitted Protest, promptly pay and discharge prior
to
the expiration of any applicable cure period, or make efforts to cause to
be
paid and discharged, all material delay rentals, royalties, expenses and
indebtedness accruing under Material Contracts affecting or pertaining to
its
Proved Oil and Gas Properties in a manner that could reasonably be expected
to
keep unimpaired their material rights with respect thereto and prevent any
forfeiture thereof or other default thereunder; and
(d) promptly
perform or make reasonable and customary efforts to cause to be performed,
in
accordance with industry standards, the obligations required by each and
all of
the Material Contracts affecting its interests in its Proved Oil and Gas
Properties and other material Properties in a manner that could
reasonably be expected to keep unimpaired, except for Permitted Liens, its
rights with respect thereto and prevent any forfeiture thereof, a default
thereunder, or any deficiency payment thereunder, except to the extent a
portion
of such properties is no longer capable of producing Hydrocarbons in
economically reasonable amounts.
5.7 Taxes. Cause
all assessments and taxes, whether real, personal, or otherwise, due or payable
by, or imposed, levied, or assessed against Parent, Borrower, their
Subsidiaries, or any of their respective assets to be paid in full, before
delinquency or before the expiration of any extension period, except to the
extent that the validity of such assessment or tax shall be the subject of
a
Permitted Protest. Borrower will and will cause its Subsidiaries and
Parent to make timely payment or deposit of all tax payments and withholding
taxes required of it and them by applicable laws, including those laws
concerning F.I.C.A., F.U.T.A., state disability, and local, state, and federal
income taxes, and will, upon request, furnish Agent with proof satisfactory
to
Agent indicating that Parent and its Subsidiaries have made such payments
or
deposits.
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5.8 Insurance.
(a) At
Borrower’s expense, maintain insurance respecting its and its Subsidiaries’
assets (and the Parent) wherever located, covering loss or damage by fire,
theft, explosion, and all other hazards and risks as ordinarily are insured
against by other Persons engaged in the same or similar businesses operating
in
the same or similar locations. The Parent and its Subsidiaries shall
maintain public liability, and product liability insurance, as well as insurance
against larceny, embezzlement, and criminal misappropriation. In
addition, each of the the Parent and its Subsidiaries shall maintain performance
bonds in respect of its operations related to its respective Oil and Gas
Properties in such amounts and in such manner as is customary for companies
engaged in the same or similar business operating in the same or similar
locations. All such policies of insurance shall be in such amounts
and with such insurance companies as are reasonably satisfactory to Agent,
it
being agreed that the insurance policies and amounts maintained by Parent
and
its Subsidiaries as of the Closing Date are satisfactory. Borrower
shall deliver copies of all such policies to Agent with an endorsement naming
Agent (on behalf of the Lenders) as loss payee (under a satisfactory lender’s
loss payable endorsement) or additional insured, as appropriate. Each
policy of insurance or endorsement shall contain a clause requiring the insurer
to give not less than thirty (30) days prior written notice to Agent in the
event of cancellation of the policy for any reason whatsoever. During
the period of the drilling of ▇▇▇▇▇ and the construction of any other
improvements comprising a part of the Oil and Gas Properties of Parent and
its
Subsidiaries, Borrower shall, cause its contractors or subcontractors to
(and
shall cause its Subsidiaries and their contractors and subcontractors to),
obtain and maintain well control insurance (including coverage for costs
and
redrilling) and builder’s risk insurance, as applicable, in such form and
amounts as is customary in the industry (it being understood that such insurance
is not required with respect to drilling and construction associated with
coal
bed methane ▇▇▇▇▇ in Wyoming) and worker’s compensation
insurance covering all Persons employed by Parent and its Subsidiaries or
its or
their agents or subcontractors of any tier in connection with any construction
affecting such Oil and Gas Properties, including, without limitation, all
agents
and employees of Parent and its Subsidiaries and its and their subcontractors
with respect to whom death or bodily injury claims could be asserted against
Parent or any Subsidiary thereof. If Borrower or any Guarantor at any
time or times hereafter shall fail to obtain or maintain any of the policies
of
insurance required above or to pay all premiums relating thereto, Agent may
at
any time or times thereafter obtain and maintain such policies of insurance
and
pay such premiums and take any other action with respect thereto which Agent
deems advisable; provided that prior to a Default or Event of Default, Agent
shall not obtain any new insurance policies without prior consultation with
Borrower. Agent shall have no obligation to obtain insurance for
Borrower or any Guarantor or pay any premiums therefor. By doing so,
Agent shall not be deemed to have waived any Default or Event of Default
arising
from Borrower’s or any Guarantor’s failure to maintain such insurance or pay any
premiums therefor. All sums so disbursed, including reasonable
attorneys’ fees, court costs and other charges related thereto, shall be payable
on demand by Borrower to Agent and shall be additional Obligations hereunder
secured by the Collateral.
(b) Agent
reserves the right at any time upon any material change in Borrower’s or any
Guarantor’s risk profile (including any change laws affecting the potential
liability of Borrower or such Guarantor) to require additional forms and
limits
of insurance to, in Agent’s reasonable opinion, adequately protect both Agent’s
and Lenders’ interests in all or any portion of the Collateral and to ensure
that each Loan Party is protected by insurance in amounts and with
coverage in compliance with the requirements of Section
5.8(a). If requested by Agent, Borrower or any Guarantor shall
deliver to Agent from time to time a report of a reputable insurance broker,
satisfactory to Agent, with respect to its insurance policies.
(c) Borrower
shall give Agent prompt notice of any loss exceeding Two Hundred Fifty Thousand
Dollars ($250,000) covered by such insurance. So long as no Event of
Default has occurred and is continuing, Borrower shall have the exclusive
right
to adjust any losses payable under any such insurance
policies. Following the occurrence and during the continuation of an
Event of Default, Agent shall have the exclusive right to adjust any losses
payable under any such insurance policies, without any liability to Borrower
whatsoever in respect of such adjustments.
(d) Borrower
will not, and will not suffer or permit its Subsidiaries or Parent to, take
out
separate insurance concurrent in form or contributing in the event of loss
with
that required to be maintained under this Section 5.8, unless Agent is included
thereon as an additional insured or loss payee under a lender's loss payable
endorsement. Borrower shall notify Agent promptly whenever such
separate insurance is taken out, specifying the insurer and the type and
amount
of insurance provided thereunder as to the policies evidencing the same,
and
copies of such policies shall be provided to Agent promptly after receipt
by
Loan Parties thereof.
5.9 Compliance
with Laws. Comply
with the requirements of all applicable laws, rules, regulations, and orders
of
any Governmental Authority, other than Environmental Laws (which are addressed
in Section 5.12 below) and laws, rules, regulations, and orders (other than
Environmental Laws) the non-compliance with which, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Change. Each shall obtain and maintain all licenses, permits, franchises,
and
governmental authorizations (other than Environmental Permits, which are
addressed in Section 5.12 below) required to own its property and to conduct
its
business as conducted on the Closing Date, except as could not reasonably
be
expected to result in a Material Adverse Change.
5.10 [Intentionally
Omitted.]
5.11 Existence. At
all times preserve and keep in full force and effect Borrower’s and its
Subsidiaries and Parent’s, valid existence and good standing and, except as
could not reasonably be expected (either individually or in the aggregate)
to
result in a Material Adverse Change, any rights, franchises, permits, licenses,
accreditations, authorizations, or other approvals material to their
businesses.
5.12 Environmental.
(a) Except
as
could not reasonably be expected to result in a Material Adverse Change,
(i)
keep any Real Property free of any Environmental Liens or (ii) post bonds
or
other financial assurances sufficient to satisfy the obligations or liability
evidenced by such Environmental Liens, in each case, to the extent such
Environmental Liens arise from any Environmental Liability of Parents or
its
Subsidiaries;
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(b) Except
as
could not reasonably be expected to result in a Material Adverse Change,
comply with all Environmental Laws and Environmental Permits; obtain and
maintain in full force and effect all Environmental Permits; and conduct
all
actions, including Response Actions, required under any Environmental Actions
or
applicable Environmental Laws, and in compliance with, the lawful requirements
of any Governmental Authority and applicable Environmental Laws;
(c) Except
as
could not reasonably be expected to result in a Material Adverse Change,
do or
cause to be taken all commercially reasonable steps necessary to prevent
any
Release caused by Parent or any of its Subsidiaries, or any contractor, employee
or agent thereof, in, on, under, to or from any Real Property except in full
compliance with applicable Environmental Laws or an Environmental Permit,
and
(ii) ensure that Parent, any Subsidiary, and any contractor, employee or
agent
thereof, shall not use, store, handle or manage Hazardous Materials in, on,
under or from any Real Property except those that are used, stored, handled
and
managed in compliance with applicable Environmental Laws;
(d) Except
as
could not reasonably be expected to result in a Material Adverse Change,
undertake all commercially reasonable actions, including Response Actions,
necessary, at the sole cost and expense of Borrower or its Subsidiaries,
to
address (i) any Environmental Action and any obligations thereunder; (ii)
any
Release at, from or onto any Real Property as required pursuant to Environmental
Law or the requirements of any Governmental Authority; and (iii) Environmental
Liability;
(e) Diligently
pursue and use commercially reasonable efforts to cause any Person with an
indemnity, contribution or other obligation to any of the Loan Parties or
their
Subsidiaries relating to any Environmental Action or compliance with or
liability under Environmental Law to satisfy such obligations in full and
in a
timely manner; and shall not amend in any way or waive any or all rights
to such
obligations without the prior written consent of Agent, which shall not be
unreasonably withheld;
(f) Upon
Agent’s reasonable request,
promptly provide to Agent documentation reasonably acceptable
to Agent
of compliance with
items
(a) through (e), including, without limitation, within 45
days following a written request of Agent, but no more frequently than once
each
year unless an Event of Default exists, pursuant to Section 5.12(g) below,
or a
Default caused by reason of a breach of Sections 4.11 or 5.12 herein, provide
Agent with an environmental assessment, including where appropriate and
permitted by the applicable lease, any soil and/or groundwater sampling,
prepared by an environmental consulting firm reasonably acceptable to Agent,
and
in form and substance reasonably acceptable to Agent;
(g) Promptly,
but in any event within ten (10) Business Days of its obtaining knowledge
thereof, provide Agent with written notice of, and all data, information
and
reports generated or prepared in connection with, any of the following: (i)
an
Environmental Lien has been filed or is threatened against the Real Property
or
any personal property of Parent or its Subsidiaries, (ii) commencement of
any
material Environmental Action or notice that a material Environmental Action
will be filed against Parent or its Subsidiaries, and (iii) any Release or
threatened Release in, on, under, at, from or migrating to any Real Property
owned, leased or operated by any of Parent or its Subsidiaries that requires
reporting by Borrower under any Environmental Law, except as otherwise pursuant
to and in compliance with the terms and conditions of an Environmental Permit
or
any Environmental Law and not including any report required under the Emergency
Planning and Community Right to Know Act or similar state and local laws,
(iv)
any material non-compliance with, or violation of, any Environmental Law
applicable to any Parent, any Subsidiary, any Parent’s business and any Real
Property, (v) any Response Action which could reasonably be expected to result
in a material Environmental Liability to Parent or any Subsidiary, (vi) any
material notice or other material communication received by any Parent or
Subsidiary from any Person or Governmental Authority relating to any material
Environmental Liability of Parent or any Subsidiary. Notwithstanding the
foregoing, nothing in this Section 5.12 shall require Parent or any of its
Subsidiaries to provide any notice or communication that would waive any
applicable privilege.
5.13 Disclosure
Updates. Promptly
and in no event later than five (5) Business Days after obtaining knowledge
thereof, notify Agent if any written information, exhibit, or report furnished
to the Lender Group contained, at the time it was furnished, any untrue
statement of a material fact or omitted to state any material fact necessary
to
make the statements contained therein not materially misleading in light
of the
circumstances in which made. The foregoing to the contrary
notwithstanding, any notification pursuant to the foregoing provision will
not
cure or remedy the effect of the prior untrue statement of a material fact
or
omission of any material fact nor shall any such notification have the effect
of
amending or modifying this Agreement or any of the Schedules hereto; provided,
however, that in no event shall the requirements of this Section 5.13 apply
to
any Projections, forecasts or other forward looking statements provided to
the
Agent or the Lender Group.
5.14 Control
Agreements. To
the extent required under the Loan Documents, take all reasonable steps in
order
for Agent to obtain control in accordance with Sections 8-106, 9-104, 9-105,
9-106, and 9-107 of the Code with respect to (subject to the proviso contained
in Section 6.12) all of its Securities Accounts, Deposit Accounts, and all
of
its electronic chattel paper, investment property, and letter-of-credit
rights other than all such items with an aggregate value not exceeding Five
Hundred Thousand Dollars ($500,000).
5.15 Formation
of Subsidiaries. To
the extent permitted under this Agreement, if at the time that Borrower or
any Guarantor forms any direct or indirect Subsidiary or acquires any direct
or
indirect Subsidiary after the Closing Date, within ten (10) Business Days
following formation or acquisition, Borrower or such Guarantor shall (a)
cause
such new Subsidiary to provide to Agent a joinder to the Guaranty and the
Security Agreement, together with such other security documents (including
Mortgages with respect to any Real Property of such new Subsidiary when required
to satisfy the requirements of Section 5.16), as well as appropriate financing
statements (and with respect to all property subject to a Mortgage, fixture
filings), all in form and substance satisfactory to Agent (including being
sufficient to grant Agent a first priority Lien (subject to Permitted Liens)
in
and to the assets of such newly formed or acquired Subsidiary), (b) provide
to
Agent a pledge agreement and appropriate certificates and powers or financing
statements, hypothecating all of the direct or beneficial ownership interest
in
such new Subsidiary, in form and substance satisfactory to Agent, and (c)
provide to Agent all other documentation, including, if requested by Agent,
one
or more opinions of counsel reasonably satisfactory to Agent, which in its
opinion is appropriate with respect to the execution and delivery of the
applicable documentation referred to above (including policies of title
insurance or other documentation with respect to all property subject to
a
Mortgage, subject to any limitation expressly set forth in Section 5.22);
provided however, that the foregoing obligations shall not apply to any
Subsidiary prior to such time as it owns assets with more than a de minimus
value. Any document, agreement, or instrument executed or issued
pursuant to this Section 5.16 shall be a Loan Document.
-22-
5.16 Further
Assurances. At
any time upon the request of Agent, Borrower shall within thirty (30) days
(unless there is an imminent threat to Agent’s or any Lender’s perfection on any
portion of the Collateral, in which case, promptly upon request) execute
or
deliver to Agent, and shall cause its Subsidiaries or the Parent, as applicable,
to execute or deliver to Agent, any and all financing statements, personal
property security act filings, fixture filings, security agreements, pledges,
assignments, endorsements of certificates of title, mortgages, deeds of trust,
opinions of counsel, and all other documents (collectively, the “Additional
Documents”) that Agent may reasonably request in form and substance reasonably
satisfactory to Agent, to create, perfect, and continue perfected or to better
perfect Agent’s Liens with respect to Oil and Gas Properties that are required
to be mortgaged pursuant to this Section 5.16 and all of the other properties
and assets of Parent and its Subsidiaries (whether now owned or hereafter
arising or acquired, tangible or intangible, real or personal), to create
and
perfect Liens in favor of Agent in any Real Property acquired by Parent or
its
Subsidiaries after the Closing Date, and in order to fully consummate all
of the
transactions contemplated hereby and under the other Loan Documents, provided
that Section 5.21 shall govern the obligation of Borrower and its Subsidiaries
and Parent to deliver title information with respect to Oil and Gas
Properties. To the maximum extent permitted by applicable law,
Borrower authorizes Agent to file such executed Additional Documents in any
appropriate filing office. If at any time the
aggregate Total Reserve Value of the Proved Oil and Gas Properties
evaluated in the most recent Reserve Report for which the Agent shall have
received Mortgages encumbering such Proved Oil and Gas Properties constitutes
less than (a) eighty percent (80%) of the aggregate Total Reserve Value and
(b)
ninety percent (90%) of the aggregate Proved Developed Producing Reserves
of all
Oil and Gas Properties of Parent and its Subsidiaries evaluated in the most
recent Reserve Report, it being agreed that the Proved Reserves not subject
to
any Mortgage shall not constitute a Proved Reserve that is reasonably necessary
to the integral operation of the Proved Reserves subject to Mortgages, Borrower
shall (and shall cause Parent or any applicable Subsidiary to) promptly:
(a)
execute and deliver to Agent Mortgages covering additional Oil and Gas
Properties, amendments to the Mortgages or such other documents as Agent
shall
deem necessary or advisable to grant to Agent, for the benefit of the Lenders,
a
perfected first priority Lien on such Oil and Gas Properties with (a) a Total
Reserve Value consisting not less than eighty percent (80%) of the aggregate
Total Reserve Value and (b) Proved Developed Producing Reserves consisting
not
less than ninety percent (90%) of the aggregate Proved Developed Producing
Reserves of all Oil and Gas Properties of Parent and its Subsidiaries evaluated
in the most recent Reserve Report; and (b) take all actions necessary or
advisable to cause such Lien to be duly perfected in accordance with all
applicable law, including, without limitation, the filing of Mortgages, or
UCC
financing statements in such jurisdictions as may be reasonably requested
by
Agent; provided, however, that in the case of Oil and Gas Properties, such
obligations shall be subject to the obtaining of any necessary third party
consents, which Borrower shall use commercially reasonable efforts to
obtain.
5.17 Material
Contracts. Contemporaneously
with the delivery of each Compliance Certificate pursuant hereto, provide
Agent
with copies of (a) each Material Contract entered into since the delivery
of the
previous Compliance Certificate, and (b) each material amendment or modification
of any Material Contract entered into since the delivery of the previous
Compliance Certificate.
5.18 Intellectual
Property. Parent
and each Subsidiary will use all reasonable efforts to conduct its business
and
affairs without material infringement of or interference with any intellectual
property of any other Person, and, in the event Borrower acquires knowledge
of
any such infringement or interference, will promptly cease such infringement
or
interference.
5.19 Exercise
of Rights. Borrower
and each Guarantor shall enforce all of its material rights as appropriate
in
its commercially reasonable judgment, including, without limitation, all
material indemnification rights, and pursue as appropriate in its commercially
reasonable judgment all material remedies available to Borrower or such
Guarantor with diligence and in good faith in connection with the enforcement
of
any such rights.
5.20 Reserve
Reports.
(a) On
or
before March 3rd and September 3rd of each year, commencing March 3, 2008,
Borrower shall furnish to Agent and the Lenders a Reserve Report as of the
immediately preceding January 1 or July 1, as applicable. The Reserve
Report as of January 1 of each year shall be prepared by Netherland, ▇▇▇▇▇▇
& Associates, Inc. of Houston, Texas or one or more other independent third
party Petroleum Engineers reasonably acceptable to Agent and the Reserve
Report
as of July 1 of each year shall be prepared by or under the supervision of
the
chief engineer of Borrower who shall certify such Reserve Report to be true
and
accurate in all material respects and to have been prepared in accordance
with
the procedures used in the immediately preceding January 1 Reserve
Report.
(b) In
the
event of an Interim Redetermination, Borrower shall furnish to Agent and
the
Lenders a Reserve Report prepared by or under the supervision of the chief
engineer of Borrower who shall certify such Reserve Report to be true and
accurate in all material respects and to have been prepared in accordance
with
the procedures used in the immediately preceding January 1 Reserve
Report. For any Interim Redetermination requested by Agent or
Borrower pursuant to Section 2.1, Borrower shall provide such Reserve Report
with an “as of” date as required by Agent as soon as possible, but in any event
no later than sixty-two (62) days following the receipt of such
request.
(c) With
the
delivery of each Reserve Report, Borrower shall provide to Agent and the
Lenders
a certificate from a Responsible Officer certifying that in all material
respects: (i) the
information contained in the Reserve Report and any other information delivered
in connection therewith is true and correct, (ii) Borrower or its
Subsidiaries owns Defensible Title to the Proved Oil and Gas Properties
evaluated in such Reserve Report, (iii) except as set forth
on an
exhibit to the certificate, on a net basis there are no gas imbalances, take
or
pay or other prepayments in excess of the volume specified in Section 4.23
with
respect to their Oil and Gas Properties evaluated in such Reserve Report
that
would require Borrower or any of its Subsidiaries to deliver Hydrocarbons
either
generally or produced from such Oil and Gas Properties at some future time
without then or thereafter receiving full payment therefor, (iv) none of their Proved
Oil
and Gas Properties have been sold since the date of the last Borrowing Base
determination except as set forth on an exhibit to the certificate, which
certificate shall list all of its Proved Oil and Gas Properties sold and
in such
detail as reasonably required by Agent, (v) attached to the certificate
is a list of all marketing agreements entered into subsequent to the later
of
the date hereof or the most recently delivered Reserve Report that Borrower
could reasonably be expected to have been obligated to list on Schedule 4.28
had
such agreement been in effect on the date hereof, (vi) attached thereto
is a
schedule of the Oil and Gas Properties evaluated by such Reserve Report that
are
Mortgaged Properties and demonstrating the percentage of the present value
that
such Mortgaged Properties represent, and (vii) to the extent required
under the Loan Documents, all Proved Oil and Gas Properties are subject to
the
Security Documents securing the Obligations, and such Security Documents
constitute legal, valid and duly perfected, first priority security interests
and Liens in favor of Agent in such properties and in the oil and gas
attributable to such properties and proceeds thereof.
-23-
5.21 Title
Information.
(a) On
or
prior to the Closing Date, Borrower will deliver title information in form
and
substance reasonably acceptable to Agent (which the Agent acknowledges may
be in
the form of a title opinion) covering enough of the Proved Oil and Gas
Properties evaluated by the Initial Reserve Report, so that Agent shall have
received, together with title information previously delivered to Agent,
reasonably satisfactory title information on at least eighty percent (80%)
of
the Total Reserve Value of the Proved Oil and Gas Properties evaluated by
the
Initial Reserve Report.
(b) On
or
before the delivery to Agent and the Lenders of each Reserve Report required
by
Section 5.20(a), Borrower will deliver title to Agent covering enough of
the
Proved Oil and Gas Properties evaluated by such Reserve Report that were
not
included in the immediately preceding Reserve Report, so that Agent shall
have
received together with title information previously delivered to Agent,
reasonably satisfactory title information evidencing Defensible Title on
at
least eighty percent (80%) of the Total Reserve Value of the Proved Oil and
Gas
Properties evaluated by such Reserve Report.
(c) If
Borrower has provided title information for additional Properties under
Section 5.21(b), Borrower shall, within sixty (60) days of notice from
Agent that title defects or exceptions exist with respect to such additional
Properties which render Borrower’s title not a Defensible Title, either (i) cure
to the satisfaction of Agent any such title defects or exceptions (including
defects or exceptions as to priority) which are not permitted by Section
6.2
raised by such information, (ii) substitute acceptable Mortgaged Properties
with
Defensible Title having an equivalent value or (iii) deliver revised title
information in form and substance reasonably acceptable to Agent so that
Agent
shall have received, together with title information previously delivered
to
Agent, reasonably satisfactory title information on at least eighty percent
(80%) of the Total Reserve Value of the Proved Oil and Gas Properties evaluated
by such Reserve Report. For purposes of clarity, Agent shall be
permitted to establish reserves against the then-existing Borrowing Base
pursuant to Section 2.1(b) to the extent that the Agent does not receive
satisfactory title as determined in this clause (c).
(d) If
Borrower is unable to cure any title defect requested to be cured pursuant
to
Section 5.21(c) within the sixty (60)-day period or Borrower does not comply
with the requirements of Section 5.21(b) to provide acceptable title information
covering eighty percent (80%) of the Total Reserve Value of the Proved Oil
and
Gas Properties evaluated in the most recent Reserve Report, such default
shall
not be a Default, but instead Agent and/or the Required Lenders shall have
the
right to exercise the following remedy in their reasonable discretion from
time
to time, and any failure to so exercise this remedy at any time shall not
be a
waiver as to future exercise of the remedy by Agent or the
Lenders. To the extent that Agent or the Required Lenders are not
reasonably satisfied with title to any Mortgaged Property after the 60-day
period has elapsed, such unacceptable Mortgaged Property shall not count
towards
“the eighty percent (80%) requirement,” and Agent may send a notice to Borrower
and the Lenders that the then outstanding Borrowing Base shall be reduced
by an
amount as determined by the Required Lenders to cause Borrower to be in
compliance with the requirement to provide acceptable title information on
eighty percent (80%) of the Total Reserve Value of the Proved Oil and Gas
Properties pursuant to this Section 5.21. This new Borrowing Base
shall become effective on the third Business Day after receipt of such
notice.
5.22 Swap
Agreements. Subject
to the provisions of Section 6.24, Borrower shall maintain in effect (and
cause
its Subsidiaries to maintain) one or more Swap Agreements with respect to
its
Hydrocarbon production, with the aggregate notional volumes of Hydrocarbons
covered by such Swap Agreements constituting not less than fifty percent
(50%)
of the aggregate amount of Borrower's (and its Subsidiaries’) estimated
Hydrocarbon production volumes on an Mcf equivalent basis (where one barrel
of
oil is equal to six (6) Mcf of gas) for the succeeding twelve (12) calendar
months on a rolling twelve (12) month basis for such period from Oil and
Gas
Properties classified as Proved Developed Producing Reserves in the most
recent
Reserve Report delivered pursuant to Section 5.20. Borrower shall use
(and cause its Subsidiaries to use) such Swap Agreements solely as a part
of
their normal business operations as a risk management strategy and/or hedge
against changes resulting from market conditions related to their oil and
gas
operations and not as a means to speculate for investment purposes on trends
and
shifts in financial or commodities markets.
5.23 [Intentionally
Omitted].
5.24 Post
Closing Obligations. No later than January 30, 2008, (i)
Borrower shall use its commercially reasonable efforts to deliver to the Agent a
Collateral Access Agreement with respect to the leased property located at
▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ and (ii) Borrower shall,
or
shall cause Parent, as applicable, to deliver to Agent Control Agreements
with
American National Bank and Nova Scotia Bank with respect to Deposit Accounts
of
the Loan Parties held at such banks.
6. NEGATIVE
COVENANTS.
Borrower
covenants and agrees that, until termination of all of the Commitments and
repayment in full of the Obligations, Borrower will not and will not permit
any
of its Subsidiaries and will not cause the Parent to do any of the
following:
6.1 Indebtedness. Create,
incur, assume, suffer to exist, guarantee, or otherwise become or remain,
directly or indirectly, liable with respect to any Indebtedness,
except:
(a) Indebtedness
evidenced by this Agreement and the other Loan Documents, together with
Indebtedness owed to Underlying Issuers with respect to Underlying Letters
of
Credit;
(b) Indebtedness
relating to the Convertible Subordinated Notes and other Indebtedness set
forth
on Schedule 4.16 and any Refinancing Indebtedness in respect of such
Indebtedness;
-24-
(c) Permitted
Purchase Money Indebtedness and any Refinancing Indebtedness in respect of
such
Indebtedness;
(d) endorsement
of instruments or other payment items for deposit;
(e) Indebtedness
associated with bonds or surety obligations required by Governmental
Requirements or otherwise in the ordinary course of business in connection
with
the operation of the Oil and Gas Properties; provided, that Indebtedness
permitted by this Section 6.1 will not exceed $2,000,000 in the aggregate
at any
one time outstanding;
(f) Indebtedness
composing Permitted Investments; and
(g) intercompany
Indebtedness described in Section 6.12(a).
6.2 Liens. Create,
incur, assume, or suffer to exist, directly or indirectly, any Lien on or
with
respect to any of its assets, of any kind, whether now owned or hereafter
acquired, or any income or profits therefrom, except for Permitted
Liens.
6.3 Restrictions
on Fundamental Changes.
(a) Consummate
any merger, consolidation, amalgamation, reorganization, or recapitalization,
or
reclassification of its Stock;
(b) Liquidate,
wind up, or dissolve itself (or suffer any liquidation or dissolution); provided
that any such transaction shall be permitted with respect to a Subsidiary
that
does not own any assets; or
(c) Suspend
or go out of a substantial portion of its or their business;
provided,
that any Guarantor (other than Parent) may merge with or into any other
Guarantor (other than Parent) and any Guarantor (other than Parent) may merge
with or into Borrower, so long as (i) in the case of a merger of a Guarantor
with Borrower, Borrower is the surviving entity, (ii) no other provision of
this Agreement would be violated thereby, (iii) Agent receives at least thirty
(30) days' prior written notice (or such shorter period as may be permitted
by the Agent) of such merger, (iv) no Default or Event of Default shall
have occurred and be continuing either before or after giving effect to such
transaction, and (v) the Lenders' rights in any Collateral, including,
without limitation, the existence, perfection and priority of any Lien thereon,
are not adversely affected by such merger or consolidation.
6.4 Disposal
of Assets. Other
than Permitted Dispositions, convey, sell, lease, license, assign, transfer,
or
otherwise dispose of (or enter into an agreement to convey, sell, lease,
license, assign, transfer, or otherwise dispose of) any of Parent’s or its
Subsidiaries assets, including the Stock of any of its
Subsidiaries.
6.5 Change
of Jurisdiction, Corporate Name or Location. (a)
Change Borrower’s or any Guarantor’s jurisdiction of organization
and/or organization and/or organizational identification number (if any),
(b)
change its corporate name or (c) change its chief executive office, principal
place of business (both in the United States and Canada), offices or warehouses
or locations at which Collateral is held or stored, or the location of its
records concerning the Collateral, in any case without at least thirty (30)
days
(or such shorter period as may be permitted by the Agent) prior written notice
to Agent and after completing any action reasonably requested by Agent in
connection therewith, including to continue the perfection of any Liens in
favor
of Agent, on behalf of Lenders, in any Collateral, has been completed or
taken,
and provided that any such new location shall be in the continental United
States (or Canada, in the case of Parent). Without limiting the foregoing,
neither Parent nor any Subsidiary shall change its location, name, identity
or
corporate structure in any manner which might make any financing or continuation
statement filed in connection herewith seriously misleading within the meaning
of Section 9-506 of the Code or any other then applicable provision of the
Code
except upon prior written notice to Agent and Lenders and after completing
any
action reasonably requested by the Agent in connection therewith, including
to
continue the perfection of any Liens in favor of Agent, on behalf of Lenders,
in
any Collateral.
6.6 Nature
of Business. Make
any change in the nature of the business of Parent and its Subsidiaries,
taken
as a whole, as conducted on the Closing Date or, to the extent
permitted hereunder, acquire any properties or assets that are not reasonably
related to the conduct of such business activities.
6.7 Prepayments
and Amendments. Except
in connection with Refinancing Indebtedness permitted by Section
6.1,
(a) optionally
prepay, redeem, defease, purchase, or otherwise acquire any Indebtedness
of
Parent or its Subsidiaries, other than the Obligations in accordance with
this
Agreement or terminate any Swap Agreements as determined appropriate by Parent
in the exercise of its commercially reasonable judgment; provided that Parent
shall at all times remain in compliance with Section 6.24;
(b) make
any
payment on account of Indebtedness that has been contractually subordinated
in
right of payment if such payment is not permitted at such time under the
subordination terms and conditions applicable thereto (for the avoidance
of
doubt, this provision shall apply to the payment by the Parent of amounts
due
under the Convertible Subordinated Notes with the effect that such payments
may
be made only to the extent permitted by the Subordination and Intercreditor
Agreement; provided that, no repayment under or with respect to the Convertible
Subordinated Notes shall be permitted if an Event of Default exists or, if
after
giving effect to such payment, an Event of Default would occur), or
-25-
(c) directly
or indirectly, amend, modify, alter, increase, or change any of the terms
or
conditions of (i) any agreement, instrument, document, indenture, or other
writing evidencing or concerning Indebtedness permitted under Section
6.1(b) or (c), or (ii) any other Material Contract except to the extent that
such amendment, modification, alteration, increase, or change could not,
individually or in the aggregate, reasonably be expected to result in a Material
Adverse Change.
6.8 Change
of Control. Cause,
permit, or suffer, directly or indirectly, any Change of Control.
6.9 [Intentionally
Omitted].
6.10 [Intentionally
Omitted].
6.11 Accounting
Methods; Fiscal Year. Modify
or change its fiscal year or its method of accounting (other than as may
be
required to conform to GAAP).
6.12 Investments. Except
for Permitted Investments, directly or indirectly, make or acquire any
Investment or incur any liabilities (including contingent obligations) for
or in
connection with any Investment; provided, however, that (a) a Borrower may
make
loans and advances to a Guarantor and a Guarantor may make loans and advances
to
a Borrower or to another Guarantor, in each case, in the ordinary course
of
business, so long as such Person shall have executed and delivered to such
lender a global demand note (collectively, the "Intercompany Notes") to evidence
any such loan and advance by such Person to such other lender, which
Intercompany Note shall be in form and substance reasonably satisfactory
to
Agent and shall be pledged and delivered to Agent in accordance with the
terms
of the Security Agreement, and (b) Parent and its Subsidiaries shall not
have
Permitted Investments (other than in the Cash Management Accounts) in Deposit
Accounts or Securities Accounts in an aggregate amount in excess of Fifty
Thousand Dollars ($50,000) at any one time unless Parent or its Subsidiary,
as
applicable, and the applicable securities intermediary or bank have entered
into
Control Agreements governing such Permitted Investments in order to perfect
(and
further establish) Agent’s Liens in such Permitted Investments. Subject to
clause (b) of the foregoing proviso, Borrower shall not and shall not permit
its
Subsidiaries and shall not cause Parent to establish or maintain any Deposit
Account or Securities Account unless Agent shall have received a Control
Agreement in respect of such Deposit Account or Securities Account.
6.13 Transactions
with Affiliates. Directly
or indirectly enter into or permit to exist any transaction with any Affiliate
of Parent or any of its Subsidiaries that is not a Loan Party except
for:
(a) transactions
(other than the payment of management, consulting, monitoring, or advisory
fees)
between Parent or its Subsidiaries, on the one hand, and any Affiliate of
Parent
or its Subsidiaries, on the other hand, so long as such transactions (i)
have
individually a value of less than Two Hundred Fifty Thousand Dollars ($250,000)
, (ii) are upon fair and reasonable terms and fully disclosed to the
Agent and the Required Lenders, and (iii) are no less favorable to Parent
or its Subsidiaries, as applicable, than would be obtained in an arm’s length
transaction with a non-Affiliate;
(b) the
payment of reasonable director, officer and employee compensation (including
bonuses) and other reasonable benefits (including retirement, health, stock
option and other benefit plans) and indemnification arrangements, each made
in
the ordinary course of business and consistent with industry
practice;
(c) each
of
the transactions set forth on Schedule 6.13;
(d) distributions
permitted in Section 6.10; and
(e) the
consummation of Permitted Investments.
6.14 Use
of Proceeds. Use
the proceeds of the Advances and the Term Loan for any purpose other than
(a) on
the Closing Date, (i) to repay, in full, the outstanding principal, accrued
interest, make-whole payment and accrued fees and expenses owing to Existing
Lender and (ii) to pay transactional fees, costs, and expenses
incurred in connection with this Agreement, the other Loan Documents and
the
transactions contemplated hereby and thereby, and (b) thereafter, consistent
with the terms and conditions hereof, for general corporate purposes, including
the funding of capital expenditures and working capital.
-26-
6.15 Financial
Covenants.
(a) Minimum
EBITDA. Fail to achieve EBITDA, calculated on the last day
of the quarterly period indicated below, of at least the required amount
set
forth in the following table for the applicable quarterly period set forth
opposite thereto:
|
Applicable
Amount
|
Applicable
Period
|
||
| $ |
12,750,000
|
For
the quarter ending
March 31, 2008
|
|
| $ |
16,600,000
|
For
the quarter ending
June 30, 2008
|
|
| $ |
20,400,000
|
For
the quarter ending
September 30, 2008
|
|
| $ |
23,300,000
|
For
the quarter ending
December 31, 2008
|
|
| $ |
28,300,000
|
For
the quarter ending
March 31, 2009
|
|
| $ |
32,300,000
|
For
the quarter ending
June 30, 2009
|
|
| $ |
37,300,000
|
For
the quarter ending
September 30, 2009, and for each quarter ending
thereafter
|
|
(b) Minimum
Average Daily Production. Fail to achieve minimum average
daily production for Borrower and its Subsidiaries for any quarterly period
indicated below, of at least the required amount set forth in the following
table for the applicable quarterly period set forth opposite
thereto:
|
Applicable
Amount
|
Applicable
Period
|
||
|
16,800
|
For
the quarter ending
March 31, 2008
|
||
|
23,100
|
For
the quarter ending
June 30, 2008
|
||
|
28,500
|
For
the quarter ending
September 30, 2008
|
||
|
30,200
|
For
the quarter ending
December 31, 2008
|
||
|
29,400
|
For
the quarter ending
March 31, 2009
|
||
|
34,600
|
For
the quarter ending
June 30, 2009
|
||
|
40,600
|
For
the quarter ending
September 30, 2009, and for each quarter ending
thereafter
|
||
;
provided that if a Force Majeure Event occurs during any quarterly period
indicated above, for purposes of calculating the Minimum Average Daily
Production, the Borrower shall be entitled to exclude the days during which
such
Force Majeure Event was in existence up to an aggregate of forty-five (45)
days
per Force Majeure Event.
(c) Minimum
Asset Coverage Ratio. Fail
to achieve a minimum Asset Coverage Ratio, calculated on the last day of
each
calendar quarter, of at least 1.60:1.00, based on the Total Reserve Value
reflected in the most recently delivered report by Borrower.
(d) Interest
Coverage Ratio. Have an Interest
Coverage Ratio, calculated on the last day of the quarterly period indicated
below, of not less than the required amount set forth in the following table
for
the applicable quarterly period set forth opposite thereto:
|
Applicable
Ratio
|
Applicable
Period
|
|
|
2.50:1.00
|
For
the quarter ending
March 31, 2008
|
|
|
2.75:1.00
|
For
the quarter ending
June 30, 2008
|
|
|
3.00:1.00
|
For
the quarter ending
September 30, 2008
|
|
|
3.25:1.00
|
For
the quarter ending
December 31, 2008
|
|
|
3.50:1.00
|
For
the quarter ending
March 31, 2009, and for each quarter ending
thereafter
|
(e) Leverage
Ratio. Have a Leverage Ratio, calculated on the last day of
the quarterly period indicated below, greater than the applicable ratio set
forth in the following table for the applicable quarterly period set forth
opposite thereto:
|
Applicable
Ratio
|
Applicable
Period
|
|
|
4.30:1.00
|
For
the quarter ending
March 31, 2008
|
|
|
3.30:1.00
|
|
For
the quarter ending
June 30, 2008
|
|
2.70:1.00
|
For
the quarter ending
September 30, 2008
|
|
|
2.50:1.00
|
For
the quarter ending
December 31, 2008, and for each quarter ending
thereafter
|
6.16 Forward
Sales.
Except in accordance with the ordinary course of the Oil and Gas Business
and
except as required under Section 5.22, enter into or permit to exist any
advance payment agreement or other arrangement pursuant to which Borrower
or any
of its Subsidiaries, having received full or substantial payment of the purchase
price for a specified quantity of Hydrocarbons upon entering such agreement
or
arrangement, is required to deliver, in one or more installments subsequent
to
the date of such agreement or arrangement, such quantity of Hydrocarbons
pursuant to and during the terms of such agreement or arrangement.
-27-
6.17 Oil
and Gas Imbalances.
Enter into any contracts or agreements which guarantee production of
Hydrocarbons (other than Swap Agreements otherwise permitted hereunder) or
hereafter allow gas imbalances, take-or-pay or other prepayment with respect
to
its Oil and Gas Properties which would require Borrower or any of its
Subsidiaries to deliver Hydrocarbons produced on Oil and Gas Properties at
some
future time without then or thereafter receiving full payment therefor to
exceed, during any monthly period, two percent (2%) of the current aggregate
monthly gas production for such monthly period from the Oil and Gas Properties
of Borrower and its Subsidiaries.
6.18 Marketing
Activities.
(a) Neither
Borrower nor any of its Subsidiaries will engage in marketing activities
for any
Hydrocarbons or enter into any contracts related thereto other than (i)
contracts for the sale of Hydrocarbons scheduled or reasonably estimated
to be
produced from their Proved Oil and Gas Properties during the period of such
contract, (ii) contracts for the sale of Hydrocarbons scheduled or reasonably
estimated to be produced from Proved Oil and Gas Properties of third parties
during the period of such contract associated with the Oil and Gas Properties
of
Borrower and its Subsidiaries that Borrower (or its Subsidiaries, as applicable)
has the right to market pursuant to joint operating agreements, unitization
agreements or other similar contracts that are usual and customary in the
oil
and gas business and (iii) other contracts for the purchase and/or sale of
Hydrocarbons of third parties (A) that have generally offsetting provisions
(i.e., corresponding pricing mechanics, delivery dates and points and volumes)
such that no “position” is taken and (B) for which appropriate credit support
has been taken to alleviate the material credit risks of the counterparty
thereto.
(b) All
Hydrocarbon produced from the Oil and Gas Properties of Borrower and its
Subsidiaries shall be marketed on an arm’s length basis using one or more
Persons that are not Affiliates of Borrower.
6.19 Sale-Leasebacks. Engage
in any sale-leaseback, synthetic lease or similar transaction involving any
of
its assets.
6.20 Cancellation
of Indebtedness. Cancel
any claim or debt owing to it, except for reasonable consideration negotiated
on
an arm’s-length basis.
6.21 No
Amendment of Governing Documents; Intercompany
Note.
(a)
Amend, modify, supplement, restate or otherwise change its Governing Documents
to the extent adverse to the rights or interests of the Lenders without the
prior written consent of the Agent or (b) add a Person other than a Loan
Party
to the Intercompany Note.
6.22 No
Impairment of Intercompany Transfers; Negative Pledge. (a)
Directly or indirectly enter into or become bound by any agreement, instrument,
indenture or other obligation (other than this Agreement and the other Loan
Documents) which directly or indirectly restricts, prohibits or requires
the
consent of any Person with respect to the payment of dividends or distributions
or the making or repayment of intercompany loans by a Subsidiary of Borrower
that is not a Guarantor to Borrower or (b) directly or indirectly enter into,
incur or permit to exist any agreement or other arrangement (other than (i)
this
Agreement, (ii) Permitted Liens under Permitted Purchase Money Indebtedness
permitted under this Agreement, (iii) restrictions on assignment contained
in
licenses, leases and other contracts entered into in the ordinary course
of
business, (iv) restrictions and conditions existing on the date of this
Agreement identified on Schedule 6.22, and (v) customary restrictions and
conditions contained in agreements relating to the sale of a Subsidiary pending
such sale, provided such restrictions and conditions apply only to the
Subsidiary that its to be sold and such sale is permitted hereunder) that
prohibits, restricts or imposes any condition upon the ability of such Borrower
or Subsidiary to create, incur or permit to exist any Lien upon any of its
property or assets.
6.23 [Intentionally
Omitted].
6.24 Swap
Agreements. Enter
into any Swap Agreements with any Person other than (a) Swap Agreements in
respect of commodities (i) with an Approved Counterparty and (ii) the notional
volumes for which (when aggregated with other commodity Swap Agreements then
in
effect other than basis differential swaps on volumes already hedged pursuant
to
other Swap Agreements) do not exceed, as of January 1, 2008, for (A) natural
gas, ninety percent (90%) of the reasonably anticipated projected production
from Proved Developed Producing Reserves in the most recent Reserve Report
delivered pursuant to Section 5.20 for each month during the period
commencing on such date and ending on the date twelve (12) months
thereafter, and for each month during any period after such twelve (12)-month
period, eighty-five percent (85%) of the reasonably anticipated projected
production from such Proved Developed Producing Reserves in the most recent
Reserve Report delivered pursuant to Section 5.20 for each month during such
period, and (B) crude oil, ninety percent (90%) of the reasonably anticipated
projected production from Proved Developed Producing Reserves in the
most recent Reserve Report delivered pursuant to Section 5.20 for each
month during the period commencing on such date and ending on the date twelve
(12) months thereafter, and for each month during any period after such twelve
(12)-month period, eighty-five percent (85%) of the reasonably anticipated
projected production from Proved Developed Producing Reserves for each month
during such period; provided, that Borrower shall not enter into any
additional Swap Agreements with respect to crude oil for which payment dates
occur in 2007 or which relate to periods in 2007, (b) Swap Agreements in
respect
of interest rates with an Approved Counterparty, as follows: (i) Swap
Agreements effectively converting interest rates from fixed to floating,
the
notional amounts of which (when aggregated with all other Swap Agreements
of
Borrower and its Subsidiaries then in effect effectively converting interest
rates from fixed to floating) do not exceed fifty percent (50%) of the then
outstanding principal amount of Borrower’s Indebtedness for borrowed money which
bears interest at a fixed rate and (ii) Swap Agreements effectively converting
interest rates from floating to fixed, the notional amounts of which (when
aggregated with all other Swap Agreements of Borrower and its Subsidiaries
then
in effect effectively converting interest rates from floating to fixed) do
not
exceed seventy-five percent (75%) of the then outstanding principal amount
of
Borrower’s Indebtedness for borrowed money which bears interest at a floating
rate and (c) Swap Agreements listed on Schedule 4.24
hereto. In no event shall any Swap Agreement contain any requirement,
agreement or covenant for Borrower or any Subsidiary to post collateral or
margin to secure their obligations under such Swap Agreement or to cover
market
exposures except to the extent permitted by Section 6.2.
-28-
7. EVENTS
OF DEFAULT.
Any
one
or more of the following events shall constitute an event of default (each,
an
“Event of Default”) under this Agreement:
7.1 If
Borrower fails to pay when due and payable, (a) all or any portion of the
Obligations consisting of scheduled interest or fees and such failure continues
for three (3) Business Days, (b) other charges due the Lender Group,
reimbursement of Lender Group Expenses, or other amounts (other than any
portion
thereof constituting principal) constituting Obligations (including any portion
thereof that accrues after the commencement of an Insolvency Proceeding,
regardless of whether allowed or allowable in whole or in part as a claim
in any
such Insolvency Proceeding) within five (5) Business Days after written notice
of such failure, or (c) all or any portion of the principal of the
Obligations;
7.2 If
Parent
or any of its Subsidiaries:
(a) fails
to
perform or observe any covenant or other agreement contained in any of
Sections 2.7, 5.2, 5.3, 5.4, 5.5, 5.8,
5.11 (as to Borrower’s existence
only), 5.13,
5.14, 5.15, 5.16, 5.20, 5.21,
5.22 and
Section
6 of this Agreement or Section 6 of the
Security Agreement;
(b) fails
to
perform or observe any covenant or other agreement contained in any of
Sections 5.6, 5.7, 5.9, 5.10, 5.11
(except as set forth in Section 7.2(a) above), and 5.12 of this
Agreement and such failure continues for a period of ten (10) days after
the
earlier of (i) the date on which such failure shall first become known to
any
Responsible Officer of Borrower or (ii) written notice thereof is given to
Borrower by Agent; or
(c) fails
to
perform or observe any covenant or other agreement contained in this Agreement,
or in any of the other Loan Documents, in each case, other than any such
covenant or agreement that is the subject of another provision of this
Section 7 (in which event such other provision of this Section 7
shall govern), and such failure continues for a period of twenty (20) Business
Days after the earlier of (i) the date on which such failure shall first
become
known to any Responsible Officer of Borrower or (ii) written notice thereof
is
given to Borrower by Agent;
7.3 If
any
material portion of Parent’s or any of its Subsidiaries’ assets is attached,
seized, subjected to a writ or distress warrant, or is levied upon, or comes
into the possession of any third Person and the same is not discharged before
the earlier of thirty (30) days after the date it first arises or five (5)
days
prior to the date on which such property or asset is subject to forfeiture
by
Borrower or the applicable Subsidiary;
7.4 If
an
Insolvency Proceeding is commenced by Parent or any of its
Subsidiaries;
7.5 If
an
Insolvency Proceeding is commenced against Parent or any of its Subsidiaries
and
any of the following events occur: (a) Parent or such Subsidiary consents
to the
institution of such Insolvency Proceeding against it, (b) the petition
commencing the Insolvency Proceeding is not timely controverted, (c) the
petition commencing the Insolvency Proceeding is not dismissed within sixty
(60)
calendar days of the date of the filing thereof, (d) an interim trustee is
appointed to take possession of all or any substantial portion of the properties
or assets of, or to operate all or any substantial portion of the business
of,
Parent or any of its Subsidiaries, or (e) an order for relief shall have
been
issued or entered therein;
7.6 If
Parent
or any of its Subsidiaries is enjoined, restrained, or in any way prevented
by
court order from continuing to conduct all or any material part of its business
affairs;
7.7 If
one or
more judgments, orders, or awards involving an aggregate amount of Two Hundred
Fifty Thousand Dollars ($250,000), or more (except to the extent covered
by
insurance pursuant to which the insurer has not disclaimed liability) shall
be
entered or filed against Parent or any of its Subsidiaries or with respect
to
any of their respective assets, and the same is not released, discharged,
bonded
against, or stayed pending appeal before the earlier of sixty (60) days after
the date it first arises or five (5) days prior to the date on which such
asset
is subject to being forfeited by Borrower or the applicable
Subsidiary;
7.8 If
there
is a default in one or more agreements to which Parent or any of its
Subsidiaries is a party with one or more third Persons relative to Parent’s or
any of its Subsidiaries’ Indebtedness involving an aggregate amount of Two
Hundred Fifty Thousand Dollars ($250,000) or more, and such default (i) occurs
at the final maturity of the obligations thereunder, or (ii) results in a
right
by such third Person(s), irrespective of whether exercised, to accelerate
the
maturity of Borrower’s or the applicable Subsidiary’s obligations thereunder
(for the avoidance of doubt, any default or event of default arising under
the
Convertible Subordinated Notes shall constitute an Event of Default
hereunder);
7.9 If
any
warranty, representation, statement, or certification made herein or in any
other Loan Document or delivered to Agent or any Lender in connection with
this
Agreement or any other Loan Document proves to be untrue in any material
respect
(except that such materiality qualifier shall not be applicable to any
representations and warranties that already are qualified or modified by
materiality in the text thereof) as of the date of issuance or making or
deemed
making thereof;
7.10 If
the
obligation of any Guarantor under the Guaranty is limited or terminated by
operation of law or by such Guarantor, or any such Guarantor becomes the
subject
of an Insolvency Proceeding;
7.11 If
the
Security Agreement or any other Loan Document that purports to create a Lien
shall, for any reason, fail or cease to create a valid and perfected and,
except
to the extent permitted by the terms hereof or thereof, first priority Lien
on
or security interest in the Collateral covered hereby or thereby, except
as a result of a disposition of the applicable Collateral in a transaction
permitted under this Agreement;
-29-
7.12 If
any
provision of any Loan Document shall at any time for any reason be declared
to
be null and void, or the validity or enforceability thereof shall be contested
by Parent or its Subsidiaries, or a proceeding shall be commenced by Parent
or
its Subsidiaries, or by any Governmental Authority having jurisdiction over
Parent or its Subsidiaries, seeking to establish the invalidity or
unenforceability thereof, or Parent or its Subsidiaries shall deny that Parent
or its Subsidiaries has any liability or obligation purported to be created
under any Loan Document;
7.13 The
loss,
suspension or revocation of, or failure to renew, any license or permit now
held
or hereafter acquired by Parent or any of its Subsidiaries, if such loss,
suspension, revocation or failure to renew could reasonably be expected to
result in a Material Adverse Change;
7.14 The
indictment of Parent or any Subsidiary thereof under any criminal statute,
or
commencement of criminal or civil proceedings against Parent or any such
Subsidiary, pursuant to which statute or proceedings the penalties or remedies
sought or available include forfeiture to any Governmental Authority of any
portion of the property of such Person which would result in a Material Adverse
Change;
7.15 If
(i) an
ERISA Event shall occur with respect to a Pension Plan that has resulted
or
could reasonably be expected to result in liability of Parent or the Guarantors,
either individually or in the aggregate, under Title IV of ERISA to the Pension
Plan, Multiemployer Plan or the PBGC in an aggregate amount in excess of
One
Hundred Thousand Dollars ($100,000); (ii) the aggregate amount of Unfunded
Pension Liability among all Pension Plans at any time exceeds One Hundred
Thousand Dollars ($100,000); or (iii) Parent or the Guarantor or any ERISA
Affiliate shall fail to pay when due, after the expiration of any applicable
grace period, any installment payment with respect to its withdrawal liability
under Section 4201 of ERISA under a Multiemployer Plan in an aggregate amount
in
excess of One Hundred Thousand Dollars ($100,000); or
7.16 Any
Material Adverse Change shall have occurred.
8. THE
LENDER GROUP’S RIGHTS AND REMEDIES.
8.1 Rights
and Remedies. Upon
the occurrence, and during the continuation, of an Event of Default, Agent
at
the request of the Required Lenders for the benefit of the Lender Group shall
without notice or demand, all of which are authorized by Borrower:
(a) Declare
all or any portion of the Obligations, whether evidenced by this Agreement,
by
any of the other Loan Documents, or otherwise, immediately due and
payable;
(b) Cease
advancing money or extending credit to or for the benefit of Borrower under
this
Agreement, under any of the Loan Documents, or under any other agreement
between
Borrower and the Lender Group;
(c) Agent,
on
behalf of the Lender Group, may foreclose any or all of the Mortgages and
sell
the Real Property Collateral or Oil and Gas Properties or cause the Real
Property Collateral or Oil and Gas Properties to be sold in accordance with
the
provisions of the Mortgages and applicable law, and exercise any and all
other
rights or remedies available to Agent, on behalf of the Lender Group, under
the
Mortgages, any of the other Loan Documents, at law or in equity with respect
to
the Collateral encumbered by the Mortgages;
(d) Terminate
this Agreement and any of the other Loan Documents as to any future liability
or
obligation of the Lender Group, but without affecting any of Agent’s Liens in
the Collateral and without affecting the Obligations; and
(e) The
Lender Group shall have all other rights and remedies available at law or
in
equity or pursuant to any other Loan Document.
The
foregoing to the contrary notwithstanding, upon the occurrence of any Event
of
Default described in Section 7.4 or Section 7.5, in addition to
the remedies set forth above, without any notice to Borrower or any other
Person
or any act by the Lender Group, the Commitments shall automatically terminate
and the Obligations then outstanding, together with all accrued and unpaid
interest thereon and all fees and all other amounts due under this Agreement
and
the other Loan Documents, shall automatically and immediately become due
and
payable, without presentment, demand, protest, or notice of any kind, all
of
which are expressly waived by Borrower.
8.2 Remedies
Cumulative . The
rights and remedies of the Lender Group under this Agreement, the other Loan
Documents, and all other agreements shall be cumulative. The Lender
Group shall have all other rights and remedies not inconsistent herewith
as
provided under the Code, by law, or in equity. No exercise by the
Lender Group of one right or remedy shall be deemed an election, and no waiver
by the Lender Group of any Event of Default shall be deemed a continuing
waiver. No delay by the Lender Group shall constitute a waiver,
election, or acquiescence by it.
9. TAXES
AND EXPENSES.
If
Borrower or its Subsidiaries fail to pay any monies (whether taxes, assessments,
insurance premiums, or, in the case of leased properties or assets, rents
or
other amounts payable under such leases) due to third Persons, or fails to
make
any deposits or furnish any required proof of payment or deposit, all as
required under the terms of this Agreement, then, Agent, in its sole discretion,
may do any or all of the following: (a) without prior notice to the
Borrower, make payment of the same or any part thereof, (b) set up such reserves
against the Borrowing Base or the Maximum Revolver Amount as Agent deems
necessary to protect the Lender Group from the exposure created by such failure,
or (c) in the case of the failure to comply with Section 5.8 hereof,
obtain and maintain insurance policies of the type described in Section
5.8 and take such action with respect to such policies as permitted pursuant
to Section 5.8. Any such amounts paid by Agent shall
constitute Lender Group Expenses and any such payments shall not constitute
an
agreement by the Lender Group to make similar payments in the future or a
waiver
by the Lender Group of any Event of Default under this
Agreement. Agent need not inquire as to, or contest the validity of,
any such expense, tax, or Lien and the receipt of the usual official notice
for
the payment thereof shall be conclusive evidence that the same was validly
due
and owing.
-30-
10. WAIVERS;
INDEMNIFICATION.
10.1 Demand;
Protest; etc. Borrower
waives demand, protest, notice of protest, notice of default or dishonor,
notice
of payment and nonpayment, nonpayment at maturity, release, compromise,
settlement, extension, or renewal of documents, instruments, chattel paper,
and
guarantees at any time held by the Lender Group on which Borrower may in
any way
be liable.
10.2 The
Lender Group’s Liability for Collateral. Borrower
hereby agrees that: (a) so long as Agent complies with its
obligations, if any, under the Code, the Lender Group shall not in any way
or
manner be liable or responsible for: (i) the safekeeping of the
Collateral, (ii) any loss or damage thereto occurring or arising in any manner
or fashion from any cause, (iii) any diminution in the value thereof, or
(iv)
any act or default of any carrier, warehouseman, bailee, forwarding agency,
or
other Person, and (b) all risk of loss, damage, or destruction of the Collateral
shall be borne by Borrower.
10.3 Indemnification. Borrower
shall pay, indemnify, defend, and hold Agent-Related Persons, the Lender-Related
Persons, and each Participant (each, an “Indemnified Person”) harmless
(to the fullest extent permitted by law) from and against any and all claims,
demands, suits, actions, investigations, proceedings, liabilities, fines,
costs,
penalties, and damages, and all reasonable out of pocket fees and disbursements
of attorneys, experts, or consultants and all other costs and expenses actually
incurred in connection therewith or in connection with the enforcement of
this
indemnification (as and when they are incurred and irrespective of whether
suit
is brought), at any time asserted against, imposed upon, or incurred by any
of
them (a) in connection with or as a result of or related to the execution,
delivery, enforcement, performance, or administration (including any
restructuring or workout with respect hereto) of this Agreement, any of the
other Loan Documents, or the transactions contemplated hereby or thereby
or the
monitoring of Borrower’s and its Subsidiaries’ compliance with the terms of the
Loan Documents, (b) with respect to any investigation, litigation, or
proceeding related to this Agreement, any other Loan Document, or the use
of the
proceeds of the credit provided hereunder (irrespective of whether any
Indemnified Person is a party thereto), or any act, omission, event, or
circumstance in any manner related thereto, and (c) in connection with or
arising out of any presence or Release of Hazardous Materials, any Environmental
Actions, any Environmental Liabilities or any Response Actions related to
any
assets or properties of Borrower or any of its Subsidiaries (each and all
of the
foregoing, the “Indemnified Liabilities”). The foregoing to
the contrary notwithstanding, Borrower shall have no obligation to any
Indemnified Person under this Section 10.3 with respect to any
Indemnified Liability that a court of competent jurisdiction finally determines
to have resulted from the gross negligence or willful misconduct of such
Indemnified Person. This provision shall survive the termination of
this Agreement and the repayment of the Obligations. If any
Indemnified Person makes any payment to any other Indemnified Person with
respect to an Indemnified Liability as to which Borrower was required to
indemnify the Indemnified Person receiving such payment, the Indemnified
Person
making such payment is entitled to be indemnified and reimbursed by Borrower
with respect thereto. WITHOUT LIMITATION, THE FOREGOING
INDEMNITY SHALL APPLY TO EACH INDEMNIFIED PERSON WITH RESPECT TO INDEMNIFIED
LIABILITIES WHICH IN WHOLE OR IN PART ARE CAUSED BY OR ARISE OUT OF ANY
NEGLIGENT ACT OR OMISSION OF SUCH INDEMNIFIED PERSON OR OF ANY OTHER
PERSON.
-31-
11. NOTICES.
Unless
otherwise provided in this Agreement, all notices or demands by Borrower
or
Agent to the other relating to this Agreement or any other Loan Document
shall
be in writing and (except for financial statements and other informational
documents which may be sent by first-class mail, postage prepaid) shall be
personally delivered or sent by registered or certified mail (postage prepaid,
return receipt requested), overnight courier, electronic mail (at such email
addresses as Borrower or Agent, as applicable, may designate to each other
in
accordance herewith), or telefacsimile to Borrower or Agent, as the case
may be,
at its address set forth below:
|
If
to Borrower:
|
Storm
Cat Energy (USA) Corporation
|
|
|
▇▇▇▇
▇▇▇▇
▇▇.,
▇▇▇▇▇ ▇▇▇▇
|
|
▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
|
|
|
Attn:
▇▇▇▇ ▇▇▇▇▇▇▇
|
|
|
Fax
No.: (▇▇▇) ▇▇▇-▇▇▇▇
|
|
|
with
copies to:
|
▇▇▇▇▇
& ▇▇▇▇▇▇▇ LLP
|
|
One
▇▇▇▇▇ Center, Suite 1500
|
|
|
▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
|
|
|
▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
|
|
|
Attn:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
|
|
|
Fax
No.: (▇▇▇) ▇▇▇-▇▇▇▇
|
|
|
If
to Agent:
|
▇▇▇▇▇
Fargo Foothill, LLC
|
|
▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
|
|
|
▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇
|
|
|
Attn:
Business Finance Manager
|
|
|
Fax
No.: (▇▇▇) ▇▇▇-▇▇▇▇
|
|
|
with
copies to:
|
▇▇▇▇▇▇▇
▇▇▇▇ & ▇▇▇▇▇ LLP
|
|
▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇
|
|
|
▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
|
|
|
Attn: ▇▇▇▇▇
▇▇▇▇, Esq.
|
|
|
Fax
No.: (▇▇▇) ▇▇▇-▇▇▇▇
|
|
|
If
to Lenders:
|
To
the addresses set forth on the signature pages under each Lender’s
name.
|
|
with
copies to:
|
Proskauer
Rose LLP
|
|
▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
|
|
|
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
|
|
|
Attn: ▇▇▇▇▇▇
▇. ▇▇▇▇▇, Esq.
|
|
|
Fax
No.: (▇▇▇) ▇▇▇-▇▇▇▇
|
Agent,
any Lender and Borrower may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to
the
other party. All notices or demands sent in accordance with this
Section 11, other than notices by Agent in connection with enforcement
rights against the Collateral under the provisions of the Code, shall be
deemed
received on the earlier of the date of actual receipt or three (3) Business
Days
after the deposit thereof in the mail. Borrower acknowledges and
agrees that notices sent by the Lender Group in connection with the exercise
of
enforcement rights against Collateral under the provisions of the Code shall
be
deemed sent when deposited in the mail or personally delivered, or, where
permitted by law, transmitted by telefacsimile or any other method set forth
above.
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12. CHOICE
OF LAW AND VENUE; JURY TRIAL WAIVER.
(a) THE
VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (UNLESS EXPRESSLY
PROVIDED TO THE CONTRARY IN ANOTHER LOAN DOCUMENT IN RESPECT OF SUCH OTHER
LOAN
DOCUMENT), THE CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF AND THEREOF,
AND THE RIGHTS OF THE PARTIES HERETO AND THERETO WITH RESPECT TO ALL MATTERS
ARISING HEREUNDER OR THEREUNDER OR RELATED HERETO OR THERETO SHALL BE DETERMINED
UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF
NEW YORK.
(b) THE
PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH
THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE TRIED AND LITIGATED ONLY
IN THE
STATE AND, TO THE EXTENT PERMITTED BY APPLICABLE LAW, FEDERAL COURTS LOCATED
IN
THE COUNTY OF NEW YORK, STATE OF NEW YORK; PROVIDED, HOWEVER, THAT
ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY
BE
BROUGHT, AT AGENT’S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE AGENT ELECTS
TO BRING SUCH ACTION OR WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE
FOUND. BORROWER AND EACH MEMBER OF THE LENDER GROUP WAIVE, TO THE
EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT
THE
DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO
VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION
12(b).
(c) BORROWER
AND EACH MEMBER OF THE LENDER GROUP HEREBY WAIVE THEIR RESPECTIVE RIGHTS
TO A
JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY
OF
THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING
CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON
LAW OR
STATUTORY CLAIMS. BORROWER AND EACH MEMBER OF THE LENDER GROUP
REPRESENT THAT EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY
WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE
FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
13. ASSIGNMENTS
AND PARTICIPATIONS; SUCCESSORS.
13.1 Assignments
and Participations.
(a) Any
Lender may at any time assign and delegate to one or more assignees (each
an
“Assignee”) all or any portion of the Obligations, the Commitments and
the other rights and obligations of such Lender hereunder and under the other
Loan Documents, in a minimum amount (unless waived by Agent and, so long
as no
Event of Default shall have occurred and be continuing, Borrower) of Two
Million
Five Hundred Thousand Dollars ($2,500,000) (except such minimum amount shall
not
apply to (x) an assignment or delegation by any Lender to any other Lender or an
Affiliate of any Lender or an Approved Fund, (y) a group of new Lenders,
each of
whom is an Affiliate of each other or a fund or account managed by any such
new
Lender or an Affiliate of such new Lender to the extent that the aggregate
amount to be assigned to all such new Lenders is at least Three Million Dollars
($3,000,000) or (z) an Eligible Assignee); provided, however, that
Borrower and Agent may continue to deal solely and directly with such Lender
in
connection with the interest so assigned to an Assignee until (i) written
notice
of such assignment, together with payment instructions, addresses, and related
information with respect to the Assignee, have been given to Borrower and
Agent
by such Lender and the Assignee, (ii) such Lender and its Assignee have
delivered to Borrower and Agent an Assignment and Acceptance and Agent has
notified the assigning Lender of its receipt thereof in accordance with
Section 13.1(b), and (iii) unless waived by Agent, the assigning Lender
or Assignee has paid to Agent for Agent’s separate account a processing fee in
the amount of Three Thousand Five Hundred Dollars ($3,500). So long
as no Event of Default shall have occurred and be continuing, any proposed
assignment pursuant to this Section 13.1(a) other than to an Eligible
Assignee shall be subject to the consent of Borrower, which consent shall
not be
unreasonably withheld or delayed.
(b) From
and
after the date that Agent notifies the assigning Lender (with a copy to
Borrower) that it has received an executed Assignment and Acceptance and,
if
applicable, payment of the required processing fee, (i) the Assignee thereunder
shall be a party hereto and, to the extent that rights and obligations hereunder
have been assigned to it pursuant to such Assignment and Acceptance, shall
have
the rights and obligations of a Lender under the Loan Documents, and (ii)
the
assigning Lender shall, to the extent that rights and obligations hereunder
and
under the other Loan Documents have been assigned by it pursuant to such
Assignment and Acceptance, relinquish its rights (except with respect to
Section 10.3 hereof) and be released from any future obligations under
this Agreement (and in the case of an Assignment and Acceptance covering
all or
the remaining portion of an assigning Lender’s rights and obligations under this
Agreement and the other Loan Documents, such Lender shall cease to be a party
hereto and thereto), and such assignment shall effect a novation among Borrower,
the assigning Lender, and the Assignee; provided, however, that
nothing contained herein shall release any assigning Lender from obligations
that survive the termination of this Agreement, including such assigning
Lender’s obligations under Section 15 and Section 17.9(a) of this
Agreement.
(c) By
executing and delivering an Assignment and Acceptance, the assigning Lender
thereunder and the Assignee thereunder confirm to and agree with each other
and
the other parties hereto as follows: (i) other than as provided in
such Assignment and Acceptance, such assigning Lender makes no representation
or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement
or
the execution, legality, validity, enforceability, genuineness, sufficiency
or
value of this Agreement or any other Loan Document furnished pursuant hereto,
(ii) such assigning Lender makes no representation or warranty and assumes
no
responsibility with respect to the financial condition of Borrower or the
performance or observance by Borrower of any of its obligations under this
Agreement or any other Loan Document furnished pursuant hereto, (iii) such
Assignee confirms that it has received a copy of this Agreement, together
with
such other documents and information as it has deemed appropriate to make
its
own credit analysis and decision to enter into such Assignment and Acceptance,
(iv) such Assignee will, independently and without reliance upon Agent, such
assigning Lender or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make its
own
credit decisions in taking or not taking action under this Agreement, (v)
such
Assignee appoints and authorizes Agent to take such actions and to exercise
such
powers under this Agreement as are delegated to Agent, by the terms hereof,
together with such powers as are reasonably incidental thereto, and (vi)
such
Assignee agrees that it will perform all of the obligations which by the
terms
of this Agreement are required to be performed by it as a Lender.
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(d) Immediately
upon Agent’s receipt of the required processing fee, if applicable, and delivery
of notice to the assigning Lender pursuant to Section 13.1(b), this
Agreement shall be deemed to be amended to the extent, but only to the extent,
necessary to reflect the addition of the Assignee and the resulting adjustment
of the Commitments arising therefrom. The Commitment allocated to
each Assignee shall reduce such Commitments of the assigning Lender pro
tanto.
(e) Any
Lender may at any time sell to one or more commercial banks, financial
institutions, or other Persons (a “Participant”) participating interests
in all or any portion of its Obligations, its Commitment, and the other rights
and interests of that Lender (the “Originating Lender”) hereunder and
under the other Loan Documents; provided, however, that (i) the
Originating Lender shall remain a “Lender” for all purposes of this Agreement
and the other Loan Documents and the Participant receiving the participating
interest in the Obligations, the Commitments, and the other rights and interests
of the Originating Lender hereunder shall not constitute a “Lender” hereunder or
under the other Loan Documents and the Originating Lender’s obligations under
this Agreement shall remain unchanged, (ii) the Originating Lender shall
remain
solely responsible for the performance of such obligations, (iii) Borrower,
Agent, and the Lenders shall continue to deal solely and directly with the
Originating Lender in connection with the Originating Lender’s rights and
obligations under this Agreement and the other Loan Documents, (iv) no Lender
shall transfer or grant any participating interest under which the Participant
has the right to approve any amendment to, or any consent or waiver with
respect
to, this Agreement or any other Loan Document, except to the extent such
amendment to, or consent or waiver with respect to this Agreement or of any
other Loan Document would (A) extend the final maturity date of the
Obligations hereunder in which such Participant is participating,
(B) reduce the interest rate applicable to the Obligations hereunder in
which such Participant is participating, (C) release all or substantially
all of the Collateral or guaranties (except to the extent expressly provided
herein or in any of the Loan Documents) supporting the Obligations hereunder
in
which such Participant is participating, (D) postpone the payment of, or
reduce
the amount of, the interest or fees payable to such Participant through such
Lender, or (E) change the amount or due dates of scheduled principal repayments
or prepayments or premiums, and (v) all amounts payable by Borrower hereunder
shall be determined as if such Lender had not sold such participation, except
that, if amounts outstanding under this Agreement are due and unpaid, or
shall
have been declared or shall have become due and payable upon the occurrence
of
an Event of Default, each Participant shall be deemed to have the right of
set
off in respect of its participating interest in amounts owing under this
Agreement to the same extent as if the amount of its participating interest
were
owing directly to it as a Lender under this Agreement. The rights of
any Participant only shall be derivative through the Originating Lender with
whom such Participant participates and no Participant shall have any rights
under this Agreement or the other Loan Documents or any direct rights as
to the
other Lenders, Agent, Borrower, the Collections of Borrower or its Subsidiaries,
the Collateral, or otherwise in respect of the Obligations. No
Participant shall have the right to participate directly in the making of
decisions by the Lenders among themselves. The provisions of this
Section 13.1(e) are solely for the benefit of the Lender Group and
Borrower shall not have any rights as third party beneficiaries of any such
provisions.
(f) In
connection with any such assignment or participation or proposed assignment
or
participation, a Lender may, subject to the provisions of Section 17.9,
disclose all documents and information which it now or hereafter may have
relating to Borrower and its Subsidiaries and their respective
businesses.
(g) Any
other
provision in this Agreement notwithstanding, any Lender may at any time create
a
security interest in, or pledge, all or any portion of its rights under and
interest in this Agreement in favor of any Federal Reserve Bank in accordance
with Regulation A of the Federal Reserve Bank or U.S. Treasury Regulation
31 CFR
§203.24, and such Federal Reserve Bank may enforce such pledge or security
interest in any manner permitted under applicable law.
13.2 Successors. This
Agreement shall bind and inure to the benefit of the respective successors
and
assigns of each of the parties; provided, however, that Borrower
may not assign this Agreement or any rights or duties hereunder without the
Lenders’ prior written consent and any prohibited assignment shall be
absolutely void ab initio. No consent to assignment by the
Lenders shall release Borrower from its Obligations. A Lender may
assign this Agreement and the other Loan Documents and its rights and duties
hereunder and thereunder pursuant to Section 13.1 hereof.
14. AMENDMENTS;
WAIVERS.
14.1 Amendments
and Waivers. No
amendment or waiver of any provision of this Agreement or any other Loan
Document (other than Bank Product Agreements), and no consent with respect
to
any departure by Borrower therefrom, shall be effective unless the same shall
be
in writing and signed by the Required Lenders (or by Agent at the written
request of the Required Lenders) and Borrower and then any such waiver or
consent shall be effective, but only in the specific instance and for the
specific purpose for which given; provided, however, that no such
waiver, amendment, or consent shall, unless in writing and signed by all
of the
Lenders directly affected thereby and Borrower, do any of the
following:
(a) increase
or extend any Commitment of any Lender,
(b) postpone
or delay any date fixed by this Agreement or any other Loan Document for
any
payment of principal, interest, fees, or other amounts due hereunder or under
any other Loan Document,
(c) reduce
the principal of, or the rate of interest on, any loan or other extension
of
credit hereunder, or reduce any fees or other amounts payable hereunder or
under
any other Loan Document,
(d) change
the Pro Rata Share that is required to take any action hereunder,
(e) amend
or
modify this Section or any provision of this Agreement providing for consent
or
other action by all Lenders,
(f) other
than as permitted by Section 15.11, release Agent’s Lien in and to any of
the Collateral,
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(g) change
the definition of “Required Lenders” or “Pro Rata Share”,
(h) contractually
subordinate any of Agent’s Liens,
(i) other
than in connection with a merger, liquidation, dissolution or sale of such
Person expressly permitted by the terms hereof or the other Loan Documents,
release Borrower or any Guarantor from any obligation for the payment of
money,
(j) amend
any
of the provisions of Section 2.4(b)(i) or (ii),
(k) change
the definition of Borrowing Base, Maximum Revolver Amount, Term Loan Amount,
or
change Section 2.1(b), or
(l) amend
any
of the provisions of Section 15.
and,
provided further, however, that no amendment, waiver or consent
shall, unless in writing and signed by Agent, Issuing Lender, or Swing Lender,
as applicable, affect the rights or duties of Agent, Issuing Lender, or Swing
Lender, as applicable, under this Agreement or any other Loan
Document. The foregoing notwithstanding, any amendment, modification,
waiver, consent, termination, or release of, or with respect to, any provision
of this Agreement or any other Loan Document that relates only to the
relationship of the Lender Group among themselves, and that does not affect
the
rights or obligations of Borrower, shall not require consent by or the agreement
of Borrower.
14.2 Replacement
of Lenders.
(a) If
(i) any action to be taken by the Lender Group or Agent hereunder requires
the
consent, authorization, or agreement of all Lenders, and a Lender (“Holdout
Lender”) fails to give its consent, authorization, or agreement, or (ii) any
Lender (an “Increased Cost Lender”; Increased Cost Lenders and Holdout
Lenders are each referred to herein as “Replaceable Lenders”) shall give
notice to Borrowers that such Lender is entitled to receive payments under
Section 2.13(d)(i) or Section 2.14, then
Agent or Borrower, upon at least 5 Business Days prior irrevocable notice
to the
Replaceable Lender, may permanently replace the Replaceable Lender with one
or
more substitute Lenders (each, a “Replacement Lender”; provided that
neither Borrower or Guarantor nor any Affiliate of Borrower or Guarantor
or of
Permitted Holders shall be permitted to become a Replacement Lender), and
the
Replaceable Lender shall have no right to refuse to be replaced
hereunder. Such notice to replace the Replaceable Lender shall
specify an effective date for such replacement, which date shall not be later
than 15 Business Days after the date such notice is given.
(b) Prior
to the effective date of such replacement, the Replaceable Lender and each
Replacement Lender shall execute and deliver an Assignment and Acceptance,
subject only to the Replaceable Lender being repaid its share of the outstanding
Obligations (including an assumption of its Pro Rata Share of the Risk
Participation Liability) without any premium or penalty of any kind
whatsoever. If the Replaceable Lender shall refuse or fail to execute
and deliver any such Assignment and Acceptance prior to the effective date
of
such replacement, the Replaceable Lender shall be deemed to have executed
and
delivered such Assignment and Acceptance. The replacement of any
Replaceable Lender shall be made in accordance with the terms of Section
13.1. Until such time as the Replacement Lenders shall have
acquired all of the Obligations, the Commitments, and the other rights and
obligations of the Replaceable Lender hereunder and under the other Loan
Documents, the Replaceable Lender shall remain obligated to make the Replaceable
Lender’s Pro Rata Share of Advances and to purchase a participation in each
Letter of Credit, in an amount equal to its Pro Rata Share of the Risk
Participation Liability of such Letter of Credit.
14.3 No
Waivers; Cumulative Remedies. No
failure by Agent or any Lender to exercise any right, remedy, or option under
this Agreement or any other Loan Document, or delay by Agent or any Lender
in
exercising the same, will operate as a waiver thereof. No waiver by
Agent or any Lender will be effective unless it is in writing, and then only
to
the extent specifically stated. No waiver by Agent or any Lender on
any occasion shall affect or diminish Agent’s and each Lender’s rights
thereafter to require strict performance by Borrower of any provision of
this
Agreement. Agent’s and each Lender’s rights under this Agreement and
the other Loan Documents will be cumulative and not exclusive of any other
right
or remedy that Agent or any Lender may have.
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15. AGENT;
THE LENDER GROUP.
15.1 Appointment
and Authorization of Agent. Each
Lender hereby designates and appoints WFF as its representative under this
Agreement and the other Loan Documents and each Lender hereby irrevocably
authorizes Agent to execute and deliver each of the other Loan Documents
on its
behalf and to take such other action on its behalf under the provisions of
this
Agreement and each other Loan Document and to exercise such powers and perform
such duties as are expressly delegated to Agent by the terms of this Agreement
or any other Loan Document, together with such powers as are reasonably
incidental thereto. Agent agrees to act as such on the express
conditions contained in this Section 15. The provisions of this
Section 15 are solely for the benefit of Agent and the Lenders, and
Borrower and its Subsidiaries shall have no rights as a third party beneficiary
of any of the provisions contained herein, except with respect to Borrower’s
consultation rights set forth in Section 15.9 and Borrower’s right to
receive release documentation set forth in Section
15.11(a). Any provision to the contrary contained elsewhere in
this Agreement or in any other Loan Document notwithstanding, Agent shall
not
have any duties or responsibilities, except those expressly set forth herein,
nor shall Agent have or be deemed to have any fiduciary relationship with
any
Lender, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or any other
Loan
Document or otherwise exist against Agent; it being expressly understood
and
agreed that the use of the word “Agent” is for convenience only, that WFF is
merely the representative of the Lenders, and only has the contractual duties
set forth herein. Except as expressly otherwise provided in this
Agreement, Agent shall have and may use its sole discretion with respect
to
exercising or refraining from exercising any discretionary rights or taking
or
refraining from taking any actions that Agent expressly is entitled to take
or
assert under or pursuant to this Agreement and the other Loan
Documents. Without limiting the generality of the foregoing, or of
any other provision of the Loan Documents that provides rights or powers
to
Agent, Lenders agree that Agent shall have the right to exercise the following
powers as long as this Agreement remains in effect: (a) maintain, in
accordance with its customary business practices, ledgers and records reflecting
the status of the Obligations, the Collateral, the Collections of Borrower
and
its Subsidiaries, and related matters, (b) execute or file any and all financing
or similar statements or notices, amendments, renewals, supplements, documents,
instruments, proofs of claim, notices and other written agreements with respect
to the Loan Documents, (c) make Advances, for itself or on behalf of Lenders
as
provided in the Loan Documents, (d) exclusively receive, apply, and distribute
the Collections of Borrower and its Subsidiaries as provided in the Loan
Documents, (e) open and maintain such bank accounts and cash management
arrangements as Agent deems necessary and appropriate in accordance with
the
Loan Documents for the foregoing purposes with respect to the Collateral
and the
Collections of Borrower and its Subsidiaries, (f) perform, exercise, and
enforce any and all other rights and remedies of the Lender Group with respect
to Borrower or its Subsidiaries, the Obligations, the Collateral, the
Collections of Borrower and its Subsidiaries, or otherwise related to any
of
same as provided in the Loan Documents, and (g) incur and pay such Lender
Group
Expenses as Agent may deem necessary or appropriate for the performance and
fulfillment of its functions and powers pursuant to the Loan
Documents.
15.2 Delegation
of Duties. Agent
may execute any of its duties under this Agreement or any other Loan Document
by
or through agents, employees or attorneys in fact and shall be entitled to
advice of counsel concerning all matters pertaining to such
duties. Agent shall not be responsible for the negligence or
misconduct of any agent or attorney in fact that it selects as long as such
selection was made without gross negligence or willful
misconduct.
15.3 Liability
of Agent. None
of Agent-Related Persons shall (a) be liable for any action taken or omitted
to
be taken by any of them under or in connection with this Agreement or any
other
Loan Document or the transactions contemplated hereby (except for its own
gross
negligence or willful misconduct), or (b) be responsible in any manner to
any of
the Lenders for any recital, statement, representation or warranty made by
Borrower or any of its Subsidiaries or Affiliates, or any officer or director
thereof, contained in this Agreement or in any other Loan Document, or in
any
certificate, report, statement or other document referred to or provided
for in,
or received by Agent under or in connection with, this Agreement or any other
Loan Document, or the validity, effectiveness, genuineness, enforceability
or
sufficiency of this Agreement or any other Loan Document, or for any failure
of
Borrower or its Subsidiaries or any other party to any Loan Document to perform
its obligations hereunder or thereunder. No Agent-Related Person
shall be under any obligation to any Lender to ascertain or to inquire as
to the
observance or performance of any of the agreements contained in, or conditions
of, this Agreement or any other Loan Document, or to inspect the books and
records or properties of Borrower or its Subsidiaries.
15.4 Reliance
by Agent. Agent
shall be entitled to rely, and shall be fully protected in relying, upon
any
writing, resolution, notice, consent, certificate, affidavit, letter, telegram,
telefacsimile or other electronic method of transmission, telex or telephone
message, statement or other document or conversation believed by it to be
genuine and correct and to have been signed, sent, or made by the proper
Person
or Persons, and upon advice and statements of legal counsel (including counsel
to Borrower or counsel to any Lender), independent accountants and other
experts
selected by Agent. Agent shall be fully justified in failing or
refusing to take any action under this Agreement or any other Loan Document
unless Agent shall first receive such advice or concurrence of the Lenders
as it
deems appropriate and until such instructions are received, Agent shall act,
or
refrain from acting, as it deems advisable. If Agent so requests, it
shall first be indemnified to its reasonable satisfaction by the Lenders
against
any and all liability and expense that may be incurred by it by reason of
taking
or continuing to take any such action. Agent shall in all cases be
fully protected in acting, or in refraining from acting, under this Agreement
or
any other Loan Document in accordance with a request or consent of the requisite
Lenders and such request and any action taken or failure to act pursuant
thereto
shall be binding upon all of the Lenders.
15.5 Notice
of Default or Event of Default. Agent
shall not be deemed to have knowledge or notice of the occurrence of any
Default
or Event of Default, except with respect to defaults in the payment of
principal, interest, fees, and expenses required to be paid to Agent for
the
account of the Lenders and, except with respect to Events of Default of which
Agent has actual knowledge, unless Agent shall have received written notice
from
a Lender or Borrower referring to this Agreement, describing such Default
or
Event of Default, and stating that such notice is a “notice of
default.” Agent promptly will notify the Lenders of its receipt of
any such notice or of any Event of Default of which Agent has actual
knowledge. If any Lender obtains actual knowledge of any Event of
Default, such Lender promptly shall notify the other Lenders and Agent of
such
Event of Default. Each Lender shall be solely responsible for giving
any notices to its Participants, if any. Subject to Section
15.4, Agent shall take such action with respect to such Default or Event
of
Default as may be requested by the Required Lenders in accordance with
Section 8; provided, however, that unless and until Agent
has received any such request, Agent may (but shall not be obligated to)
take
such action, or refrain from taking such action, with respect to such Default
or
Event of Default as it shall deem advisable.
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15.6 Credit
Decision. Each
Lender acknowledges that none of Agent-Related Persons has made any
representation or warranty to it, and that no act by Agent hereinafter taken,
including any review of the affairs of Borrower and its Subsidiaries or
Affiliates, shall be deemed to constitute any representation or warranty
by any
Agent-Related Person to any Lender. Each Lender represents to Agent
that it has, independently and without reliance upon any Agent-Related Person
and based on such documents and information as it has deemed appropriate,
made
its own appraisal of and investigation into the business, prospects, operations,
property, financial and other condition and creditworthiness of Borrower
or any
other Person party to a Loan Document, and all applicable bank regulatory
laws
relating to the transactions contemplated hereby, and made its own decision
to
enter into this Agreement and to extend credit to Borrower. Each
Lender also represents that it will, independently and without reliance upon
any
Agent-Related Person and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action under this Agreement
and
the other Loan Documents, and to make such investigations as it deems necessary
to inform itself as to the business, prospects, operations, property, financial
and other condition and creditworthiness of Borrower or any other Person
party
to a Loan Document. Except for notices, reports, and other documents
expressly herein required to be furnished to the Lenders by Agent, Agent
shall
not have any duty or responsibility to provide any Lender with any credit
or
other information concerning the business, prospects, operations, property,
financial and other condition or creditworthiness of Borrower or any other
Person party to a Loan Document that may come into the possession of any
of
Agent-Related Persons.
15.7 Costs
and Expenses; Indemnification. Agent
may incur and pay Lender Group Expenses to the extent Agent reasonably deems
necessary or appropriate for the performance and fulfillment of its functions,
powers, and obligations pursuant to the Loan Documents, including court costs,
attorneys fees and expenses, fees and expenses of financial accountants,
advisors, consultants, and appraisers, costs of collection by outside collection
agencies, auctioneer fees and expenses, and costs of security guards or
insurance premiums paid to maintain the Collateral, whether or not Borrower
is
obligated to reimburse Agent or Lenders for such expenses pursuant to this
Agreement or otherwise. Agent is authorized and directed to deduct
and retain sufficient amounts from the Collections of Borrower and its
Subsidiaries received by Agent to reimburse Agent for such out-of-pocket
costs
and expenses prior to the distribution of any amounts to Lenders. In
the event Agent is not reimbursed for such costs and expenses by Borrower
or its
Subsidiaries, each Lender hereby agrees that it is and shall be obligated
to pay
to Agent such Lender’s Pro Rata Share thereof. Whether or not the
transactions contemplated hereby are consummated, the Lenders shall indemnify
upon demand Agent-Related Persons (to the extent not reimbursed by or on
behalf
of Borrower and without limiting the obligation of Borrower to do so), according
to their Pro Rata Shares, from and against any and all Indemnified Liabilities;
provided, however, that no Lender shall be liable for the payment
to any Agent-Related Person of any portion of such Indemnified Liabilities
resulting solely from such Person’s gross negligence or willful misconduct nor
shall any Lender be liable for the obligations of any Defaulting Lender in
failing to make an Advance or other extension of credit
hereunder. Without limitation of the foregoing, each Lender shall
reimburse Agent upon demand for such Lender’s Pro Rata Share of any costs or out
of pocket expenses (including attorneys, accountants, advisors, and consultants
fees and expenses) incurred by Agent in connection with the preparation,
execution, delivery, administration, modification, amendment, or enforcement
(whether through negotiations, legal proceedings or otherwise) of, or legal
advice in respect of rights or responsibilities under, this Agreement, any
other
Loan Document, or any document contemplated by or referred to herein, to
the
extent that Agent is not reimbursed for such expenses by or on behalf of
Borrower. The undertaking in this Section shall survive the payment
of all Obligations hereunder and the resignation or replacement of
Agent.
15.8 Agent
in Individual Capacity. WFF
and its Affiliates may make loans to, issue letters of credit for the account
of, accept deposits from, acquire equity interests in, and generally engage
in
any kind of banking, trust, financial advisory, underwriting, or other business
with Borrower and its Subsidiaries and Affiliates and any other Person party
to
any Loan Documents as though WFF were not Agent hereunder, and, in each case,
without notice to or consent of the other members of the Lender
Group. The other members of the Lender Group acknowledge that,
pursuant to such activities, WFF or its Affiliates may receive information
regarding Borrower or its Affiliates or any other Person party to any Loan
Documents that is subject to confidentiality obligations in favor of Borrower
or
such other Person and that prohibit the disclosure of such information to
the
Lenders, and the Lenders acknowledge that, in such circumstances (and in
the
absence of a waiver of such confidentiality obligations, which waiver Agent
will
use its reasonable best efforts to obtain), Agent shall not be under any
obligation to provide such information to them. The terms “Lender”
and “Lenders” include WFF in its individual capacity.
15.9 Successor
Agent. Agent
may resign as Agent upon forty-five (45) days notice to the Lenders (unless
such
notice is waived by the Required Lenders). If Agent resigns under
this Agreement, the Required Lenders, in consultation with Borrower, shall
have
the right to appoint a successor Agent for the Lenders; provided that
after the occurrence and during the continuation of a Default or an Event
of
Default, the Required Lenders shall have no obligation to consult Borrower
prior
to appointing a successor Agent. If no successor Agent is appointed prior
to the effective date of the resignation or removal of Agent, Agent may appoint,
after consulting with the Lenders, a successor Agent. At any time,
Agent may be removed upon prior notice from the Required Lenders to Agent
and
the other Lenders. If Agent has been removed by the Required Lenders, Required
Lenders may agree in writing to replace Agent with a successor Agent from
among
the Lenders. In any such event, upon the acceptance of its
appointment as successor Agent hereunder, such successor Agent shall succeed
to
all the rights, powers, and duties of the retiring Agent and the term “Agent”
shall mean such successor Agent and the retiring Agent’s appointment, powers,
and duties as Agent shall be terminated. The fees payable by Borrower
to a successor Agent shall be the same as those payable to its predecessor
unless otherwise agreed between Borrower and such successor. After
any retiring Agent’s resignation hereunder as Agent, the provisions of this
Section 15 shall inure to its benefit as to any actions taken or omitted
to be taken by it while it was Agent under this Agreement. If no
successor Agent has accepted appointment as Agent by the date which is
forty-five (45) days following a retiring Agent’s notice of resignation, the
retiring Agent’s resignation shall nevertheless thereupon become effective and
the Lenders shall perform all of the duties of Agent hereunder until such
time,
if any, as the Lenders appoint a successor Agent as provided for
above.
15.10 Lender
in Individual Capacity.
Any Lender and its respective Affiliates may make loans to, issue letters
of
credit for the account of, accept deposits from, acquire equity interests
in and
generally engage in any kind of banking, trust, financial advisory,
underwriting, or other business with Borrower and its Subsidiaries and
Affiliates and any other Person party to any Loan Documents as though such
Lender were not a Lender hereunder without notice to or consent of the other
members of the Lender Group. The other members of the Lender Group
acknowledge that, pursuant to such activities, such Lender and its respective
Affiliates may receive information regarding Borrower or its Affiliates or
any
other Person party to any Loan Documents that is subject to confidentiality
obligations in favor of Borrower or such other Person and that prohibit the
disclosure of such information to the Lenders, and the Lenders acknowledge
that,
in such circumstances (and in the absence of a waiver of such confidentiality
obligations, which waiver such Lender will use its reasonable best efforts
to
obtain), such Lender shall not be under any obligation to provide such
information to them.
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15.11 Collateral
Matters.
(a) The
Lenders hereby irrevocably authorize Agent, at its option and in its sole
discretion, to release any Lien on any Collateral or other collateral securing
the Obligations (i) upon the termination of the Commitments and payment and
satisfaction in full by Borrower of all Obligations, (ii) constituting property
being sold or disposed of if a release is required or desirable in connection
therewith and if Borrower certifies to Agent that the sale or disposition
is
permitted under Section 6.4 of this Agreement or the other Loan Documents
(and Agent may rely conclusively on any such certificate, without further
inquiry), (iii) constituting property in which Borrower or its Subsidiaries
owned no interest at the time Agent’s Lien was granted nor at any time
thereafter, or (iv) constituting property leased to Borrower or its
Subsidiaries under a lease that has expired or is terminated in a transaction
permitted under this Agreement. Except as provided above, Agent will
not execute and deliver a release of any Lien on any Collateral or other
collateral securing the Obligations without the prior written authorization
of
(y) if the release is of all or substantially all of the Collateral, all
of the
Lenders, or (z) otherwise, the Required Lenders. Upon request by
Agent or Borrower at any time, the Lenders will confirm in writing Agent’s
authority to release any such Liens on particular types or items of Collateral
or other collateral securing the Obligations pursuant to this Section
15.11. Upon receipt (i) by Agent of any confirmation
from all of the Lenders or the Required Lenders, as applicable, or (ii) the
occurrence of an event described above for which collateral release does
not
require the approval of any Lender and upon at least ten (10) Business Days’ (or
such shorter period as may be approved by Agent) prior written request by
Borrower, Agent shall (and is hereby irrevocably authorized by Lenders to)
execute such documents as may be necessary to evidence the release of the
Liens
granted to Agent upon such Collateral or other collateral securing the
Obligations; provided, however, that (1) Agent shall not be
required to execute any document necessary to evidence such release on terms
that, in Agent’s opinion, would expose Agent to liability or create any
obligation or entail any consequence other than the release of such Lien
without
recourse, representation, or warranty, and (2) such release shall not in
any
manner discharge, affect, or impair the Obligations or any Liens (other than
those expressly being released) upon (or obligations of Borrower in respect
of)
all interests retained by Borrower, including, the proceeds of any sale,
all of
which shall continue to constitute part of the Collateral.
(b) Agent
shall have no obligation whatsoever to any of the Lenders to assure that
the
Collateral exists or is owned by Borrower or its Subsidiaries or is cared
for,
protected, or insured or has been encumbered, or that Agent’s Liens have been
properly or sufficiently or lawfully created, perfected, protected, or enforced
or are entitled to any particular priority, or to exercise at all or in any
particular manner or under any duty of care, disclosure or fidelity, or to
continue exercising, any of the rights, authorities and powers granted or
available to Agent pursuant to any of the Loan Documents, it being understood
and agreed that in respect of the Collateral, or any act, omission, or event
related thereto, subject to the terms and conditions contained herein, Agent
may
act in any manner it may deem appropriate, in its sole discretion given Agent’s
own interest in the Collateral in its capacity as one of the Lenders and
that
Agent shall have no other duty or liability whatsoever to any Lender as to
any
of the foregoing, except as otherwise provided herein.
15.12 Restrictions
on Actions by Lenders; Sharing of Payments.
(a) Each
of
the Lenders agrees that it shall not, without the express written consent
of
Agent, and that it shall, to the extent it is lawfully entitled to do so,
upon
the written request of Agent, set off against the Obligations, any amounts
owing
by such Lender to Borrower or its Subsidiaries or any deposit accounts of
Borrower or its Subsidiaries now or hereafter maintained with such
Lender. Each of the Lenders further agrees that it shall not, unless
specifically requested to do so in writing by Agent, take or cause to be
taken
any action, including, the commencement of any legal or equitable proceedings
to
enforce any Loan Document against Borrower or any Guarantor or to foreclose
any
Lien on, or otherwise enforce any security interest in, any of the
Collateral.
(b) If,
at
any time or times any Lender shall receive (i) by payment, foreclosure, setoff,
or otherwise, any proceeds of Collateral or any payments with respect to
the
Obligations, except for any such proceeds or payments received by such Lender
from Agent pursuant to the terms of this Agreement, or (ii) payments from
Agent in excess of such Lender’s Pro Rata Share of all such distributions by
Agent, such Lender promptly shall (A) turn the same over to Agent, in kind,
and
with such endorsements as may be required to negotiate the same to Agent,
or in
immediately available funds, as applicable, for the account of all of the
Lenders and for application to the Obligations in accordance with the applicable
provisions of this Agreement, or (B) purchase, without recourse or warranty,
an
undivided interest and participation in the Obligations owed to the other
Lenders so that such excess payment received shall be applied ratably as
among
the Lenders in accordance with their Pro Rata Shares; provided,
however, that to the extent that such excess payment received by
the
purchasing party is thereafter recovered from it, those purchases of
participations shall be rescinded in whole or in part, as applicable, and
the
applicable portion of the purchase price paid therefor shall be returned
to such
purchasing party, but without interest except to the extent that such purchasing
party is required to pay interest in connection with the recovery of the
excess
payment.
15.13 Agency
for Perfection. Agent
hereby appoints each other Lender as its agent (and each Lender hereby accepts
such appointment) for the purpose of perfecting Agent’s Liens in assets which,
in accordance with Article 8 or Article 9, as applicable, of the Code can
be
perfected only by possession or control. Should any Lender obtain
possession or control of any such Collateral, such Lender shall notify Agent
thereof, and, promptly upon Agent’s request therefor shall deliver possession or
control of such Collateral to Agent or in accordance with Agent’s
instructions.
15.14 Payments
by Agent to the Lenders. All
payments to be made by Agent to the Lenders shall be made by bank wire transfer
of immediately available funds pursuant to such wire transfer instructions
as
each party may designate for itself by written notice to
Agent. Concurrently with each such payment, Agent shall identify
whether such payment (or any portion thereof) represents principal, premium,
fees, or interest of the Obligations.
15.15 Concerning
the Collateral and Related Loan Documents. Each
member of the Lender Group authorizes and directs Agent to enter into this
Agreement and the other Loan Documents. Each member of the Lender
Group agrees that any action taken by Agent in accordance with the terms
of this
Agreement or the other Loan Documents relating to the Collateral and the
exercise by Agent of its powers set forth therein or herein, together with
such
other powers that are reasonably incidental thereto, shall be binding upon
all
of the Lenders.
15.16 Field
Audits and Examination Reports; Confidentiality; Disclaimers by Lenders;
Other
Reports and Information. By
becoming a party to this Agreement, each Lender:
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(a) is
deemed
to have requested that Agent furnish such Lender, promptly after it becomes
available, a copy of each field audit or examination report respecting Borrower
or its Subsidiaries (each a “Report” and collectively, “Reports”)
prepared by or at the request of Agent, and Agent shall so furnish each Lender
with such Reports,
(b) expressly
agrees and acknowledges that Agent does not (i) make any representation or
warranty as to the accuracy of any Report, and (ii) shall not be liable for
any
information contained in any Report,
(c) expressly
agrees and acknowledges that the Reports are not comprehensive audits or
examinations, that Agent or other party performing any audit or examination
will
inspect only specific information regarding Borrower and its Subsidiaries
and
will rely significantly upon Borrower’s and its Subsidiaries’ books and records,
as well as on representations of Borrower’s personnel,
(d) agrees
to
keep all Reports and other material, non-public information regarding Borrower
and its Subsidiaries and their operations, assets, and existing and contemplated
business plans in a confidential manner in accordance with Section 17.9,
and
(e) without
limiting the generality of any other indemnification provision contained
in this
Agreement, agrees: (i) to hold Agent and any other Lender preparing a Report
harmless from any action the indemnifying Lender may take or fail to take
or any
conclusion the indemnifying Lender may reach or draw from any Report in
connection with any loans or other credit accommodations that the indemnifying
Lender has made or may make to Borrower, or the indemnifying Lender’s
participation in, or the indemnifying Lender’s purchase of, a loan or loans of
Borrower, and (ii) to pay and protect, and indemnify, defend and hold Agent,
and
any such other Lender preparing a Report harmless from and against, the claims,
actions, proceedings, damages, costs, expenses, and other amounts (including,
attorneys fees and costs) incurred by Agent and any such other Lender preparing
a Report as the direct or indirect result of any third parties who might
obtain
all or part of any Report through the indemnifying Lender.
In
addition to the foregoing: (x) any Lender may from time to time request of
Agent
in writing that Agent provide to such Lender a copy of any report or document
provided by Borrower or its Subsidiaries to Agent that has not been
contemporaneously provided by Borrower or such Subsidiary to such Lender,
and,
upon receipt of such request, Agent promptly shall provide a copy of same
to
such Lender, (y) to the extent that Agent is entitled, under any provision
of
the Loan Documents, to request additional reports or information from Borrower
or its Subsidiaries, any Lender may, from time to time, reasonably request
Agent
to exercise such right as specified in such Lender’s notice to Agent, whereupon
Agent promptly shall request of Borrower the additional reports or information
reasonably specified by such Lender, and, upon receipt thereof from Borrower
or
such Subsidiary, Agent promptly shall provide a copy of same to such Lender,
and
(z) any time that Agent renders to Borrower a statement regarding the Loan
Account, Agent shall send a copy of such statement to each Lender.
15.17 Several
Obligations; No Liability. Notwithstanding
that certain of the Loan Documents now or hereafter may have been or will
be
executed only by or in favor of Agent in its capacity as such, and not by
or in
favor of the Lenders, any and all obligations on the part of Agent (if any)
to
make any credit available hereunder shall constitute the several (and not
joint)
obligations of the respective Lenders on a ratable basis, according to their
respective Commitments, to make an amount of such credit not to exceed, in
principal amount, at any one time outstanding, the amount of their respective
Commitments. Nothing contained herein shall confer upon any Lender
any interest in, or subject any Lender to any liability for, or in respect
of,
the business, assets, profits, losses, or liabilities of any other
Lender. Each Lender shall be solely responsible for notifying its
Participants of any matters relating to the Loan Documents to the extent
any
such notice may be required, and no Lender shall have any obligation, duty,
or
liability to any Participant of any other Lender. Except as provided
in Section 15.7, no member of the Lender Group shall have any liability
for the acts of any other member of the Lender Group. No Lender shall
be responsible to Borrower or any other Person for any failure by any other
Lender to fulfill its obligations to make credit available hereunder, nor
to
advance for it or on its behalf in connection with its Commitment, nor to
take
any other action on its behalf hereunder or in connection with the financing
contemplated herein.
16. WITHHOLDING
TAXES.
(a) All
payments made by any Loan Party hereunder or under any note or other Loan
Document will be made without setoff, counterclaim, or other
defense. In addition, all such payments will be made free and clear
of, and without deduction or withholding for, any present or future Indemnified
Taxes and Other Taxes, and in the event any deduction or withholding of
Indemnified Taxes and Other Taxes is required, each Loan Party shall comply
with
the penultimate sentence of this Section 16(a). If any
Indemnified Taxes and Other Taxes are so levied or imposed, each Loan Party
agrees to pay the full amount of such Indemnified Taxes and Other Taxes and
such
additional amounts as may be necessary so that every payment of all amounts
due
under this Agreement, any note, or Loan Document, including any amount paid
pursuant to this Section 16(a) after withholding or deduction for or on
account of any Indemnified Taxes and Other Taxes, will not be less than the
amount provided for herein; provided, however, that no such Loan Party shall
be
required to increase any such amounts if the increase in such amount payable
results from Agent’s or such Lender’s own willful misconduct or gross negligence
(as finally determined by a court of competent jurisdiction). Each
Loan Party will furnish to Agent as promptly as possible after the date the
payment of any Indemnified Tax and Other Tax is due pursuant to applicable
law
certified copies of tax receipts evidencing such payment by such Loan
Party.
(b) If
a
Lender claims an exemption from United States withholding tax, Lender agrees
with and in favor of Agent and Borrower, to deliver to Agent:
(i) if
such
Lender claims an exemption from United States withholding tax pursuant to
its
portfolio interest exception, (A) a statement of the Lender, signed under
penalty of perjury, that it is not a (I) a “bank” as described in Section
881(c)(3)(A) of the IRC, (II) a 10% shareholder of Borrower (within the meaning
of Section 871(h)(3)(B) of the IRC), or (III) a controlled foreign corporation
related to Borrower within the meaning of Section 864(d)(4) of the IRC, and
(B)
a properly completed and executed IRS Form W-8BEN, before receiving its first
payment under this Agreement and at any other time reasonably requested by
Agent
or Borrower;
(ii) if
such
Lender claims an exemption from, or a reduction of, withholding tax under
a
United States tax treaty, properly completed and executed IRS Form W-8BEN
before
receiving its first payment under this Agreement and at any other time
reasonably requested by Agent or Borrower;
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(iii) if
such
Lender claims that interest paid under this Agreement is exempt from United
States withholding tax because it is effectively connected with a United
States
trade or business of such Lender, two properly completed and executed copies
of
IRS Form W-8ECI before receiving its first payment under this Agreement and
at
any other time reasonably requested by Agent or Borrower; or
(iv) such
other form or forms, including IRS Form W-9, as may be required under the
IRC or
other laws of the United States as a condition to exemption from, or reduction
of, United States withholding or backup withholding tax before receiving
its
first payment under this Agreement and at any other time reasonably requested
by
Agent or Borrower.
Lender
agrees promptly to notify Agent and Borrower of any change in circumstances
which would modify or render invalid any claimed exemption or
reduction.
(c) If
a
Lender claims an exemption from withholding tax in a jurisdiction other than
the
United States, Lender agrees with and in favor of Agent and Borrower, to
deliver
to Agent any such form or forms, as may be required under the laws of such
jurisdiction as a condition to exemption from, or reduction of, foreign
withholding or backup withholding tax before receiving its first payment
under
this Agreement and at any other time reasonably requested by Agent or
Borrower.
Lender
agrees promptly to notify Agent and Borrower of any change in circumstances
which would modify or render invalid any claimed exemption or
reduction.
(d) If
any
Lender claims exemption from, or reduction of, withholding tax and such Lender
sells, assigns, grants a participation in, or otherwise transfers all or
part of
the Obligations of Borrower to such Lender, such Lender agrees to notify
Agent
and Borrower of the percentage amount in which it is no longer the
beneficial owner of Obligations of Borrower to such Lender. To the
extent of such percentage amount, Agent and Borrower will treat such Lender’s
documentation provided pursuant to Sections 16(b) or 16(c) as no longer
valid. With respect to such percentage amount, Lender may provide new
documentation, pursuant to Sections 16(b) or 16(c), if
applicable.
(e) If
any
Lender is entitled to a reduction in the applicable withholding tax, Agent
may
withhold from any interest payment to such Lender an amount equivalent to
the
applicable withholding tax after taking into account such
reduction. If the forms or other documentation required by
subsection (b) or (c) of this Section 16 are not delivered to
Agent, then Agent may withhold from any interest payment to such Lender not
providing such forms or other documentation an amount equivalent to the
applicable withholding tax.
(f) If
the
IRS or any other Governmental Authority of the United States or other
jurisdiction asserts a claim that Agent did not properly withhold tax from
amounts paid to or for the account of any Lender due to a failure on the
part of
the Lender (because the appropriate form was not delivered, was not properly
executed, or because such Lender failed to notify Agent of a change in
circumstances which rendered the exemption from, or reduction of, withholding
tax ineffective, or for any other reason) such Lender shall indemnify and
hold
Agent harmless for all amounts paid, directly or indirectly, by Agent, as
tax or
otherwise, including penalties and interest, and including any taxes imposed
by
any jurisdiction on the amounts payable to Agent under this Section 16,
together with all costs and expenses (including attorneys fees and
expenses). The obligation of the Lenders under this subsection shall
survive the payment of all Obligations and the resignation or replacement
of
Agent.
17. GENERAL
PROVISIONS.
17.1 Effectiveness. This
Agreement shall be binding and deemed effective when executed by Borrower,
Agent, and each Lender whose signature is provided for on the signature pages
hereof.
17.2 Section
Headings. Headings
and numbers have been set forth herein for convenience only. Unless
the contrary is compelled by the context, everything contained in each Section
applies equally to this entire Agreement.
17.3 Interpretation. Neither
this Agreement nor any uncertainty or ambiguity herein shall be construed
against the Lender Group or Borrower, whether under any rule of construction
or
otherwise. On the contrary, this Agreement has been reviewed by all
parties and shall be construed and interpreted according to the ordinary
meaning
of the words used so as to accomplish fairly the purposes and intentions
of all
parties hereto.
17.4 Severability
of Provisions. Each
provision of this Agreement shall be severable from every other provision
of
this Agreement for the purpose of determining the legal enforceability of
any
specific provision.
17.5 Bank
Product Providers. Each
Bank Product Provider shall be deemed a party hereto for purposes of any
reference in a Loan Document to the parties for whom Agent is acting; it
being
understood and agreed that the rights and benefits of such Bank Product Provider
under the Loan Documents consist exclusively of such Bank Product Provider’s
right to share in payments and collections out of the Collateral as more
fully
set forth herein. In connection with any such distribution of payments and
collections, Agent shall be entitled to assume no amounts are due to any
Bank
Product Provider unless such Bank Product Provider has notified Agent in
writing
of the amount of any such liability owed to it prior to such
distribution.
17.6 Lender-Creditor
Relationship. The
relationship between the Lenders and Agent, on the one hand, and Borrower,
on
the other hand, is solely that of creditor and debtor. No member of
the Lender Group has (or shall be deemed to have) any fiduciary relationship
or
duty to Borrower arising out of or in connection with, and there is no agency
or
joint venture relationship between the members of the Lender Group, on the
one
hand, and Borrower, on the other hand, by virtue of any Loan Document or
any
transaction contemplated therein.
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17.7 Counterparts;
Electronic Execution. This
Agreement may be executed in any number of counterparts and by different
parties
on separate counterparts, each of which, when executed and delivered, shall
be
deemed to be an original, and all of which, when taken together, shall
constitute but one and the same Agreement. Delivery of an executed
counterpart of this Agreement by telefacsimile or other electronic method
of
transmission shall be equally as effective as delivery of an original executed
counterpart of this Agreement. Any party delivering an executed
counterpart of this Agreement by telefacsimile or other electronic method
of
transmission also shall deliver an original executed counterpart of this
Agreement but the failure to deliver an original executed counterpart shall
not
affect the validity, enforceability, and binding effect of this
Agreement. The foregoing shall apply to each other Loan Document
mutatis mutandis.
17.8 Revival
and Reinstatement of Obligations. If
the incurrence or payment of the Obligations by Borrower or Guarantor or
the
transfer to the Lender Group of any property should for any reason subsequently
be declared to be void or voidable under any state or federal law relating
to
creditors’ rights, including provisions of the Bankruptcy Code relating to
fraudulent conveyances, preferences, or other voidable or recoverable payments
of money or transfers of property (each, a “Voidable Transfer”), and if
the Lender Group is required to repay or restore, in whole or in part, any
such
Voidable Transfer, or elects to do so upon the reasonable advice of its counsel,
then, as to any such Voidable Transfer, or the amount thereof that the Lender
Group is required or elects to repay or restore, and as to all reasonable
costs,
expenses, and attorneys fees of the Lender Group related thereto, the liability
of Borrower or Guarantor automatically shall be revived, reinstated, and
restored and shall exist as though such Voidable Transfer had never been
made.
17.9 Confidentiality.
(a) Agent
and
Lenders each individually (and not jointly or jointly and severally) agree
that
material, non-public information regarding Borrower and its Subsidiaries,
their
operations, assets, and existing and contemplated business plans shall be
treated by Agent and the Lenders in a confidential manner, and shall not
be
disclosed by Agent and the Lenders to Persons who are not parties to this
Agreement, except: (i) to attorneys for and other advisors,
accountants, auditors, and consultants to any member of the Lender Group
(it
being understood that the Persons to whom such disclosure is made will be
informed of the confidential nature of such information and instructed to
keep
such information confidential), (ii) to Subsidiaries and Affiliates of any
member of the Lender Group (including the Bank Product Providers), provided
that
any such Subsidiary or Affiliate shall have agreed to receive such information
hereunder subject to the terms of this Section 17.9, (iii) as may be
required by statute, decision, or judicial or administrative order, rule,
or
regulation, (iv) as may be agreed to in advance by Borrower or as requested
or
required by any Governmental Authority pursuant to any subpoena or other
legal
process, (v) as to any such information that is or becomes generally available
to the public (other than as a result of prohibited disclosure by Agent or
the
Lenders), (vi) in connection with any assignment, prospective assignment,
sale,
prospective sale, participation, prospective participation or pledge or
prospective or pledge of any Lender’s interest under this Agreement, provided
that any such assignee, prospective assignment, sale, prospective sale,
participation, prospective participation or pledge or prospective or pledgee
shall have agreed in writing to receive such information hereunder subject
to
the terms of this Section, and (vii) in connection with any litigation or
other
adversary proceeding involving parties hereto which such litigation or adversary
proceeding involves claims related to the rights or duties of such parties
under
this Agreement or the other Loan Documents. The provisions of this
Section 17.9(a) shall survive for two (2) years after the payment in full
of the Obligations.
(b) Anything
in this Agreement to the contrary notwithstanding, Agent may provide information
concerning the terms and conditions of this Agreement and the other Loan
Documents to loan syndication and pricing reporting services.
17.10 Lender
Group Expenses.
Lender Group Expenses shall become due and payable ten (10) days after receipt
of an invoice from the Agent setting forth in reasonable detail the Lender
Group
Expenses for which payment is being demanded. Borrower agrees to pay any
and all
Lender Group Expenses as set forth above and agrees that its
obligations contained in this Section 17.10 shall survive payment or
satisfaction in full of all other Obligations.
17.11 USA
PATRIOT Act.
Each Lender that is subject to the requirements of the USA Patriot Act (Title
111 of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”)
hereby notifies Borrower that pursuant to the requirements of the Act, it
is
required to obtain, verify and record information that identifies Borrower,
which information includes the name and address of Borrower and other
information that will allow such Lender to identify Borrower in accordance
with
the Act.
17.12 Integration. This
Agreement, together with the other Loan Documents, reflects the entire
understanding of the parties with respect to the transactions contemplated
hereby and shall not be contradicted or qualified by any other agreement,
oral
or written, before the date hereof.\
[Signature
pages to follow.]
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IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered as of the date first above written.
|
STORM
CAT ENERGY (USA) CORPORATION,
as
Borrower
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||
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By:
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/s/
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Name:
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ | |
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Title:
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Chief Executive Officer | |
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▇▇▇▇▇
FARGO FOOTHILL, LLC,
as
Agent and as a Lender
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||
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By:
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/s/
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
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Name:
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ | |
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Title:
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Vice-President | |
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REGIMENT
CAPITAL SPECIAL SITUATIONS FUND III, L.P., as a Lender
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||
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By: Regiment
Capital GP, LLC
its
General Partner
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||
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By:
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/s/
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Name:
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ | |
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Title:
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Authorized Signatory | |
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Address
for Notice:
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||
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▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇
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||
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▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
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||
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Attn:
▇▇▇▇ ▇’▇▇▇▇
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||
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Fax
No.: (▇▇▇) ▇▇▇-▇▇▇▇
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-42-
Schedule
1.1
As
used
in the Agreement, the following terms shall have the following
definitions:
“Account”
means an account (as that term is defined in the Code).
“Account
Debtor” means any Person who is obligated on an Account, chattel paper, or a
general intangible.
“ACH
Transactions” means any cash management or related services (including the
Automated Clearing House processing of electronic fund transfers through
the
direct Federal Reserve Fedline system) provided by a Bank Product Provider
for
the account of Parent or its Subsidiaries.
“Act”
has the meaning specified therefor in Section 17.11.
“Additional
Documents” has the meaning specified therefor in Section
5.16.
“Advances”
has the meaning specified therefor in Section 2.1(a).
“Affiliate”
shall mean, with respect to any Person, (a) each Person that, directly or
indirectly, owns or controls, whether beneficially, or as a trustee, guardian
or
other fiduciary or a joint venturer or partner, ten percent (10%) or more
of the
Stock having ordinary voting power in the election of directors of such Persons,
(b) each Person that controls, is controlled by or is under common control
with
such Person, (c) each of such Person’s officers, directors, joint venturers and
partners (in the case of joint venturers and partners, to the extent covered
by
clause (a)), and (d) in the case of any Loan Party, the immediate family
members, spouses and lineal descendants of individuals who are Affiliates
of any
Loan Party. For the purposes of this definition, “control” of
a Person shall mean the possession, directly or indirectly, of the power
to
direct or cause the direction of its management or policies, whether through
the
ownership of voting securities, by contract or otherwise; provided,
however, that the term “Affiliate” shall specifically exclude
Agent and each Lender.
“Agent”
has the meaning specified therefor in the preamble to the
Agreement.
“Agent-Related
Persons” means Agent, together with its Affiliates, officers, directors,
employees, attorneys, and agents.
“Agent’s
Account” means the Deposit Account of Agent identified on Schedule
A-1.
“Agent’s
Liens” mean the Liens granted by Parent or its Subsidiaries to Agent under
the Loan Documents.
“Agreement”
means the Credit Agreement to which this Schedule 1.1 is
attached.
“Approved
Counterparty” means (a) any Lender or any Affiliate of a Lender, or (b) any
other Person whose long term senior unsecured debt rating is A-/A3 by S&P or
▇▇▇▇▇’▇ (or their equivalent) or higher.
“Approved
Fund” means any Fund that is administered or managed by (a) a Lender, (b) an
Affiliate of a Lender or (c) an entity or an Affiliate of an entity that
administers or manages a Lender.
“Asset
Coverage Ratio” means, as of any date of determination (a) Parent’s
Total Reserve Value as of such date, divided by (b) the amount of
Parent’s Total Debt as of such date.
“Assignee”
has the meaning specified therefor in Section 13.1(a).
“Assignment
and Acceptance” means an Assignment and Acceptance Agreement substantially
in the form of Exhibit A-1.
“Authorized
Person” means any one of the individuals identified on Schedule
A-2.
“Availability”
means, as of any date of determination, the amount that Borrower is entitled
to
borrow as Advances under Section 2.1 of the Agreement (after giving
effect to all then outstanding Obligations (other than Bank Product Obligations)
and all sublimits and reserves then applicable hereunder).
“Bank
Product” means any financial accommodation extended to Borrower or its
Subsidiaries by a Bank Product Provider (other than pursuant to the Agreement)
including: (a) credit cards, (b) credit card processing services, (c)
debit cards, (d) purchase cards, (e) ACH Transactions, (f) cash management,
including controlled disbursement, accounts or services, or (g) transactions
under Swap Agreements.
“Bank
Product Agreements” means those agreements entered into from time to time by
Parent or its Subsidiaries with a Bank Product Provider in connection with
the
obtaining of any of the Bank Products.
“Bank
Product Collateralization” means providing cash collateral (pursuant to
documentation reasonably satisfactory to Agent) to be held by Agent for the
benefit of the Bank Product Providers in an amount determined by Agent as
sufficient to satisfy the reasonably estimated credit exposure with respect
to
the then existing Bank Products.
-43-
“Bank
Product Obligations” means all obligations, liabilities, contingent
reimbursement obligations, fees, and expenses owing by Parent or its
Subsidiaries to any Bank Product Provider pursuant to or evidenced by the
Bank
Product Agreements and irrespective of whether for the payment of money,
whether
direct or indirect, absolute or contingent, due or to become due, now existing
or hereafter arising, and including all such amounts that Parent or its
Subsidiaries are obligated to reimburse to Agent or any member of the Lender
Group as a result of Agent or such member of the Lender Group purchasing
participations from, or executing indemnities or reimbursement obligations
to, a
Bank Product Provider with respect to the Bank Products provided by such
Bank
Product Provider to Parent or its Subsidiaries.
“Bank
Product Provider” means ▇▇▇▇▇ Fargo or any of its Affiliates.
“Bank
Product Reserve” means, as of any date of determination, the lesser of (a)
$1,000,000 and (b) an
amount equal to the amount of reserves that Agent has established (based
upon
the Bank Product Providers’ reasonable determination of the credit exposure of
Parent and its Subsidiaries in respect of Bank Products) in respect of Bank
Products then provided or outstanding.
“Bankruptcy
Code” means title 11 of the United States Code, as in effect from time to
time or under any other bankruptcy or insolvency law (including without
limitation, the Bankruptcy and Insolvency Act (Canada) and the Companies
Creditors Arrangement Act (Canada)).
“Base
LIBOR Rate” means the rate per annum, determined by Agent in accordance with
its customary procedures, and utilizing such electronic or other quotation
sources as it considers appropriate, to be the rate at which Dollar deposits
(for delivery on the first day of the requested Interest Period) are offered
to
major banks in the London interbank market two (2) Business Days prior to
the
commencement of the requested Interest Period, for a term and in an amount
comparable to the Interest Period and the amount of the LIBOR Rate Loan
requested (whether as an initial LIBOR Rate Loan or as a continuation of
a LIBOR
Rate Loan or as a conversion of a Base Rate Loan to a LIBOR Rate Loan) by
Borrower in accordance with the Agreement, which determination shall be
conclusive in the absence of manifest error; provided that for purposes of
the
Term Loan, such rate shall be the rate applicable to the rate on a one-,
two-,
three- or six-month LIBOR contract on the relevant date of determination
and
shall apply to the entire Term Loan.
“Base
Rate” means, the rate of interest announced, from time to time, within ▇▇▇▇▇
Fargo at its principal office in San Francisco as its “prime rate”, with the
understanding that the “prime rate” is one of ▇▇▇▇▇ Fargo’s base rates (not
necessarily the lowest of such rates) and serves as the basis upon which
effective rates of interest are calculated for those loans making reference
thereto and is evidenced by the recording thereof after its announcement
in such
internal publications as ▇▇▇▇▇ Fargo may designate. Notwithstanding the
foregoing, if at any time the Base Rate is less than 6.25%, the Base Rate
shall
be deemed to be 6.25% until such time as the Base Rate is at least equal
to
6.25%.
“Base
Rate Loan” means the portion of the Advances or the Term Loan that bears
interest at a rate determined by reference to the Base Rate.
“Base
Rate Margin” means (i) for purposes of determining the interest rate
applicable to the Term Loan or upon the occurrence of an event described
in
Section 2.13(d)(ii), 5.75% and (ii) for purposes of determining the
interest rate applicable to Base Rate Loans that are Advances, the applicable
Base Rate Margin set forth in the table below opposite the Borrowing Base
Utilization on the date of determination:
|
Tier
|
Borrowing
Base Utilization
|
Base
Rate Margin for Advances
|
|
I
|
<0.33
|
0.75%
|
|
II
|
>=0.33
< 0.66
|
1.00%
|
|
III
|
>=0.66
|
1.25%
|
“Benefit
Plan” means (i) a “defined benefit plan” (as defined in Section 3(35) of
ERISA) for which Borrower or any Subsidiary or ERISA Affiliate of Borrower
has
been an “employer” (as defined in Section 3(5) of ERISA) within the past six (6)
years or (ii) a “benefit plan” defined under any comparable foreign law that is
or was sponsored, maintained or contributed to by, or required to be contributed
by, Parent, any of its Subsidiaries or any of their respective ERISA
Affiliates.
“Board
of Directors” means the board of directors (or comparable managers) of
Borrower or any committee thereof duly authorized to act on behalf of the
board
of directors (or comparable managers).
“Borrower”
has the meaning specified therefor in the preamble to the
Agreement.
“Borrowing”
means a borrowing hereunder consisting of Advances made, converted or continued
on the same day by the Lenders (or Agent on behalf thereof) and, in the case
of
Advances that are LIBOR Rate Loans, as to which a single Interest Period
is in
effect, or by Swing Lender in the case of a Swing Loan, or by Agent in the
case
of a Protective Advance.
“Borrowing
Base” means, initially, Twenty-Five Million Dollars ($25,000,000), as set
forth in Section 2.1(c), or such other amount as may be determined pursuant
to
Section 2.1(d), as the same may be adjusted from time to time pursuant to
Section 5.21(d) or clause (g) of the definition of “Permitted
Dispositions.”
“Borrowing
Base Utilization” means the (i) the Revolver Usage divided by (ii) the
Borrowing Base.
“Business
Day” means any day that is not a Saturday, Sunday, or other day on which
banks are authorized or required to close in the state of New York, except
that,
if a determination of a Business Day shall relate to a LIBOR Rate Loan, the
term
“Business Day” also shall exclude any day on which banks are closed for dealings
in Dollar deposits in the London interbank market.
“Canadian
Pledge Agreement” means that certain Pledge and Security Agreement dated as
of the date hereof by Parent in favor of Agent.
“Capital
Expenditures” means, with respect to any Person for any period, the
aggregate of all expenditures by such Person and its Subsidiaries during
such
period that are capital expenditures as determined in accordance with GAAP,
whether such expenditures are paid in cash or financed.
-44-
“Capitalized
Lease Obligation” means that portion of the obligations under a Capital
Lease that is required to be capitalized in accordance with GAAP.
“Capital
Lease” means a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP.
“Cash
Equivalents” means (a) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States or issued by any agency
thereof
and backed by the full faith and credit of the United States, in each case
maturing within one (1) year from the date of acquisition thereof, (b)
marketable direct obligations issued by any state of the United States or
any
political subdivision of any such state or any public instrumentality thereof
maturing within one (1) year from the date of acquisition thereof and, at
the
time of acquisition, having one of the two highest ratings obtainable from
either Standard & Poor’s Rating Group (“S&P”) or ▇▇▇▇▇’▇
Investors Service, Inc. (“Moody’s”), (c) commercial paper maturing no
more than two hundred seventy (270) days from the date of creation thereof
and,
at the time of acquisition, having a rating of at least A-1 from S&P or at
least P-1 from Moody’s, (d) certificates of deposit, eurodollar-time deposits,
bankers’ acceptances maturing within one (1) year from the date of acquisition
thereof either (i) issued by any bank organized under the laws of the United
States or any state thereof which bank has a rating of A or A2, or better,
from
S&P or Moody’s, or (ii) certificates of deposit less than or equal to Fifty
Thousand Dollars ($50,000) in the aggregate issued by any other bank insured
by
the Federal Deposit Insurance Corporation, (e) Deposit Accounts maintained
with
(i) any bank that satisfies the criteria described in clause (d)(i)
above, or (ii) any other bank organized under the laws of the United States
or
any state thereof so long as the amount maintained with any such other bank
is
less than or equal to One Hundred Thousand Dollars ($100,000) and is insured
by
the Federal Deposit Insurance Corporation, (f) Investments in money market
funds
substantially all of whose assets are invested in the types of assets described
in clauses (a) through (e) above, and (g) repurchase obligations with a term
of
not more than one (1) year for underlying securities of the types described
in
(a) and (c) above entered into with any bank that satisfies the criteria
described in clause (d)(i) above.
“Cash
Management Account” has the meaning specified therefor in Section
2.7(a).
“Cash
Management Agreements” means those certain cash management agreements, in
form and substance satisfactory to Agent, each of which is among Borrower
or one
of its Subsidiaries, Agent, and one of the Cash Management Banks.
“Cash
Management Bank” has the meaning specified therefor in Section
2.7(a).
“Change
of Control” means that (a) any “person” or “group” (within the meaning of
Sections 13(d) and 14(d) of the Exchange Act), other than Permitted Holder,
becomes the beneficial owner (as defined in Rule 13d-3 under the Exchange
Act),
directly or indirectly, of twenty percent (20%), or more, of the Stock of
Parent
having the right to vote for the election of members of the Board of Directors
(or, in the case of Permitted Holder only, the Permitted Holder beneficially
own, thirty percent (30%) or more of such Stock), (b) a majority of the members
of the Board of Directors do not constitute Continuing Directors,
(c) Parent shall cease to beneficially own and control, directly or
indirectly, 100% on a fully diluted basis each of the aggregate of the economic
and voting interest in the Stock of Borrower; (d) except to the extent
constituting a Permitted Disposition or a transaction permitted pursuant
to
Section 6.3, Borrower shall cease to directly or indirectly beneficially
own and control 100% on a fully diluted basis of each of the aggregate of
the
economic and voting interests in the Stock of any of its Subsidiaries; or
(e) a
“change of control” under the Convertible Subordinated Notes has
occurred.
“Closing
Date” means the date of the making of the Term Loan and the initial Advances
made on the date hereof.
“Code”
means the Uniform Commercial Code, as in effect from time to time, in the
State
of New York.
“Collateral”
means all assets and interests in assets and proceeds thereof now owned or
hereafter acquired by Borrower or its Subsidiaries in or upon which a Lien
is
granted under any of the Loan Documents.
“Collateral
Access Agreement” means a landlord waiver, bailee letter, or acknowledgement
agreement of any lessor, warehouseman, processor, consignee, or other Person
in
possession of, having a Lien upon, or having rights or interests in Parent’s or
its Subsidiaries’ books and records, Equipment, or Inventory, in each case, in
form and substance satisfactory to Agent.
“Collections”
means all cash, checks, notes, instruments, and other items of payment
(including insurance proceeds, proceeds of cash sales, rental proceeds, and
tax
refunds).
“Commitment”
means, with respect to each Lender, its Revolver Commitment, its Term Loan
Commitment, or its Total Commitment, as the context requires, and, with respect
to all Lenders, their Revolver Commitments, their Term Loan Commitments,
or
their Total Commitments, as the context requires, in each case as such Dollar
amounts are set forth beside such Lender’s name under the applicable heading on
Schedule C-1 or in the Assignment and Acceptance pursuant to which such
Lender became a Lender hereunder, as such amounts may be reduced or increased
from time to time pursuant to assignments made in accordance with the provisions
of Section 13.1.
“Common
Stock” means common stock of Parent, without par value per
share.
“Compliance
Certificate” means a certificate substantially in the form of Exhibit
C-1 delivered by the chief financial officer of Borrower to
Agent.
“Consolidated
Net Income” means, with respect to a Person, for any period, such Person’s
and its Subsidiaries’ gross revenues for such period, including any cash
dividends or distributions actually received from any other Person during
such
period, minus such Person’s and its Subsidiaries’ expenses and other proper
charges against income (including taxes on income to the extent imposed),
determined on a consolidated basis after eliminating earnings or losses
attributable to outstanding minority interests and excluding the net earnings
of
any Person other than a Subsidiary in which such Person or any of its
Subsidiaries has an ownership interest. Consolidated Net Income shall not
include: (i) any gain or loss from the sale of assets, (ii) any extraordinary
gains, (iii) any extraordinary noncash losses, (iv) any non-cash income,
gains,
losses or charges resulting from the requirements of SFAS 133, 142, 143 or
144,
or (v) any interest expense associated with the Convertible Subordinated
Notes.
-45-
“Continuing
Director” means (a) any member of the Board of Directors who was a director
(or comparable manager) of Parent on the Closing Date, and (b) any individual
who becomes a member of the Board of Directors after the Closing Date if
such
individual was appointed or nominated for election to the Board of Directors
by
a majority of the Continuing Directors, but excluding any such individual
originally proposed for election in opposition to the Board of Directors
in
office at the Closing Date in an actual or threatened election contest relating
to the election of the directors (or comparable managers) of Parent and whose
initial assumption of office resulted from such contest or the settlement
thereof.
“Control
Agreement” means a control agreement, in form and substance satisfactory to
Agent, executed and delivered by Parent or one of its Subsidiaries, Agent,
and
the applicable securities intermediary (with respect to a Securities Account)
or
bank (with respect to a Deposit Account).
“Convertible
Subordinated Notes” means the Series A Subordinated Convertible Notes due
March 31, 2012 issued by the Parent on January 30, 2007 and the Series B
Subordinated Convertible Notes due March 31, 2012 issued by the Parent on
March
30, 2007.
“Copyright
Security Agreement” has the meaning specified therefor in the Security
Agreement.
“Daily
Balance” means, as of any date of determination and with respect to any
Obligation, the amount of such Obligation owed at the end of such
day.
“Default”
means an event, condition, or default that, with the giving of notice, the
passage of time, or both, would, unless cured or waived, become an Event
of
Default.
“Defaulting
Lender” means any Lender that fails to make any Advance (or other extension
of credit) that it is required to make hereunder on the date that it is required
to do so hereunder.
“Defaulting
Lender Rate” means (a) for the first three (3) days from and after the date
the relevant payment is due, the Base Rate, and (b) thereafter, the interest
rate then applicable to Advances that are Base Rate Loans (inclusive of the
Base
Rate Margin applicable thereto).
“Defensible
Title” means that record title of Parent or its Subsidiaries which, subject
to clauses (a), (b), (c), (k) and (m) of the definition of “Permitted Liens”,
(a) entitles Parent or its Subsidiaries, as applicable, to receive from each
such Property not less than the interests shown in the Reserve Report as
the
“Net Revenue Interest” of all Hydrocarbons produced, saved and marketed from or
allocated to the formations in such Property, all without reduction, suspension
or termination except as stated in such Reserve Report or otherwise permitted
as
Permitted Liens; and (b) obligates Parent or its Subsidiaries, as applicable,
to
bear a percentage of the costs and expenses relating to the maintenance and
development of, and operations relating to, the producing formations in each
such Property not greater than the “Working Interest” shown in the Reserve
Report (without a proportionate increase in the Net Revenue Interest), all
without increase except as stated in such Reserve Report or otherwise permitted
under clauses (a), (b), (c), (k) and (m) of the definition of “Permitted
Liens”.
“Deposit
Account” means any deposit account (as that term is defined in the
Code).
“Designated
Account” means the Deposit Account of Borrower identified on Schedule
D-1.
“Designated
Account Bank” has the meaning specified therefor in Schedule
D-1.
“Disbursement
Letter” means an instructional letter executed and delivered by Borrower to
Agent and Lenders regarding the extensions of credit to be made on the Closing
Date, the form and substance of which is satisfactory to Agent.
“Disqualified
Stock” shall mean any Stock which, by its terms (or by the terms of any
security into which it is convertible or for which it is exchangeable), or
upon
the happening of any event, (a) matures or is mandatorily redeemable,
pursuant to a sinking fund obligation or otherwise, or is redeemable at the
option of the holder thereof, in whole or in part, on or prior to the date
that
is one hundred eighty (180) days following the Maturity Date, (b) is
convertible into or exchangeable for (i) debt securities or (ii) any
Stock referred to in (a) above, in each case at any time on or prior to the
date that one hundred eighty (180) days following the Maturity Date, or
(c) is entitled to receive a dividend or distribution (other than for taxes
attributable to the operations of the business) prior to the time that the
Obligations are paid in full, or (d) has the benefit of any covenants or
agreements that restrict the payment of any of the Obligations or that are
EBITDA or debt-multiple based (i.e. financial covenants).
“Dollars”
or “$” means United States dollars.
“EBITDA”
means, for any period (without duplication), the sum of (a) Consolidated
Net
Income during such period (excluding all interest income earned or accrued
during such period that was included in determining such Consolidated Net
Income), plus (b) all interest paid or accrued during such period on
Indebtedness (including amortization of original issue discount and the interest
component of any deferred payment obligations and capital lease obligations)
that was deducted in determining such Consolidated Net Income, plus (c) all
income taxes that were deducted in determining such Consolidated Net Income,
plus (d) all depreciation, depletion expense, amortization expense (including
amortization of good will and debt issue costs), and other non-cash charges
(including any provision for the reduction in the carrying value of assets
recorded in accordance with GAAP and stock option grants, warrants and similar
non-cash charges) and expenses incurred by Parent and its Subsidiaries that
were
deducted in determining such Consolidated Net Income; provided,
however, that any calculation of EBITDA hereunder shall be made
using an
EBITDA calculated on a pro forma basis (inclusive of any acquisitions financed
with Funded Indebtedness, if any, made during the relevant calculation period
and, if any such acquisition has a value in excess of $500,000, as if such
acquisition had occurred on the first day of such period); provided,
further, that EBITDA shall be calculated as follows for the first
three
fiscal quarters following the Closing Date:
(a)
for
the fiscal quarter ending March 31, 2008, EBITDA shall be EBITDA for the
three-month period ending on such date multiplied by four;
(b)
for
the fiscal quarter ending June 30, 2008, EBITDA shall be EBITDA for the
six-month period ending on such date multiplied by two;
-46-
(c)
for
the fiscal quarter ending September 30, 2008, EBITDA shall be EBITDA for
the
nine-month period ending on such date multiplied by 4/3;
Thereafter,
EBITDA shall be calculated using EBITDA for the period of four (4) fiscal
quarters ending on the last day of the fiscal quarter immediately preceding
the
date of determination for which financial statements are available.
“Eligible
Assignee” means (a) a Lender, (b) an Affiliate of a Lender, (c) an Approved
Fund, (d) a commercial bank organized under the laws of the United States,
or
any state thereof, and having total assets in excess of $250,000,000, (e)
a
commercial bank organized under the laws of any other country which is a
member
of the Organization for Economic Cooperation and Development or a political
subdivision of any such country and which has total assets in excess of
$250,000,000, provided that such bank is acting through a branch or agency
located in the United States and (f) a finance company, insurance company,
or
other financial institution, or fund that is engaged in making, purchasing,
or
otherwise investing in commercial loans in the ordinary course of its business
and having (together with its Affiliates) total assets in excess of
$250,000,000; provided that notwithstanding the foregoing and for the avoidance
of doubt, “Eligible Assignee” shall not include Parent, Borrower, any of
Parent’s Affiliates or Subsidiaries.
“Engineering
Reports” has the meaning assigned such term in
Section 2.1(e)(i).
“Environmental
Actions” means any written complaint, summons, citation, notice, directive,
demand, suit, order, claim, litigation, governmental investigation, judicial
or
administrative proceeding, judgment, letter, or other communication to Parent
or
any of its Subsidiaries from any Governmental Authority, or any third party
alleging violations of Environmental Laws or liability for Response Actions
with
respect to Releases (a) at, onto or from any assets, properties, or businesses
of Parent, its Subsidiaries, including the Real Property, (b) from or onto
adjoining properties or businesses, or (c) from or onto any facilities which
received Hazardous Materials generated by Borrower, its
Subsidiaries.
“Environmental
Law” means any applicable federal, state, provincial, territorial, foreign
or local statute, law, rule, regulation, ordinance, code, binding and
enforceable guideline, binding and enforceable written policy, or rule of
common
law now or hereafter in effect and in each case as amended, or any applicable
judicial or administrative interpretation thereof, including any applicable
judicial or administrative order, consent decree or judgment, issued by a
Governmental Authority, in each case, to the extent binding on Parent or
its
Subsidiaries, relating to the environment, health and safety, natural resources
or natural resource damages, or Hazardous Materials, in each case as amended
from time to time.
“Environmental
Liabilities” means all liabilities, monetary obligations, losses, damages,
punitive damages, consequential damages, treble damages, costs and expenses
(including all reasonable fees, disbursements and expenses of counsel, experts,
or consultants, and costs of investigation and feasibility studies), fines,
penalties, sanctions, and interest that arise under Environmental Laws or
are incurred as a result of any (i) Environmental Action, (ii)
Release or (iii) Response Action.
“Environmental
Lien” means any Lien in favor of any Governmental Authority or Person for
Environmental Liabilities.
“Environmental
Permits” has the meaning specified therefor in
Section 4.11(b).
“Equipment”
means equipment (as that term is defined in the Code).
“ERISA”
means the Employee Retirement Income Security Act of 1974, as amended, and
any
successor statute thereto.
“ERISA
Affiliate” means (a) any Person subject to ERISA whose employees are treated
as employed by the same employer as the employees of Parent or its Subsidiaries
under IRC Section 414(b), (b) any trade or business subject to ERISA whose
employees are treated as employed by the same employer as the employees of
Parent or its Subsidiaries under IRC Section 414(c), (c) solely for purposes
of
Section 302 of ERISA and Section 412 of the IRC, any organization subject
to
ERISA that is a member of an affiliated service group of which Parent or
any of
its Subsidiaries is a member under IRC Section 414(m), or (d) solely for
purposes of Section 302 of ERISA and Section 412 of the IRC, any Person subject
to ERISA that is a party to an arrangement with Parent or any of its
Subsidiaries and whose employees are aggregated with the employees of Parent
or
its Subsidiaries under IRC Section 414(o).
“ERISA
Event” means, with respect to Parent or any of its Subsidiaries or any of
their ERISA Affiliates, (a) any event described in Section 4043(c) of ERISA
with
respect to a Title IV Plan; (b) the withdrawal of any Loan Party or ERISA
Affiliate from a Title IV Plan subject to Section 4063 of ERISA during a
plan year in which it was a substantial employer, as defined in Section
4001(a)(2) of ERISA; (c) the complete or partial withdrawal of any Loan Party
or
any ERISA Affiliate from any Multiemployer Plan; (d) the filing of a notice
of
intent to terminate a Title IV Plan or the treatment of a plan amendment
as a
termination under Section 4041 of ERISA; (e) the institution of proceedings
to
terminate a Title IV Plan or Multiemployer Plan by the PBGC; (f) the failure
by
any Loan Party or ERISA Affiliate to make when due required contributions
to a
Multiemployer Plan or Title IV Plan unless such failure is cured within
30 days; (g) any other event or condition which might reasonably be
expected to constitute grounds under Section 4042 of ERISA for the termination
of, or the appointment of a trustee to administer, any Title IV Plan or
Multiemployer Plan or for the imposition of liability under Section 4069
or
4212(c) of ERISA; (h) the termination of a Multiemployer Plan under
Section 4041A of ERISA or the reorganization or insolvency of a
Multiemployer Plan under Section 4241 of ERISA; or (i) the loss of a Qualified
Plan’s qualification or tax exempt status.
“Event
of Default” has the meaning specified therefor in Section
7.
“Excess
Cash Flow” means, with respect to any fiscal period and with respect to
Parent determined on a consolidated basis in accordance with GAAP (a) EBITDA
for
such fiscal period, minus (b) without duplication, the sum of (i) the
cash portion of Interest Expense paid during such fiscal period, (ii) the
cash
portion of income taxes paid during such fiscal period, (iii) all voluntary
and
scheduled principal payments made in respect of the Term Loan during such
fiscal
period, (iv) the cash portion of Capital Expenditures (net of (y) any proceeds
reinvested in accordance with the proviso to Section 2.4(c)(iii)(A) of
the Agreement, and (z) any proceeds of related financings with respect to
such
expenditures) made during such period, and (v) the cash portion of interest
expense paid during the fiscal period of the Convertible Subordinated
Notes.
“Exchange
Act” means the Securities Exchange Act of 1934, as in effect from time to
time.
-47-
“Excluded
Tax” means, with respect to Agent, any Lender, the Issuing Lender or any
other recipient of any payment to be made by or on account of any obligation
of
Borrower hereunder, the following Taxes, including interest, penalties or
other
additions thereto: (a) income or franchise taxes imposed on (or measured
by) its
gross or 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 which it is otherwise deemed to be engaged in a
trade
or business for Tax purposes 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 Borrower is located; and (c) in the case of a Foreign
Lender, any 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 16(b), (c) or
(d).
“Existing
Lender” means JPMorgan Chase Bank, N.A.
“Extraordinary
Receipts” means any cash received by Parent or any of its Subsidiaries not
in the ordinary course of business, including (a) Tax Refunds, (b) pension
plan
reversions, (c) proceeds of insurance (including key man life insurance and
business interruption insurance, but excluding any casualty insurance), (d)
judgments, proceeds of settlements or other consideration of any kind in
connection with any cause of action, (e) indemnity payments arising out of
acquisitions, and (f) any purchase price adjustment received in connection
with
any purchase agreement following the closing and funding of any applicable
acquisition with the proceeds of any Advance or the Term Loan in whole or
in
part.
“Fee
Letter” means that certain fee letter between Borrower and Agent, in form
and substance satisfactory to Agent.
“Force
Majeure Event” mean any
act or event not
within the control of the party claiming suspension, and which, by the exercise
of due diligence, such party is unable to prevent or overcome, and shall
include, but not be limited to, acts of God, strikes, lockouts, or industrial
disputes or disturbances, civil disturbances, arrests and restraints,
interruptions by government or court order, future orders of any regulatory
body
having proper jurisdiction, acts of the public enemy, wars, riots, blockades,
insurrections, inability
to secure materials by reason of allocations promulgated by authorized
governmental agencies, epidemics, landslides, lightning, earthquakes, fires,
storms, floods, washouts, explosions, breakage or freezing of pipelines,
electrical power interruptions, inability to obtain permits, easements,
rights-of-way or materials at reasonable cost, the making of repairs,
maintenance or alterations to lines or pipe, machinery or plants, interruption
or curtailment by downstream pipeline, or any other cause whether of the
kind
herein enumerated or otherwise, not reasonably within the control of the
party
claiming "force majeure"; provided, however, in no event shall the failure
of,
or insufficient, gas reserves or gas supply constitute an event of force
majeure.
“Foreign
Lender” means any Lender that is organized under the laws of a jurisdiction
other than the United States of America or any State thereof or the District
of
Columbia.
“Fund”
means any Person (other than a natural person) that is (or will be) engaged
in
making, purchasing, holding or otherwise investing in commercial loans and
similar extensions of credit in the ordinary course.
“Funded
Indebtedness” means, as of any date of determination, all Indebtedness for
borrowed money or letters of credit of Borrower, determined on a consolidated
basis in accordance with GAAP, that by its terms matures more than one (1)
year
after the date of calculation, and any such Indebtedness maturing within
one (1)
year from such date that is renewable or extendable at the option of Borrower
or
its Subsidiaries, as applicable, to a date more than one (1) year from such
date, including, in any event, but without duplication, with respect to Borrower
and its Subsidiaries, the Revolver Usage, the Term Loan and the amount of
their
Capital Lease Obligations.
“Funding
Date” means the date on which a Borrowing occurs.
“Funding
Losses” has the meaning specified therefor in
Section 2.13(b)(ii).
“GAAP”
means generally accepted accounting principles as in effect from time to
time in
the United States, consistently applied.
“Governing
Documents” means, with respect to any Person, the certificate or articles of
incorporation, by-laws, or other organizational documents of such
Person.
“Governmental
Authority” means any federal (including, the federal government of Canada),
state, local, provincial, territorial or other governmental or administrative
body, instrumentality, board, department, or agency or any court, tribunal,
administrative hearing body, arbitration panel, commission, or other similar
dispute-resolving panel or body.
“Guarantors”
means Parent and each Subsidiary of Borrower and “Guarantor” means any
one of them; provided, that, if any Subsidiary is a “controlled foreign
corporation” within the meaning of Section 957 of the IRC, it shall not be
required to be a Guarantor.
“Guaranty”
means that certain general continuing guaranty executed and delivered by
each
Guarantor in favor of Agent, for the benefit of the Lender Group and the
Bank
Product Providers, in form and substance satisfactory to Agent.
“Hazardous
Materials” means (a) chemical, materials or substances that are regulated
under any Environmental Law, or defined or listed in, or otherwise classified
pursuant to, any Environmental Law as “hazardous substances,” “hazardous
materials,” “hazardous wastes,” “toxic substances,” or any other formulation
intended to define, list, or classify substances by reason of deleterious
properties such as ignitability, corrosivity, reactivity, carcinogenicity,
reproductive toxicity, or “EP toxicity,” (b) oil, petroleum, or petroleum
derived substances, natural gas, natural gas liquids, synthetic gas, drilling
fluids, produced waters, and other wastes associated with the exploration,
development, or production of crude oil, natural gas, or geothermal resources,
(c) any flammable substances or explosives, (d) any radioactive materials,
(e)
asbestos in any form, (f) oil or dielectric fluid containing levels of
polychlorinated biphenyls in excess of 50 parts per million, (g) lead based
paint, (h) urea formaldehyde, (i) radon, and (j) pesticides.
“Holdout
Lender” has the meaning specified therefor in Section
14.2(a).
-48-
“Hydrocarbon
Interests” means all rights, titles, interests and estates now owned or
hereafter acquired in and to oil and gas leases, oil, gas and mineral leases,
oil, gas and casinghead gas leases, or other liquid or gaseous hydrocarbon
leases, mineral fee or lease interests, farm-outs, overriding royalty and
royalty interests, net profit interests, oil payments, production payment
interests and similar mineral interests, including any reserved or residual
interest of whatever nature.
“Hydrocarbons”
means, collectively, oil, gas, coal seam gas, casinghead gas, condensate,
distillate, liquid hydrocarbons, gaseous hydrocarbons, all products and
byproducts refined, separated, settled and dehydrated therefrom and all products
and byproducts refined therefrom, including, without limitation, kerosene,
liquefied petroleum gas, refined lubricating oils, diesel fuel, drip gasoline,
natural gasoline, helium, sulfur, geothermal steam, water, carbon dioxide,
and
all other minerals.
“Indebtedness”
of any Person means, without duplication, (a) all obligations for borrowed
money, (b) all obligations evidenced by bonds, debentures, notes, or other
similar instruments and all reimbursement or other obligations in respect
of
letters of credit, bankers acceptances, interest rate swaps, or other financial
products, (c) all obligations as a lessee under Capital Leases, (d) all
obligations or liabilities of others secured by a Lien on any asset of a
Person
or its Subsidiaries, irrespective of whether such obligation or liability
is
assumed, (e) all obligations to pay the deferred purchase price of assets
(other
than trade payables incurred in the ordinary course of business and repayable
in
accordance with customary trade practices provided that such obligations
are not
more than ninety (90) days past due), (f) all obligations owing under Swap
Agreements, (g) all Disqualified Stock, and (h) any obligation guaranteeing
or
intended to guarantee (whether directly or indirectly guaranteed, endorsed,
co-made, discounted, or sold with recourse) any obligation of any other Person
that constitutes Indebtedness under any of clauses (a) through (g)
above.
“Indemnified
Liabilities” has the meaning specified therefor in
Section 10.3.
“Indemnified
Person” has the meaning specified therefor in Section
10.3.
“Indemnified
Taxes” means Taxes other than Excluded Taxes.
“Initial
Reserve Report” means the report of Netherland, ▇▇▇▇▇▇ & Associates,
Inc. dated June 30, 2007 with respect to the Oil and Gas Properties of Borrower
and its Subsidiaries.
“Insolvency
Proceeding” means any proceeding commenced by or against any Person under
any provision of the Bankruptcy Code or under any other state or federal
bankruptcy or insolvency law, assignments for the benefit of creditors, formal
or informal moratoria, compositions, extensions generally with creditors,
or
proceedings seeking reorganization, arrangement, or other similar
relief.
“Intercompany
Note” means that certain Intercompany Note, dated as of the date hereof, by
and among Borrower, Parent and the other Guarantors, as may be amended,
restated, supplemented, renewed, extended, replaced or otherwise modified
from
time to time.
“Interim
Redetermination” has the meaning specified therefor in Section
2.1(d).
“Interest
Coverage Ratio” means, with respect to Parent and its Subsidiaries for any
period, the ratio of EBITDA to Interest Expense for such period.
“Interest
Expense” means, for any period, the aggregate of the interest expense of
Parent and its Subsidiaries for such period, determined on a consolidated
basis
in accordance with GAAP, less (A) interest expense associated with the
Convertible Subordinated Notes, and (B) any non cash amounts including, but
not
limited to, (i) amortization of debt discount, (ii) amortization of debt
origination costs and (iii) capitalized interest; provided that Interest
Expense
shall be calculated as follows for the first three fiscal quarters following
the
Closing Date:
(a) for
the fiscal quarter ending March 31, 2008, Interest Expense shall be Interest
Expense for the three-month period ending on such date multiplied by
four;
(b) for
the fiscal quarter ending June 30, 2008, Interest Expense shall be Interest
Expense for the six-month period ending on such date multiplied by
two;
(c) for
the fiscal quarter ending September 30, 2008, Interest Expense shall be Interest
Expense for the nine-month period ending on such date multiplied by
4/3.
Thereafter,
Interest Expense shall be calculated using Interest Expense for the period
of
four (4) fiscal quarters ending on the last day of the fiscal quarter
immediately preceding the date of determination for which financial statements
are available.
“Interest
Period” means, with respect to (i) each LIBOR Rate Loan (other than the Term
Loan) a period commencing on the date of the making of such LIBOR Rate Loan
(or
the continuation of a LIBOR Rate Loan or the conversion of a Base Rate Loan
to a
LIBOR Rate Loan) and ending one (1), two (2), three (3) or six (6) months
thereafter; provided, however, that (a) if any Interest Period
would end on a day that is not a Business Day, such Interest Period shall
be
extended (subject to clauses (c)-(e) below) to the next succeeding Business
Day,
(b) interest shall accrue at the applicable rate based upon the LIBOR Rate
from
and including the first day of each Interest Period to, but excluding, the
day
on which any Interest Period expires, (c) any Interest Period that would
end on
a day that is not a Business Day shall be extended to the next succeeding
Business Day unless such Business Day falls in another calendar month, in
which
case such Interest Period shall end on the next preceding Business Day, (d)
with
respect to an Interest Period that begins on the last Business Day of a calendar
month (or on a day for which there is no numerically corresponding day in
the
calendar month at the end of such Interest Period), the Interest Period shall
end on the last Business Day of the calendar month that is one (1), two (2),
three (3) or six (6) months after the date on which the Interest Period began,
as applicable, and (e) Borrower may not elect an Interest Period which will
end
after the Maturity Date and (ii) the Term Loan (a) with respect to the first
interest payment date, the period from and including the Closing Date to
and
including the last day of the calendar quarter in which the Closing Date
occurs
and (b) with respect to any subsequent interest payment date, the calendar
quarter immediately preceding the quarter in which the interest payment occurs;
provided, that if any Interest Period would otherwise extend beyond the
Maturity Date for which the interest rate is being calculated, the Interest
Period shall end on such Maturity Date.
-49-
“Inventory”
means inventory (as that term is defined in the Code).
“Investment”
means, with respect to any Person, any investment by such Person in any other
Person (including Affiliates) in the form of loans, guarantees, advances,
or
capital contributions (excluding bona fide Accounts arising in the
ordinary course of business consistent with past practice), purchases or
other
acquisitions of Indebtedness, Stock, or all or substantially all of the assets
of such other Person (or of any division or business line of such other Person),
and any other items that are or would be classified as investments on a balance
sheet prepared in accordance with GAAP.
“IRC”
means the Internal Revenue Code of 1986, as in effect from time to
time.
“IRS”
shall mean the Internal Revenue Service, or any successor thereto.
“Issuing
Lender” means WFF or any other Lender that, at the request of Borrower and
with the consent of Agent, agrees, in such Lender’s sole discretion, to become
an Issuing Lender for the purpose of issuing L/Cs or L/C Undertakings pursuant
to Section 2.12.
“L/C”
has the meaning specified therefor in Section 2.12(a).
“L/C
Disbursement” means a payment made by the Issuing Lender pursuant to a
Letter of Credit.
“L/C
Undertaking” has the meaning specified therefor in Section
2.12(a).
“Lender”
and “Lenders” have the respective meanings set forth in the preamble to
the Agreement, and shall include any other Person made a party to the Agreement
in accordance with the provisions of Section 13.1.
“Lender
Agreement” means that certain agreement dated as of the date hereof by and
between the Lenders.
“Lender
Group” means, individually and collectively, each of the Lenders (including
the Issuing Lender) and Agent.
“Lender
Group Expenses” means all (a) costs or expenses (including taxes, and
insurance premiums) required to be paid by Parent or its Subsidiaries under
any
of the Loan Documents that are paid, advanced, or incurred by the Lender
Group,
(b) out-of-pocket fees or charges paid or incurred by Agent in connection
with
the Lender Group’s transactions with Parent or its Subsidiaries, including, fees
or charges for photocopying, notarization, couriers and messengers,
telecommunication, public record searches (including tax lien, litigation,
and
UCC searches and including searches with the patent and trademark office,
the
copyright office, or the department of motor vehicles), filing, recording,
publication, appraisal (including periodic collateral appraisals or business
valuations to the extent of the fees and charges (and up to the amount of
any
limitation) contained in the Agreement or the Fee Letter), real estate surveys,
real estate title policies and endorsements, and environmental audits, (c)
out-of-pocket costs and expenses incurred by Agent in the disbursement of
funds
to Borrower or other members of the Lender Group (by wire transfer or
otherwise), (d) charges paid or incurred by Agent resulting from the dishonor
of
checks, (e) reasonable out-of-pocket costs and expenses paid or incurred
by the
Lender Group to correct any Default or Event of Default or enforce any provision
of the Loan Documents, or in gaining possession of, maintaining, handling,
preserving, storing, shipping, selling, preparing for sale, or advertising
to
sell the Collateral, or any portion thereof, irrespective of whether a sale
is
consummated, (f) out-of-pocket audit fees and expenses of Agent related to
any
inspections or audits to the extent of the fees and charges (and up to the
amount of any limitation) contained in the Agreement or the Fee Letter, (g)
reasonable costs and expenses of third party claims or any other suit paid
or
incurred by the Lender Group in enforcing or defending the Loan Documents
or in
connection with the transactions contemplated by the Loan Documents or the
Lender Group’s relationship with Parent or any its Subsidiaries, (h) Agent’s and
each Lender’s reasonable out-of-pocket costs and expenses (including attorneys
fees) incurred in advising, structuring, drafting, reviewing, administering,
or
amending the Loan Documents (whether or not consummated), including the
reasonable costs and expenses of any independent engineers and consultants
retained by Agent and each Lender in connection herewith, and (i) Agent’s and
each Lender’s reasonable costs and expenses (including attorneys, accountants,
consultants, and other advisors fees and expenses) incurred in terminating,
enforcing (including attorneys, accountants, consultants, and other advisors
fees and expenses incurred in connection with a “workout,” a “restructuring,” or
an Insolvency Proceeding concerning Parent or its Subsidiaries or in exercising
rights or remedies under the Loan Documents), or defending the Loan Documents,
irrespective of whether suit is brought, or in taking any Remedial Action
concerning the Collateral.
“Lender-Related
Person” means, with respect to any Lender, such Lender, together with such
Lender’s Affiliates, officers, directors, employees, attorneys, and
agents.
“Letter
of Credit” means an L/C or an L/C Undertaking, as the context
requires.
“Letter
of Credit Collateralization” means either (a) providing cash collateral
(pursuant to documentation reasonably satisfactory to Agent, including
provisions that specify that the Letter of Credit fee set forth in the Agreement
will continue to accrue while the Letters of Credit are outstanding) to be
held
by Agent for the benefit of those Lenders with a Revolver Commitment in an
amount equal to one hundred five percent (105%) of the then existing Letter
of
Credit Usage, (b) causing the Underlying Letters of Credit to be returned
to the
Issuing Lender, or (c) providing Agent with a standby letter of credit, in
form
and substance reasonably satisfactory to Agent, from a commercial bank
acceptable to Agent (in its sole discretion) in an equal to one hundred five
percent (105%) of the then existing Letter of Credit Usage (it being understood
that the Letter of Credit fee set forth in the Agreement will continue to
accrue
while the Letters of Credit are outstanding and that any such fee that accrues
must be an amount that can be drawn under any such standby letter of
credit).
“Letter
of Credit Usage” means, as of any date of determination, the aggregate
undrawn amount of all outstanding Letters of Credit.
“Leverage
Ratio” means, as of any date of determination (a) the amount of Parent
and its Subsidiaries’ Funded Indebtedness as of such date, divided by
(b) the TTM EBITDA of Parent and its Subsidiaries as of such
date.
“LIBOR
Deadline” has the meaning specified therefor in
Section 2.13(b)(i).
“LIBOR
Notice” means a written notice in the form of Exhibit
L-1.
-50-
“LIBOR
Option” has the meaning specified therefor in Section
2.13(a).
“LIBOR
Rate” means, for each Interest Period relating to any LIBOR Rate Loan, the
rate per annum determined by Agent by dividing (a) the Base LIBOR Rate
for such Interest Period, by (b) 100% minus the Reserve
Percentage. The LIBOR Rate shall be adjusted on and as of the
effective day of any change in the Reserve Percentage. Notwithstanding the
foregoing, if at any time the LIBOR Rate is less than 4.8425%, the LIBOR
Rate
shall be deemed to be 4.8425% until such time as the LIBOR Rate is at least
equal to 4.8425%, provided, however, for the avoidance of doubt,
no change in the LIBOR Rate shall be imposed until the end of the applicable
Interest Period.
“LIBOR
Rate Loan” means each portion of an Advance or the Term Loan that bears
interest at a rate determined by reference to the LIBOR Rate.
“LIBOR
Rate Margin” means with respect to (a) the Term Loan, 7.00% and (b) any
Advances, the applicable LIBOR Rate Margin set forth in the table below opposite
the Borrowing Base Utilization on the date of determination:
|
Tier
|
Borrowing
Base Utilization
|
LIBOR
Rate Margin for Advances
|
|
I
|
<0.33
|
2.00%
|
|
II
|
>=0.33
< 0.66
|
2.25%
|
|
III
|
>=0.66
|
2.50%
|
“Lien”
means any mortgage, deed of trust, pledge, hypothecation, assignment, charge,
deposit arrangement, encumbrance, easement, lien (statutory or other), security
interest, or other security arrangement and any other preference, priority,
or
preferential arrangement of any kind or nature whatsoever, including any
conditional sale contract or other title retention agreement, the interest
of a
lessor under a Capital Lease and any synthetic or other financing lease having
substantially the same economic effect as any of the foregoing, including
(a)
any interest in an asset securing an obligation owed to, or a claim by, any
Person other than the owner of the asset, whether such interest shall be
based
on the common law, statute or contract, whether such interest shall be recorded
or perfected, and whether such interest shall be contingent upon to occurrence
of some future event or events or the existence of some future circumstance
or
circumstances and (b) any of the preceding, in addition to any purchase options,
reservations, exceptions, encroachments, easements, rights of way, covenants,
conditions, restrictions, leases and other title exceptions and encumbrances
affecting any Oil and Gas Properties or Real Property.
“Loan
Account” has the meaning specified therefor in Section
2.10.
“Loan
Documents” means the Agreement, the Bank Product Agreements, the Cash
Management Agreements, the Control Agreements, the Copyright Security Agreement,
the Canadian Pledge Agreement, the Fee Letter, the Guaranty, the Lender
Agreement, the Letters of Credit, the Mortgages, the Patent Security Agreement,
the Security Agreement, the Trademark Security Agreement, any note or notes
executed by Borrower in connection with the Agreement and payable to a member
of
the Lender Group, and any other agreement entered into, now or in the future,
by
Borrower or any of its Subsidiaries and the Lender Group in connection with
the
Agreement.
“Loan
Party” means any Borrower and any Guarantor.
“Margin
Stock” shall have the meaning specified therefor in Section
4.2.
“Material
Adverse Change” means (a) a material adverse change in the business,
operations, results of operations, assets, liabilities or condition (financial
or otherwise) of Parent and its Subsidiaries, taken as a whole, (b) a material
impairment of the ability of Parent and its Subsidiaries, taken as a whole,
to
perform their obligations under the Loan Documents to which they are parties
or
of the Lender Group’s ability to enforce the Obligations or realize upon the
Collateral, or (c) a material impairment of the enforceability or priority
of
Agent’s Liens with respect to the Collateral as a result of an action or failure
to act on the part of Parent or its Subsidiaries.
“Material
Contract” means, with respect to any Person, (i) each contract or agreement
to which such Person or any of its Subsidiaries is a party that is (A) a
bond or
surety obligation or (B) an employment agreement with an officer or a director
and (ii) all other contracts or agreements to which such Person or any of
its
Subsidiaries is a party for which breach, non-performance, cancellation or
failure to renew could reasonably be expected to result in a Material Adverse
Change or operate to materially reduce the “Net Revenue Interest” below the
interest described in the most recently delivered Reserve Report for Proved
Oil
and Gas Properties.
“Maturity
Date” has the meaning specified therefor in Section 3.3.
“Maximum
Revolver Amount” means Fifty Million Dollars ($50,000,000).
“▇▇▇▇▇’▇”
has the meaning specified therefor in the definition of Cash
Equivalents.
“Mortgages”
means, individually and collectively, one or more mortgages, deeds of trust,
or
deeds to secure debt, executed and delivered by Parent or its Subsidiaries
in
favor of Agent, in form and substance satisfactory to Agent, that encumber
the
Oil and Gas Properties.
“Multiemployer
Plan” means a “multiemployer plan” as defined in Section 4001(a)(3) of
ERISA, and to which Borrower, any Subsidiary of Borrower or ERISA Affiliate
of
Borrower is making, is obligated to make, has made or been obligated to make,
contributions on behalf of participants who are or were employed by any of
them.
-51-
“Net
Cash Proceeds” means:
(a) with
respect to any sale or disposition by Parent or any of its Subsidiaries of
property or assets, the amount of cash proceeds (other than escrowed funds
to
support obligations reasonably expected to be payable) received (directly
or
indirectly) from time to time (whether as initial consideration or through
the
payment of deferred consideration) by or on behalf of Parent or its
Subsidiaries, in connection therewith after deducting therefrom only (i)
the
amount of any Indebtedness secured by any Permitted Lien on any asset (other
than (A) Indebtedness owing to Agent or any Lender under the Agreement or
the
other Loan Documents and (B) Indebtedness assumed by the purchaser of such
asset) which is required to be, and is, repaid in connection with such sale
or
disposition, (ii) fees, commissions, and expenses related thereto and required
to be paid by Parent or such Subsidiary in connection with such sale or
disposition and (iii) taxes paid or payable to any taxing authorities by
Parent
or such Subsidiary in connection with such sale or 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 or payable to a Person that is
not
an Affiliate of Parent or any of its Subsidiaries, and are properly attributable
to such transaction; and
(b) with
respect to the issuance or incurrence of any Indebtedness by Parent or any
of
its Subsidiaries, or the issuance by Parent or any of its Subsidiaries of
any
shares of its Stock, the aggregate amount of cash (other than escrowed funds
to
support obligations reasonably expect to be payable) received (directly or
indirectly) from time to time (whether as initial consideration or through
the
payment or disposition of deferred consideration) by or on behalf of Borrower
or
such Subsidiary in connection with such issuance or incurrence, after deducting
therefrom only (i) fees, commissions, and expenses related thereto and
required to be paid by Parent or such Subsidiary in connection with such
issuance or incurrence, (ii) taxes paid or payable to any taxing authorities
by
Parent or such Subsidiary in connection with such issuance or incurrence,
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 or payable to a Person
that is not an Affiliate of Parent or any of its Subsidiaries, and are properly
attributable to such transaction.
“New
Borrowing Base Notice” shall have the meaning specified therefor in
Section 2.1(e)(iii)(A).
“Obligations”
means (a) all loans (including the Term Loan), Advances, debts, principal,
interest (including any interest that accrues after the commencement of an
Insolvency Proceeding, regardless of whether allowed or allowable in whole
or in
part as a claim in any such Insolvency Proceeding), contingent reimbursement
obligations with respect to outstanding Letters of Credit, premiums, liabilities
(including all amounts charged to Borrower’s Loan Account pursuant to the
Agreement), obligations (including indemnification obligations), fees (including
the fees provided for in the Fee Letter), charges, costs, Lender Group Expenses
(including any fees or expenses that accrue after the commencement of an
Insolvency Proceeding, regardless of whether allowed or allowable in whole
or in
part as a claim in any such Insolvency Proceeding), guaranties, covenants,
and
duties of any kind and description owing by any Loan Party to the Lender
Group
pursuant to or evidenced by the Loan Documents and irrespective of whether
for
the payment of money, whether direct or indirect, absolute or contingent,
due or
to become due, now existing or hereafter arising, and including all interest
not
paid when due and all other expenses or other amounts that any Loan Party
is
required to pay or reimburse by the Loan Documents or by law or otherwise
in
connection with the Loan Documents, and (b) all Bank Product
Obligations. Any reference in the Agreement or in the Loan Documents
to the Obligations shall include all or any portion thereof and any extensions,
modifications, renewals, or alterations thereof, both prior and subsequent
to
any Insolvency Proceeding.
“Oil
and Gas Business” means (a) the acquisition, exploration, exploitation,
development, operation and disposition of interests in Oil and Gas Properties
and Hydrocarbons, (b) the gathering, marketing, treating, processing,
storage, selling and transporting of any production from such interests or
properties, including, without limitation, the marketing of Hydrocarbons
obtained from unrelated Persons, (c) any business relating to or arising
from
exploration for or development, production, treatment, processing, storage,
transportation or marketing of oil, gas and other minerals and products produced
in association therewith, (d) any business relating to oilfield sales and
service, and (e) any activity that is ancillary or necessary or desirable
to
facilitate the activities described in clauses (a) through (d) of this
definition.
“Oil
and Gas Properties” means (a) Hydrocarbon Interests; (b) the Properties now
or hereafter pooled or unitized with Hydrocarbon Interests; (c) all presently
existing or future unitization, pooling agreements and declarations of pooled
units and the units created thereby (including without limitation all units
created under orders, regulations and rules of any Governmental Authority)
which
may affect all or any portion of the Hydrocarbon Interests; (d) all
operating agreements, contracts and other agreements, including production
sharing contracts and agreements, which relate to any of the Hydrocarbon
Interests or the production, sale, purchase, exchange or processing of
Hydrocarbons from or attributable to such Hydrocarbon Interests; (e) all
Hydrocarbons in and under and which may be produced and saved or attributable
to
the Hydrocarbon Interests, including all oil in tanks, and all rents, issues,
profits, proceeds, products, revenues and other incomes from or attributable
to
the Hydrocarbon Interests; (f) all tenements, hereditaments, appurtenances
and
Properties in any manner appertaining, belonging, affixed or incidental to
the
Hydrocarbon Interests and (g) all Properties, rights, titles, interests and
estates described or referred to above, including any and all Property, real
or
personal, now owned or hereinafter acquired and situated upon, used, held
for
use or useful in connection with the operating, working or development of
any of
such Hydrocarbon Interests or Property (excluding drilling rigs, service
rigs,
trailers, backhoes, automotive equipment, rental equipment or other personal
Property which may be on such premises for the purpose of drilling and servicing
a well or for other similar temporary uses) and including any and all oil
▇▇▇▇▇,
gas ▇▇▇▇▇, injection ▇▇▇▇▇ or other ▇▇▇▇▇, buildings, structures, fuel
separators, liquid extraction plants, plant compressors, pumps, pumping units,
field gathering systems, tanks and tank batteries, fixtures, valves, fittings,
machinery and parts, engines, boilers, meters, apparatus, equipment, appliances,
tools, implements, cables, wires, towers, casing, tubing and rods, surface
leases, rights-of-way, easements and servitudes together with all additions,
substitutions, replacements, accessions and attachments to any and all of
the
foregoing.
“Originating
Lender” has the meaning specified therefor in
Section 13.1(e).
“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.
“Overadvance”
has the meaning specified therefor in Section 2.5.
“Parent”
means Storm Cat Energy Corporation, a company incorporated under the laws
of
British Columbia, Canada.
“Participant”
has the meaning specified therefor in Section 13.1(e).
“Patent
Security Agreement” has the meaning specified therefor in the Security
Agreement.
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“PBGC”
shall mean the Pension Benefit Guaranty Corporation or any successor
thereto.
“Pension
Plan” shall mean, at any time, an employee benefit plan, as defined in
Section 3(3) of ERISA, which Parent or any of its Subsidiaries maintains,
contributes to or has an obligation to contribute to on behalf of participants
who are or were employed by any Loan Party (or, if such plan were terminated
at
such time, would under Section 4069 of ERISA be deemed to be an employee
benefit
plan of such Loan Party).
“Permitted
Discretion” means a determination made in the exercise of reasonable (from
the perspective of a secured lender) business judgment.
“Permitted
Dispositions” means (a) sales or other dispositions of Equipment that is
substantially worn, damaged, surplus or obsolete in the ordinary course of
business; (b) sales of Inventory to buyers in the ordinary course of business;
(c) the use or transfer of money or Cash Equivalents in a manner that is
not
prohibited by the terms of the Agreement or the other Loan Documents; (d)
the
licensing, on a non-exclusive basis, of patents, trademarks, copyrights,
and
other intellectual property rights in the ordinary course of business; (e)
the
sale of Hydrocarbons in the ordinary course of business; (f) farmouts of
undeveloped acreage and assignments in connection with such farmouts; (g)
sales
or other dispositions of Oil and Gas Properties (or any Subsidiary of Borrower
possessing one or more Oil and Gas Properties (and no other assets) to the
extent the disposition satisfies each of the following conditions, including
the
limitation on the value of such disposition in subclause (iii) hereof);
provided, that (i) one hundred percent (100%) of the consideration
received in respect of such sale or other disposition shall be cash or like-kind
exchange, (ii) the consideration received in respect of such sale or other
disposition shall be equal to or greater than the fair market value of the
Oil
and Gas Property or interest therein subject of such sale or other disposition
(as reasonably determined by Borrower and, if requested by Agent, Borrower
shall
deliver a certificate of a Responsible Officer of Borrower certifying to
that
effect), (iii) if such sale or other disposition of Oil and Gas Property
included in the most recently delivered Reserve Report during any period
between
two successive Scheduled Redetermination Dates has a fair market value (as
determined by Agent), individually or in the aggregate, in excess of One
Million
Five Hundred Thousand Dollars ($1,500,000), other than like-kind exchanges
for
comparable value, the Borrowing Base shall be reduced, effective immediately
upon such sale or disposition, by an amount equal to the value, if any, assigned
such Property as determined by the Required Lenders in the most recently
delivered Reserve Report and (iv) in no event shall the value of the
dispositions permitted by subclause (g) hereof exceed, in the aggregate,
Two
Million Dollars ($2,000,000) during the term of this Agreement; (h) (i) sales,
transfers and dispositions of Property (A) by any Guarantor to another Guarantor
(other than Parent) or to Borrower, including the transfer of Oil and Gas
Properties into newly created limited partnerships or limited liability
companies that have become Guarantors in accordance with Section 5.15,
(ii) the issuance of any Stock in Borrower or any Guarantor (other than Parent)
to Borrower or any Guarantor and (iii) issuances of Stock upon conversion
of the
Convertible Subordinated Notes.
“Permitted
Holder” means the Person identified on Schedule P-1.
“Permitted
Investments” means (a) Investments in cash and Cash Equivalents, (b)
Investments in negotiable instruments for collection, (c) advances made in
connection with purchases of goods or services in the ordinary course of
business, (d) Investments received in settlement of amounts due to Parent
or any
of its Subsidiaries effected in the ordinary course of business or owing
to
Parent or any of its Subsidiaries as a result of Insolvency Proceedings
involving an Account Debtor or upon the foreclosure or enforcement of any
Lien
in favor of Borrower or its Subsidiaries, (e) subject to the limits in
Section 6.6, Investments in direct ownership interests in additional Oil
and Gas Properties and gas gathering systems related thereto or related to
farm-out, farm-in, joint operating, joint venture or area of mutual interest
agreements, gathering systems, pipelines or other similar arrangements which
are
usual and customary in the oil and gas exploration and production business
located within the geographic boundaries of the United States of America;
provided that for purposes of this clause (e), an investment in capital stock,
partnership interests, joint venture interests, limited liability company
interests or other similar equity interests in a Person shall not constitute
a
Permitted Investment, (f) commission, travel and similar advances and loans
to
employees, officers or directors in the ordinary course of business of the
Parent or any of its Subsidiaries, in each case only as permitted by applicable
law, including Section 402 of the Sarbanes Oxley Act of 2002, as amended,
but in
any event not to exceed Twenty Five Thousand Dollars ($25,000) in the
aggregate at any time, (g) any guarantee permitted under Section 6.1, (h)
any Swap Agreement permitted under Section 6.24, (i) Investments (1) made
by the Parent in or to the other Guarantors and (2) made by any Subsidiary
of
Borrower in or to the Borrower or any Guarantor (other than Parent), (j)
deposits in the ordinary course of business to secure the performance of
(i)
letters of credit, (ii) bids, tenders, or obtaining of any license from of
Governmental Authority, (iii) indemnification obligations, or (iv) operating
leases, and (k) any Oil and Gas Property received in an exchange for another
Oil
and Gas Property of the Parent or any of its Subsidiaries in connection with
a
Permitted Disposition.
“Permitted
Liens” means (a) Liens held by Agent to secure the Obligations, (b) Liens
for unpaid taxes, assessments, or other governmental charges or levies that
either (i) are not yet delinquent, or (ii) (A) either (I) do not have priority
over Agent’s Liens, or (II) secure taxes, assessments, charges or levies in
an aggregate amount not in excess of Two Hundred Fifty Thousand Dollars
($250,000) and after the Agent establishes reserves against the then-existing
Borrowing Base or the Maximum Revolver Amount in such aggregate amount and
at
least One Dollar ($1.00) of Availability exists, and (B) the underlying taxes,
assessments, or charges or levies are the subject of Permitted Protests,
(c)
judgment Liens that do not constitute an Event of Default under Section
7.7 of the Agreement, (d) Liens set forth on Schedule P-2, provided
that any such Lien only secures the Indebtedness that it secures on the Closing
Date and any Refinancing Indebtedness in respect thereof, (e) the interests
of
lessors under operating leases, (f) purchase money Liens or the interests
of
lessors under Capital Leases permitted under Section 6.1(c) to the extent
that such Liens or interests secure Permitted Purchase Money Indebtedness
and so
long as (i) such Lien attaches only to the asset purchased, acquired,
constructed or improved and the proceeds thereof, and (ii) such Lien only
secures the Indebtedness that was incurred to acquire the asset purchased,
acquired, constructed or improved or any Refinancing Indebtedness in respect
thereof, (g) Liens arising by operation of law in favor of warehousemen,
landlords, carriers, mechanics, materialmen, laborers, or suppliers, incurred
in
the ordinary course of business and not in connection with the borrowing
of
money, and which Liens either (i) are for sums not yet delinquent, or (ii)
are
the subject of Permitted Protests, (h) Liens on amounts deposited in connection
with obtaining worker’s compensation or other unemployment insurance, (i) Liens
on amounts deposited in the ordinary course of business in connection with
letters of credit, bids, tenders or leases, obtaining any license from a
Governmental Authority, (j) Liens on amounts deposited as security for surety
or
appeal bonds in connection with obtaining such bonds in the ordinary course
of
business, (k) with respect to any Real Property, easements, rights of way,
and
zoning restrictions and other similar encumbrances that do not materially
interfere with or impair the use or operation thereof, (l) Liens arising
solely
by virtue of any statutory or common law provision relating to banker’s liens,
rights of set-off or similar rights and remedies and burdening only deposit
accounts or other funds maintained with a creditor depository institution,
and
(m) contractual Liens which arise in the ordinary course of business under
operating agreements, joint venture agreements, oil and gas partnership
agreements, oil and gas leases, farm-out agreements, division orders, contracts
for sale, transportation or exchange of oil and natural gas, unitization
and
pooling declarations and agreements, processing agreements, net profits
agreements, development agreements, gas balancing or deferred production
agreements, injection, repressuring and recycling agreements, salt water
or
other disposal agreements, seismic or other geophysical permits or agreements,
and other agreements which are usual and customary in the oil and gas business
and are for claims which are not delinquent or which are being contested
in good
faith by appropriate action and for which adequate reserves have been maintained
in accordance with GAAP, provided that any such Lien referred to in this
clause
does not materially impair the use of the Property covered by such Lien for
the
purposes of which such Property is held by the Borrower or any of its
Subsidiaries or materially impair the value of material Property subject
thereto.
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“Permitted
Protest” means the right of Parent or any of its Subsidiaries to protest any
Lien (other than any Lien that secures the Obligations), taxes (other than
payroll taxes or taxes that are the subject of a United States federal tax
lien), or rental payment, provided that (a) a reserve with respect to such
obligation is established on Parent’s or its Subsidiaries’ books and records in
such amount as is required under GAAP, (b) any such protest is instituted
promptly and prosecuted diligently by Parent or its Subsidiary, as applicable,
in good faith, and (c) Agent is satisfied that, while any such protest is
pending, there will be no impairment of the enforceability, validity, or
priority of any of Agent’s Liens.
“Permitted
Purchase Money Indebtedness” means, as of any date of determination,
Purchase Money Indebtedness incurred after the Closing Date in an aggregate
principal amount outstanding at any one time not in excess of One Million
Dollars ($1,000,000).
“Person”
means natural persons, corporations, limited liability companies, limited
partnerships, general partnerships, limited liability partnerships, joint
ventures, trusts, land trusts, business trusts, or other organizations,
irrespective of whether they are legal entities, and governments and agencies
and political subdivisions thereof.
“Petroleum
Engineers” means such petroleum engineers of recognized national standing as
may be selected by Loan Parties with the prior consent of Agent.
“Pro
Rata Share” means, as of any date of determination:
(a) with
respect to a Lender’s obligation to make Advances and right to receive payments
of principal, interest, fees, costs, and expenses with respect thereto, (i)
prior to the Revolver Commitments being terminated or reduced to zero, the
percentage obtained by dividing (y) such Lender’s Revolver Commitment, by (z)
the aggregate Revolver Commitments of all Lenders, and (ii) from and after
the
time that the Revolver Commitments have been terminated or reduced to zero,
the
percentage obtained by dividing (y) the aggregate outstanding principal amount
of such Lender’s Advances by (z) the aggregate outstanding principal amount of
all Advances,
(b) with
respect to a Lender’s obligation to participate in Letters of Credit, to
reimburse the Issuing Lender, and right to receive payments of fees with
respect
thereto, (i) prior to the Revolver Commitments being terminated or reduced
to
zero, the percentage obtained by dividing (y) such Lender’s Revolver Commitment,
by (z) the aggregate Revolver Commitments of all Lenders, and (ii) from and
after the time that the Revolver Commitments have been terminated or reduced
to
zero, the percentage obtained by dividing (y) the aggregate outstanding
principal amount of such Lender’s Advances by (z) the aggregate outstanding
principal amount of all Advances,
(c) with
respect to a Lender’s obligation to make the Term Loan and right to receive
payments of interest, fees, and principal with respect thereto, (i) prior
to the
making of the Term Loan, the percentage obtained by dividing (y) such Lender’s
Term Loan Commitment, by (z) the aggregate amount of all Lenders’ Term Loan
Commitments, and (ii) from and after the making of the Term Loan, the percentage
obtained by dividing (y) the principal amount of such Lender’s portion of the
Term Loan by (z) the principal amount of the Term Loan, and
(d) with
respect to all other matters as to a particular Lender (including the
indemnification obligations arising under Section 15.7), the percentage
obtained by dividing (i) such Lender’s Revolver Commitment plus the outstanding
principal amount of such Lender’s portion of the Term Loan, by (ii) the
aggregate amount of Revolver Commitments of all Lenders plus the outstanding
principal amount of the Term Loan; provided, however, that in the
event the Revolver Commitments have been terminated or reduced to zero, Pro
Rata
Share under this clause shall be the percentage obtained by dividing (A)
the
outstanding principal amount of such Lender’s Advances plus such Lender’s
ratable portion of the Risk Participation Liability with respect to outstanding
Letters of Credit plus the outstanding principal amount of such Lender’s portion
of the Term Loan, by (B) the outstanding principal amount of all Advances
plus
the aggregate amount of the Risk Participation Liability with respect to
outstanding Letters of Credit plus the outstanding principal amount of the
Term
Loan.
“Projections”
means Parent’s forecasted (a) balance sheets, (b) profit and loss statements,
and (c) cash flow statements, all prepared on a basis consistent with Parent’s
historical financial statements, together with appropriate supporting details
and a statement of underlying assumptions. The Projections shall also
contain a forecast of Capital Expenditures for the period covered
thereby.
“Property”
means any interest in any kind of property or asset, whether real, personal
or
mixed, or tangible or intangible, including, without limitation, cash,
securities, accounts and contract rights.
“Proposed
Borrowing Base” has the meaning specified therefor in Section
2.1(e)(i).
“Proposed
Borrowing Base Notice” has the meaning specified therefor in Section
2.1(e)(ii).
“Protective
Advances” has the meaning specified therefor in
Section 2.3(d)(i).
“Proved
Oil and Gas Properties” means Oil and Gas Properties that are Proved
Reserves.
“Proved
Reserves” means “Proved Reserves” as defined in the Definitions for Oil and
Gas Reserves (in this paragraph, the “Definitions”) promulgated by the Society
of Petroleum Engineers (or any generally recognized successor) as in effect
at
the time in question. “Proved Developed Producing Reserves”
means Proved Reserves which are categorized as both “Developed” and “Producing”
in the Definitions, “Proved Developed Nonproducing Reserves” means Proved
Reserves which are categorized as both “Developed” and “Nonproducing” in the
Definitions, and “Proved Undeveloped Reserves” means Proved Reserves
which are categorized as “Undeveloped” in the Definitions.
“Purchase
Money Indebtedness” means Indebtedness (other than the Obligations, but
including Capitalized Lease Obligations), incurred at the time of, or within
thirty (30) days after, the acquisition, construction or improvement by Borrower
of any capital or fixed assets for the purpose of financing all or any part
of
the acquisition, construction or improvement cost thereof.
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“Real
Property” means any estates or interests in real property owned, leased or
operated by Parent or its Subsidiaries and the improvements
thereto.
“Real
Property Collateral” means the Real Property identified on
Schedule R-1 and any Real Property hereafter acquired by Parent or
its Subsidiaries.
“Record”
means information that is inscribed on a tangible medium or that is stored
in an
electronic or other medium and is retrievable in perceivable form.
“Redetermination
Date” means, with respect to any Scheduled Redetermination or any Interim
Redetermination, the date that the redetermined Borrowing Base related thereto
becomes effective pursuant to Section 2.1(e)(iii)(A).
“Refinancing
Indebtedness” means refinancings, renewals, or extensions of Indebtedness so
long as: (a) the terms and conditions of such refinancings, renewals, or
extensions do not, in Agent’s reasonable judgment, materially impair the
prospects of repayment of the Obligations by Borrower or materially impair
Loan
Party’s creditworthiness, (b) such refinancings, renewals, or extensions do not
result in an increase in the principal amount of the Indebtedness so refinanced,
renewed, or extended, (c) such refinancings, renewals, or extensions do not
result in an increase in the interest rate with respect to the Indebtedness
so
refinanced, renewed, or extended, (d) such refinancings, renewals, or extensions
do not result in a shortening of the average weighted maturity of the
Indebtedness so refinanced, renewed, or extended, nor are they on terms or
conditions that, taken as a whole, are materially more burdensome or restrictive
to any Loan Party, (e) if the Indebtedness that is refinanced, renewed, or
extended was subordinated in right of payment to the Obligations, then the
terms
and conditions of the refinancing, renewal, or extension must include
subordination terms and conditions that are at least as favorable to the
Lender
Group as those that were applicable to the refinanced, renewed, or extended
Indebtedness, and (f) the Indebtedness that is refinanced, renewed, or extended
is not recourse to any Person that is liable on account of the Obligations
other
than those Persons which were obligated with respect to the Indebtedness
that
was refinanced, renewed, or extended.
“Regiment”
means Regiment Capital Special Situations Fund III, L.P. together with its
permitted successors and assigns.
“Release”
means any spilling, leaking, seepage, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, leaching, dumping, disposing, depositing,
dispersing, emanating or migrating of any Hazardous Materials in, into, onto,
from or through the environment or any Real Property.
“Replacement
Lender” has the meaning specified therefor in Section
14.2(a).
“Report”
has the meaning specified therefor in Section 15.16(a).
“Required
Availability” means Availability of not less than Twenty Million Dollars
($20,000,000).
“Required
Lenders” means, at any date of determination thereof, collectively, (i)
Regiment, for so long as it holds at least twenty-five percent (25%) of the
Term
Loan, (ii) WFF, for so long as it holds at least twenty-five percent (25%)
of
the Revolver Commitment and (iii) such other Lenders whose aggregate Pro
Rata
Shares (calculated under clause (d) of the definition of Pro Rata Shares)
together with those of Regiment and/or WFF (to the extent that each such
entity
is deemed a Required Lender) exceed fifty percent (50%).
“Reserve
Percentage” means, on any day, for any Lender, the maximum percentage
prescribed by the Board of Governors of the Federal Reserve System (or any
successor Governmental Authority) for determining the reserve requirements
(including any basic, supplemental, marginal, or emergency reserves) that
are in
effect on such date with respect to eurocurrency funding (currently referred
to
as “eurocurrency liabilities”) of that Lender, but so long as such Lender is not
required or directed under applicable regulations to maintain such reserves,
the
Reserve Percentage shall be zero.
“Reserve
Report” means a report, in form and substance reasonably satisfactory to
Agent, setting forth, as of each January 1st or July 1st (or such other date
in
the event of an Interim Redetermination) (a) the volumetric quantity and
the
PV-10 of the oil and gas reserves estimated to be attributable to the Oil
and
Gas Properties of Parent and its Subsidiaries, together with a projection
of the
rate of production and future net income, taxes, operating expenses and capital
expenditures with respect thereto as of such date, and (b) such other
information customarily contained in such reports as Agent may reasonably
request.
“Response
Action” means all actions taken to (a) clean up, remove, remediate, contain,
treat, monitor, assess, investigate, evaluate, correct or in any way address
any
violation of or non-compliance with Environmental Law, any Environmental
Liability, any Release or any Hazardous Materials in the indoor or outdoor
environment, (b) prevent or minimize a release or threatened release of
Hazardous Materials so they do not migrate or endanger or threaten to endanger
public health or welfare or the indoor or outdoor environment, (c) restore
or
reclaim natural resources or the environment, or (d) perform any pre-remedial
studies, investigations, or post-remedial operation and maintenance
activities.
“Responsible
Officer” means, as to any Person, the Chief Executive Officer, the
President, any Financial Officer or any Vice President of such
Person. Unless otherwise specified, all references to a Responsible
Officer herein shall mean a Responsible Officer of Borrower.
“Revolver
Commitment” means, with respect to each Lender, its Revolver Commitment,
and, with respect to all Lenders, their Revolver Commitments, in each case
as
such Dollar amounts are set forth beside such Lender’s name under the applicable
heading on Schedule C-1 or in the Assignment and Acceptance pursuant to
which such Lender became a Lender hereunder, as such amounts may be reduced
or
increased from time to time pursuant to assignments made in accordance with
the
provisions of Section 13.1.
“Revolver
Usage” means, as of any date of determination, the sum of (a) the amount of
outstanding Advances, plus (b) the amount of the Letter of Credit
Usage.
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“Risk
Participation Liability” means, as to each Letter of Credit, all
reimbursement obligations of Borrower to the Issuing Lender with respect
to an
L/C Undertaking, consisting of (a) the amount available to be drawn or which
may
become available to be drawn, (b) all amounts that have been paid by the
Issuing
Lender to the Underlying Issuer to the extent not reimbursed by Borrower,
whether by the making of an Advance or otherwise, and (c) all accrued and
unpaid
interest, fees, and expenses payable with respect thereto.
“Scheduled
Redetermination” has the meaning specified therefor in Section
2.1(d).
“SEC”
means the United States Securities and Exchange Commission and any successor
thereto.
“Securities
Account” means a securities account (as that term is defined in the
Code).
“Security
Agreement” means a security agreement, in form and substance satisfactory to
Agent, executed and delivered by Borrower and Guarantors to Agent.
“Security
Documents” means the Cash Management Agreements, the Control
Agreements, the Security Agreement, Canadian Pledge Agreement,
Copyright Security Agreement, Patent Security Agreement and Trademark Security
Agreement.
“Settlement”
has the meaning specified therefor in Section 2.3(e)(i).
“Settlement
Date” has the meaning specified therefor in Section
2.3(e)(i).
“Solvent”
means, with respect to any Person on a particular date, that, at fair
valuations, the sum of such Person’s assets is greater than all of such Person’s
debts.
“S&P”
has the meaning specified therefor in the definition of Cash
Equivalents.
“Stock”
means all shares, options, warrants, interests, participations, or other
equivalents (regardless of how designated) of or in a Person, whether voting
or
nonvoting, including common stock, preferred stock, or any other “equity
security” (as such term is defined in Rule 3a11-1 of the General Rules and
Regulations promulgated by the SEC under the Exchange Act).
“Subordination
and Intercreditor Agreement” means that certain Subordination and
Intercreditor Agreement by and among ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ Bank, N.A. and the other
signatories thereto.
“Subsidiary”
of a Person means a corporation, partnership, limited liability company,
or
other entity in which that Person directly or indirectly owns or controls
the
shares of Stock having ordinary voting power to elect a majority of the board
of
directors (or appoint other comparable managers) of such corporation,
partnership, limited liability company, or other entity.
“Swap
Agreement” means any agreement with respect to any swap, forward, future or
derivative transaction or option or similar agreement, whether exchange traded,
“over-the-counter” or otherwise, involving, or settled by reference to, one or
more rates, currencies, commodities, equity or debt instruments or securities,
or economic, financial or pricing indices or measures of economic, financial
or
pricing risk or value or any similar transaction or any combination of these
transactions; provided that no phantom stock or similar plan providing for
payments only on account of services provided by current or former directors,
officers, employees or consultants of Borrower or any of its Subsidiaries
shall
be a Swap Agreement.
“Swing
Lender” means WFF or any other Lender that, at the request of Borrower and
with the consent of Agent agrees, in such Lender’s sole discretion, to become
the Swing Lender under Section 2.3(b).
“Swing
Loan” has the meaning specified therefor in Section
2.3(b).
“Tax
Refund” means foreign, United States, state or local tax
refunds.
“Taxes”
means shall mean, any taxes, levies, imposts, duties, fees, assessments or
other
charges of whatever nature now or hereafter imposed by any jurisdiction or
by
any political subdivision or taxing authority thereof or therein with respect
to
such payments (but excluding any tax imposed by any jurisdiction or by any
political subdivision or taxing authority thereof or therein measured by
or
based on the net income or net profits of any Lender) and all interest,
penalties or similar liabilities with respect thereto.
“Term
Loan” has the meaning specified therefor in Section 2.2.
“Term
Loan Amount” means Thirty Million Dollars ($30,000,000).
“Term
Loan Commitment” means, with respect to each Lender, its Term Loan
Commitment, and, with respect to all Lenders, their Term Loan Commitments,
in
each case as such Dollar amounts are set forth beside such Lender’s name under
the applicable heading on Schedule C-1 or in the Assignment and
Acceptance pursuant to which such Lender became a Lender hereunder, as such
amounts may be reduced or increased from time to time pursuant to assignments
made in accordance with the provisions of Section 13.1.
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“Total
Commitment” means, with respect to each Lender, its Total Commitment, and,
with respect to all Lenders, their Total Commitments, in each case as such
Dollar amounts are set forth beside such Lender’s name under the applicable
heading on Schedule C-1 attached hereto or on the signature page of the
Assignment and Acceptance pursuant to which such Lender became a Lender
hereunder, as such amounts may be reduced or increased from time to time
pursuant to assignments made in accordance with the provisions of Section
13.1.
“Total
Debt” means, at any date, all Indebtedness, except for Letters of Credit, of
the Parent and its Subsidiaries on a consolidated basis, excluding (i) non-cash
obligations under FAS 133 or 143, (ii) all obligations owing under Swap
Agreements, (iii) accounts payable and other accrued liabilities (for the
deferred purchase price of property or services) from time to time incurred
in
the ordinary course of business which are not greater than sixty (60) days
past
the date of invoice or delinquent or which are being contested in good faith
by
appropriate action and for which adequate reserves have been maintained in
accordance with GAAP, (iv) all obligations related to the Convertible
Subordinated Notes.
“Total
Reserve Value” means, with respect to any Proved Reserves expected to be
produced from any Oil and Gas Properties, the net present value, discounted
at
ten percent (10%) per annum, of the future net revenues expected to accrue
to
the Parent’s and its Subsidiaries’ during the remaining expected economic lives
of such reserves, as estimated in the most recently delivered Reserve Report
with respect to such Oil and Gas Properties. Each calculation of such
expected future net revenues shall be made in accordance with the then existing
standards of the Society of Petroleum Engineers; provided, that in any
event (a) appropriate deductions shall be made for estimated severance and
ad
valorem taxes, and for estimated operating, gathering, transportation,
marketing, capital and capital expenditure costs required for the production
and
sale of such reserves, (b) appropriate adjustments shall be made for hedging
operations, provided that Swap Agreements with non-investment grade
counterparties shall not be taken into account to the extent that such Swap
Agreements improve the position of or otherwise benefit the Borrower or any
of
its Subsidiaries, (c) the pricing assumptions used in determining Total Reserve
Value for any particular reserves shall be based upon the following price
decks:
(i) for natural gas, the lesser of (A) 85% of Platts’ Inside FERC Gas
Market Report – index futures price for the nearest market index point and
(B) $6.00/Mcf, and (ii) for crude oil, the lesser of (A) 85% of West Texas
Intermediate crude oil from the New York Mercantile Exchange for Cushing,
Oklahoma futures price, and (B) $65.00/Bbl and (d) the cash-flows derived
from the pricing assumptions set forth in clauses (b) and (c) above shall
be
further adjusted to account for heat content, gas shrinkage, transportation
costs, gathering and compression charges, Btu adjustments, basis differentials
and other historical adjustments, in each case, in a manner acceptable to
Agent
and estimated on the basis of the information available to Borrower;
provided that for purposes of this calculation, Proved Developed Reserves
shall constitute not less than 60% of the Total Reserve Value.
“Trademark
Security Agreement” has the meaning specified therefor in the Security
Agreement.
“Triggering
Event” means, as of any date of determination, the occurrence of an Event of
Default.
“TTM
EBITDA” means, as of any date of determination, EBITDA of Parent determined
on a consolidated basis in accordance with GAAP, for the twelve (12)-month
period most recently ended.
“Underlying
Issuer” means a third Person which is the beneficiary of an L/C Undertaking
and which has issued a letter of credit at the request of the Issuing Lender
for
the benefit of Borrower.
“Underlying
Letter of Credit” means a letter of credit that has been issued by an
Underlying Issuer.
“Unfunded
Pension Liability” shall mean, at any time, the aggregate amount, if any, of
the sum of (a) the amount by which the present value of all accrued benefits
under each Title IV Plan exceeds the fair market value of all assets of such
Title IV Plan allocable to such benefits in accordance with Title IV of ERISA,
all determined as of the most recent valuation date for each such Title IV
Plan
using the actuarial assumptions for funding purposes in effect under such
Title
IV Plan, and (b) for a period of five (5) years following a transaction which
might reasonably be expected to be covered by Section 4069 of ERISA, the
liabilities (whether or not accrued) that could be avoided by any Loan Party
or
any ERISA Affiliate as a result of such transaction.
“United
States” means the United States of America.
“Voidable
Transfer” has the meaning specified therefor in Section
17.8.
“▇▇▇▇▇
Fargo” means ▇▇▇▇▇ Fargo Bank, National Association, a national banking
association.
“WFF”
means ▇▇▇▇▇ Fargo Foothill, LLC, a Delaware limited liability
company.
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Schedule
5.2
Collateral
Reporting
Provide
Agent
(with copies for each Lender) with each of the documents set forth below
at the
following times in form satisfactory to Agent:
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Quarterly
(as soon as possible and in any event not later than forty-five
(45) days
after end of each quarter)
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(a) lease
operating statements as historically reported by Parent on a consolidated
basis, showing (i) the gross proceeds from the sale of Hydrocarbon
products produced from any of the Oil and Gas Properties of Parent
and its
Subsidiaries, (ii) the quantity of Hydrocarbon products sold, (iii)
the
aggregate severance, ad valorem, conservation, gross production,
or other
production related taxes deducted from or paid out of the proceeds,
and
(iv) the lease operating expenses;
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On
or before March 3 and September 3 of each fiscal year of Borrower,
pursuant to Sections 5.20 and 5.21
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(b) (i)
a Reserve Report, prepared by (A) in the case of the Reserve Report
due
March 1, Netherland, ▇▇▇▇▇▇ & Associates, Inc. or another qualified
independent third party Petroleum Engineer reasonably acceptable
to Agent,
and (B) in the case of the Reserve Report due September 1, the
chief
engineer or chief operating officer of Borrower and its Subsidiaries,
in
each case in accordance with the procedures used in the Initial
Reserve
Report, and together with each such Reserve Report, a certificate
of a
Responsible Officer certifying as to the matters required under
Section
5.20(c) and attaching such exhibits as are required by Section
5.20(c) and
(ii) such title information in respect of the Oil and Gas Properties
of
Borrower and its Subsidiaries as is required by Section 5.21 in
respect of
at least eighty percent (80%) of the Total Reserve Value of the
Proved Oil
and Gas Properties evaluated by the Reserve Report described in
clause
(i);
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Promptly
upon request by Agent
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(c) notification
of prepayment of Hydrocarbons by any customer of Borrower or any
of its
Subsidiaries, together with a reasonably detailed summary of the
terms of
such transaction, including, without limitation, the amount of
such
prepayment, the quantity of Hydrocarbons to be delivered, the delivery
schedule of such Hydrocarbons and such other information as may
be
reasonably requested by Agent;
(d) proof
of payment of applicable Taxes, including Real Property, ad valorem
and production Taxes; and
(e) such
other reports as to the Collateral of Borrower or any of its Subsidiaries,
as Agent may reasonably request.
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Schedule
5.3
Financial
Statements; Reports; Certificates
Deliver
to Agent, with copies to each
Lender, each of the financial statements, reports, or other items set forth
set
forth below at the following times in form satisfactory to Agent:
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Monthly
(as soon as possible and in any event within ten (10) days following
receipt by Borrower of reports from swap counterparties)
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(a) a
report setting forth as of the last Business Day of such month,
a summary
of its hedging positions under all Swap Agreements (including
commodity
price swap agreements, forward agreements or contracts of sale
which
provide for prepayment for deferred shipment or delivery of Hydrocarbons
of Parent or any of its Subsidiaries), including the type, term,
effective
date, termination date and notional principal amounts or volumes,
the
hedged price(s), interest rate(s) or exchange rate(s), as applicable,
the
net market to marked value thereof and any credit support agreements
relating thereto (including any margin required or supplied),
and the
counterparty to each such agreement;
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as
soon as available, but in any event within thirty (30) days (for
each
month that is not the end of one of Borrower’s fiscal quarters) after the
end of each month during each of Borrower’s fiscal years
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(b) report
setting forth, on a consolidated basis, for the trailing twelve
(12)
months, the volume of production and sales attributable to production
(and
the prices at which such sales were made and the revenues derived
from
such sales) for each such calendar month from the Oil and Gas
Properties,
and setting forth the (i) aggregate related ad valorem, severance
and
production taxes, lease operating expenses, (ii) Capital Expenditures,
(iii) Total Debt and (iv) estimated EBITDA attributable thereto
and
incurred for each such month presented; and
(c) a
summary aging, by vendor, of all accounts payable of Parent and
its
Subsidiaries and any book overdraft, including lease operating
expenses
and royalty payments, together with such other documentation
as my
reasonably be requested by Agent, to demonstrate that such royalty
payments are being paid on a timely basis;
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as
soon as available, but in any event within forty-five (45) days
after the
end of each of the first three fiscal quarters during each of
Borrower’s
fiscal years
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(d) an
unaudited consolidated balance
sheet, income statement, and statement of cash flow covering
the
operations of Parent and its Subsidiaries during such quarterly
period,
and that portion of the fiscal year ending as of the close of
such quarter
and providing (i) a comparison to the corresponding period in
the prior
fiscal year, and (ii) a management report describing the performance
of
Parent and its Subsidiaries for such fiscal quarter and such
period of the
fiscal year then ended and explaining any variances between such
results
and the results for the comparable quarter and fiscal period
in the prior
year and the Projections delivered to Agent hereunder; provided,
that so
long as Borrower shall be a reporting company under the Securities
Exchange Act of 1934, as amended, the requirement to provide
the
information required under clauses (i) and (ii) above shall be
satisfied
to the extent Borrower complies with the requirements pursuant
to clause
(i) below; and
(e) a
Compliance
Certificate;
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as
soon as available, but in any event within ninety (90) days after
the end
of each of Borrower’s fiscal years
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(f) consolidated
financial statements
of Parent and its Subsidiaries for each such fiscal year, audited
by ▇▇▇▇
& Associates LLP or another independent certified public accountants
reasonably acceptable to Agent and certified, without any (A)
“going
concern” or like qualification or exception, or (B) qualification or
exception as to the scope of such audit, by such accountants
to have been
prepared in accordance with GAAP (such audited financial statements
to
include a balance sheet, income statement, and statement of cash
flow and,
if prepared, such accountants’ letter to management); and
(g) a
Compliance
Certificate;
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within
fifteen (15) days prior to the start of each of Borrower’s fiscal
years,
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(h) copies
of Parent and its
Subsidiaries’ Projections, in form and with underlying assumptions
satisfactory to Agent, in its Permitted Discretion, for the forthcoming
three (3) years, year by year, and for the forthcoming fiscal
year, month
by month, certified by the chief financial officer of Borrower
as being
such officer’s good faith estimate of the financial performance of Parent
and its Subsidiaries on a consolidated basis during the period
covered
thereby, subject to the same qualifications as those contained
in the
second sentence of Section 4.15 of the Credit Agreement with
respect to
the Projections delivered on the Closing Date;
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if
and when filed by Parent (or the Borrower, as applicable), notice
of any
of the following,
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(i) Form
10-Q quarterly reports, Form
10-K annual reports, and Form 8-K current reports;
(j) any
other material public filings
made by Parent or the Borrower, as applicable, with the SEC or
any
corresponding Canadian or provincial Governmental Authority to
the extent
not duplicative of SEC filings;
(k) any
other information that is
provided by Parent to its shareholders generally;
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promptly,
but in any event within five (5) days after any Loan Party has
knowledge
of (i) any event or condition that constitutes a Default or an
Event of
Default, and (ii) any termination or cancellation of any Material
Contract
that could reasonably be expected to result in a Material Adverse
Change,
in each case, that does not otherwise constitute a Default or
an Event of
Default,
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(l) notice
of such event or condition
and a statement of the curative action that such Loan Party proposes
to
take with respect thereto;
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promptly
after the commencement thereof, but in any event within five
(5) days
after the service of process with respect thereto on any Loan
Party,
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(m) notice
of all actions, suits, or
proceedings brought by or against Parent or any of its Subsidiaries
before
any Governmental Authority in which the party bringing such action,
suit
or proceeding seeks damages in excess of Two Hundred Fifty Thousand
Dollars ($250,000) or seeks injunctive relief or alleges any
violation of
any Environmental Law or seeks remedies in connection with any
Environmental Liabilities;
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promptly
upon the request of Agent,
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(l) copies
of all management letters,
exception reports or similar reports or letters received by Parent
and its
Subsidiaries from its independent certified public accountants
in
connection with the preparation or filing of Form 10-Q quarterly
reports
and Form 10-K annual reports or similar reports in connection
with the
Parent being a Canadian public company;
(m) copies
of any material notice or other correspondence sent to, or received
from,
any Governmental Authority related to the Oil and Gas Properties
of Parent
or any of its Subsidiaries, including, without limitation, notice
of any
new plugging and abandonment or other performance or other assurance
bond
requirements related to such Oil and Gas Properties;
(n) copies
of any material notices or
notices of default that Parent or any of its Subsidiaries receives
from or
sends to any person in connection with any Material Contract;
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Contemporaneously
with the delivery of each Compliance Certificate pursuant to
the Credit
Agreement,
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(o) any
amendments or modifications,
waivers or other changes to any Material Contract;
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upon
the request of Agent or any Lender,
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(p) any
other information reasonably
requested relating to the financial condition of Parent or any
of its
Subsidiaries.
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